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Serving Customers in Emerging Markets: The Good, The Bad, and The Unknown
The opportunities and challenges of serving major customers in emerging markets was my presentation topic at the recent SAMA (Strategic Account Management Association) Conference in San Diego. I compared and contrasted a number of emerging markets, such as Brazil and Turkey to China when it was considered an emerging market through today’s evolution into a growth market. Some of the key takeaways from this discussion were as follows.
Having Clients in an Emerging Market Offers a Competitive Advantage, But Not Without Its Own Set of Challenges
Entering an emerging market with a strategic account’s business as a base can be a great head start. When China was an early emerging market, it was often a key customer that drew suppliers to China. Later, manufacturers and distributors leveraged this presence into a solid market position as China grew to being an attractive market on its own. Such was the case in auto parts, with many suppliers having entered and become well-positioned as China rapidly grew to become the world’s largest auto market. Competing suppliers are often absent in emerging markets due to the lack of local demand, the different demands of the market for low-cost, “good enough” solutions, and lack of service sophistication.
The challenge includes, but goes beyond, the institutions and infrastructure that are often absent in developing countries. Those challenges are serious, but relatively well-known. Even in China, which has advanced beyond emerging market status, getting approval for a change in mission or footprint still is a significant project all on its own. Finding suppliers of your own, hiring workers, planning logistics, and many other normal business activities are quite a different game in an emerging market, and each market is different.
Put Yourself in Your Customer’s Shoes
What we would suggest deserves more thought is to put your company in the position of your customer, looking at the needs of the customer’s customers (or end customers). When strategic accounts were primarily seeking a low-cost production environment to serve, say, the U.S. market, things were far simpler. Then, the customer’s customer is the same as always and the needs and success factors are well-understood. However, when the objective is to serve a local market, there is a great deal of joint learning to do. We have found in our China work (especially in the past decade) that even very global, U.S. companies are challenged to deliver “good enough” solutions to price-sensitive, mid-market customers in emerging markets. Their suppliers have exactly the same challenge, and suppliers are often the key to successfully adapting to market needs experienced by the strategic account.
Always be Mindful of Current and Future Competitors
The challenge to strategic accounts was indeed great in China, with local competitors almost totally focused on cost, competing not on innovation and quality but on borrowing ideas to meet basic needs. Their local suppliers were even more basic operations but totally focused on achieving the minimum standards at the lowest cost. Even though China has grown beyond “emerging” status for most, Chinese companies are positioning themselves to serve the needs of emerging markets around the globe. It’s only a matter of time before your strategic customers are going to be seeing that competition wherever rapid growth and lower standards of living are found.
The moral of the story when it comes to serving your strategic accounts in emerging markets is that your customers need you more than ever when entering “unknown territory” in search of growth. True partnership is about understanding and meeting those challenges.