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Member Eleanor Eaton shares her recent presentation at Trade Week in New York City.

Member Eleanor Eaton shares her recent presentation at Trade Week in New York City.

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  • 1. Best Foreign Markets ofTomorrowWhat Lies Beyond the BRIC Presented by Eaton & Co. May 15, 2012 1
  • 2. Today’s Discussion Life beyond the BRIC (or BRICS) --Emergence of Frontier markets Process of evaluation and prioritization of new markets based on specific needs Best markets by geographic region 2
  • 3. Eaton & Co. Founded in 1987 Focus on global developing and emerging markets Offices/branches in major developing regions Record of successful entries into top priority markets Clients across industries, from aerospace/ defense to consumer goods and industrial manufacturing to retail 3
  • 4. History of Emerging Markets 56.2% New markets of: Asia: -Vietnam -Bangladesh -Sri Lanka 39.7% Latin America: - Economy -Columbia becomes global -Peru - BRIC countries -Paraguay outperform the -Mexico “old” world of US and Western Sub-Saharan Europe Africa: 23% - Prominence of -Ghana Emergence of BRIC new markets in all -Nigeria countries parts of the world -Mozambique - Size promoted by liberalization of Ex-Soviet Union: - Supply resources Less than 10% - Pent-up demand trade and internal -Kazakhstan policies -Uzbekistan China enters as a supplier Year 1980 1999 2011 2021 4
  • 5. The new markets are very appealing.- Size- Growth- Market Demand- Weak Local Competition- Sourcing Opportunities- Cost Advantages 5
  • 6. Experience with BRIC revealed stumblingblocks for any new market.- Political Instability- Legal Uncertainty/Trademark Protection- Corruption- Energy Costs/Availability- Low Consumption Ability- Cultural Issues: • Management • Training • Product Acceptance- No Data- No Means of Validating Possible Partners- Inadequate Infrastructure- Security Issues- Government Heavy-Handedness 6
  • 8. No single market is good foreveryone! Process of Identifying and Evaluating New Markets 8
  • 9. Defining Your Company Needs – Are youinterested in selling or producing in newmarkets?A. Volume Growth In the Specific Market Use One Market as a Hub to Enter the RegionB. Cost Advantage Outsourcing Own Manufacturing FacilityC. Search for Innovations Licensing Technologies Joint Venture Supply Source 9
  • 10. Developing screening criteria.Factor Key ElementsSize - Market Growth - Labor PoolCompetition - Internal - External - Market PotentialPurchasing Power - Education Level - Market Segmentation - SourcingNatural Resources - Access - Growing EconomiesGDP Trend - Economic Perspective - Infrastructure - Political StabilityBusiness-Friendly Climate - Experience with Foreign Investment - Partnerships - Legal Environment/Corruption 10
  • 11. Population in emerging marketsgrows fastest. Source: IHS Global Insights 11
  • 12. How attractive are these markets forconsumption of goods and services?The consumption in US $’s per capita growth from 2010 to 2021 isimpressive. Source: Deloitte Report 12
  • 13. Depending on your needs, each continent offers opportunities. R&D Skilled Labor Emerging Europe Latin America AsiaLow-End Internal High-End Internal Consumption Consumption Ex-Soviet Union Middle East/ North Africa Sub- Saharan Africa National Resources Low Cost Labor Source: Eaton & Co. Analysis 13
  • 14. Region – Asia Attractiveness Concerns- Access to maritime routes - North Korea is a destabilizing- Integration with global economy factor- Strong and still inexpensive labor - Security issues (Philippines, India) force - Propensity to natural disasters- Traditions of democracy in (tsunami, earthquake) major countries – Indonesia, - China maritime ambitions South Korea- Shift to global trade in previously closed countries (Burma, Vietnam)- Natural Resources 14
  • 15. Best Markets in Asia GDP Growth Population Best Country Risk 2010-2025 (M) FeaturesVietnam 6.9% 88 Low to Medium - Experience in subcontracting to China - Pent-up demandBangladesh 6.3% 142 - Great for Low growth andIndonesia 6.2% 238 sourcingBurma 5.8% 48 Medium - Labor cost advantage - Low-end market - NaturalPhilippines 5.5% 92 Low - resources Rapid development - Business friendlySouth Korea 4.1% 49 Low - Strong manufacturing and R&D Source: Business Monitor 15
  • 16. Region – Sub-Saharan Africa Attractiveness Concerns- Chinese demand for African - Unstable regimes spill violence natural resources lifted over the borders disrupting economy economies- Explosion of a mobile phone - South Africa begins to face market led to fast developing declining growth, high “grey” economy unemployment, and after- South Africa provided a model Mandela the future is uncertain of peaceful transition and - Security risk is too high prosperity 16
