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Growth market characteristics

  • Published 25/08/2014
Finding the right agent or distributor and developing a strong partnership is relevant in any market. Many of the tools are therefore widely applicable. The tools are, however, designed especially for growth markets. These countries are extremely diverse, but they are all significantly different than Nordic markets and often require a different partner approach due to language barriers and differences in business culture.

 

 

"In India we do not say no. It is in our cultural mindset and is probably the most important thing to remember. It requires an understanding of the market dynamics in order to know what is possible and what seems too good to be true"

Krishnan Naganathan, Valcon 

 

 

 

Growth markets are promising, but often hard to navigate. Market knowledge is often low and risks are higher. A number of interviews have been conducted to identify the key challenges Nordic SMEs and local partners meet when they work together. The following highlights some of the crosscutting themes mentioned:

 

Handling uncertainty: Nordic companies and local partners often have different perceptions of agreements and plans. Business in many growth markets is often based on shorter-term planning and a high degree of flexibility and adaptation to changes, whereas Nordic companies often like to plan for the longer term and see frequent changes as breaches of agreement. You can use the tools to better understand the market dynamics and manage uncertainties more efficiently.

 

 

 

"Partners get annoyed when emails are not answered. Communication can be a problem, especially if written reporting is required. Egyptians prefer talking instead of writing, when an issue needs to be discussed"

Egyptian distributor

 

 

 

Networks: Networks are the foundation for many business transactions in growth markets. This means partners are not always willing to share information about their networks, making it difficult to assess a potential partner. By using these tools, you can often get your potential partner to “open the box” a bit more about specificity of networks and ways of working.

 

Relations: “My partner never asks about my family,” one local partner mentioned. Odds are the Nordic partner never thought about it. Nordic business people often want to be efficient and professional as well as formalize relations contractually, whereas local partners often prefer to build and maintain relations socially. A bit of effort in understanding the cultural etiquette often makes a big difference.

 

 

 

"Trust is something you earn, not the starting point. Prioritizing good relations makes the distributor prioritize your products and ensures conflicts are solved quickly. It can be small things such as remembering birthdays and inviting your partner for dinner"

Glenn Mikkelsen, manager DI China

 

 

 

"Egyptian companies are a bit more formal than Nordic companies. It is important that you do not say your opinion openly about everything. Egyptians are proud people and less direct. Going friendly is a good approach at any meeting"

Engy Basiouny, Danish Embassy in Cairo   

 

 

 

 

Hierarchy: “Gray hair and titles means power and respect. Mexican business people will often expect you to send the CEO or high-level managers to make decisions.” The quote is from Mexico but also represents sentiments in many other growth markets. While Nordic companies delegate authority and may find it more relevant to send a specialist, formal hierarchy often matters much more locally.

 

 

 

"There’s a reason why we have such a long lunch break – the Mexicans are very social, but we still work with a higher level of control than the Nordic Countries. The high Nordic ‘trust’ can actually in some cases be considered lack of power – so be aware of the balance"

Sergio Rivas, DI Mexico

 

 

 

Informal markets: Many SMEs interviewed said they don’t know much about what happens with their products once they reach the local partner. Understanding the formal and informal value chains and your end user’s needs can help you adapt packaging, manuals, marketing materials, etc., and enhance your product’s success in these markets. In addition, growth markets often have large, informal market segments, which Nordic products reach, knowingly or not. Informal markets are often very organized and represent very high business volumes despite the lack of formality. The tools can help you understand market dynamics and best position your product.

 

Mutual value: A real partnership requires mutual value. This is a lot easier said than done. Often one forgets to focus on identifying the value for the local partner. Does the product really fit your partner’s product portfolio? Does your partner have the right sales tools? Does your partner have the right incentive structures? The tools can help you focus on defining and creating mutual value.

 

 

 

"The Egyptian distributors think that it is a mistake if they are treated as customers instead of partners. This is a big mistake many European companies make and this way they undermine a partnership from the beginning"

Egyptian distributor