3 Emerging Markets Entrepreneurs Should Be Watching and How to Approach Them
Emerging markets can sometimes spook entrepreneurs. China’s economic slowdown, anemic performances in Brazil and South Africa and the deteriorating socio-political situation in Turkey have prompted would-be business leaders to reconsider whether the opportunities there are worth the risks.
But as these noteworthy markets have faltered, lesser-known ones offer comparatively stable economies. Here are three promising countries that offer entrepreneurs inviting business climates and rich opportunities:
The Philippines has strategically positioned itself as an investment alternative to China. Foreign direct investment to this Southeast Asian archipelago doubled in 2014, and its economy grew by 5.6 percent in the second quarter of this year. China’s economy lagged to just 7.4 percent growth last year, giving the Philippines the opportunity to win business away from the superpower.
Entrepreneurs will find a growing market, low startup and manufacturing costs and favorable business policies among the country's many draws. The 2014 Philippines-European Union Free Trade Agreement, which eliminated tariffs on roughly 6,000 EU-bound exports, further buoys its position as an exciting economic hub.
Though it’s still transitioning from a frontier to an emerging market, Vietnam should be on any list of up-and-coming business prospects. Vietnam’s membership in the World Trade Organization and its competitive labor costs are key drivers of the country’s development. International entrepreneurs benefit from Vietnamese consumers’ burgeoning spending power, illustrated by the 8.3 percent surge in retail sales during the first half of 2015.
Foreign direct investment in Vietnam increased 60 percent year over year in the fourth quarter of 2014 alone, and corporations such as Intel, Ford, Samsung and Toyota have a presence there. Vietnam is ripe for investment if foreign business leaders are willing to capitalize on the moment.
Morocco often gets overlooked in roundups of “Africa Rising” favorites, but it’s an exciting frontier economy. Its strategic location makes it a gateway to both the European and Mediterranean markets, and steady reforms helped reduce the budget deficit there from 7.4 percent to 4.9 percent between 2012 and 2014. Those measures will ensure stability in coming years.
With North Africa still reeling from the Arab Spring -- and sub-Saharan Africa’s economic acceleration dragged down by pockets of lethargy, such as South Africa and Zambia -- Morocco offers a unique alternative. Casablanca ranks as Africa’s No. 2 financial center behind only Johannesburg, which indicates that it’s a lucrative, long-term bet for enterprising founders and entrepreneurs.
Strategizing to enter one of these markets requires out-of-the-box thinking and a deep understanding of the region. Entrepreneurs who plan to start or expand businesses in a frontier or emerging economy should heed the following recommendations:
Know your options. How one enters the market depends entirely on what makes sense in that country. The Danish pharmaceutical company LEO Pharma sold its products through local partners in Morocco before establishing a ground presence there in 2001. Savvy moves like this enable entrepreneurs to set their antennae on the market while minimizing exposure to potential volatility.
Adapt to local tastes. Business leaders must consider how their products will fare among local consumers. Burger King expanded its vegetarian menu options to cater to Indian diners, and KFC created Ugali nuggets based on a staple Kenyan dish. Favorable market conditions will only take foreign companies so far if they don’t know what customers in these countries want.
Plan for the long term. Entrepreneurs who succeed in emerging and frontier markets possess the agility to respond to rapidly changing dynamics. And they need a keen eye for predicting which industries will be profitable down the road. For instance, Bangalore, India, is fast emerging as a global tech and startup hub, and 40 percent of Kenya’s GDP is driven through the mobile payment platform m-pesa. Savvy founders can spot such openings and strategize for them several years out.
The nature of emerging and frontier markets is one of high growth and dynamic evolution. Because these countries are often recovering from violence or political instability, development can be volatile and doesn’t always occur linearly. But entrepreneurs who are willing to brave initial risks have the chance to reap exceptional profits as the markets stabilize and gain momentum.