SUCCEEDING IN EMERGING MARKETS - NASBITE

SUCCEEDING IN EMERGING MARKETS

Michael Pacurar

Global Director, Trade & Government

Raymond Clark

Development Executive, Trade & Government

PART I: WHY EMERGING MARKETS?

PART II: CHOOSING THE RIGHT MARKET


INTRODUCTION

ASSESSING MARKET POTENTIAL

STRATEGIES FOR SUCCESS

CONCLUSION

© Euromonitor International

5

Emerging markets still hold the key INTRODUCTION

Source: Euromonitor International from national statistics/OECD/IMF.

http://www.euromonitor.com/


6





7





8





9

What does this mean on the ground? INTRODUCTION


Between 2013 and 2025 Emerging Markets Will See:



INTRODUCTION



CONCLUSION


11

Market

Macroeconomic stability

Middle class

Consumer market size and

growth

Openness

Population

Size and growth

Age structure

Vital statistics

Urbanisation

Access

Infrastructure

Internet

Partners

Retail landscape

Business Environment

Ease of doing business

Government

Corruption

Human capital

Factors affecting market selection ASSESSING MARKET POTENTIAL



12

Market


Middle class


growth

Openness

Population

Size and growth

Age structure

Vital statistics

Urbanisation

Access

Infrastructure

Internet

Partners

Retail landscape



Government

Corruption

Human capital




13

Market


Middle class


growth

Openness

Population

Size and growth

Age structure

Vital statistics

Urbanisation

Access

Infrastructure

Internet

Partners

Retail landscape



Government

Corruption

Human capital




14

Market


Middle class


growth

Openness

Population

Size and growth

Age structure

Vital statistics

Urbanisation

Access

Infrastructure

Internet

Partners

Retail landscape



Government

Corruption

Human capital




15

Market


Middle class


growth

Openness

Population

Size and growth

Age structure

Vital statistics

Urbanisation

Access

Infrastructure

Internet

Partners

Retail landscape



Government

Corruption

Human capital




16

Market


Middle class


growth

Openness

Population

Size and growth

Age structure

Vital statistics

Urbanisation

Access

Infrastructure

Internet

Partners

Retail landscape



Government

Corruption

Human capital




17

A granular strategy: Across countries


Source: Euromonitor International from national statistics/UN/OECD/IMF. Note: Data refer to a ranking of consumer expenditure growth in 120 major cities globally.



18



• Chinese and Indian cities dominate the rankings of fastest-growing consumer markets




19



• Other more surprising entrants into the list include:

• Minsk • Ho Chi Minh City • Almaty

• Nairobi




20

A granular strategy: Within a country ASSESSING MARKET POTENTIAL

Source: Euromonitor International from national statistics.



21





22





23

Young, fast-growing populations

Rapid urbanisation

Strong economic growth Weak infrastructure

Corruption and poor governance

Widespread poverty

Frontier markets offer potential on a vast scale ASSESSING MARKET POTENTIAL

Opportunities

Challenges



INTRODUCTION



CONCLUSION


25

Knowledge is power STRATEGIES FOR SUCCESS



26

A tale of two markets STRATEGIES FOR SUCCESS

Source: Euromonitor International from national statistics. Note: All data refer to 2013.



27





28





INTRODUCTION



CONCLUSION


30

Choose wisely – remembering the market, population, access and business environment factors affecting selection:

Look beyond the usual suspects

Think granular

Learn from others – winning strategies are based on knowledge:

Differentiate between and within markets

Localisation

Sales strategies

Price and features

Winning in emerging markets requires staying power CONCLUSION



INTRODUCTION

MARKET

POPULATION

ACCESS

BUSINESS ENVIRONMENT

CONCLUSION


34

The First and Most Important Step to Success

INTRODUCTION



35

Market



growth

Middle class

Openness

Population

Size and growth

Age structure

Vital statistics

Urbanisation

Access

Infrastructure

Internet

Retail landscape

Partners



Regulations

Corruption

Human capital

Factors Affecting Market Selection




INTRODUCTION

MARKET

POPULATION

ACCESS


CONCLUSION


37

Market

MARKET

Market



growth

Middle class

Openness

Is the country sizeable and stable

enough to do business in?

Are consumers/companies well-off

enough to buy my products and

services?

Is the potential growth of the market

attractive enough to offset any risk?

Are the conditions for foreign

businesses right?



