5 Advantages of Doing Business in an Emerging Market

An emerging market is an economy that is trying to shift from a traditional economy that majorly comprises of agriculture and export raw materials to a more modern, advanced, and industrialized economy.

These are the markets of the developing countries that have lower per capita income. Their economy is highly volatile because of all the political and social instability that goes on and is extremely vulnerable to the slightest increases in currency or prices of commodities.

From the characteristics that define the emerging markets; lower per capita income, high volatility, and being extremely vulnerable to changes in currency and prices of commodities, one would think that multinational corporations would avoid considering them (emerging markets) to expand their business. But the truth is quite the opposite. As much challenging and risky they can be, emerging markets come with their opportunities and advantages. Some of these advantages are;

Cheap Labor

As mentioned, the emerging markets are not a completely industrialized economy yet but they are on their way to becoming one. For this, they are using a lot of their land to improve the infrastructure of their cities. This leads to a lot of people losing their jobs or source of income as they still are agrarian societies and the majority of people are farmers by profession. However, on the plus side, this also means that these markets have tons of labour available.

The young individuals of these countries are also developing new skills and talents. Multinational corporations can take advantage of all this and compile an incredibly hardworking and dedicated workforce for them. As not many career opportunities are available in their local companies, so these talented and educated individuals are waiting for such opportunities to come by. This will help them gain experience and improve their standard of living.

High Demand

Emerging markets might have a lower per capita income, but with the help of industrialization, their leaders are trying to increase the quality of life for their people. The number of people that belong to the upper-class category of social classes. These people have tons of money to spend but not enough luxuries to buy. Bringing your business in an emerging market and providing options to people that were previously unavailable to them is going to be extremely profitable. This can also result in your brand being the status symbol for the people of that country as you might be the option available to them.

Less Competition

As mentioned previously that there are not many luxury options available to the elite people of an emerging market. And if you become the first and sole provider of a product or service in such a market then you can capture a significant share in the market.

This also means that there is no, or less, competition to worry about. Being the market leader also makes it a lot easier to build your brand and earn customer loyalty. You can be as creative and innovative with your business without worrying somebody else replacing you.

Low Costs

If you are a small business and you are thinking about tapping into the global market then emerging markets might be the safest place to start. This because these markets are still going through major developments. Huge corporations take up the responsibility of building roads, plants, and factories and this allows the small businesses to run their businesses without incurring huge amounts of setup costs.

They can start their business even in the smallest of the shop and sell their product at affordable prices. This will help them attract a wide customer range as these options are more convenient to the people of emerging markets. Furthermore, they can invest their time in building good relationships with their customers.

Diversity

If we look at businesses in general, then we will notice that it not the best idea to keep your business limited to one region or country and not explore other markets. This is riskier than not investing in an emerging market. Your business will be highly sensitive to even the slightest of economical or financial problems going on in that country. As the famous idiom says;

“Don’t put all your eggs in one basket.”

To know more about the characteristics of emerging markets, READ : Emerging Markets.