- May 28, 2020
Exporting Situation Analysis
EXPORTING SITUATION ANALYSIS 5
The term “emerging market” also describes commercial,political, and human development in these countries. Most companiesrarely have the sufficient resources they need to enjoy emergingmarkets alone. With the necessary tools and effective planning, onecan establish a firm foundation for safely exporting to an emergingmarket so as to take advantage of the raw potential (Ciravegna etal., 2013).
Diageo as an example is the owner of some iconic brands such asJohnnie Walker, Smirnoff, and Guinness just to name a few, and allare the market leaders in their respective areas. The mission of thecompany is to target middle-class alcohol consumers (Enderwick,2012). Based on the company`s website has hugely invested inworld-class marketing to build their brands, focusing on propermarketing (DIAGEO SUBMISSION, n.d.). Formany years, Diageo products have been at the front in successfulmarketing.
An example of an emerging market is Malaysia that Diageo mayconsider to enter. Based on Agility report, the country has exhibitedtremendous commitments and efforts to economic diversification and anupgrade of its infrastructure. It now has modern ports, airports,road and railway networks and technological centers. Malaysia is oneof the largest emerging economies in the Association of SoutheastAsian Nations which had an average annual growth of 6.4 percent fromthe year 1960 to 2011 (Wong, 2012). Based on a report by theCommission on Growth and Development, it has managed a sustainedgrowth over the last few years. For a country that was entirelydepending on mining and exports, Malaysia is now home to adiversified economy (Wong, 2012).
Malaysia’s GDP has risen from $300 to $9,700 between 1960’s and2011. According to a 2012 report by World Bank, Malaysia was rankedposition eighteen out of a hundred and eighty-three countries forease of conducting business (Wong, 2012).
Malaysia also is comprised of a young population with diversecultures with over sixty-four percent of its population made up ofpeople aged between fifteen and sixty-four. The population ofMalaysia has a sustainable economy and has been increasing annuallyat a rate of ten percent since 2006 (Wong, 2012). These factors makeMalaysia an attractive emerging market for a company like Diageo.
According to a BBVA Research, other examples of emerging markets thata company could consider are Sudan and Mexico. Cement companies, inparticular, are looking into Sudan as a possible trading partner.Mexico, on the other hand, enjoys a high economic growth ratealthough its annual rate of GDP increase slowed during the globalrecession, its growth was strong in 2015 (DePersio, 2015).
However, these two markets are poorer and with more risk thanMalaysia. Mexico is involved in a never-ending drug war. Sudan is aclosed society. Both countries, Sudan and Mexico, offer significantpotential but way more risks for any company (DePersio 2015). Whilethe emerging markets could provide substantial revenue potential,rarely is the road to profits be less complicated than expected andcan take longer to be realized. Additionally, the short-term benefitsmay be way smaller than the company’s expected (Boso et al., 2016).
Each emerging market presents a different set of risk. Beforeentering into an emerging market, one has to confident of workingthrough the risks. The risk may include government instability aswell as a weak economy. In Malaysia, for instance, foreign companiesshould consider entering into their emerging market only aftercarefully checking if their potential partners are from the Malaycommunity which is the majority, or the Chinese community. The chiefreason for this is to prevent disagreement with the government’sfirm policy of moving major assets from the Chinese to Malays. Thepolicy was brought into play because of a common belief that the 1969race riots were as a result of the tension between the financiallywell-off Chinese and the not so well-off Malay community (Boso etal., 2016).
Once a company has entered the emerging market, it has to beginfinding ways to deal and manage risks. This could be done byinquiring from potential customers what they would expect from thecompany (Boso et al., 2016). To create awareness of the presence ofthe brand, the company can seek to conduct promotion campaigns.
Emerging markets are gradually growing and becoming very attractivepossibilities for export of goods. The rise of these countries saidto be emerging markets represents the degree of change in thedistribution of economic growth and, not one particular countrycontrolling the world economy. They are giving rise to a newgeneration of large multinational enterprises that compete in worldmarkets. Conducting trade with emerging markets such as Malaysia isall about taking risks and facing uncertainty, but possiblesignificant returns (Knight, 2015).
Boso, N., Adeleye, I., & White, L. (2016).Africa-to-Africa Internationalization: Emerging Trends and KeyIssues. In Africa-to-AfricaInternationalization (pp. 3-34).Springer International Publishing.
Ciravegna, L., Fitzgerald, R., & Kundu, S.(2013). Operating in emerging markets: Aguide to management and strategy in the new international economy.FT Press.
DePersio, G. (2015). Is Mexico an emerging market economy? RetrievedNovember 21, 2016, fromhttp://www.investopedia.com/ask/answers/090915/mexico-emerging-market-economy.asp
DIAGEO SUBMISSION Government review of the Balanceof … (n.d.). Retrieved November 21, 2016, fromhttps://www.gov.uk/government/uploads/system/uploads/attachment_data/file/278501/Diageo.pdf
Enderwick, P. (2012). Understandingemerging markets: China and India.Routledge.
Knight, G. (2015). Emerging Markets. TheWiley-Blackwell Encyclopedia of Race, Ethnicity, and Nationalism.
Wong, R. (2012). Renowned as an Islamic finance center, Malaysia aimsto become a fully fledged member of the developed world by 2020.TheTreasurer. Retrieved November 21, 2016, fromhttp://www.treasurers.org/ACTmedia/Sept12TTmalaysia24-25.pdf