As people look at various political events in places like the Middle East, some may consider them as opportunities to enter new markets with business propositions. This may ultimately proof to be true, but going to these new emerging markets requires a careful approach.

1. Do’s and Don’ts: Entrepreneurship in Emerging Markets
April 29, 2011 By Aviad Meitar
As people look at various political events in places like the Middle East, some
may consider them as opportunities to enter new markets with business
propositions. This may ultimately proof to be true, but going to these new
emerging markets requires a careful approach.
Twenty years ago Eastern Europe came out of the communist era and was
viewed as the “new frontier” for business people. I led the effort to set up the
Pepsi business in Romania at that time. It took a methodical work of a full
year to establish that business and get ready to operate. I would like to share
with you some of the key learnings from that experience, which I believe could
be helpful in considering entering the emerging markets of today.
1. Who should consider investing in emerging markets?
Investing in an emerging market is not for everyone. It requires a number of
elements that are not part of an investment in a developed market. This
includes a great deal of patience – to deal with authorities, potential partners,
etc., that are not well versed with the business culture of the developed world.
It also includes determination to overcome various obstacles that are bound to
come up along the process. As an example, after a lengthy negotiations
process we thought we arrived at a “joint venture” agreement with a state-
owned company, only to find out on our next visit that the entire management
was replaced by the owner (i.e a state authority) to make that agreement
void…One additional requirement is a long term view. There is no point in
going to such markets unless one is prepared to stay there for the long term
and build a business for sustainable success.
2. What to look for in considering an emerging market?
There are a number of important elements that need consideration in
evaluating this proposition. The most important one is the existence of a legal
framework that allows one to know the “rules of the game”. In Romania of the

2. early 1990′s, although coming out of over 45 years of communism, there was
some legal foundation that dealt with the rules of establishing a foreign owned
business. This proved essential and even withstood the test of challenging it
in court – as we were forced to take the state to “battle our differences” on a
few occasions. In the absence of a minimum business-legal foundation, one is
risking entering a chaotic situation. Other important elements are the structure
of the particular industry considered, the strength of the competition – both
existing and potential new entrants; The size of the market – in consumer
goods this is driven by the population size as a key criterion; The existence of
support industries for the business in question – suppliers of raw materials,
service providers etc. In our Pepsi business in Romania there was a
significant lack of domestic raw materials, which meant we had to import a
number of important elements – and this proved to be a major challenge in
the early years where hard currency was hard to find.
3. What to cover when visiting a new emerging market?
Learning a new market is a process. First impressions are not always a true
reflection of reality, especially if one is being taken around by officials who
want to make the best impression on a potential investor. In this process it is
important to go outside the main city/cities. To understand what the majority of
the market (which usually at this stage is in the rural areas) looks like. The
infrastructure is also important – roads, utilities. When we started in Romania
there were close to no highways in the entire country. As moving products
around the country was a key activity for a Pepsi business, we asked officials
and were told that they had a 5 year plan to lace the entire country with
highways. This is yet to happen, after more than 20 years…One needs to
understand the trade structure, the strength of distributors and other links
between a producer and the market. This also involves the assessment
whether one could operate a fairly “clean” business, free of coercion from
government corruption and/or organized crime. Even if the environment is not
identical to what one is used to at home, it has to be such that he/she is
comfortable enough to operate in.
There is a great benefit to being an early entrant to an emerging market. One
enjoys a greater pool of potential partners, is able to get a “head start” on the
competition and is probably able to negotiate a favorable deal with local
authorities eager to attract foreign investors. However, there are a number of
pitfalls awaiting early investors that one must try and avoid as the business
climate is in a formation stage.
In taking the time to learn and analyze the market being considered, one can
minimize the risks and improve the chances of success. Achieving success in
such challenging conditions is definitely very rewarding. And this I share from
true experience.
To find out more about this venture read my book: “An Unimaginable
Journey”

3. For more tips and insights on entrepreneurship and business
management, or to share your journey, visit me at www.AviadMeitar.com
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