Look Before You Leap!Doing Business in Emerging Markets

Presented By: Li Li, Edoardo Schillaci & Ami Thomas

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Success or Failure You Choose

Emerging Markets are different from developed markets in a variety of ways. The most prominent being the existence of institutional voids. This case discusses how institutional voids can be a opportunity, or a hindrance for companies entering emerging markets. To encourage success the case gives us a framework for evaluating markets and highlights the importance of implementing an adaptive strategy to compete and thrive in emerging countries.

Look Before You Leap! Doing Business in Emerging Markets Brazil flag: http://www.wallpaperup.com/52031/brazil_flags.html

What is an Emerging Market? An Institutional Void?● The term emerging markets was coined by Antoine W. Van Agtmael in 1981.

● A lot of economists define a country as “emerging” only by looking at some indicators like the GDP. This is not the best way to define an emerging market.

● Fortunately, Harvard Business School Professors Tarun Khanna and Krishna G. Palepu in their book Winning in Emerging Markets, coined the term Institutional Voids. The term, Institutional Voids, refers to the absence of market intermediaries like market research firms, or credit card systems to efficiently connect buyers and seller.

● The term was coined to explain the market ecosystem companies are dependent on, and the fact that the institutions that make up this market ecosystem are either missing or not functioning as expected in emerging economies. They are referring to labor markets, macro markets, product markets and capital markets in general.

Look Before You Leap! Doing Business in Emerging Markets Source for Chart: Case Study

Emerging Market vs. Developed Country Market

● The best way to distinguish emerging markets from developed markets is the intensity of Institutional Voids.

● Four Dimensions help identify an emerging market. Government, Society, Security and Economy.

Look Before You Leap! Doing Business in Emerging Markets

Source for Chart: Case Study

Before You Leap! Four Ways to Evaluate a Market

How do you reach & evaluate your customer?

Is there a deep network of suppliers?

Efficient inventory Management

Look Before You Leap! Doing Business in Emerging Markets

Product Market Labor Market

What are restraint that company will face in labor market?

Does a deep pool of local management talent exist?

Will company have adequate resources to control costs?

How can company get reliable resources?

Capital Market Macro Context

What restrictions does the government place on foreign

investment?

Do the laws articulate and protect private property rights?

Information Derived from Case

Concepts in Action! Doing Business in China

Look Before You Leap! Doing Business in Emerging Markets

China is outperforming the rest of the Emerging and Developing parts of Asia

Chart Source: World Economic Forum, Global Competitiveness Index, 2014-2015

Yum! Brand! (A Focus on Product Markets)

Look Before You Leap! Doing Business in Emerging Markets

Strategy:

KFC "would not be seen as a foreign presence but as part of the local community"

Brand awareness:

“You can’t make it yourself and competitors can’t get close” -Marketing strategy

Quality of products:

What does the KFC taste mean to each audience?

KFC Photo: https://s-media-cache-ak0.pinimg.com/736x/b6/b8/0a/b6b80ac3aa2ae6d25ec25c039205d094.jpg

Product Market Evaluation is about how to effectively reach the

consumer

Hiring the Right People! (A Focus on Labor Markets)

Look Before You Leap! Doing Business in Emerging Markets

KFC’s Strategy:

Hire local managers

Chinese Market Characteristic:

Absence of individualism

A Highlight of KFC Culture in China:

Employee -- Employer relationship

KFC employee “High Five” photo: http://images.china.cn/attachement/jpg/site1007/20080922/0011111fa1560a417e3c13.jpg

China vs. Google (A Focus on the Macro Context)

Brief History:

January 2006 Google creates Google.cn (Censored site)

Mid December 2009Google suffers a Cyber Attack which reportedly

originated from China

January 2010 Google announces it would stop censoring search

results in China

March 2010 Google stopped censoring their search results and

redirected all traffic to their new google.com.hk which was based in Hong Kong

In a Macro Environment:

“Politics, history and culture affect the development, form, and function of institutions and the existence and

persistence of institutional voids”

Look Before You Leap! Doing Business in Emerging Markets “Cloud” information source: Case StudyTimeline derived from information at: http://googleblog.blogspot.com/2006/01/google-in-china.html , http://googleblog.blogspot.com/2010/01/new-approach-to-china.html , http://googleblog.blogspot.com/2010/03/new-approach-to-china-update.html

Why Google and China didn’t work

“Google entered the Chinese market with the intention of changing the way the country worked. However, China’s political system was deeply rooted and would not be undone by the efforts of one company.” (Our group opinion)

Look Before You Leap! Doing Business in Emerging Markets Macro Question and Business Implication from Case Study

What Can We Learn?

Macro Question to Ask: How vibrant and independent are the media?

Business implications: What other stakeholders does my business need to consider?

Top Reasons

-Arrogance

-Not enough adaptation

-Inaccurate Measurement of Institutional Void and Culture

Responding to Institutional Voids

Look Before You Leap! Doing Business in Emerging Markets

Can I Use My Current Business Model or Does it need to be Adapted? What is the best way to reach

my consumer?

Should I operate within the parameters set by the institutional

void, or try to fill it myself? Is this the best time for this market? Or should I consider another?

Chart Source: Case Study

The Importance of Strategy

Look Before You Leap! Doing Business in Emerging Markets Chart Source: Case Study

Persistent Voids usually require

anchored strategies

Look Before You Leap!Doing Business in Emerging Markets

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Thank you for listening!!

Questions??