Home > Business-Economy > Turning east isn’t easy!!!

Turning east isn’t easy!!!

November 9, 2010 Leave a comment Go to comments

While the foremost thing on everyone’s mind is the shift in global economic dynamics… from the wester developed world to the eastern emerging markets, one thing that fails to appear in most discussions is the response of the business world to this new normal.

It isn’t so easy to just close shop here in the US and start doing business in the east… some of the biggest challenges that businesses need to be prepared for in their shift from the west to the east are:
– Consumer preferences: The consumers in the developing world are different from the western consumers in terms of their product/service preferences due to their cultural and social characteristics.
– Public sector involvement: Emerging economics are not mature enough / not used to operating independently of the government… also in most of these markets, government has significant investments in businesses.
– Business model: This is a common differentiator in every market even within the developed world. While for some markets, the brick-and-mortar model might work wonders, for some the online model would suit.
– Disposable income vs. Spendable income: The new consumer has a propensity to spend less than his/her same level counterpart in the west.

Therefore, what businesses need is a radically different strategy to expand their businesses in the emerging markets… requiring different skills, capabilities and a different approach to developing and offering their products/services. An example of this is the lawn mower business in the US. This business would never succeed in the emerging markets since there is no such market in that region… partly because most people live in apartments and even if they live in houses, there is a very negligible proportion of houses with grass lawns. One way this business can expand its market is to build on its agricultural engine manufacturing capabilities and build products for the agricultural sector in terms of harvesters, ploughers et al.

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  1. JK
    November 12, 2010 at 9:09 pm

    Good say, Well what about aging population with nearing to shut doors for newcomers with imposing strict visa rules in view of protectionism. Also developing nations are still holding mindset of using goods even if they need to compromise on 100% quality of goods who manage with less quality or even adulterated goods or commodities.

  2. November 16, 2010 at 7:37 pm

    @ JK, I hear you… in fact, I am not saying that China’s state capitalism model is good either. My point is that we are no longer in the western business model and that there is a new normal to how we do business. While western economists might not be welcoming to the approach China has been taking to strengthen its economy… using its control over state policies and the financial system, these “developed” countries are no longer in a position to influence the new emerging markets. The 1900s were the Western era and what they did defined the then-normal… and the 2000s are the Eastern era (read… BRIC era) and so what is normal in these markets becomes the new normal.

  1. November 9, 2010 at 3:59 am

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