Summary

WINNING IN EMERGING MARKETS A road map for strategy and execution Summary

Juan Rene Serrano Juan Jos Parra Tadeo Abraham Tarazona Palma Javier Hidalgo Morgan International Market Analysis Professor: Eduardo Diaz March 03, 2011

Chapter 1: The Nature of Institutional Voids in Emerging Markets

The Institutional void of emerging markets holds the diffusion of skills, processes, and technologies throughout global markets that are resulting in a quickly closing of the gap between emerging economies and their more developed counterparts. The forecast potential, the investment environments and the institutional infrastructure are helping to support nascent market economies. To be fully develop its important to create infrastructure in the emerging market, like roads, bridges, telecommunication networks and all the necessary buildings to achieve the desired development. In develop economies, companies can depend on a variety of similar outside institutions to minimize sources of market failure, missing intermediaries are a frequent source of market failures. Institutional voids play a defining role in shaping the capital, product and labor markets, this means that if the source of the market information is unreliable and has an uncertain regulatory environment, with an inefficient judicial system would make foreign and domestic consumers, and investors reluctant to do business in emerging markets. The market failure is due to economic factors and development in emerging markets, also because transaction costs which offer one measure of how well a market works and shows the potential barriers to development. To solve market emerging failures its important to first gather information asymmetries and incentive conflicts between buyer and sellers that create the problem. And last, its possible to devise institutional arrangements that solve the failure.

Chapter 2: Spotting and Responding to Institutional Voids.

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This chapter shows us that the structural definition of emerging markets needs to equip managers with toolkits to spot and respond to institutional voids. Companies need the expertise of market research firms, for example, to understand customer preferences and then adapt the offering to raise the willingness to pay. For anyone interested in managing or investing in emerging markets, applying and spotting institutional voids with Market toolkit is a key first step. This toolkit analyze tree different types of markets, Product markets, Labor markets and Capital markets; by asking questions of the behavior of the consumers and their local regions, about how the law protect workers and the posture of local culture accepting foreign managers, and what is the behavior of the stock market in the local region and how reliable are information sources for performance of the companies. International voids in factor and output markets are shaped by the broader macro context of emerging economies. Politics, history, and culture affect the development, and function of institutions and the existence of institutional voids. To measure the importance of the political and social systems in emerging markets and their openness to investment and the flow of information is necessary the use of Spotting institutional voids toolkit relating to macro context.

Chapter 3: Exploiting Institutional Voids as Business Opportunities

In a market increasingly competitive and global is necessary to be in a constant introspection of possible areas of opportunity for business. For this reason both multinational and local companies, are looking to expand their markets based on their competitive advantage by innovating their business models, offering services that represent value to the consumer and as a result of these efforts end with a greater market share . One area that presents these opportunities is the intermediaries, which can be defined as the person or entity that links the demand for a product with the offer, which is an extremely important role in international trade. Therefore the perception of its functions has been changed completely, since previously it was regarded as a necessary evil as their presence was a cost to the producer of a product in concepts of rates and fees. But now and especially in this chapter shows the importance of the role of the same which provides a specialized service based on general knowledge of the industry and market, which is more convenient in cost issues in their application commercial transactions, that if the company develop the elements needed to fill the role of intermediary. For these reasons international companies, several firms have seen in this an area of opportunity and growth, especially in emerging countries like India, China, Russia to name a few, whose characteristics such as economic growth, population, make them attractive for various goods and services companies, which in turn needed intermediaries to maximize their resources in the introduction to new markets. To achieve these goals as an intermediary is necessary to analyze first the needs or voids that are in the markets, their characteristics, the core advantages of the company and the various alliances that could be performed with different companies branches of industry to provide better services in terms of quality and price.

