By 2020, the global middle class will almost double to 3.2 billion people, and as the middle class grows, particularly in emerging markets, so will their demand for high-tech gadgets, according to the Organization for Economic Cooperation and Development (OECD). Smart OEMs are going to be eyeing these emerging markets.
As background for those who missed my previous posts, in our annual Change in the Chain survey conducted by IDC Manufacturing Insights, we asked high-tech executives in North America, Latin America, Europe, and APAC about important topics in the industry that are driving changes in their supply chains. Emerging market expansion was a key topic in our most recent survey, which showed that, worldwide, high-tech companies are already aggressively moving into emerging markets, as reported by 49% of high-tech logistics executives globally.
Based on their experience with expansion, high-tech companies have documented a number of lessons learned, which are not only applicable as companies in the high-tech industry continue to expand but could also be helpful for other industries as they take advantage of growing demand in emerging markets across the globe. The top “lesson learned” by 27% of high-tech decision makers is how to establish initial operations in new markets, which is followed by managing the overall in-country presence, as cited by 16% of those surveyed. Other top lessons learned include partnering with a logistics provider in the early stages to assist with market entry and managing changing regulations, both of which are cited by 15% of high-tech executives.
Despite having an established presence in many emerging markets, high-tech companies still report barriers when it comes to global expansion. At the top of the list, 19% of high-tech decision makers say their main barrier is understanding the appeal of their product in new markets. This is closely followed by the ability to execute a new in-market strategy, as cited by 17% of those surveyed. And 15% of respondents cite the current economic conditions as their top barrier to global expansion. In an effort to address these and other challenges that high-tech companies face, 42% say they need a turnkey solution to help them enter markets.
At UPS, we work closely with companies in the high-tech industry to navigate the complexities of entering emerging and established markets. Here are a couple of tips to consider as you prepare for expansion:
- In the short term and oftentimes also over the long term, leveraging logistics partners to facilitate import/export processes can be very helpful, as can taking advantage of partners with in-depth, local expertise.
- Don't be intimidated by emerging markets if you are not there yet; use a fulfillment partner to establish a presence in those markets.
- Finally, look at entering emerging markets as a variation of the “buy-or-make” analysis, and engage partners as needed.
When considering establishing operations in a new market, what would be most helpful for your company?