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Lessons From Emerging Markets

May 17, 2008

My son called this week, pleading for help with one of his university assignments. He had to write about the challenges faced by Western companies in entering the Indian market, with particular reference to financial services.

He had been a member of a team that had undertaken a PESTLE analysis and now had to critique their work. It seemed to me that a good approach to this might be to look at the actual experiences of major Western corporations in their efforts to build market presence in India.

Fortuitously, I was helped in this by an article in this month’s Chief Executive magazine, “Lessons for the Indian Market”. This warned: “Legions of big-name companies have failed in India”. It highlighted the dangers of seeing similarities (extensive use of English, legal system based on common law, parliamentary democracy, Western-style education and judicial system) and overlooking major differences in social and economic values.  “It can create a feeling that the market is easy to assess, as well as easily conquerable by transplanting business techniques and products that work elsewhere in the world”.

As I dug deeper, it became steadily more evident that a fundamental issue for any company entering new markets is its competence in commercial innovation – and in particular the dramatic impacts that new technologies will have on the needs and expectations of the market. What is needed is a tight coupling between market analysis and strategy and the ability to execute through new forms of relationship and business offerings.

For example, behind the similarities mentioned above is the fact that over 20% of the population remains below the poverty line. The average age of the population is still only 24 (and is forecast to get younger over the next few years) . Middle-class income is in the range $4,000 – $15,000. When looking at financial services specifically, Indians are moving fast to change traditional methods of trading and saving, but this may never result in structures and delivery methods like those in the west. For example, unreliable power supplies prevent the expansion of physical bank branches and undermine alternatives such as electronic banking. So as with many fast-growing economies, alternatives such as the mobile phone are emerging to allow credit exchanges. Phone minutes are becoming a form of currency and phone companies are becoming financial services providers.

So the research report written by my son observed: “The implications to a financial services provider are therefore significant. First, they may well find themselves partnering with non-traditional sectors like telecommunications in order to reach their customers. They will need to package their offerings in new and different ways and this will raise major questions over issues such as pricing and methods of revenue collection.”

In previous posts, I have written about the way that networked technology is transforming internal functional roles and organizational models; and also the impact more broadly on trading relationships. But what this research illustrates is the way that traditional industry segmentations are changing. The networked revolution truly does break down virtually every assumed boundary and opens endless possibilities – and uncertainties.

It is challenges such as these that can make the world of commercial management and contracting so fascinating, for these are the vehicles that underlie business growth and effective management of risk. Unless the contracts and commercial staff are open to and aligned with these new market challenges and models, they are inhibitors to change; but if they get out onto the front line, they can be a powerful source of innovation and business development.

I know where I want to be!



  1. My Doctoral research focused on identifying the success the success factors of Global Multinationals in emerging markets. The research showed that the top three success factors were; (a) assembling and/or developing a strong organizational staff of experienced local managers that (b) understand the local culture and marketplace and are able to translate that understanding into (c) product features and options that meet the needs of the local market. This supports the position espoused in this article.

  2. Great article, but why do so many businesses make these basic mistakes and lose their shirts in the process? It is because they take their old thinking into new territory. Consequently they only draw conclusions that match their conventional thinking, this leads to making decisions that they feel comfortable with and then they wonder why it did not work. Dr. Knab’s summary of his reseach findings is entirely correct, but unless a business learns to think differently it risks making the wrong decisions about any new set of circumstances or challenges it faces. For more on how different thinking can produce different and better results read our article on “The Nice Decade – was anybody listening? on

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