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

1. Best Foreign Markets of
Tomorrow
What Lies Beyond the BRIC
Presented by Eaton & Co.
May 15, 2012
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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
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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
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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
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5. The new markets are very appealing.
- Size
- Growth
- Market Demand
- Weak Local Competition
- Sourcing Opportunities
- Cost Advantages
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6. Experience with BRIC revealed stumbling
blocks 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
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7. AS NEW MARKETS
DEVELOP, COST
ADVANTAGES DISAPPEAR
AND COMPETITION
INTENSIFIES.
We’re off to new frontiers!
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8. No single market is good for
everyone!
Process of Identifying and Evaluating New Markets
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9. Defining Your Company Needs – Are you
interested in selling or producing in new
markets?
A. Volume Growth In the Specific Market
Use One Market as a Hub to Enter
the Region
B. Cost Advantage Outsourcing
Own Manufacturing Facility
C. Search for Innovations Licensing Technologies
Joint Venture
Supply Source
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10. Developing screening criteria.
Factor Key Elements
Size - Market Growth
- Labor Pool
Competition - Internal
- External
- Market Potential
Purchasing Power - Education Level
- Market Segmentation
- Sourcing
Natural Resources - Access
- Growing Economies
GDP Trend - Economic Perspective
- Infrastructure
- Political Stability
Business-Friendly Climate - Experience with Foreign Investment
- Partnerships
- Legal Environment/Corruption
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11. Population in emerging markets
grows fastest.
Source: IHS Global Insights 11

12. How attractive are these markets for
consumption of goods and services?
The consumption in US $’s per capita growth from 2010 to 2021 is
impressive.
Source: Deloitte Report 12

13. Depending on your needs, each
continent offers opportunities.
R&D
Skilled Labor
Emerging
Europe
Latin
America
Asia
Low-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
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15. Best Markets in Asia
GDP Growth Population Best
Country Risk
2010-2025 (M) Features
Vietnam 6.9% 88 Low to Medium - Experience in
subcontracting
to China
- Pent-up demand
Bangladesh 6.3% 142 - Great for
Low growth and
Indonesia 6.2% 238 sourcing
Burma 5.8% 48 Medium - Labor cost
advantage
- Low-end
market
- Natural
Philippines 5.5% 92 Low - resources
Rapid
development
- Business
friendly
South 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
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17. Best Markets in Sub-Saharan Africa
GDP Growth Population Best
Country Risk
2010-2025 (M) Features
Nigeria 7.7% 163 High - Strong
economy
- Resources
- Health and
birth rate
improvement
Ghana 7.6% 24 - Political stability
- Reforms
Mozambique 7.6% 24 Low to Medium designed to
encourage
investment
Botswana 5.5% 2 Low - The most
peaceful pied-a-
terre into
Africa
South 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
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19. Best Markets in Emerging Europe
GDP Growth Population Best
Country Risk
2010-2025 (M) Features
Turkey 5.4% 75 Low - Traditions of
foreign investment
and co-operations
- Growing middle
class
- Location
Poland 4% 40 Low - Strong
manufacturing
base
- Developed
academy/R&D
- Educated market
- Political will
Czech Republic 1.8% 11 - Best for R&D
sourcing
Hungary 2.1% 10 - Potential for
Low tourism and real
Latvia 2.7% 2 estate
Estonia 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)
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21. Best Markets in Latin America
GDP Growth Population Best
Country Risk
2010-2025 (M) Features
Panama 5.5% 3 Low - Location
- Growing trade
Peru 4.8% 30 Low to Medium - Commitment to
attract foreign
investment and
growth
Columbia 4.2% 48 Low - Infrastructure
- Natural resources
- Political stability
Chile 3.3% 17 Low - Strong stable
market
- Natural resources
Mexico 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
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23. Best Markets in MENA
GDP Growth Population Best
Country Risk
2010-2025 (M) Features
Libya 13.3% 6 Medium to High - Natural resources
- Liberalization of
trade
Iraq 12.1% 33 High to Medium - Growing market
- Demand for
Egypt 4.9% 82 High Now/Medium manufacturing
Long-Term - Young population
- Natural resources
Lebanon 5.7% 4 Medium - Skilled labor
- Traditionally
business friendly
- Gateway to the
rest of the Middle
East
Tunisia 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
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25. Best Markets in Ex-Soviet Union
GDP Growth Population Best
Country Risk
2010-2025 (M) Features
Mongolia 11% 3 Low - Business friendly
regulations
- Geography
Turkmenistan 10.2% 5 Low
Uzbekistan 8% 29 Low to Medium
Kazakhstan 7% 18 Medium - Untapped market
- Geography
Azerbaijan 6.2% 9 Low - Natural Resources
Source: Business Monitor 25

26. Is China passé or a frontier
country?
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
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27. No single market is good for
everyone!
Process of Identifying and Evaluating New Markets
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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
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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
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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
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31. TO WIN
 Be Patient
 Be Committed
 Be Flexible
 Be Intelligent
 Stay Optimistic
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32. Q &A
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