Chapter 4: Multinationals in Emerging Markets

The importance of emerging markets is no longer a promise to become a reality, and beyond in the future of the majority of multinational companies, as implied by its nature these countries demand more goods and services which represents a wide range of business to business, so no wonder the positioning of the largest firms in countries such as China, India, Russia, Brazil, which according to projections are intended to have a constant growth rate in years come. Equally attractive as the market also presents many challenges for companies ranging from government policies, domestic competition, reaching the cultural aspects and consumer shopping. For these reasons it is important to consider the implications of the incursion into this market and even more interesting to analyze the different strategies that companies implement to succeed in such projects. For example, one of these strategies to address the gaps in emerging markets is the determination of the strategy to use, which is one of the most important and critical decisions as this will depend largely on the success of the introduction to market. In some cases in order to save resources, some companies try to adapt their business models were successful in a certain country, in order to work with some adjustments to the characteristics of a new market that it is true they have things in common as economic growth, are totally different social and cultural aspects. Another important strategy is that of deciding which is more suitable to compete alone, or through a strategic alliance, which largely depend on the firm's capabilities and resources with which has, as shown in the various examples presented in the book, each option taking strategy has its advantages and disadvantages, which is essential to know the target market has detailed the characteristics of it to based on this knowledge to decide what action to take. Which in turn is difficult to achieve in emerging markets due to the difficulty of collecting market data for the various constraints such as technological infrastructure or situations that occur in markets or first world countries. Chapter 5: Emerging Giants. Competing at Home

In this chapter, the author talks about how companies in emerging markets have numerous opportunities to grow national and internationally. They have an advantage, since they already confronted institutional voids that prevented them to from getting access to capital, technology and higher utilities at their home markets. In other words the already fought against their issues and debilities, and were able to overcome all of them. After, obtaining favorable positions on their home markets they are able to enter the global market in a more aggressive method. Some examples of companies that have taken advantage of their position at their home market and have been able to establish in many countries of the world are CEMEX (Mexico), Infosys (India), South African breweries and Chinas Haier Group. These are clearly examples of emerging giants because they are successfully competitive companies that come from an emerging market or economy. The author states that these companies have been able to grow more rapidly because their home markets are growing fast so that gives them an opportunity to exploit it. On the other hand there are multinational companies entering those emerging markets, so these companies have to be able to survive that competence if they want to become international. In order to respond effectively to institutional voids, emerging market based companies must implement strategic choices to respond to the following options; 1. Replicate or adapt; sometimes companies believe that replicating a model of a multinational company will work at their home market but sometimes it ends up paving the way for incoming foreign companies. What is recommended is that they develop a plan suitable for that specific market, understanding their needs. Adaptation is a disadvantage that multinational companies have because sometimes they are not willing to change the product or processes that the manage everywhere

2. Compete alone or collaborate; it is recommended to view multinational competitors as valuable partners, since we can learn and gain experience with that. 3. Accept or attempt to change market context; home market companies develop market infrastructure to fill voids. This gives them a competitive advantage since foreign companies sometime are not willing to do that. 4. Enter, wait or exit; multinational companies have an easy access to many other markets and to pay the cost of a mistake. In emerging market based companies is wise to know when to stop if the company is not going the right way.

Chapter 6: Going Global

It may seem that globalizing companies is the best idea ever, that it will bring mountains of cash and best of all profit, but what happens when it goes wrong, and how do you know if a company is ready to go global. Those questions are often asked by the CEOs and CFOs of local companies. This brings to the table what recourse do we have, what are our advantages in a foreign countries, how much is our risk and over all are we willing to take it? the answer is developing marketing data and research to know and have a good idea of what type of market are you entering and how are your prospect customers going to receive your product or service . Many big local enterprises have gone into financial crisis because they didnt know how to enter a foreign market and ended up losing big numbers of money. The best way to enter is search and developing skills our joint ventures to know what, how and when to enter.

Chapter 7: The emerging arena How can an enterprise increase sales, how can entrepreneurs make a business in a difficult and competitive market? Looking outside the box can always help , in this case refers to be a middle man , negotiations between companies and two or more countries can help a company grow as well of entrepreneurs , becoming a link between enterprises can help the three parties . Most companies in the U.S have Joint ventures with Asian companies that manufacture and adapt to its supply chain. Working this way can help with legal, cultural and economic problems that going wrong can cost a lot of money and time. Strategic Choice Replicate or adapt? Compete alone or collaborate? Accept our attempt to change market context? Enter, wait or exit? All of these questions are the yes or no answer between entering waiting our exiting any business deal in foreign markets.