Services that aspa|Michael Toedter|consulting offers

Emerging Markets are characterized with a far above average growth rate and with a significant market size at least in the near future. Hence, for a company the need arises to be present in these markets. This creates a challenge, especially for those companies that have addressed these markets so far not at all or only to a minor degree. And medium-term it might even be a question of survival for a company to participate at the economic importance of these markets.

A company that has accepted this strategic challenge is confronted with a number of challenges. First of all, due to the lack of being present in these markets the knowledge regarding product requirements, adequate marketing activities, success critical distribution channels, competitors, etc. is rather limited. On top of this, there are uncertainties regarding legal requirements (taxes, customs, non-tariff issues). Furthermore, it also lacks experience in terms of bureaucracy, e.g. how long administrative proceedings by local authorities might take.

In order to manage these challenges successfully, it is advisable to start a separate project. Critical for a smooth project course is a strong support and mentoring via the top management, access to information regarding market characteristics as well as a professional project management.

In the context of building up new business in Emerging Markets in principal all distribution related tasks could be outsourced, e.g. to an appointed distributor. This form is quite common for a start into a new market. However, if the objective is clearly to gain a significant market position the establishment of own sales subsidiaries might become a success-critical issue. 

The establishment of own sales structures is an important milestone for the handling of a market. Not only significant financial and personnel resources are required; also management resources are needed with the risk that the focus on the ongoing business in the core markets might be diverted.

Send the signal to the dealers with such an activity is clearly that a serious interest in this new market exists. And this inevitably creates expectations. Therefore, the phase from the announcement till the official start of the new sales company should be short and with minimal conflicts with existing distribution partners. As for the business processes, these should be running at least without major hick-ups in order not to disappoint the customers.

It is strongly advisable to set up a professionally designed and stirred project with the aim to manage the before mentioned challenges in the best possible manner.

In today's era of digitization and globalization the intensity of competition in all business fields is clearly on the rise. Hence, companies are forced constantly to improve their own competitiveness. This statement is valid for all markets, but especially in Emerging Markets. Here importing companies encounter well established local competitors with substantial market shares, i.e. they enjoy the advantages of economies of scale in distribution. Moreover, local and/or locally producing competitors benefit from local product designs as well as from advantageous local production costs.

A well-established instrument to improve the operational excellence consists of comparing the performance with that of other business units. This benchmark is performed via a set of viable key performance indicators, either from within the corporation or with external companies from a similar industry.

In either case, the objective is always to identify areas for improvement within the own organization and increase the performance at least to the same level as the best-in-class.

Any distribution strategy should be integrated into the overall strategy of a company and should be well thought out for a number of reasons. Contrary to corporate strategies in other areas, a distribution strategy is immediately visible in the market. Any changes of direction almost always lead to concerns on behalf of trade partners. They assume automatically that the supplier changes his strategy in order to take advantage and to cover a larger share of the whole value chain. Of course, this is not always the case and it stresses the sensitivity of this issue. Therefore a company should be pretty sure about the need for a direction change prior to initiating a project that aims at a strategic realignment.

The Digital Transformation is currently probably the most prevailing issue also for Sales Companies. It causes without any doubt an urgency of highest priority for any company to analyze the chances and risks out of this technological revolution. The discussion should always aim at an improvement of efficiency and customer value for trade partners and consumers. Surely, we will notice changes in the order of importance of trade partners for a specific company. It is an important task for any company to acquire new dealers at the most appropriate time and at the same time manage the relationship with all established partners in a smooth way. All these considerations should not only take place in view of the traditional markets because quite often the front-runners and the pioneers of the digitization can be found in the Emerging Markets. Here even smaller companies will encounter opportunities to generate a USP for their customers.

I have been dealing first hand with these issues during my term as Managing Director of Sales Companies but also as Divisional Director at the Corporate Headquarter. It would be my great pleasure to enter a discussion about all the important and exciting topics around the Digital Transformation.