Entering emerging markets 1 st lesson

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Entering emerging markets 1 st
lesson
EMERGING MARKETS who are they?
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BRICS; Brazil, Russia, India ,China, South Africa
BRICI; BRIC + Indonesia
STIM; South-Africa, Turkey, Indonesia, Mexico
N11; Bangladesh, Egypt, Indonesia, Iran, South
Korea, Mexico, Nigeria, Pakistan, Philippines,
Turkey and Vietnam
• TICKS ; China, India , Taiwan ,Korea
BRIC (Russia ,Brazil ,India ,China
• In 2004 China was representing 13% of the
world growth and the rest of BRIC 9%, with a
quite similar growth rate.
• In 2013 China was representing 29% of the
world growth and the rest of BRIC 7%
Emerging markets actual problems
Emerging markets actual problems
• Less growth than in the past
• Big Debt , generally in dollars, with a strong
dependance from the raw material at least for
many countries ( Iran , Arabian Gulf ,Russia,
Venezuela , Brazil ,Nigeria ,Kazhakhistan ,
Angola...)
Characteristics and elements to be
taken in consideration
CHARACTERISTICS
• The total population is 60% of the global one and
steady growing
• The population is younger than in developed
markets >Technology impact
• In general fast urbanization
• The “trigger point” of consumption is around
2000- 3000 dollars
• In China, India, Indonesia, Malaysia, Thailand the
people with an income over 3000 dollars have
grown by more 40% between 2010-2015
THE BIGGEST GROWTH OPPORTUNITY
BY 2025
The annual consumption will be $ 30 trillions
In 2010 has been 12 !
Developed countries will be $ 34 trillions,26
in 2010
Analysis of the main indicators
• PIL, PIL by inhabitants and their growth
• Social demographic split (by age, by income)
• Geographic repartition of the population by area ,the
split between urban and rural (China vs. India)
• Dimension and growth of the medium class
• Different cultures
• Duties and laws on the different products
• Political stability
• Attitude of the government on the international
companies.
• Protection on the intellectual property
ANALYSIS OF THE MAIN INDICATORS
• Dimension of the market and is potential .
• Import duties and the regulations between the
countries
• Infrastructures
• Distribution (traditional or modern )
• Logistic
• Advertising costs (taste imprinting )
• Availability of distributors and suppliers
• Availability of skilled resources and their costs
IN WHICH COUNTRY
• The biggest countries like China , India, Russia,
Brazil…are in fact countries with different
cultures, level of income in the same country
and each area can be considered different
• In China the consumers in the three tiers
cities are , at least for the moment, more
willing to buy local brands than global brands
CHINA
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Dimensions: 9.596.961 Km
Population:1.367.485.000 inhabitants (2014)
Density:142,5 hab/km
Climate: extremely divers, tropical in South and
sub arctic in North
56 Ethnics, Han 92% of the population
$ 19,51 trillions (2015 est.) n.1 in the world in
term of PPP ( Purchase power parity)
Pro capita income 14.300 $ ( 2015.est)
First exporter in the world
CHINA
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Strong Growth also in term of income pro capita
Strong urban population, actually 55,6%, in 2040 70%
Political stability
Good infrastructures (at least for the moment
,problems with the growth of the cities )
Consumer confidence high but decreasing in 2016
Large number of skilled human resources
Modern trade predominant 62%
City clusters
AFRICA
• 1,070 Billions people ( Asia 4,250 Billions
people)
• 2000 dialects
• 30,415 millions Km ( Asia 43,810 Km )
• 35 inhabitants/Km (97 inhabitants /km )
• Very rich in natural resources (10 % of the
world wide oil, 40% of the Gold ,80-90% of
Chrome and platinum )
AFRICA ( CONT)
• Rural 60%, Urban 40 % within 2025 50% urban
• Countries are very different
• Strong Growth of revenue’s ($ 800 billion’s by
2020) mainly coming from the Distribution to
the consumer, Telecommunications, Bank and
Business link to the infrastructures,
Agricultural and natural resources.
• The working population is growing by 2,7%
per year ( 1,3% Latin America,1,2% SE Asia)
AFRICA (CONT)
• Very young population, 50% under 20 years old
• Optimistic about the future 84 % thinks that it will be
better ,with the exception of the North Africans
• By 2020 the African households which will have
discretionary income will rise from 85 million up to 130
million
• The big increase will come from the households who
have more than $20,000
• Urban spending is increasing twice as fast as rural
spending
• The mobile phone penetration has reached 89%
Africa Challenges
• Political Instability ;on 54 nations only 10 cinsidered
totaly free ,22 only partially.
• Infastuctures totally inacceptable,high costs of
transport ( 7times higher than Brazil and Vietnam) .
• Modern distribution very low ( less than 10% of the
total )
• Consumption different in the different countries and
different approach to the brands.
