Emerging markets present unique competitive challenges. While companies may account for obvious obstacles such as institutional voids and evolving infrastructure, they can fall victim to subtle cultural differences by neglecting to complete on-the-ground research prior to expansion. Local competition knows the rules of the game better than even the most savvy international firm.
Packed with exemplary successes and cautionary tales, our newest white paper - authored by Nathaniel Emmons, Director, Diversified practice - lays out the need for a systematic approach when entering frontier economies. Based on insights from security experts and seasoned investors, the paper offers a four part framework for identifying, analyzing, and reacting to risks and includes an Overseas Expansion Checklist.
To add real-world applicability, the paper focuses on bureaucratic hurdles, political risks, and security issues in diverse African and Asian countries:
Identifying a Country’s Stability Tipping Point: Myanmar, Still a Long Way to Go
Myanmar's 2015 national elections seem to be ushering in an era of democratic prosperity in the Southeast Asian nation. Increasing hotel investment, cell phone adoption, and foreign direct investment support growing international confidence. Has Myanmar safely tipped into stability? The legacy of military dictatorship, ongoing ethnic strife, and an ubiquitous drug trade indicate a much more precarious situation than first meets the eye.
Leading Indicators of Political Risk: Caterpillar’s Misstep in Indonesia
Caterpillar invested hundreds of millions in mining in Indonesia in 2011. In 2014, a partial ban of mineral exports and a jump in export taxes on mineral concentrates severely disrupted Caterpillar's business, contributing to (if not causing) massive declines in retail sales, layoffs, and plant closings. Yet the signs of growing resource nationalism were evident since at least 2009, illustrating how even large companies can miss warning signs in foreign terrain.
Evaluating Ethiopia: Change Your Mindset and Treat Instability Like a Tax
An expanding middle class, rapid urbanization, and a recent commitment to invest heavily in infrastructure are drawing many international firms to Ethiopia. President Obama lauded the nation's growing consumer market and surging access to the internet during his 2015 visit. It's easy to get caught up in the hype, but successful companies stay cognizant of risks such as lingering corruption, state ownership of all land, and unresolved conflict in neighboring South Sudan, Eritrea, Somalia, and Kenya.
The African Hotel Pipeline: Egypt Entices the Unwary
Egypt has 18 new hotels in development as of 2015, second only to Nigeria in the entire African continent. 91% are already under construction. Tourism revenue is Egypt fell 95% between 2010 and 2014, and escalating threats from ISIS are putting the country's entire tourism industry in jeopardy. These developments call into question whether Egyptian hotels are a safe and productive investment for any international hotel company.
Read the full white paper: