Understanding Emerging Markets

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Strategies for Doing Business in Emerging Markets 273
Partnering with Family Conglomerates
As we discussed, family conglomerates are key players in their respective
economies and have much capital to invest in new ventures. For example, most
major FCs in Korea, as well as Koc and Sabanci in Turkey, Vitro in Mexico, and
Astra in Indonesia, own their own financing operations in the form of insurance
companies, banks, and securities brokers. Many FCs possess extensive distribution
channels throughout their home countries. They have a deep understanding
of local markets and customers.
For foreign firms that want to do business in emerging markets, FCs can make
valuable venture partners. 21 By collaborating with an FC, the foreign firm can:
(1) reduce the risks, time, and capital requirements of entering target markets;
(2) develop helpful relationships with governments and other key, local players;
(3) target market opportunities more rapidly and effectively; (4) overcome infrastructure-related
hurdles; and (5) leverage FC’s resources and local contacts.
There are many examples of successful FC partnering. Ford partnered with
Kia to introduce the Sable line of cars in South Korea. Ford benefited from Kia’s
strong distribution and after-service network. Digital Equipment Corporation
(DEC) designated Tatung, a Taiwanese FC, as the main distributor of its workstations
and client-server products in Taiwan. DEC benefited from Tatung’s local
experience and distribution network. In Turkey, Sabanci entered a joint venture
with Danone, the French yogurt producer and owner of the Evian brand of bottled
water. Danone brought ample technical knowledge in packaging and bottling,
and a reputation for healthy and environmentally friendly products, but it lacked
information on the local market. As the Turkish market leader, Sabanci knows the
market, retailers, and distributors. The collaboration helped make Danone the bottled
water market leader in the first year.
Marketing to Governments in Emerging Markets
In emerging markets, as well as in developing economies, government agencies and
state-owned enterprises are an important customer group for three reasons: First,
governments buy enormous quantities of products (such as computers, furniture,
office supplies, and motor vehicles) and services (such as architectural, legal, and
consulting services). Second, state enterprises in areas such as railways, airlines,
banking, oil, chemicals, and steel buy goods and services from foreign companies.
Third, the public sector influences the procurement activities of various private or
semi-private corporations. For example, in India the government is directly
involved in planning housing projects. Construction
firms lobby the government to gain access to
promising deals to build apartments and houses
for local dwellers.
Emerging market governments regularly
announce tenders—formal offers made by a
buyer to purchase certain products or services.
Tender is also known as a request for proposals
(RFPs). Government agencies seek bids from
suppliers to procure bulk commodities, equipment,
and technology or to build power
plants, highways, dams, and public housing.
Vendors submit bids to the government to
work on these projects.
Governments in emerging markets as well
as developing countries often formulate economic
development plans and annual programs
to build or improve national infrastructure. To
Tenders Formal offers made by
a buyer to purchase certain products
or services.
Emerging market governments
are important potential customers
for various types of products and
services. Pictured here is India’s
parliament building in New Delhi.