• Informations reliable not realy existing
• Good local companies with good market shares
Successes
• At least 400 companies have a turnover over 1
billion in Africa
• Coca Cola ,P&G ,Unilever have very good
market shares in many product categories
• Need to look in depth and be very selective
about the markets to choose
• Focus in some cities or cities clusters
• Within 2025, 60% of the consumption will be
generated by only 20 cities
Success
• Adapting the products?( Ariel case or Sab
Miller…)
• To create a very good route to market which
can be different by country.
• Right timing
• Right persons able to work in an informal
business environment. Training of the local
people is important.
Mexico
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Surface; 1.964.000 Km
Population; 121.700.000
Median age ;27,6
Urbanization ; 79,2%
GDP ,2.22 $ trillion (12) (P.P.P.
GDP pro capita $18.500
Mexico
• In the last three decades transition from a
commodity and agricultural based economy to
one dominated by manufacturing and services
• Firmly situated within North- America supplychain.
• Strongly involved in the Trans-pacific
Partnership ( TPP ) and Pacific alliance.
Mexico
• Mexico boasts free-trade agreements with over
40 countries.
• Trade to GDP ratio who measure the economic
openness is over 60% surpassing US, Brazil and
China.
• Strong growth of the middle class who are
confident about the future ( +43 millions people
since 2000, 34,7% of the total population in
2018)
• The consumption of Middle Class will represent
42% of the total by 2018.
Mexico
• Reforms are needed in order to mantain a
growth of 2- 2,5%. > positive confidence about
the future.
• - labor market
• - investments in the energy
• - improve the effiicency of the public services
• People will spend more for Healthier products
• Consumers will buy more in modern trade
CORRUPTION INDEX
INDIA MAIN FACTS
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Climate ; from tropical monsoon to temperate in North
Population 1.251 .700 ( 2015 July est. )
Median age 27,3
Average growth since 1997 up to 2012 7%
Growth rate 3,2% ( 2013 est.) 7,3% estimation in 2015
Public debt 51,7%
GDP 8.027 Trillions $ (4) (P.P.P.)
GDP pro capita 6.300 $ ( 2015 est 158 country)
32.7%urbanisation
INDIA MAIN FACTS ( CONT.)
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Deficit ; 5,7% ( 2013 est.)
Agriculture 16,1% of GDP , 49% of workers
Industry 29,5% of GDP , 20% workers
Services 54,4% of GDP with 31% of workers
29.8% poor people
Gross national saving 33.7% of GDP (31)
Inflation rate ;9,6% ( 2013 est)
REFORMS NEEDED IN INDIA
1) accelerating the jobs creation
• 27 millions in manufacturing
• 40 millions in services
• 50 millions in construction
• The farm jobs will represent 37% of the work
force in 2022
REFORMS NEEDED IN INDIA
• Accelerate critical infrastructure for power and
logistics
• Reduce the administrative burden on business
• Remove tax and markets distortions
• Rationalize land market
• Take phased steps to make labour markets
more flexible
REFORMS NEEDED IN INDIA
• Help poor workers build skills with
government-funded mechanisms
REFORMS NEEDED IN INDIA ( CONT)
2) Raising farm productivity from 2,3 T per hectare
in 2012 to 4.0T
3) Increasing publics spending on basic services ;
energy ,health-care.infrastucture
4) Making basic services more effective ( from 50%
to 75% )
CHARACTERISTICS
• There are big differences between the
emerging countries (infrastructures,
distribution, duties, laws…)each market has is
own identity; China and India case
• The markets of the emerging countries are,
generally, big in term of population but low in
term of consumption pro-capita
• A complex array of forces drive growth
Why to enter in the emerging markets
WHY TO ENTER IN EMERGING
MARKETS
• A company need’s to increase turnover yearly
( the productivity is growing by 2-3% ) and
decrease the risks
• Growing economies ( in general)
• 60% of the global population is partcipating to
the growth
• The consumption is growing strongly
Why to enter in the emerging markets
• To learn to compete with the new companies
created in the emerging markets
experimenting also new business models.
• The rules of success have not changed they
are the classic one’s
• - understanding the consumers
• - build economies of scale
• - Offer/design products in line with the price
points of the different segments
THREATS OF THE EMERGING MARKETS
THREATS OF THE EMERGING
MARKETS
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Different cultures
Protectionism latent
Fast changes (of the law ,the consumption ..)
Big differences between the markets
Specific products in many cases needed
Strong local competition
Scarcity of the information on the consumer
Modern distribution not always present
Political instability ( at least for some areas)
IN WHICH COUNTRY? ;FIVE STEPS
• In which countries to focus the analysis
• Analysis of the main indicators of the prechosen countries
• Analysis of the demand
• The competition; structure and dynamics
• Internal analysis to the company
Analysis of the main indicators
• Depends on which categories of products is
your business;
• - industrial products
• - consumer products ; high-mdlle or low end?
• Two kind of approaches;
• - the contribution of each country at tha
global development
• - to look at the big block of consumption
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