The importance of understanding emerging markets as a small business owner

The emerging markets are a land of opportunity for investors and business entrepreneurs. They also represent an area of inherent risk. However, in the competitive marketplace, businesses need to look for ways to reduce costs and increase profit margins – and the emerging market is a good way to achieve this.

The emerging markets are actually much closer than you may think. Although many people still think of the Far East and South America, we now have emerging markets within Eastern Europe and just beyond in Turkey. Africa is also now becoming an exciting new region for many investors.

For business owners, emerging markets are an opportunity to source cheaper labour and products. Both the manufacturing and service industries can make significant savings by outsourcing to emerging markets; as many companies are already doing. Some business owners are taking this one step further by investing in companies overseas that support services; this is a clever way to help cheaper suppliers stay in business while also benefiting from a growing economy.

Africa

One of the most interesting emerging economic regions at the moment is Africa, and this includes the Seychelles. This is a region where the middle class is growing exponentially. It is estimated that the world’s middle class population will nearly double from the 2009 figure of 1.8 billion people to 3.2 billion in 2020 – and many of these middle class people will be in Africa.

In countries such as South Africa and Nigeria, many people are now obtaining college qualifications and going on to run successful businesses. One major change in recent years is that many new businesses are quickly utilizing the benefits of the internet to reach customers overseas.

Nigeria is Africa’s fastest growing country and is becoming a dominant force in the continent; if growth continues it could soon rival South Africa as the largest economy on the continent. Egypt is another of Africa’s growing economies and due to its favorable location, it has great potential to support European businesses.

The Middle East

Many of the Middle Eastern economies are experiencing economic growth, and are actively seeking international trade links. Countries such as the United Arab Emirates have grown to prominence in the luxury markets, and other countries are hotbeds of business and investment opportunity. The growth in technical infrastructure in the region is helping to connect more of the Middle Eastern customer bases to the global digital marketplace. Entrepreneurs such as Ehsan Bayat, who split their time and business between their native countries and the United States, are proof of the growing cooperation between East and West.

Have an escape plan

The emerging markets can be extremely volatile so it is important for businesses to develop a contingency plan when dealing with them. For example, if a new supplier is sourced from a newly emerging economy then a business may be able to purchase products at a lower price to increase profit margins or reduce their prices to undercut the competition. However, the business should be prepared for the worst case scenario; the supplier could suddenly close down or supplies could be temporarily cut off due to unforeseen circumstances.

If risk is managed and plans are in place to cope with worst case scenarios, then the emerging markets can be a land of opportunity that will allow a business to succeed over the competition and ultimately win a larger market share.

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