Attraction of Developed Markets for Emerging Market Brands - Essay Example

Attraction of Developed Markets for Emerging Market Brands Introduction There has been an increasing attraction of the developed markets for the emerging market brands. Emerging markets are markets that have almost unlimited opportunity set. More conventionally, emerging markets are the markets or nations that have economies classified as being in their relatively early development stages. These nations’ financial markets are less developed compared to the major financial centers from all over the world. However, these markets are becoming increasingly integrated and sophisticated into the international and developed markets. The emerging markets spread across the globe and they differ extensively in their cultures, political, and economic behavior, as well as in factors that drive their market growth. There has been an increasing attraction of the developed markets for the emerging market brands, though they face numerous challenges (Cullen & Parboteeah, 2013). Discussion Emerging markets face numerous challenges in their efforts of joining and competing in the developed markets. Agtmael (2007) stated that limited financial resources and the lack of international experience force the emerging markets into becoming low cost equipment manufacturers and providers for the developed markets. The result is that the developed markets consider the products within the emerging markets as commodities and competitive, which leads to lower performance levels of the emerging markets, as well as the products within these markets (Agtmael, 2007). An additional obstacle for emerging markets venturing into the developed markets is that the developed markets are the negative stigma that consumers in these markets have on products from the emerging markets. Most of the consumers within the developed markets, as Agtmael (2007) states, are usually not willing to pay the market price of emerging commodities. This forces the companies within the emerging markets to lower their sales prices to make sales. In return, the companies get little or no income, and at times, they make losses on the products they provide to the markets. The negative stigma of the developed markets makes it difficult for the brands within the emerging markets to grow and join the developed markets (Das, 2011). Emerging market brands seek to join the developed markets for various reasons. The different reasons are mainly to benefit from the greater developed market. The main reason is to gain a greater market (Mutum, 2013). Developed markets have more customers compared to the emerging market. These markets provide a wider range of consumers for the products that exist within the markets compared to the developing markets. The developed markets usually have more participants, who are willing and committed to trading business activities. The increased number of participants increases the number of customers for the products within the market. Emerging market brands seek to venture into the developed market to take advantage of the increased number of consumers. This in turn improves their level or sales and their profit making abilities. Brands that are able to join the emerging markets gain the advantage of maximizing on their sales (Kumar, 2013). They maximize on their sale due to the increased number of participants within the markets. There are usually different kinds of business operators within the developed market, making it possible for any kind of goods to perform well within this market. The diverse emerging markets within the developed market make it possible for the emerging brands to maximize on their profit making abilities. In addition, emerging market brands seek to join the developed markets in order to improve on their activities (Ali, 2000). New trends and technologies used in production and marketing activities usually emerge from the developed markets. Better methods of production and operation emerge from the developed markets because of the competition between products and service (Mutum, 2013). Competition within the market encourages businesses to acquire better technologies to remain competitive. Better technologies encourage quality production, which in turn encourage increased sales. In case a brand gains access to operate within the developed market, it is able to acquire more and better knowledge on the general performance of a business (Batten, Fetherston, & Szilagyi, 2004). The knowledge gained aids in improving the quality of production and sales activities for the emerging market brands. The improved knowledge may enable the emerging market products to perform better and within any market, which maximizes their potential of being competitive within any market (Segal-Horn & Faulkner, 2010). There are different kinds of challenges that the merging market brands may face while targeting the developed markets, as Agtmael (2007) states. Culture majority affects the ability of emerging market brands to join the developed market (Agtmael, 2007). Different nations operate in dissimilar ways due to the difference in culture. For a brand to successfully venture into the developed markets, the brand producers must understand how to operate within different kinds of cultures. For example, culture may greatly affect communication, which makes international promotion complex. In addition, different cultures may have same promotional mix elements, but the elements may have different importance for different countries. For an emerging market brand, it may have difficulties in joining the developed markets due to cultural differences within the markets. In order to successfully within the developed markets, the emerging market brands need to conduct detailed research on operating within different cultures. The researches may give these brands a better idea on how to operate successfully within different kind of cultures (Agtmael, 2007; Tunzelmann, 2010). Lack of familiarity with the international environment negatively affects emerging market brands in their efforts of joining the developed markets (Singh, 2010). Singh (2010) insist that emerging market brands need to familiarize themselves with the international environment in order to successfully venture into the developed markets. The process of understand the international environment may be difficult for the emerging brands. The emerging brands may have difficulties in joining the developed markets, or completely fail to join the developed markets, due to insufficient information on how to operate within the international environment (Singh, 2010). Emerging market products should begin by understanding the international environment before venturing into the developed markets to avoid any negative effects on the brands. In order to operate successfully within the international environment, the emerging market brands should conduct researches on how to operate within these markets. These researches provide the emerging brands to have a general idea on operating within the international markets (Webster, Lambert, & Beziudenhout, 2011). For emerging market brands, there is need of understanding the global trends as well as the trends within individual markets. Emerging market brands fail to successfully venture into the developed markets because of insufficient information about global trends and the trends that exist within the individual markets (Kumar, 2013). There exist differences in global and regional trends. Global trends may be more diverse compared to the regional trends. For example, the technological developments within the global markets are diverse and develop at faster rates compared to the technologies within the regional markets. The diverse development within the global