Care needed when engaging emerging markets

Care needed when engaging emerging markets

While Emerging Markets are leading the world out of recession, New Zealand businesses need to be well prepared and targeted before they engage with these markets, according to Peter Sherwin, a leading New Zealand business adviser for accounting firm Grant Thornton New Zealand.

Commenting on a recent international survey of 7400 chief executive officers from 36 countries, Sherwin said that business leaders in emerging markets were vastly more optimistic about the prospects for their country’s economy than those for more mature economies.

“A balance of 57% of respondents from emerging markets were optimistic about their country’s prospects in the year ahead compared with only 2% in more mature economies.

“The survey also looked at the countries identified as offering most opportunities and this was again led by China, followed by India, Russia, Mexico and Brazil.”

Sherwin said that for New Zealand companies to reap the undoubted benefits, they had to be thoroughly prepared and with a recommended focus on China and India.

Many businesses entering the China market have found success through strategic joint ventures with a lot of information available from the likes of the Economist Intelligence Unit on the experience of other companies doing business in China.

“Companies need to be cautious and well advised when entering any of these markets, as fraud and corruption are systemic in many emerging markets and far removed from normal business practice in this country. Fonterra’s experience in China is a prime example of how a brand can be badly damaged by corrupt practices.

“China and India are not without these problems, but the potential benefits are enormous. Combined, India and China have in excess of two billion people and we have double tax agreements with both countries.

“India is also the largest democracy in the world, with English as the language of business along with a Commonwealth-style legal system,” he said.

Sherwin sees these markets as offering a dual benefit, both us with them and them with us.

“At first glance you would think the recent double tax agreement with China is all about us gaining access into their markets, but while we might be only a small country of four million, a mere township in China, they look upon us as having the potential to feed 250 million people. Plenty of opportunities for Kiwi businesses..

“I know of a New Zealand business that sent a marketing representative up to China last year in a well researched visit and the results have been excellent. They have had to sharpen their prices, but the company is already 20% ahead of budget for the year on the back of this success,” he said.

Sherwin believes that the world recession has elevated the importance of these emerging markets. “Not only were they less severely hit, but they are recovering quickly with growth rates over the next two years forecast to be double that of more mature economies.

“Indeed, these markets and their businesses are developing so rapidly and powerfully that ignoring them could be a risk. Rushing in, especially to some of the more distant and challenging markets such as Russia, without professional advice and full research of the market conditions and strategies to achieve your goals, is even riskier,” he said.

ENDS

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