Company Expansions from Emerging Markets into Developed Markets
Date
2014-01-14
Authors
Katzen, Jeremy
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Abstract
The number of participants in the global economy is growing each year, fuelled
partly by globalisation and increasing levels of integration (Lloyd 1993) amongst
economies. Companies from emerging markets (“EMC”s) are playing an
increasingly significant role in the global economy. In 2009, EMCs received
50% of foreign direct investment (“FDI”) flows, up from 40% in 2008 (UNCTAD
2010). More interestingly though, in 2009, EMCs were the source of 25% of FDI
flows, up from 19% in 2008 (UNCTAD 2010). With healthy balance sheets, due
in part to strong home market growth (Kumar 2009), EMCs are not just
choosing other emerging markets (“EM”s) for growth. Developed Markets
(“DM”s) are becoming increasingly important as a host location for EMCs
(Cantwell and Barnard 2008).
The study identified the critical success factors for EMC expansions into DMs.
Moreover, it also identified the top 5 critical success factors. Data was collected
by conducting 15 semi-structured interviews with high ranking members of
South African companies.
The critical success factors were as follows:
• Corporate brand management
• Understanding of local customers
• Customised marketing strategies
• Financial management/capital
• Understanding the legal/regulatory environment
• Experienced management team
• Management team with local complement
• Organisational structure and design
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• Corporate governance and citizenship
• Management of external stakeholders
• Clear objectives/goals for the expansion
• Integration and corporate culture management
• Due diligence with high degree of care/accuracy
• Experience/learning
The top 5 critical success factors ranked in order of importance were as follows:
1. Clear objectives/goals for the expansion
2. Experienced management team
3. Due diligence with high degree of care/accuracy
4. Financial management/capital
5. Integration and corporate culture management
There is significant change taking place in the global economy. Both the
presence and role of EMCs will likely continue to increase, particularly within
DMs. In so doing, EMCs need to ensure that they consider the critical success
factors in their expansionary activities, particularly during the planning stages.
Moreover, they should put extra energy into the top 5 critical success factors,
which are actually applicable whether entering an EM or DM alike. Lastly, some
of the key recommendations include, inter alia, that EMCs need to adhere to
their core competences, not stray from existing business models and implement
flexible strategies within their DMs of choice.
Description
MBA thesis
Keywords
Emerging markets, Developed markets