Rethinking Growth in Emerging Markets

Last week I had the opportunity to moderate a panel on “How companies need to rethink growth in emerging markets.” Panel members were stellar, all members of IESE’s International Advisory Board (IAB). While four of them work for and/or seat on Boards of Western companies, Ibukun Awosika is founder and CEO of a Nigerian company: The Chair Center Group, and Chairperson of the First Bank of Nigeria.

IESE IAB members session: Andrea Crhistenson, Ibukun Awosika, Ermenegildo Zegna, África Ariño, Francesco Vanni and Hans Ulricht Maerki
IESE IAB members of the session: Andrea Crhistenson, Ibukun Awosika, Ermenegildo Zegna, Prof. Africa Ariño (myself), Francesco Vanni d’Archirafi, and Hans Ulricht Maerki

I asked Ibukun to share her views on how companies can tap best the opportunities that emerging markets presents. Her insights resonated with ideas that underlie some of my posts in this blog (the points below are hers; their elaboration is my own):

  • Partnerships: looking for a local partner to create some type of alliance is a natural way to enter these markets. A local partner provides the local knowledge and connections that you lack. Else, you start at a disadvantage.
  • You need to have local management: this isn’t just about how expensive expats are. It’s about understanding the local context, and being perceived as such by customers and other stakeholders involved. We have to keep in mind the diversity across African countries – same as in other continents. It’s not enough to have “Africans” on board: you need people from the country you are operating in.
  • Be careful with official statistics! They don’t capture a truthful picture of reality because they miss an important part of it: the informal economy. To bridge the gap, you need to go to the country you’re thinking of and see it by yourself. Applying “the toothpick test” will help you calibrate the size of the opportunities – if you wonder what “the toothpick test” is, have a look at an earlier post on the informal economy.

Other ideas shared by the panelists included the need to have a long term perspective, and to be flexible – again, ideas that underlie this blog.

Overall, the tone of the panel was one of optimism – not only in relation to Africa but to emerging markets in general. For a synthesis of the discussion, read here.

Do you agree to these points?

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6 thoughts on “Rethinking Growth in Emerging Markets

  1. Congratulations Africa. You had a great opportunity to share Africa and emerging economies perspectives.
    I am fully agree with your comments. When we apply change management in internationalization or globalization in my company, we always talk to our customers about key factors like cultural, economic, geographic and administrative. But also risk evaluation, how to adapt our brand and product to new consumers, how to evaluate our investment in an emerging economy and long term vision. This is going to be part of our business, so we should treat it like this.

  2. Great!
    I agree to those three points: partnerships with a local partner, having local management to understand the local context, and being careful with the accuracy of official statistics.

    Can I add one point here? How will foreign investors/ companies be protected when doing business or having partnership with local partner?
    Thank for sharng your post.

    1. Thank you, Khaled. Protecting one’s contributions to a partnership is something to be considered always.
      Actually,this week I’m in Sao Paulo with a group of IESE’s Global E-MBA participants. The course I’m teaching focuses on aliiances and M&As, and the point you raise is quite prominent in one of the cases we’ll discuss.
      I think both foreign and local companies need to think about the issue: the local company may also lose its market knowledge to the foreign partner. It may happen to relationships as well, but I think this is more difficult to happen.
      On the other side of the coin, learning requires a capacity to absorb the other’s knowledge, and the capability to use it — and not all local partners are ready for this, though they will, eventually.
      From conversations with business people from SSA, I think they see themselves at a disadvantage: they believe that the foreign company will absorb the Africans’ knowledge, and they’ll be left out. However, I think that African companies have very valuable assets: their relationships. And this is something extremely difficult for a foreign company to develop. And let’s not forget that, for the time being, most foreign companies are “scared” to jump into Africa. Those who enter tend to do it slowly, and are happy to work with a local partner than understands how to navigate the local context. In the meanwhile, Africans can benefit a lot from these partnerships, and gain a good position in the continent.

  3. Dear Africa,

    Thanks a lot for your always very interesting posts. Yes, I believe that the panel members’ recommendations are OK in very few english speaking African Coutries such as Ghana, Nigeria, Botswana, RSA and, to a (much) lesser extend, Ivory Coast and Senegal. In other de-regulated African countries, I am afraid it is almost impossible since extreme precarity makes it almost impossible to even have a short term (3 months) perpective: in such markets, another type of management applies.

    1. Thank you for your comment, Marc-Henry. I fully agree. AT times, for the sake of brevity, I — as many others — talk about AFrica or sub-Saharan being aware that that’s an undue generalization. We should be speaking about particular countries. But paraphrasing the Spanish proverb, a few words suffice if the reader understands the issue (“A buen entendedor, con pocas palabras basta”). But fair enough, not everybody reading my posts should be aware of this, and it’s always better to be more fine-grained.

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