Last week in Barcelona at the Mobile World Congress (the conference formerly known as 3GSM), attendees got a taste of what it really means to bring technology to frontier markets. Karim Kohja, CEO of Afghanistan telecom operator Roshan, described the challenges of expanding into rural Afghanistan. He woke up his audience with the story of his unexpected entry into the “financial services industry” when he had to carry boxes of cash into bandit-infested mountains. Kohja quickly learned that, if reaching remote customers was easy, they would already be subscribers.
While the Afghanistan telecom example is extreme, it is not unique. Barriers to entry are typically segment- and geography-specific, and mature-market experience does not necessarily help a company prepare for them. Vital Wave Consulting field researchers know this well – before conducting interviews or taking photos of technology usage in the favelas of Rio de Janeiro, they must request permission from local drug traffickers. Oftentimes the more remote the region or poor the market, the greater the challenge. But, emerging-market expansion is not always so treacherous. Many, for instance Eastern European countries, can look and act more like developed markets than their least developed counterparts such as those in Sub-Saharan Africa. And the least developed markets can also offer unexpected advantages. Markets that have not yet been penetrated by technology have fewer barriers to entry (e.g., no legacy systems to upgrade, less competition).
Companies eager to find growth opportunities in emerging markets must balance their appetite for risk with the urgency to grow. Businesses may chose to work with partners to share the risk or to avoid the most extreme situations. Others may chose to embrace the risks and hedge against them with business rigor, including tested business models, credible market and business intelligence, and reliable supply chains. Businesses with such a toolkit will mitigate emerging-market risks and gain a reliable measure of potential rewards. These are the firms most likely to effectively tackle the unique barriers to entry in new markets.
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