Breaking Into a Volatile (But Rewarding) Emerging Market

While emerging markets can be a little unstable, they can also offer a plethora of opportunities. Entrepreneurs just need a little bit of strategic thinking to identify these circumstances.

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By Emily Buchanan

Opinions expressed by Entrepreneur contributors are their own.

Every economist has an opinion on the economic viability of emerging markets -- and those opinions rarely correlate. Emerging markets are shape-shifting creatures and this lack of fix creates tension among investors and businesses alike.

However, the business opportunities in BRIC nations (Brazil, Russia, India and China), are copious and companies that have enjoyed global success know that small actions can make a huge difference.

As such, business owners shouldn't let the recent market instabilities put them off emerging economies. A little strategic thinking will allow entrepreneurs to identify the market opportunities in these volatile but rewarding economies. It just takes a little extra acumen.

Here are a few bits of advice to get you started:

Understand the market. In the first quarter of the year, Federal Reserve tapering caused bearish investors to panic, removing a net total of $58.2 billion from global assets. As is the way with economics, this caused mass hysteria and many economists feared a reoccurrence of the late '80s Asian Crisis. However, crisis talks were called off when currencies stabilized. And while that is good news for international economices, the Ukraine-Russian dispute is putting a strain on matters. Investors have pulled out of Russia but have chosen to reinvest in other emerging markets, benefiting Brazil, Romania, Turkey, Colombia and Hungary.

Related: 3 Surprisingly Hot Global VC Markets That Are Getting Even Hotter

This renewed stability (for the most part) comes at the same time as Coca-Cola announces exponential growth in key emerging markets. According to their findings, Brazil grew 4 percent, Russia and India both 6 percent and China surged ahead at 12 percent. This means that currently, most of Coke's revenue and profit is generated internationally, rather than in the domestic "developed" market of the U.S.

Although Coca-Cola enjoys a super corporation status, these figures shine a light on the business potential of emerging economies. These countries are fast becoming the drivers of global growth and regardless of domestic investors and their unwillingness to diversify their portfolios, GDP cannot be overlooked.

After all, China's economy has grown seven percent faster than the US every year since 1996, and yet its stock market has underperformed by an average five percent per annum, according to Andrew Miller of financial-service company Barclays. The stock market may influence consumers and their business confidence, but its effect on the economy is not absolute, and with investors cautious after the sell-off, now is the time to expand your business. But how should you go about it when the market is so volatile?

Get grass roots. Your first port of call is to assess your product or service from a startup level. You might be solving a problem in your domestic market but does that translate abroad? If you're trying to sell high-end gadgets in a country with a low socioeconomic status, it's going to be more than tough. You need to have a firm grasp of the market you're entering and then tailor a business expansion model to that specific destination. There is no "one size fits all."

As Matthew J. Eyring et al writes at the Harvard Business Review, "We have seen the opportunities of the future on a street corner in Bangalore, in a small city in central India, in a village in Kenya—and they don't require companies to forgo profits. On the surface, nothing could be more prosaic: a laundry, a compact fridge, a money-transfer service. But look closely at the businesses behind these offerings and you will find the frontiers of business model innovation."

Related: Global Startup Trend for 2014: Consider Brazil

Find the middle market. Increasingly, BRIC nations are home to a growing middle class whose basic needs are not being met. While existing companies cater to the opposite ends of the income spectrum, very little feed the middle market -- representing a significant business opportunity for savvy entrepreneurs.

Find a problem in this market and solve it. It's back to business school basics, but it's paramount to success. "Many companies have already been lured by the promise of profits from selling low-end products and services in high volume to the very poor in emerging markets," Eyring continues.

However, this is not a sustainable business model. Treat each expansion as a startup and identify to a genuine, territory-specific market need.

Live local. You're never going to understand a new market unless you immerse yourself in the culture. While relocating to a different country and effectively becoming a business expat might seem like an extreme strategy, you'll be able to identify business opportunities, get to know your new workforce and establish your business in a much more hands-on way.

Nic Brown, global head of distribution at Aetna International, writes, "The key to harnessing a new market is to get to know its people, its history and its complex cultures. There really is no better way to achieve this than to live like a local for an extended period of time. To embrace the expat lifestyle and all that it entails. That way, business decisions will be grounded in direct experience."

Hire local. The key to economic growth is sustainable work opportunities. Therefore, by manufacturing products locally and hiring locally, your business could aid economic growth and in turn, the viability of your own business expansion. Benefit the local community and that community will in turn provide reciprocal benefit.

Jeffrey A. Joerres, chairman and chief executive of ManpowerGroup writes about the importance of hiring "someone who is culturally attuned to the team and emerging market business they lead, who spends time exposed to an established system and absorbs effective practices so that they can quickly adopt these as appropriate in their emerging market for lasting impact." Hire local, and you'll be far better equipped to deal with a potentially challenging marketplace.

Related: Tips for Investing in Emerging Markets (Infographic)

The emerging world as a whole has grown 3 percent per annum faster than the developed world over the same period, and has contributed most to global growth. As we've established, these markets are volatile and there is a level of risk involved in business expansion.

However, emerging markets have large populations, an increasingly young middle class and a GDP that is growing much faster than developed economies. There is huge potential in these marketplaces and, provided you enter into them with a tailored business model and you are willing to embrace the market with all you've got, it could be the best business decision you've ever made.

Related: Women Entrepreneurs Becoming Force in the Developing World

Emily Buchanan
Emily Buchanan is the senior digital editor at Further, a marketing company based in the UK.

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