Entrepreneurship in Emerging Economies Entrepreneurship in Emerging Economies Entrepalooza 2001...
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Transcript of Entrepreneurship in Emerging Economies Entrepreneurship in Emerging Economies Entrepalooza 2001...
EntrepreneurshipEntrepreneurshipin Emerging Economiesin Emerging Economies
Entrepalooza 2001September 14, 2001
Brent ChriteAndy Lawlor
Today’s Agenda
Opening RemarksBrent ChriteAndy Lawlor
Two Emerging Market Case Studies:Croatia’s Push Toward An Entrepreneurial Culture through Business Innovation CentersPalestine As A Start-up: Financing Needs and Business Cluster Creation
Discussion & Questions
Brent Chrite,Managing DirectorThe William Davidson Institute
Emerging Markets: Questions to Consider
With scarcity of private venture capital & banking sector constraints, what are alternative financing mechanisms (e.g. DFIs)?How can we consider optimal political policies, leverage national comparative advantages and induce private savings to make entrepreneurship a national phenomena?How might micro finance mechanisms become scalable?What are the skill sets, attributes and experiences in emerging markets that are necessary precursors to sustained entrepreneurial behavior?What role can western institutions assume in contributing to entrepreneurship in emerging markets and therefore contribute to long-term development and the creation of competitive industries
Economic Integration of Technology, Capital and Markets
Initial entrance into global markets
Trade develops & capital is accumulated
Export competitively produced (low cost)
goods & commodities
Import Capital Goods Entry to hi-tech, bio sciences, ad infinitum
Sell consumer goods to developing nations
Secondary tier Importation of food stuff, goods, etc.
Accumulated capital used to satisfy local
demand & consumption
Domestic production of previously imported
goods begins
Now producers of formerly importedconsumer goods
Local consumer market becomes outlet
Status Action Externalities
Civil Society and Political Transitions
Civil Society is a useful formula for analyzing state-society relations in emerging markets because it embodies a core of universal beliefs and practices about the legitimation of, and limits to, state power….Notions on civil societies
Civil society is a public realm between the state and the familyCivil is distinguishable from political societyCivil Society is a theoretical rather empirical constructThe state and civil society though distinct are best considered togetherCivil society is the source of legitimation of state power
Key Success Factors in Emerging MarketAn Example: the Automotive Industry
Focused manufacturing processes
Rationalized product lines
Established export markets
Diversified product offerings (i.e., vehicles, components)
Domestic operations integrated with parents’/licensors’ global network
Products tailored to local/surrounding markets demand
Strong industrial relations skills
Effective supply chain management
Competencies Required In Emerging Automotive Markets
Geographic domestic coverage/presence
Efficiency in production, delivering high quality, low price products
Focused product models to generate economies of scale
Vertical integration or partnership with key suppliers
Access to key foreign markets to effectively utilize excess plant/production capacity
Portfolio diversification to grow revenue/contribution
Strong industrial relations skills
Partnership with strong assembler and distributors
Emerging Market ChallengesChallenges
• Underperforming business processes
• Poor customer satisfaction
– End-customer– Dealers
• Lack of effective partnering with suppliers and source OEMs
• Functionality siloed organization
• Bureaucratic structure
Questions
• Have product models been rationalized to match demand?
• Is there adequate supplier interfaces?• Is production focused and balanced for maximum
efficiency?• Are there adequate resources/ processes, to
forecast demand, production?
• How quickly are problems resolved?• Are world-class service standards in place?• How integrated are dealers into the business
process?• Are local suppliers leveraged?• Is the client involved in the parent/licensor’s
global network?• Is product quality meeting end-customer and
source OEM requirements?• Is there duplication of effort/function across departments?• Are staffing levels above/below industry levels?• Who makes decisions?
Civil Society and Political Renaissance in Emerging Markets
The ultimate depth, breadth and direction of recent political reforms remains unclear (Zambia, Kenya, Uganda, South Africa)Multiparty elections do not by themselves produce or sustain democracyThey do not ipso facto institutionalize broad participation in political lifeDemocracy and parallel transitions from state-dominated to market-driven economies do not necessarily peacefully coexist
Questions?
Andy LawlorDirector, Global MBA ProjectsThe William Davidson Institute,& The U of MI Business School
Outside-In Challenges
Market entrants, particularly multi-national companies, must recognize the unique character of EMs and differences across EMs“Business As Usual” approaches often failUnderstanding culture and history of EM is mandatory and a key success factor; the religions, social structures, and regional differences could yield excellent insights, marketing edges, and are sources of competitive advantage
Outside-In Challenges
Absence of ‘Expected Basic Marketing Infrastructure’
Little or no market data availableNonexistent or poorly developed distribution systemsRelatively few communication vehiclesUnpredictable regulatory environments; corporate strategy by government decree (caution: they who give, can also take away!)
Outside-In ChallengesPlaying by a different set of product-market rules
High levels of product diversionWidespread product counterfeiting (lost unit sales and damage to reputation & quality image)Opaque power & loyalty structures (street-smarts needed to understand business & political ‘networks’, and alternate channels of product delivery)
Outside-In Challenges
Questioning the parochial mindset‘less developed countries’ will evolve smoothly into ‘developed countries’ (which are assumed to be the higher stage of development)It’s best to assume that ‘typical’ market evolution steps will be skipped or taken in a non-traditional orderThe role of the internet in education and setting consumer expectations cannot be underestimated
Emerging Market Strategies
‘Non-traditional’ sources of first-mover advantage are often key
favorable government regulationstapping pent-up demandhigher marketing activity to achieve brand recognition and early volume burstsearly and continuous consumer polling and touch points that lead to cultural and consumer needs learning
Emerging Market Strategies
Market assessment must focus on the long-term potential
Lack of data and stability often makes standard methods of estimating market potential and share difficult to applyBuilding brand loyalty and share (and keeping it, staying ahead of the consumer needs cycle)Data, data, data: both trade and consumer
Emerging Market Strategies
Adapting distribution policy is keyChoosing partners requires greater emphasis on industry and regional/local knowledge, direct selling, local autonomy, and exclusivityPreferred models and channels of product delivery will change over time; will you be a leader or a follower? Decision speed is critical to success!
Emerging Market StrategiesProduct policy adaptation may be a pre-requisite for success
EM customers may be just as sophisticated and value-oriented (if not more so!) as their counterparts in other ‘no-advanced’ markets, willing/demanding to adopt new technology and product versions very quickly in the product’s life cycle (they see these advanced products on trips abroad and on the internet)
Emerging Market Strategies
Product policy adaptation may be a pre-requisite for success
A narrow line of ‘proven’ (i.e., older!) or ‘value-engineered’ (i.e., less full-featured!) may be insufficient
Questions?
Two Emerging Market Case Studies
Croatia’s Push Toward An Entrepreneurial Culture through Business Innovation CentersPalestine As A Start-up: Financing Needs and Business Cluster Creation
The William Davidson Institute’s Global Project Programs
Global Projects I - IMAP • A 7-week UMBS core course
Global Projects II • A 14-week UMBS elective course
Global Projects III • The William Davidson Institute summer internships.
These projects fulfill a dual mission:
1) help organizations solve an international business issue 2) provide valuable professional development for MBA team members
William Davidson InstituteContact Information:
Brent Chrite734.936.2772 /
Andy Lawlor734.763.5809 /
EntrepreneurshipEntrepreneurshipin Emerging Economiesin Emerging Economies
Questions?