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Before the global economy can recover and stabilize market patterns, the focus must be on dynamic markets where costs are lower and output is higher than in industrialized countries.
There are generally fewer rules and regulations in emerging markets than in developed countries. Governments are more willing to trade and do business with other nations as long as their people and businesses see economic prosperity.
Emerging markets are an integral part of any company’s growth strategy, but what factors make this so? This article answers that question and discusses strategies for entering one.
Table of Contents
What will emerging economies look like in 2023?
Emerging markets are the growing economies of developing countries that have become dynamic enough to increase participation in world trade. These markets have many characteristics similar to mature markets, but with much lower costs and greater enthusiasm for new products.
- Integration — Welcomes investment, focuses on barter and supply rather than production, and is more concerned with global markets.
- Liquid shares — Increased local debt and equity in both domestic and foreign markets, with easy cash flow.
- Increased trade — Lower transportation, storage and labor costs result in higher profit margins that help increase trade for both domestic and international investment.
- Improved legal support — Taxes and regulations on foreign investment are less strict in emerging countries, allowing an easy flow of goods and investment.
Related: Is Now the Right Time to Take Your Business Global?
Best strategies to win in emerging economies in 2023
Opportunities in vibrant markets must be pursued aggressively. The right plan can help generate higher income just because of the population size. Investors can increase their chances of success and return on investment by using one of four strategies when entering these markets:
1. Understand the political and commercial environment
It is crucial to be aware of the political situation in each country in which you wish to invest. The political forces governing emerging markets can significantly affect your ability to generate profits.
Foreign policies conducive to investment and a vibrant economy can be bolstered by stable governments open to such endeavours. Understanding changing political environments and the help of local political forces can make investments safer.
Stability is a precondition for prosperity, and prosperity requires an open economy where money and goods can move freely across national borders. Emerging markets are embracing good business practices and investments to boost their economies and bring them on par with those of developed countries. In some circumstances, emerging markets can even offer significantly higher returns due to the environment.
2. Hire local teams
The main goal of investing in emerging markets is to expand your business and take advantage of local opportunities. Hire local people and resources are logically more efficient because they are more familiar with native scenarios, which in turn can boost investment opportunities.
Local recruiting also boosts the community’s economy and strengthens emotional bonding among locals, motivating them to work harder and support long-term goals in these markets. In addition, the lower wages lead to cost savings that not only increase revenues but also support local economic development.
Emerging economies such as Saudi Arabia, for example, allow massive investment but require that the board have local members. They also set a percentage of the local workers to be hired as compared to the foreign workers. In the long run, this also sends the political message that foreign companies bring business and prosperity.
Related: The benefits and risks of launching new products in new markets
3. Let go of assumptions
CEOs and companies believe they can do business in emerging economies and markets the same way they do in developed countries; yet the quality of the infrastructure differs per country. For example, political officials or pragmatic leaders often enforce contracts in emerging economies rather than the legal system.
4. Using extensive distribution to reach customers
Using expanded distribution increases product awareness and ensures that the company reaches the maximum number of people. It enables companies to expand their reach and get the best possible market coverage. If executed properly, this strategy has the potential to generate millions of loyal customers.
There is a lot of untapped potential in emerging markets. When investors can combine local practices with their expertise and technical innovation, the possibilities are virtually limitless.