38

Macroeconomic Stability – Look Below the Surface

MARKET

Source: Euromonitor International from IMF/national statistics/OECD



39

There is Usually a Trade-Off Between Size and Growth

MARKET

Source: Euromonitor International from IMF/national statistics/Eurostat/OECD



40

- 50 100 150

Panama

China

Ghana

Qatar

Ethiopia

Sierra Leone

Turkmenistan

Mongolia

Macau

Nauru

Real % growth

There is Usually a Trade-Off Between Size and Growth

MARKET

The World’s Fastest-growing Economies: 2009-2014

Source: Euromonitor International from IMF/national statistics/Eurostat/OECD



41

Openness is Central to Success

MARKET

Trade Investment New Ideas



42

0

40

80

120

160

UAE MalaysiaThailand Poland Qatar SaudiArabia

Mexico Chile SouthAfrica

Turkey

% o

f G

DP


MARKET


Total Trade as % of GDP: 2014

Source: Euromonitor International from national statistics/OECD/IMF



43

0.0

2.0

4.0

6.0

8.0

Chile Turkmenistan

% o

f G

DP

Chile Turkmenistan

Overall

Score

78.5 41.4

Investment

Freedom

90.0 0.0

Business

Freedom

69.3 30.0

Financial

Freedom

70.0 10.0


MARKET


Source: UNCTAD/2015 Index of Economic Freedom, The Heritage Foundation

Note: The index is based on 10 quantitative and qualitative factors, grouped into four broad categories of economic

freedom: rule of law; limited government, regulatory efficiency, and open markets.

FDI Inflows as % of GDP: 2013 Index of Economic Freedom: 2015



44

0% 20% 40% 60% 80% 100%

China

Russia

Brazil

India

Agree

Neither agree nor disagree

Disagree

Openness is Crucial

MARKET

Percentage of Respondents who Describe Themselves as Liking to

Try New Products and Services: 2013

Source: Euromonitor International's Global Consumer Trends Survey 2013

Note: Between 1,800-2,000 consumers in each market are surveyed



IKEA CHINA

Local FLAVOUR

Granular STRATEGY


INTRODUCTION

MARKET

POPULATION

ACCESS


CONCLUSION


47

Population Matters

POPULATION

Population

Size and growth

Age structure

Vital statistics

Urbanisation

Where do my target customers live?

Where will they live in the future?

Which age segment offers most

opportunities?

Is my target audience growing and will

it continue to do so?

Is it geographically dispersed or

concentrated?



48

Size and Growth: India and China Compared

POPULATION

247 million increase in the Indian

population to 2030

India



49

Size and Growth: India and China Compared

POPULATION

247 million increase in the Indian

population to 2030

50 million increase in the Chinese

population to 2030

Source: Euromonitor International from national statistics/UN

India

China



50

-10 0 10 20 30 40

80+75-7970-7465-6960-6455-5950-5445-4940-4435-3930-3425-2920-2415-1910-14

5-90-4

Change in millions

9.4 million fewer children

aged 0-9 years in

2030

45%

35-54 year olds as

a % of total

population growth

Age Structure

POPULATION

Population Growth in India by Age Group: 2012-2030




51

Vital statistics - births, deaths and migration - are the building blocks of population

change.

Growth driven by migration leads to a different

demographic make-up to a population driven by

natural increase.

Life expectancy impacts consumption trends and

varies dramatically from region-to-region and even

within a region.

Life expectancy at birth in Nigeria in 2014: 53 years

Life expectancy at birth in Chile in 2014: 80 years

Vital Statistics Are…Vital!

POPULATION

Average Fertility

Rates 2014-2030

Population Change

2014-2030

Japan 1.6 -8%

UAE 1.6 +25%




52

0 20 40 60 80

Angola

Ghana

Côte d'Ivoire

Senegal

Mozambique

Tanzania

Ethiopia

Uganda

% of total population

0 20 40 60

Angola

Ghana

Côte d'Ivoire

Senegal

Mozambique

Tanzania

Ethiopia

Uganda

% of urban population

Urbanisation and City Configurations

POPULATION

Urbanisation in African

Markets of the Future: 2014

% of the Population Residing in the Largest

Cities in African Markets of the Future:

2014

Source: Euromonitor International from national statistics and

www.citypopulation.de



53

Mexico City in Focus

POPULATION




54


POPULATION




55


POPULATION




INTRODUCTION

MARKET

POPULATION

ACCESS


CONCLUSION


57

Access All Areas

ACCESS

Access

Infrastructure

Internet

Partners

Retail landscape

Will it be difficult to get products to market?

Are consumers easily accessible for sales,

marketing and promotional activities?

Would a local partner facilitate market

entry?

Is the retail landscape modern or

traditional?



58

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

-

1.0

2.0

3.0

4.0

5.0

6.0

La

nd

are

a, ‘0

00

sq

. km

Qua

lity o

f in

fra

str

uctu

re, 0

-7

Quality of overall infrastructure Land area

Infrastructure Can Add Significant Costs

ACCESS

Quality of Infrastructure v Land Area: 2014-2015

Source: FAOSTAT/WEF Global Competitiveness Report 2014-2015.

