Additionally, while multinationals continue to seek out these attractive emerging markets, a new report shows many still struggle to compete with powerful local businessmen.
Many of these markets are dominated by able and ambitious local businessmen that not only have far superior knowledge of the market and better language skills, but also stronger government and local ties. They are often able to better negotiate, which can help lower costs, and can sometimes be seen as favored over their multinational rivals.
Despite China’s slowing growth, it still remains their most important emerging market, followed by Brazil and India. It’s clear why major companies want to enter developing regions. Not only is labor cheap there in comparison, but emerging markets are now responsible for nearly 40% of global GDP and an even larger share of GDP growth.
But the picture is not all that rosy- A survey information recently released by Boston Consulting group (BCG) based on interviews conducted with C-suite – executives (of multi-national organizations that have either ventured/ or in the process of entering the BRICs foray) reveal that, 87 % don’t believe that they have what it takes to succeed against niche competitors in developing markets. Importantly, these C- suite executives were from US, Canada, Western Europe and even Asia.
Yet when BCG asked executives to assess the relative importance of 13 capabilities in emerging markets and then evaluate their companies’ actual performance against those dimensions, companies reported disappointing findings.
As a Business Enterprise Strategist, having led development of more than 1200 drug products currently being sold in 65 countries worldwide, including BRIC, I thought of taking this platform to share few of my experiences here-
Let’s take example of China- A pharma/ biotech company selling Type 1 vaccines, gets entry into China only if the product is locally manufactured. Therefore, enterprise strategy should necessarily be based on either creating a manufacturing base in China or establish a JV with a local Chinese company.
Furthermore, new entrant organizations having strategic alliance with local Chinese companies get better tax and government benefits as compared to wholly owned enterprise.
Another e.g. involving India & Brazil - In India, there is a huge need for compliance to different licenses. The procedure for application & approval of these licenses are pretty well laid out, But, execution of those procedures at government offices is extremely poor. For e.g. The average wait time to receive a permission to conduct bio-equivalence study lies anywhere between 12- 18 months. Similar license scenario exists in Brazil too. Importing even an excipient into India or Brazil is a big hassle, unless a well-thought of procurement design plan is in place.
Yet another example - Most of BRIC countries expect in-coming foreign companies to manufacture locally... But what is “local manufacturing” is defined differently in different countries within BRIC !
This clearly amplifies the point- if corporates wish to expand into BRIC, they better understand the bricks & mortar of what builds, works and stays in BRIC countries!
Are you ready ?
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