Business Models for Emerging Markets

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En provenance du cours de National Research University Higher School of Economics

Business Strategies for Emerging Markets

58 notes

National Research University Higher School of Economics

Business Strategies for Emerging Markets

58 notes

The course aims to transfer the fundamental knowledge and to form the basic competencies necessary for the development and the implementation of a business strategy in an emerging market. The students are going to improve their analyzing, decision making, and planning skills as well as the ability to recognize strategic opportunities and threats. The course requires the knowledge of basic economics concepts as the pre-requisite. It is preferable that the students have some practical entrepreneurial or marketing experience, but this is not obligatory. The course has a distinct stress to the practice of strategic management. Although a few fundamental theories are mentioned, the bulk of the ideas are based on simple though efficient applied model that are easy to understand and convenient to use. The multitude of examples and stories from the personal consulting and managerial experience of the author are the hallmark of the course. The author’s original drawings make the key concepts well memorable ad cozy to deal with.

À partir de la leçon

Designing your business model

Dear student! In this module you will learn how to design a coherent and strong business model out of a business idea. You are going to study how to segment you potential market and how to establish marketing, distribution and partnerships in order to meet the demands of your target audience. On completing the module you will be able to calculate the potential market size, to pack attractive value into your products and to position them properly. You will learn how to attract agents and partners, how to establish a sustainable value exchange, and how to plan the necessary basic activities. Do your best to apply all the ideas of the module to your business idea, discuss it with your friends and colleagues, do all the tasks, and you will have good progress in your learning. Good luck on this way!

Business Models for Emerging Markets8:44

Rencontrer les enseignants

Mikhail Plotnikov
Professor
Department of General and Strategic Management

[MUSIC]

In the previous part of the course, we've discussed the fundamental concepts

that can be the basis for the business ideas in emerging markets.

A business idea is the core of any venture, however,

it needs proper organization and implementation.

In this part, we're going to know how to design a coherent and

efficient business model for your ideas.

Let's get started.

So what is a business model?

You can find different definitions and

approaches to business models, analysis, and creation.

Basically a business model is a pattern of interactions between the company itself,

its clients, and its partners.

It answers the questions, what are we going to do?

How we're going to do?

Who should be involved?

And in what way?

It is the theory of your business.

Presumably, one of the most popular way to answer those questions is to

use business model canvas suggested by Alexander Osterwalder and Yves Pigneur.

According to this model,

there are nine key elements of any business that should correlate each other.

There are value proposition, customers, customer relationships, channels, key

activities, key resources, key partners, cost structure, and revenue streams.

We're not going to discuss the model in detail.

You can easily find its description on the internet.

I use the business model canvass for many times to relegate existing businesses and

to start the new ones.

And I should say it's a brilliant tool, however,

when applied to emerging markets it has some certain limitations.

Let's see though.

I'd like to remind you briefly the main particularities of emergent markets

that we discussed in the part one.

They are Market Heterogeneity, Sociopolitical Governance,

Chronic Shortage of Resources, Inadequate Infrastructure and Unbranded Competition.

So what is wrong with business model canvas in emerging markets?

There are at least five important differences that limit the use

of the model.

Let's look at them.

First, as we discussed before, the markets in emerging economies are too fragmented.

That means it is extremely difficult to design a business model

focused on a single or a few segments.

As the client groups are too different in their needs and behaviors,

operation of the emerging markets requires a much more flexible approach.

Second, due to the sociopolitical governments and

monopoly powers the customers often have limited ability to decide.

Very often the key to success is not the interactive to customers rally

proposition, but the ability to negotiate with the decision makers.

Third, the supplies failures are common, so

we need to take into account that they affect quality and costs.

That means it is necessary to take the risks into account and make reserves for

the risk management activities.

Fourth, the channels for communication and distribution are often weak and

cannot provide sufficient coverage, speed or volume.

In practical sense, this means you need to use multiple channels, create your own

ones, and establish non-traditional ways to communicate and distribute.

And the fifth, be prepared that business models can be easily copied.

Patents, unique products, or innovative ideas are most

commonly not a significant barrier for the competitors and new entrance.

A solid ground to protect business in emerging markets

is to establish a unique network of partners and influencers.

Truly the competition here is the contest of partner networks and

the ability to negotiate.

So we now see that building a successful business model in an emerging market

requires special attention because of the differences mentioned about.

What should we taken into account?

How to develop a business model for emerging markets?

I can give you five hints.

Number one, find local partners.

Connections are the cornerstone of success in emerging markets.

No matter how good you are in quality cost reduction or service,

you need someone, a person or a company,

to guide you through the net of established connections.

Number two, offer customized products.

As far as the client preferences are diverse and

are being changed unpredictably,

you can never guess what set of product characteristics and options is optimal.

Instead, offer an opportunity for

clients to choose the available options for themselves.

Thus, you diminish the risk and increase customer involvement.

Number three, choose mass growing segments.

The risks can be reduced if you enter mass growing segments.

Happily, there are numerous in emerging markets.

The incremental growth of large-scale sales is able to compensate the losses and

unpredictable events in your business.

Number four, focus on accessibility rather than quality.

The quality standards in emerging markets are not established yet.

So, the struggles for better characteristics is almost senseless, as

the clients are not able to differentiate between something very good and perfect.

Instead, focus on providing accessibility in terms of pricing and distribution.

An excellent product that is not accessible will bring you less profit

than just a good product that is widespread sold and bought.

And finally, number five, focus on short term results.

Business environment is changing quickly in emerging markets.

Simply forget about long term strategic plans, focus on short term results.

You can develop strategic collision statement for five years.

A longer period of planning can be afforded only by huge companies

that are able to dominate in the market.

Detailed action plans can be developed and implemented for a one year period only.

If you act as an investor, think of shortening the payback period.

It is more than reasonable here.

So, five hints are local partners, customized product,

mass growing segments, high accessibility, and short-term results.

When we design VBS business model, we tried to follow all the five.

We attracted local partners to conduct markets and communications sales,

and places for our consultant's sessions.

We introduced a set of customized products, each of which consisted

of several one day modules that could be easily added or removed from the program.

We chose management skills training as this was the most attractive mass

growing segment of corporate education market.

Striving to reach accessibility, we offered a number of short programs

at average local prices so that it could be affordable and accessible for many.

At last, we offered ready to use methods and

know-hows as the hallmark of VBS programs.

This was a way to demonstrate short results for our clients, and

to reach quick and short money for the school.

This model proved to be a success.

We easily penetrated the market and attracted the first clients.

Many of them are still loyal to us.

So, let's sum it up.

A business model is a pattern of interactions between the company itself,

its clients and its partners.

Emerging markets are fragmented, consumers here have a limited ability to decide,

the shortage of supply may cause problems with cost or quality.

The established channels of communication and distribution are not very efficient.

And the ideas may be easily copied.

If you decide to enter an emergent market find local partners,

offer customized products, concentrated mass growing segments,

provide accessibility rather than quality, and focus on short-term results.

This will help you to ascend the negative factors of emergent markets.

[MUSIC]

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