Note: Quality of overall infrastructure is based on responses from an executive survey.

Respondents were asked ”How would you assess general infrastructure (e.g. transport,

telephony, and energy) in your country? 1 = extremely underdeveloped; 7 = well developed and

efficient by international standards.”



59

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

-

1.0

2.0

3.0

4.0

5.0

6.0

La

nd

are

a, ‘0

00

sq

. km

Qua

lity o

f in

fra

str

uctu

re, 0

-7

Quality of overall infrastructure Land area

Infrastructure Can Add Significant Costs

ACCESS

Quality of Infrastructure v Land Area: 2014-2015

Russia has weak

infrastructure

combined with

a huge land

area

Source: FAOSTAT/WEF Global Competitiveness Report 2014-2015.

Note: Quality of overall infrastructure is based on responses from an executive survey.

Respondents were asked ”How would you assess general infrastructure (e.g. transport,

telephony, and energy) in your country? 1 = extremely underdeveloped; 7 = well developed and

efficient by international standards.”



60

Sharing the Risks and Rewards

ACCESS

Tata Starbucks Ltd

• Launched in Mumbai and opened its

50th store in Chennai in July 2014

• In 2013, Tata Starbucks had a 2.2%

brand share in Chained Cafés/Bars,

way behind the market leader Café

Coffee Day

• Looking at moving into second and third

tier cities

• Its alliance with Tata has enabled it to

grow its business at a faster rate than

would otherwise have been the case

Go it alone Strategic

partnership Acquisition



61

0

5

10

15

20

25

30

% o

f to

tal re

tail

sa

les fro

m to

p 5

re

taile

rs

The Nature of Retailing

ACCESS

Concentration of Retailing Sector in Selected

Emerging Asian Economies: 2014

• Modern v traditional

retail sector

• Distribution challenges:

• Micro-distributors

• Direct distribution

Source: Euromonitor International from trade sources


Colgate CAMEROON

Distribution THREE-WHEELED MOTORCYCLES

500% INCREASE IN DELIVERIES


INTRODUCTION

MARKET

POPULATION

ACCESS


CONCLUSION


64

A Business Environment Fit for Purpose




Regulations

Corruption

Human capital

Is there a level playing field between

domestic and foreign investors?

Is the rule of law sufficient?

How can business beat corruption?



65

Mexico ranks 39th of 189 economies

6 days to start a business

11 days to import

85 days to get electricity

Nigeria is ranked at 170th of 189 economies

28 days to start a business

33 days to import

260 days to get electricity

Easy Does it


Source: World Bank Doing Business



66

Regulations can be an effective barrier to entry:

Financial cost

Reduced productivity

Opportunity cost

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

Mexico Turkey Brazil Indonesia China Russia India Nigeria

Regulatory Burden can be a Barrier to Entry


Regulatory Quality Index in BRIC and MINT: 2013

Source: World Bank

Note: Regulatory quality index captures perceptions of the ability of the government to

formulate and implement sound policies and regulations that permit and promote private

sector development. The index ranges between -2.5 and 2.5 with higher values

corresponding to better governance,



67

Corruption has an impact on:

Economic growth

FDI inflows

Business risk

A two-fold impact on business:

Subdues market demand

Supresses economic development 0.0 2.0 4.0 6.0

Russia

Nigeria

Indonesia

Mexico

China

India

Brazil

Italy

Turkey

USA

Germany

Corruption Costs


Corruption Perceptions Index in

Selected Economies: 2014

Source: Transparency International

Note: perceptions of the degree of corruption as seen by

business people and country analysts, and ranges between

10 (highly clean) and 0 (highly corrupt).



INTRODUCTION

MARKET

POPULATION

ACCESS


CONCLUSION


69

The four pillar model offers methodological clarity to emerging market selection:

The first pillar, market, incorporates the most fundamental concerns of any emerging

market strategy.

Many of the most important decisions that planners must make should be shaped by

the factors within the second pillar – population.

To Sum Up

CONCLUSION

The factors within the third pillar,

access, concern the realities of

market entry.

The fourth pillar, business

environment, incorporates the

practicalities of doing business.



70

Can you afford not to be in emerging markets? CONCLUSION


THANK YOU FOR LISTENING

Michael Pacurar

Global Director, Trade & Government

[email protected]

Raymond Clark

Development Executive, Trade & Government

[email protected]

http://blog.euromonitor.com/economic-and-consumer-insight/









SUCCEEDING IN EMERGING MARKETS - NASBITE

Documents

Transcript of SUCCEEDING IN EMERGING MARKETS - NASBITE