High tech firms—long accustomed to rapid growth—are looking to emerging markets as technology adoption rates in established countries level out. The opportunity in these markets is immense: According to a report by McKinsey & Co., consumer spending in emerging markets is expected to grow three times faster than in developed nations over the next 10 years, reaching a total of $6 trillion by 2020.
Working in emerging markets offers great opportunities for growth, but are not without risk. In this post, we’ll explore the opportunities and risks in emerging markets. We’ll also demonstrate how PRECISION Multi Carrier Shipping and PRECISION Trade Compliance helps high tech firms succeed with their emerging markets strategy.
Growth Opportunities in Emerging Markets
Despite representing roughly 70% of the world’s population, emerging-market consumers today account for only 35% of the world’s GDP. However, this is changing: By 2020, the collective GDP of emerging markets will overtake that of developed economies for the first time. And as their economies grow, consumers in these markets are driving demand for high tech products—especially mobile devices.
Given these growth prospects, it’s not surprising that two out of three high tech firms say they’re either operating in emerging markets already, or expect to be within the year. Some of the markets showing the greatest promise for high tech firms are in East Asia, where established carrier networks, strong economic growth, and significant demand for high tech consumer goods can support high growth for high tech firms, with minimal risk.
China, for instance, is emerging on the world stage not just as a manufacturing center for high tech goods, but also as a consumer of them. According to UPS, 1 in 4 consumer dollars will be spent in China over the next few years. Carrier networks and logistics infrastructure are growing rapidly to serve China’s new consumer class. South Korea and Japan with their developed economies have long been avid consumers of high tech goods, with Korea in particular showing strong growth.
All’s not rosy in the Far East though—there’s also risk of disruption as tensions rise with North Korea. Other promising opportunities for high tech firms include India, the Middle East, Eastern Europe, and former Soviet states, where economies and demand for high-tech products are growing.
Risks in Emerging Markets
Without a doubt, working in emerging markets can be risky. Delivery networks and supply chain experience can be thin on the ground, especially outside the largest urban areas. Infrastructure is often lacking and warehouse space, rail networks, and roads can all be unreliable.
Risk and opportunity often go hand-in-hand when evaluating an emerging market. For instance, Africa is home to some of the world’s fastest growing economies, with Ethiopia topping the list in 2017 according to the World Economic Forum. Yet, despite high growth, lack of reliable carrier networks and poor logistics infrastructure can make it difficult for high tech firms to do business in many African countries.
The political environment in emerging markets is also subject to change. Geopolitical relationships can change on a dime, and that means trade restrictions can change quickly as well. Even when relations are friendly, the import/export process is always subject to confusing rules, high tariffs, and in some cases, even corruption.
How PRECISION Helps High Tech Firms Succeed in Emerging Markets
The ability to navigate change is a key requirement for high-tech firms that want to succeed in emerging markets. PRECISION Multi Carrier Shipping and PRECISION Trade Compliance software can help, whether your organization needs to find faster and more reliable ways to deliver products to your customers, or adapt to rules on the ground as they change.
Here’s how PRECISION helps high tech firms succeed in emerging markets.
Trade Compliance. High tech firms face some big challenges when they expand into an emerging market. Some products face significant export restrictions, particularly given the potential for dual use. There’s also the risk that sensitive information—such as encryption methods—could inadvertently be shared with unfriendly governments or organizations operating in emerging markets. In short, ensuring that your trading partners are trustworthy is a key consideration.
PRECISION Trade Compliance delivers up-to-date information that helps high tech firms navigate a rapidly changing regulatory and legal environment, as well as up-to-date documentation to ensure every shipment is in compliance. Real time updates of trusted content from regulatory agencies, including licensing lists and lists of sanctioned countries, entities, and persons, ensures that customers and trading partners are not subject to embargoes or trade sanctions and are authorized to handle your shipments.
Risk Management. High tech firms must understand the risk factors that exist in each market. Due diligence should include a review of the political situation and legal framework in the country, as well as any cultural concerns. It should also include logistical concerns that might make it challenging to get products to market. Reliable carrier and distribution networks comprised of experienced and trustworthy logistics partners with the ability to minimize loss due to theft and damage while maximizing on-time delivery can make the difference between failure and success in emerging markets.
PRECISION Multi Carrier Shipping helps shippers reduce their risks for excess cost, non-delivery due to theft or loss, or late delivery by providing access to a worldwide network of more than 500 reliable carriers. This data can also be used in the planning phase to identify less risky carriers and markets, while PRECISION Trade Compliance export compliance tools helps high tech shippers gain a clear picture of the regulatory programs and cross-border customs requirements in each country.
Carrier Networks and Infrastructure. Getting products safely to market can be one of the biggest challenges in emerging markets. Shippers must quickly and easily identify and select carriers and modes that are available to get the product to its final destination. Obtaining reliable delivery service and minimizing excess cost, theft and loss, and unexpected delays can all be significant issues in many emerging countries. Infrastructure challenges can also impact a carriers’ ability to provide reliable service.
PRECISION Multi Carrier Shipping helps high tech shippers solve these challenges with more than 500 global, regional, and national carriers around the globe, across multiple modes—by rail or over-the-road carriers. Shippers can access detailed data about rates, routes, and reliability for each shipment or during the planning phase to better understand where and how to deliver each shipment, identify the most promising markets, and develop relationships with the most reliable and cost effective carriers.
Customer Support and Reverse Logistics. Getting your products to your customers is just part of the job when entering emerging markets. How will you support those customers once they’ve purchased your products, and when the product reaches the end of its useful life? For these challenges, the ability to easily process returns and repairs through a reliable carrier network is crucial.
With PRECISION Multi Carrier Shipping, you can compare pricing and delivery service for each return shipment to ensure best pricing and best service, everywhere in the world.
Know Who You’re Working With
When conflicts occur, trade sanctions, increased regulations, and new compliance and documentation requirements are often the result. All of these factors create more work and headaches for high tech firms that ship to emerging markets. Non-compliance isn’t an option as penalties become more severe—and more strictly enforced. The United States recently levied its biggest ever fine of $1.19 billion on a Chinese electronics firm that failed to comply with trade sanctions against Iran and North Korea.
PRECISION Trade Compliance helps manage Denied Parties Screening, ensuring that every shipment and business partner receives the due diligence required to reduce risk. Combining real time updates to compliance regulations, documentation and published lists with data on carrier rates, routes, and reliability, high tech firms know who to trust so they can operate confidently in emerging markets.