To comfortable first-worlders, emerging-market economies are mysterious and confounding. China, for instance, is a treasure trove of strange and wonderful things that you almost certainly know nothing about. India is the world’s most populous democracy (that few in the U.S. seem to know or care about), Russia is a contradictory land of glitz and intrigue, and sub-Saharan Africa’s desperate poverty is increasingly counterbalanced by pockets of go-go capitalism.
Is it really possible to make sense of the world’s hundred or so emerging-market economies in a big-picture sense? Or do ground-level realities simply overwhelm attempts to put the emerging-market scene into neat little boxes?
The answer lies somewhere in the middle. While every emerging economy is different, it’s possible to make some generalizations about doing business in what’s less than charitably referred to as the third world. If you’re serious about entering — or starting a business in — an emerging market, though, you also need to draw on your own common sense and past experiences to make sense of what you’re up for.
With that caveat aside, here’s what you need to know about starting a business in an emerging economy.
You Can Get Talent for Less
Cheap labor is a defining characteristic of emerging markets. Whether you’re building a local factory to manufacture products more cheaply or outsourcing white collar labor from more expensive first-world economies, you can expect your wage dollars to go a lot further. What’s more, you’ll find that lower wages don’t always mean lower talent. That’ll no doubt be welcome news as you ramp up your overseas operation on a limited budget.
You’ll Probably Have to Play a Rigged Game
Some emerging-market economies are on the up and up, but many are hopelessly (or partially) corrupt. Before you enter a new market, do some research and figure out exactly how bad things are on the ground. If you do choose to take the plunge, expect to grease some palms and engage in some quid pro quos along the way. Remember that this is simply how business is done in many parts of the world. You can either embrace it or refuse to play the game.
Local Context Matters
You can’t expect emerging-market success without a detailed understanding of the local context: language, customs, culture, frame of thinking, attitudes toward outsiders. Most people don’t think like Americans because they’re not Americans. And, while you don’t have to burn your U.S. passport and go native, it’s to your great benefit to learn how to get along.
There Are a Lot More Emerging-Market Consumers These Days
Many emerging economies had no middle class to speak of at the beginning of the 21st century. Today, they’re bastions of consumption. That makes it easier and more profitable to sell what you make locally — a welcome alternative to exporting.
Everything Is Connected
The global economy increasingly functions as a single unit. What happens on one side of the world inexorably affects people on the other side. If you’re not comfortable untangling the currency exchange, trade policy and labor relationships that drive global commerce, hire or consult with people who are. It’s simply too great a risk to sit back and let the world do with you what it may.
Are you planning on starting a business in an emerging economy? If you already run your own business, what are your thoughts on expanding into emerging markets?