market is caused by the increased competitions between brands within the markets. Lack of information about the development of these trends, as well as the inability to keep up with the developing trends, may lead to failure of emerging market brands’ ability to venture into the developed markets. Kumar (2013) insists that emerging market brands should understand the global trends and be able to keep up with market trends in order to operate successfully and remain competitive within the developed markets (Das, 2009). Uncertainty due to an increased lack of knowledge about foreign markets creates a major challenge for the emerging market brands to join the developed markets (Singh, 2010). Some of the brands seeking to venture into the developed markets do not have enough information regarding these markets. The lack of information creates uncertainty about the future of the brands. Lack of information hinders quality developments within the brand, which may have negative consequences on the future of the brand (Singh, 2010). For an emerging market brand, the company producing the brand should have information about the performance of the market, how the market fluctuates, the competitiveness of the market, and the general operations of the market in order to perform successfully within the markets. Lack of knowledge about the global market may lead to failure of emerging market brands venturing successfully into the developed markets (Griffith-Jones, Ocampo, & Stiglitz, 2010). The increased pace of development may also create a challenge for the emerging market brands to successfully join the developed markets (Mutum, 2013). Development may gradually change over time, leading to improvement of the general production, marketing, and sales processes. Mutum (2013) states that new market brands may face difficult times in keeping up with the market developments. This creates challenges in venturing into the developed markets. Emerging market brands require adequate information, quality production equipment, and quality products to successfully venture into the developed markets. At times, the emerging markets have fewer resources to operate successfully within the developed markets. Acquiring better equipment to operate successfully and competitively within these markets may be a difficult task. To avoid the negative impact of inadequate resources, emerging market brands may combine their resources to improve their general performance through combined efforts (Ignatieff, 2001). Firms within the developing markets come together and combine resources to produce quality goods or services. Because emerging market brands face different kinds of difficulties in their efforts of joining and competing in the developed markets, the combining of resources have improved the quality of products, raising the interest of the developed markets attraction to the emerging market brands. Firms within the developed markets become more interested in acquisition of the emerging market brands to market the brands and benefit from them due to their improved qualities (Kumar, 2013). On the other hand, the improved products gain the potential of venturing into the developed markets by themselves to maximize on their profit making abilities. For example, different competitors within the emerging markets come together and join their forces in pulling together their resources and jointly changing the perception that their products have within the developed markets. They also use these resources in making their products better and of good quality. Chilean and South African wine growers is an example of brands that used this strategy in improving the image of their products, making the firms within the developed markets gain more interest to the emerging brand. The firms within the developed markets become interested in the emerging brands for them to benefit from the sales of these improved and better quality emerging market brands. There are different methods that the emerging brands may use to join the developed markets. Licensing, joint ventures, and foreign contract manufacturing assists emerging market brands in venturing into the developed markets (Agtmael, 2007). Emerging market brands also use the wholly owned subsidiary mode in venturing into the developed markets. The brands use two different methods, which are the acquisition and organic growth modes, as Kumar (2013) states. There has been an increasing attraction of the developed markets for the emerging market brands, though they face numerous challenges. The emerging markets are becoming increasingly integrated and sophisticated into the international and developed markets. These markets spread across the globe and they differ extensively in their cultures, political, and economic behavior, as well as in factors that drive their market growth. Emerging markets face numerous challenges in their efforts of joining and competing in the developed markets. Limited financial resources and the lack of international experience force the emerging markets into becoming low cost equipment manufacturers and providers for the developed markets. The result is that the developed markets consider the products within the emerging markets as commodities and competitive, which leads to lower performance levels of the emerging markets, as well as the products within these markets. Other challenges include lack of familiarity with the international environment, inability of understanding global trends, culture, and insufficient knowledge about foreign markets, among many other challenges. Emerging market brands need to have sufficient information about developed markets to operate successfully within the developed markets. Conclusion Emerging market brands need to have sufficient information about developed markets to operate successfully within the developed markets. This information should be obtained through extensive research and deep consultancy on the market needs and requirements. References Agtmael, A. W. (2007). The emerging markets century: How a new breed of world-class companies is overtaking the world. New York: Free Press. Ali, A. (2000). Globalization of business: Practice and theory. New York: Psychology Press. Batten, J. A., Fetherston, T. A., & Szilagyi, P. G. (Eds.). (2004). European Fixed Income Markets: Money, Bond, and Interest Rate Derivatives. New York: John Wiley & Sons. Cullen, J., & Parboteeah, K. P. (2013). Multinational management. London: Cengage Learning. Das, D. K. (2011). Conceptual globalism and globalization: an initiation. London: Cengage. Das, D. K. (2009). Two faces of globalization: Munificent and malevolent. New York: Edward Elgar Publishing. Griffith-Jones, S., Ocampo, J. A., & Stiglitz, J. E. (Eds.). (2010). Time for a visible hand: Lessons from the 2008 world financial crisis. Oxford: Oxford University Press. Ignatieff, M. (2001). Human rights as politics and idolatry. London: Princeton University Press. Kumar, N., & Steenkamp, J.-B. E. M. (2013). Brand breakout: How emerging market brands will go global. London: Cengage. Mutum, D., In Roy, S. K., & In Kipnis, E. (2013). Marketing cases from emerging markets. London: Cengage. Segal-Horn, S., & Faulkner, D. (2010). Understanding global strategy. London: Cengage Learning EMEA. Singh, S. (2010). Handbook of business practices and growth in emerging markets. Hackensack, NJ: World Scientific. Tunzelmann, N. V. (2010). Technology and technology policy in the postwar UK:«market failure» or «network failure»?. Revue d'économie industrielle, (1), 237-258. Webster, E., Lambert, R., & Beziudenhout, A. (2011). Grounding globalization: Labor in the age of insecurity. New York: John Wiley & Sons. Zou, S., & Fu, H. (2011). International marketing: Emerging markets. Bingley: Emerald. Read More