Emerging markets are starting 2016 in a rough patch. According to Bloomberg, global investors and companies have pulled over $735 Billion out of emerging markets in the past year. Unfortunately for them, predictions aren’t forecasting any signs of improvement. The Institute for International Finance predicts that up $350 Billion will be withdrawn from developing countries in the coming year. A slump in commodity prices, rising American interest rates, as well as skepticism over China’s slow economic growth, have driven investors to place their capital elsewhere. “We’ve seen massive outflows from emerging markets to the benefit of Europe and Japan,” said Ibra Wane, a Paris-based senior equity strategist at Amundi Asset Management.
As an investor or entrepreneur looking to invest in emerging markets, current economic forecasts for these markets can seem a bit deterring. Fear not though, venturing into new markets can always be a bit scary for investors, especially when predictions seem so bleak. Successfully breaking into emerging markets requires a substantial amount of due diligence, and a true understanding of the economic landscape you’re venturing into. Entrepreneur.com discusses some very important tips and strategies that can help entrepreneurs navigate through unfamiliar waters. We will be covering some of those strategies in this article.
What is Consumer Consumption like in these Markets?
If you are introducing a new product into an emerging market, it’s important to study their consumer culture. Is consumer consumption strong, steady, or weak ? Is the economy generally strong enough to stir consumerism, or does it still lack that capability. Investors should look to conduct business in economies that don’t hold gross economic disparities between rich and poor, and in markets with a relatively stable middle class. This ensures sufficient purchasing power exists within these nations. If you are considering investing in countries that lack these capabilities, look to engage in frugal innovation, and cost effective products as Entrepreneur.com suggests. Markets with low-purchasing power tend to prize innovative products such as the bicycle powered phone charger.
Identify Key Trends in that Market’s Evolution
What kind of progress has your targeted market made in the past few years? What are trends that have driven and influenced progress in that market? The innovations in communication technology have had evident changes in our consumer market. Surprisingly, those same innovations have also had similar influences over emerging markets. It is important for entrepreneurs to identify possible market movements, and seize those opportunities. It is equally as important for entrepreneurs to identify possible pitfalls, learned from previous trends.
Look for Strategic Partnerships and Operation Channels in your Venture
It is very important to conduct business with individuals who are more familiar with the market than you are. In order to establish an inroad, or presence in the targeted market, it is vital to partner with existing enterprises. Consumers in emerging markets are surprisingly loyal to existing brands, therefore partnering with existing enterprises can help safeguard against consumer skepticism. This strategy also helps mitigate cultural, and linguistic barriers that foreign entrepreneurs are forced to face. Of course, do your due diligence to ensure your future partnership is trustworthy, and professional.
Investing in emerging markets can be tricky business. However, if done right, it can open new doors and propel your enterprise to new heights. If you liked this post, shift through my blog for more. Thanks for reading!