Questions to ask before entering an emerging market

Here’s my latest post for client Pitney Bowes:

For companies in search of global growth, emerging markets are hard to resist. But like the California gold fields of the 1850s, the promise of riches doesn’t always result in riches. That’s not to say you shouldn’t have an emerging market strategy — you absolutely should. But set your expectations accordingly.

Begin by understanding that “emerging market” can apply to diverse range of countries, cultures, governments, and growth rates. China, for example, is considered an emerging market even though its economy is more than ten times the size of Turkey — another emerging market.

And China, despite its massive size, may for some companies be a more challenging market to succeed in than other markets. For example, a number of American multinationals, most notably Facebook and Google, have been humbled by China’s “great firewall,” which has often left their websites blocked to hundreds of millions of Internet users. Meanwhile, Facebook has been surprisingly successful in Indonesia — another emerging market that often gets overlooked by companies rushing headfirst into China.

As you begin crafting an emerging market strategy, keep your eyes open to all emerging markets, and not just the BRICs (Brazil, Russia, India, China).

And consider the following ten questions.

 

Living in a post-PC world

tablet

PCs, laptops, tablets, smartphones

The latest data from IDC show the sharpest decline in PC sales on record. From the release:

“Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome,” said David Daoud, IDC Research Director, Personal Computing. “The industry is going through a critical crossroads, and strategic choices will have to be made as to how to compete with the proliferation of alternative devices and remain relevant to the consumer.”

So is it safe to say we are not longer “entering” the post-PC era and are now living in it?

I would say so, with a caveat.

As global transformations go, this one has been highly uneven.

The fact is, there are many people in the US who don’t own a mobile phone or a tablet. For these folks, the post-PC era has not yet arrived.

And if you look outside the US, you might say we’ve been living in the post-PC era for quite some time. Or, to be more accurate, a non-PC era.

That is, many emerging markets leapfrogged PCs altogether (from the consumer’s perspective) and have been mobile-centric all along.

Case in point is this chart of PC vs. mobile Internet usage in India, courtesy of KPCB and StatCounter.

graph: desktop vs mobile internet in India

 

Judging by this chart you could argue that India has been “post-PC” since 2011.

Last year, I updated the Report Card methodology to factor in the globalization of mobile websites and mobile apps. This year, I’ve given additional weight to companies that treat mobile on par with PC in regards to globalization investment, which is a key factor why Hotels.com performed so well and why Google retained the top spot.

Needless to say, these are challenging times for web teams that must support a dizzying array of devices and screen sizes.

But this is also an exciting time. The Internet is, for millions of people, more within reach than ever before.

India: One country, many IDNs

If you’re interested in learning more about IDNs, UNESCO and EURid recently released a report on the evolution and challenges of IDNs.

It’s a good read and it highlights some of the struggles that countries and registries face and taking IDNs mainstream. Though Russia has so far proven to be a major success story — with more than 800,000 IDN registrations so far (and counting) — most other IDNs are have a long ways to go yet. Arabic IDNs in particular face an uphill battle because web browsers offer poor (and inconsistent) support for them.

I noticed in the report that India’s IDNs were not all properly displayed. So here’s a screen shot from our IDN poster that illustrates the wealth of scripts used within India, as illustrated by the country’s seven (yes, seven) approved IDNs:

As of today, 26 countries have received one or more IDNs; I’ve collected the full list here.

World 3.0: Making Sense of a Semi-Global Planet

I received an advance review copy of Pankaj Ghemeawat’s new book World 3.0: Global Prosperity and How to Achieve It.

I greatly enjoyed his previous book, Redefining Global Strategy, calling it a valuable counterpoint to Tom Friedman’s book The World is Flat.

In his newest book, Pankaj sets out to chart a course forward that balances global integration (globalization) with regulation.

In light of the global recession, Pankaj does not want to see countries revert to an all-or-nothing approach to globalization — either embracing globalization with no checks or balances or completely closing the door to trade, immigrants, ideas, etc.

Of course, charting such a course requires making sense of a world that cannot be easily summarized in sound bites — something most American politicians seem unable or unwilling to do. The fact is, the globalization “train” has long ago left the station. We’re all connected, whether we like it or not. We can either choose to create relationships that benefit everyone or we can live with the outdated mindset that some countries must win at the expense of others. What I really appreciate about Pankaj’s writing is that he believes that globalization (properly regulated) can benefit everyone and he backs up these beliefs with plenty of data and recommendations for politicians, business leaders, and ordinary folks like myself.

What I most liked about this book was how Pankaj debunks popular misconceptions about globalization, which he calls “globaloney.” For example:

  • We have vastly overestimated how global we think we are. At best, Pankaj writes, we are semi-global. According to Panjak, global exports account for just 20% of global GDP. Cross-border Internet traffic accounts for about 20% of all traffic. And about 20% of VC money is deployed outside of that VC’s borders. And from where I sit, as one who studies web globalization, most companies are still very much in the early stages of figuring out how to expand globally.
  • Globalization has not, in fact, resulted in less diversity of brands, but greater diversity. He cites the auto industry, which is more diverse today than it was forty years ago. He stresses that globalization is not a one-way street towards homogenization.While there are Starbucks and McDonald’s seemingly everywhere, the US has seen its fair of share of international retailers set up shop here as well — from IKEA to Uniqlo. But more important, Pankaj illustrates how global brands are effectively localized to such a degree that they are just as local as they are global.
  • Successful global trade depends heavily on trust. And it’s easier to trust someone who shares your language, culture, and time zone. Pankaj cites data to show how trade levels drop the further two countries are from each other. He devotes quite a bit of ink to just how little trade is conducted between the US and Canada, despite our shared language, time zones, and cultures. Why is that? He cites obstacles like lack of harmonized rules and regulations, customs nightmares that hold up goods, and other seemingly minor details that, in total, give companies reason to rethink expanding beyond borders.

However, I think Pankaj does a bit too much debunking at times. Pankaj says that the “race to the bottom” of countries focusing on low costs at the expense of the environment, human rights, etc. simply does not exist. I disagree. He focuses on pollution largely but there are so many other issues that should be addressed.

For instance, factory farming is, in my view, an absolute atrocity and it is now being exported around the world via US trade agreements. That is, when the US exports meat that has been produced cheaply via factory farming, local farmers in other countries are forced to embrace factory farming to remain competitive or go out of business. A number of Korean family farmers committed suicide in protest of the recent trade agreement between South Korea and the US. Pankaj vastly trivializes these so-called “externalities” and, in doing so, overlooks what is one of the great (and growing) forces mobilizing against globalization.

That said, I recommend this book. Pankaj is one of a handful of writers who are tackling globalization, warts and all, in a thoughtful manner. Globalization is not a black and white argument; there are many shades of gray and this book does a very good job of shedding light on them.