There is something fascinating about emerging economies. The lack of infrastructure and uncertainty in governance and property rights lead to massive challenges for businesses unheard of in more developed economies. But as businesses are challenged, they tend to come up with solutions.

To be successful in a developed economy companies rely very much on intellectual property. Advancing technology faster than competitors, companies secure their competitive edge. This leads to very specialized firms, focusing on a particular part of the value chain. The large conglomerates like GE are a rare breed nowadays (and those that do still exist are becoming more and more focused). Even consumer goods companies that seem to play in all kinds of different spaces do so by being good at one thing in particular: marketing.

In emerging economies on the other hand, companies spread out in all kind of different activities. Conglomerates (e.g. Grupos in Latin America) cover whole value chains, including in-house financial services. On the one hand this can be explained with business opportunities arising in markets that are not yet highly penetrated. Once you gain knowledge about a particular customer segment it becomes much easier to identify additional products and services they need but can't find in the marketplace.

On the other hand though, and that in my view is more important, companies in such markets need to complement their core business because the environment does not provide the support they need to be successful. Your product may be perfectly adapt to the customers' needs, at a competitive price point. Your salesforce may do all the right things to target the customers and get the leads. But if the customer does not get financing from his bank because the financial sector is underdeveloped, you won't be able to sell.

Understanding those challenges in your environment and creating your business model accordingly will provide you with both, an enabler to your core business AND an opportunity for additional business in adjacent markets.

_____________________________________________

Please share your comments and inputs (via comment function, twitter, e-mail, etc.). In my short write-ups I address topics that I am particularly interested in because they align with my values and beliefs. As such, they are always a reflection of my ideas, thoughts, and opinions. The only thing I am positive in that regard is that I do not have all the perspectives, all the knowledge, or all the facts - help me be better tomorrow.