  • 17. Best Markets in Sub-Saharan Africa GDP Growth Population Best Country Risk 2010-2025 (M) FeaturesNigeria 7.7% 163 High - Strong economy - Resources - Health and birth rate improvementGhana 7.6% 24 - Political stability - ReformsMozambique 7.6% 24 Low to Medium designed to encourage investmentBotswana 5.5% 2 Low - The most peaceful pied-a- terre into AfricaSouth Africa 4.1% 52 Medium - Consistent policies - Rising middle class Source: Business Monitor 17
  • 18. Region – Emerging Europe Attractiveness Concerns- Strong democratic - Euro zone decline affects principles new EU members- Educated labor force - Dependency on Russian- Geographic advantages for gas global integration - Emergence of social- Best source for R&D leads programs adds costs to to creation of combined, labor more powerful markets 18
  • 19. Best Markets in Emerging Europe GDP Growth Population Best Country Risk 2010-2025 (M) FeaturesTurkey 5.4% 75 Low - Traditions of foreign investment and co-operations - Growing middle class - LocationPoland 4% 40 Low - Strong manufacturing base - Developed academy/R&D - Educated market - Political willCzech Republic 1.8% 11 - Best for R&D sourcingHungary 2.1% 10 - Potential for Low tourism and realLatvia 2.7% 2 estateEstonia 3.4% 1.5 Source: Business Monitor 19
  • 20. Region – Latin America Attractiveness Concerns- Natural resources - Disruptive regimes of- Brazil serves as a model of Venezuela and Argentina peaceful development affect the region- Tradition of working with - Drug cartels in Mexico a foreign investors threat- Strong manufacturing base - High inflation, especially in Brazil, may weaken the markets - Recent nationalization of foreign banks (Argentina, Bolivia) 20
  • 21. Best Markets in Latin America GDP Growth Population Best Country Risk 2010-2025 (M) FeaturesPanama 5.5% 3 Low - Location - Growing tradePeru 4.8% 30 Low to Medium - Commitment to attract foreign investment and growthColumbia 4.2% 48 Low - Infrastructure - Natural resources - Political stabilityChile 3.3% 17 Low - Strong stable market - Natural resourcesMexico 2.7% 115 Low - Traditional ally - Dramatic rise in the middle class - Developing academia Source: Business Monitor 21
  • 22. Region – Middle East/North Africa(MENA) Attractiveness Concerns-Natural resources -Iran-Skilled labor force -Political Turmoil-Young population -Palestinian/Israel-Geographic position conflict -Small local population dependent on export labor 22
  • 23. Best Markets in MENA GDP Growth Population Best Country Risk 2010-2025 (M) FeaturesLibya 13.3% 6 Medium to High - Natural resources - Liberalization of tradeIraq 12.1% 33 High to Medium - Growing market - Demand forEgypt 4.9% 82 High Now/Medium manufacturing Long-Term - Young population - Natural resourcesLebanon 5.7% 4 Medium - Skilled labor - Traditionally business friendly - Gateway to the rest of the Middle EastTunisia 5.6% 11 Low to Medium - Political situation stabilized - Geography - Tourism Source: Business Monitor 23
  • 24. Region – Ex-Soviet Union Attractiveness Concerns-Natural Resources -Russia penchant for re--Yet untapped markets integration-Tradition of trade -Propensity to economy – “silk” road autocratic regions -Very poor internal market 24
  • 25. Best Markets in Ex-Soviet Union GDP Growth Population Best Country Risk 2010-2025 (M) FeaturesMongolia 11% 3 Low - Business friendly regulations - GeographyTurkmenistan 10.2% 5 LowUzbekistan 8% 29 Low to MediumKazakhstan 7% 18 Medium - Untapped market - GeographyAzerbaijan 6.2% 9 Low - Natural Resources Source: Business Monitor 25
  • 26. Is China passé or a frontiercountry? Current But Huge New Problems: Market West Of- Aging population The Great China- High debt Wall: structure - Natural resources- Increasing labor - Some infrastructure costs already in place- Government - 65% of total regulations population, upwardly mobile.- Fragility of political system- Risk for intellectual property 26
  • 27. No single market is good foreveryone! Process of Identifying and Evaluating New Markets 27
  • 28. The path to successful entry is not easy and often challenging…- Addressing lower market needs- Sensitivity to cultural issues/demands- Human resources Local- Ability to find Partnerships business/market data when little is publicly available- Contacts 28
  • 29. Partnerships may have many forms: Total or partial ownership Joint venture Sub-contracting Alliance with outside the industry (e.g., the government or an association) Knowledge exchange Offsets 29
  • 30. Partnership is crucial to the successful exploration of new markets but it has its dark side…PRO’S CON’S •Knowledge of local • Learning curve can be market structure and costly culture • Contacts’ value may •Established change with each representation and election contacts • Customer loyalty SOLUTION •Extra production uncertain capabilities • Local rivalries may •PR showcase • Thorough vetting have a negative •Labor cost reduction process impact • Multiple and • History unknown continuous information sources • Start with two potential partners on a small sub- contracting basis • Ongoing benchmarking against pre-established criteria 30
  • 31. TO WIN  Be Patient  Be Committed  Be Flexible  Be Intelligent  Stay Optimistic 31
  • 32. Q &A 32