Only Fools Rush In

Matthew Harrison, B2B International’s Director of International Operations, was featured in Marketing’s recent special issue on emerging markets.

Drawing upon his time spent working in our China office and using his extensive experience gained through managing research projects in such far-reaching geographies as Russia, Sri Lanka and Tanzania, Matthew offers invaluable advice to Western companies looking to establish or build a presence in any emerging B2B market.  The full published article is as follows:

Some years ago, the chief justification for Western companies entering emerging markets was to establish low-cost manufacturing operations.

However, in the past five years there has been a revolution in strategy as the purchasing power of emerging economies has grown and these companies have now shifted their focus from supply to demand.

The casual observer watching a Muscovite sip a Starbucks cappuccino could be forgiven for thinking that customers in developing markets want Western products in Western packaging, promoted in a Western style at Western prices.

While many Western brands have developed a cachet across the developing world, the real picture is more complex, particularly in B2B markets. There are six factors that must distinguish B2B marketing in emerging markets.

The first is the importance of conveying higher product quality. In developing markets, companies’ product requirements often place less emphasis on product durability and quality of materials than in Western countries, putting greater importance on a lower cost. This is a huge challenge to Western companies seeking to enter the market, as they may find it hard to convey the value of the technical superiority of their product.

Second, when it comes to the services associated with a product offering, buyers in emerging markets are frequently as demanding, if not more so, than Westerners. For example, branches of Subway in China often take telephone orders for their sandwiches, and deliver these free of charge to customers’ homes or workplaces. A service such as this would be seen as extravagant in the West, but is often a basic requirement in Beijing and Shanghai, and no economic value is attached to it.

The third factor is the importance of local presence. Western companies entering developing markets often assume that the prestige of their brand excuses them from establishing a local presence. This is not the case. While customers in developing countries may be willing to pay more for the quality, prestige and technical know-how of an established Western company, all these advantages must be in addition to, not instead of, the basic requirements of spare-parts availability, access to technical support and face-to-face contact with local-language speakers.

Then there is promotion. If a Western brand can deliver on its promises, its name and values can prove a huge advantage and allow extremely large margins to be achieved. This is particularly true in consumer markets, where products such as luxury clothing and perfume brands frequently collect higher premiums than they do in the West.

In B2B markets, Western brands carry a particular weight if they can boast international accreditations such as ISO or a prestigious client list. These demonstrations of a company’s aptitude are often vital.

Fifth, relationships are key. As developing markets open up, buyers are only gradually becoming comfortable with dealing with people and companies they don’t know. Relationships are widely used as a substitute for brand when it comes to verifying provenance. Most B2B offerings also involve repeat purchases or after-sales support, and this makes attendance at events, face-to-face contact and local language capability essential.

Lastly, market research is vital. This is commonplace among Western companies, and the necessity of obtaining independent information is even more critical when it comes to operating in foreign markets. Not only do many Western companies lack insight into the developing markets, but cultural barriers and a lack of familiarity between managers in different locations can often mean that the exchange of information within international companies is wanting.

The most successful multinationals conduct frequent research across geographies, challenging their own thinking as well as the flow of information within their companies.

More of Matthew’s white papers on developing markets are available on our website:

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