Emerging markets: balancing risk & opportunity


Emerging markets can hold many rewards for British businesses, but difficult political, cultural and economic landscapes can also pose significant challenges. In the first part of our interview, Stewart MacRae, Regional Managing Director (Russia, Emerging Europe, Middle East, Africa & Turkey) of international spirits company Edrington, shares his learnings on managing risk, dealing with the unexpected and hanging in there when things go wrong. Read the second part of our interview with Stewart on African markets here.

Research, research and research again

Knowledge is power, and knowing your market is crucial. However, within some emerging markets it can be very difficult to access reliable data; they may not have held a census if the country is experiencing conflict, for example. The best approach can be to go back to basics. Is your product legal in that country? What opportunity can you see amongst your target consumer group? What parts of the marketing mix are open to you?

Social issues frequently factor in our decision making; it’s not unheard of for types of advertising to be banned, or for alcohol to be a culturally sensitive issue. Make sure you know what kind of reception you can expect within your chosen market.

Know your partner

I can’t over-emphasise how important having a good local partner is. You need someone there on the ground who can judge the local sentiment and atmosphere – they can act as an early warning system if something is about to go wrong.

That said, finding the right partner in the first place can be challenging. I’d recommend asking for transparency above all else, and don’t assume that business will be conducted the same way the world over. They can also help you with local etiquette; in Bulgaria, for example, nodding your head means ‘no’ and shaking your head means ‘yes’.

Be patient

Markets are often cyclical, so you need to adopt a long-term mindset. Consider what this market will be doing in five or ten years’ time, and ask if you can wait that long before making significant profits or gaining a bigger market share. On the flip side of this, sometimes the desire to enter a market which is hot right now can get the better of you – fight that impulse and maintain your perspective.

15 years ago Dubai wasn’t on many people’s radar – it has since undergone rapid urbanisation and the expat community has exploded. Similarly, in Russia during 2002 we sold 500 cases of The Macallan single malt whisky: in 2017 we’ll sell 55,000 cases. Rather than go in all guns blazing as soon as we saw what was happening, we built a presence gradually and established the brand equity.

Stay informed

We’ve been operating in Lebanon for over 25 years now, and also in Israel, so we have a good awareness of Middle Eastern tensions. Whichever markets you are operating in, you need to remain hyperaware of not only developing pressures between them and your home country, but also between each other.

Understanding how markets react to and interact with each other can therefore save you spending a lot of time and money putting things right. The sensitive political situations between Israel and the Middle East meant we couldn’t invoice directly from Dubai for example, so to counter this, we have a back office in Cyprus. Potentially irreversible damage to your reputation means diplomacy has to inform your every move; perceived slights against one nation or another are not quickly forgotten.

Don’t panic

Conditions within emerging markets can change quickly and it can be quite shocking, but you need to be ready to respond in a measured manner. Turkey is a perfect example: with the 2016 terror attack in Ataturk Airport, the attempted military coup and the shooting down of a Russian jet which all had a massive impact on the market. Tourism suffered immediately, and you’re faced with very tough decisions about what’s best for your staff and the communities you’re operating in, and indeed what’s right for your business.

Rather than pull out when the going gets tough, you need to hang in there and protect your market share. When sentiment improves you can come back stronger than ever. The best time to hold your ground in a market can be when everyone else is leaving.


Don’t assume the worst, but plan for it

Assumptions are dangerous. Entering an emerging market doesn’t mean you’ll be facing all of the socio-political and economic challenges you might expect, and sometimes you may even be pleasantly surprised. If we hadn’t done our research, we might have been forgiven for thinking that the Middle East was a no-go for any company selling unconservative products. However, we’ve actually found there to be a big expat community whose consumption habits are very Western.

"The best time to hold your ground in a market can be when everyone else is leaving."

Muslim-majority countries tend to have stringent rules in place for businesses. If you play by the rules of the market and respect the people and their culture, you’ll find it much easier than if you try to push boundaries. Places like Saudi Arabia are very clear on what is and is not permissible.

Even when you have been fortunate enough to find a foothold, you need to be reactive. The Syrian conflict brought immediate sanctions which meant that half of our business stopped overnight. Ask yourself, how would your business handle something like that?

Prepare for the personal impact

It’s all very well looking at numbers on a spreadsheet, but you should bear in mind that if you are doing business in emerging markets experiencing a socio-political or economic crisis, it’s likely to become personal.

When you’ve been to the locations, spent time with people and made friends, it hits home when you hear a news report about a tragedy. Rather than worrying about sales, your first reaction is to make sure everyone is safe. Nothing can prepare you for that, and it’s something you should factor into your decision making process.

Stay true to you

You may need to take an ethical view on doing business within an emerging market. Would you be happy to sell your services to anyone, no matter the circumstances? Selling luxury products in a poverty-stricken country can evoke strong feelings. Your conscience can play a bigger role in commercial decisions than you’d think.

Maintaining integrity can be difficult in markets with different views to your own. You may have a female employee dealing with a market where women don’t have the same rights or freedoms as men. The view we take isn’t an easy one, but we don’t believe in making personnel decisions based on cultural beliefs; if someone’s capable, they’re capable. It’s never caused us a problem, but that’s not to say it won’t in the future – you’ve just got to be brave and get on with it. You need to think hard about what you will and won’t compromise on in order to do business.

Fortune favours the focused

Before I first ventured into emerging markets, I wish someone had told me to narrow my focus. The temptation can be to generalise and cast a wide net, but no two emerging markets are alike and there will be certain countries which just aren’t right for your business.

I also wish I had been bolder when I first started out; fortune really does favour the brave when it comes to emerging markets. It can be scary to limit your options, but take the plunge and visit the country you’re interested in – don’t rely on the internet to tell you everything. Kick the tyres and validate it in your own mind. In the end, a lot will come down to just gut instinct.

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