5 advantages of doing business in an emerging market
What makes India an emerging market? For that you need to know the traits of an emerging market.
An emerging market shares some characteristics of a developed market. For example, per capita income is higher. Liquid equity is available in greater proportions. There are strong economic growth indicators. There is heavy industrialisation, advanced communication setup and well-connected transport systems. People’s spending power has increased. There are established channels for selling and buying. Law and order are good. There is a dependable regulatory system. The infrastructure is developing fast. The country welcomes and facilitates foreign direct investment.
An emerging market is a great investment and business expansion opportunity whether you already live amidst such a market, or you live in another country. 59% of worldwide GDP right now is coming from emerging markets.
Listed below are 5 reasons why you should do business in an emerging market.
1. Greater acceptance for new goods and services
Consumers in emerging market are more enthusiastic about accepting and trying out new goods and services compared to markets that have already developed and have reached a saturation point. They have moved beyond meeting basic needs and are ready to spend money on luxury goods and more expensive acquirements.
2. Lower competition and larger populations
Despite booming economies and overall growth, countries like India are not as industrialised as developed countries. So, there is more scope for setting up new industries without much competition. India’s middle-class population is 35 crores, which is more than the total population of the US, which is 33 crores (as per 2022 statistics).
Local businesses and industries certainly have an edge because they are more in tune with indigenous cultural values and tastes, but with research and modification, businesses even from other countries can adapt to local nuances and do well.
3. Lots of opportunities in growing infrastructure
Infrastructure development is one of the biggest growth avenues in emerging markets. Growth cannot happen without roads, railways, bridges, tunnels, and airports. New towns and cities crop up. In 2020-21 40 km of roads were being laid per day (source). 74% of Indian villages are connected with roads but still a great amount of work in this area remains to be accomplished (source). 43% of the population in India is connected to the Internet (source). The Indian government has committed to build 100 smart cities in various parts of the country which is going to herald one of the biggest construction booms in the world.
4. Buffer against recession
Businesses these days are globally connected through broadband, shipping, road transport and airways. This makes it extremely easy to recession proof your business in case your country is on the brink of periodic recession. For example, the US was hit by recession in 2008 (Lehman Brothers scandal) and right now, in 2022, it is again facing one of the biggest recessions in recent history. Not just US, even European countries are edging towards a very difficult winter in the wake of the ongoing Russia-Ukraine war.
Doing business in emerging markets helps you make your business recession proof. You can cast your net wider. If you’re unable to sell your products and services in your own country, you can sell them in emerging markets. If your business is being constrained by recession in your own country, you can set up shop in an emerging economy that isn’t suffering from recession.
Take for example India: while much of the industrialised world is falling into recession, the IMF has projected the Indian economy to grow by 6.8% by the end of 2022. Recently India overtook UK to become the fifth largest economy in the world (source).
Hence, by investing in an emerging market, you can insulate your business against the ups and downs of the recession in your own country.
5. Lower operational costs
The cost of living is much lower in emerging markets compared to industrialised countries. Due to greater population, labour is abundant and hence, the cost of labour is low. Rent prices in United States are 741.81% higher than in India. While consumer prices in the United States are 209.20% higher than in India, the purchasing power is just 84.57% higher than in India. Food expense in India on an average is $164 per month compared to $543 per month in the US (source).
Therefore, with little capital, you can easily start a business in an emerging market like India.
One of the biggest reasons emerging markets like India are growing is that the respective governments nurture an environment of growth. There is a vibrant startup ecosystem. There is an extensive trade network. The government provides tax benefits and even infrastructural support – there are many industrial zones where special facilities are provided to businesses. India boasts of one of the biggest English-speaking populations with approximately 125 million people speaking fluent English. Due to a solid family system, emerging markets enjoy better work ethics and people are generally hard-working.
There was never a better time to do business in an emerging market like India.