27 September 2012 15:45 [Source: ICIS news]
Correction: In the ICIS story headlined "INSIGHT: Distribution, knowledge key to emerging market growth" dated 27 September 2012, please read in the fourth paragraph …Hong Kong-based Global Intelligence ?xml:namespace>
By Nigel Davis
LONDON (ICIS)--In hindsight, some chemical industry executives think their companies could have tackled emerging markets differently.
A lack of market intelligence – and the accuracy of what is available – has been cited across many industries as a key issue for those who want to do more business, and make more products in fast growing economies.
Chemical companies are not alone in wanting fervently to tap into new markets and to grab market share while they can.
But, according to a cross industry survey from the Hong Kong-based Global Intelligence Alliance (GIA), the availability, accuracy and completeness of market intelligence on emerging markets are issues for any industry.
A majority, 60%, of the 400 companies featured in a cross-industry study say that decision making is delayed because of lack of information. Three-quarters of those companies doubt the accuracy and the completeness of the data they have on emerging markets.
“Not surprisingly, therefore, 91% say they would like to have done something differently in how they planned and executed their emerging markets strategy, GIA’s consulting director Kelvin Inn says.
“Some would like to have made greater efforts to adapt to local conditions. Many would have entered emerging markets earlier or ensured they had better local market intelligence and due diligence.”
Going local and getting it right is the way to do it but in some markets there are growing obstacles. Political risk is the greatest threat, the GIA survey suggests, but local competition is also of concern as is the cost of operating complex international supply chains.
“The 20 chemical industry executives in GIA’s Business Perspectives for Emerging Markets 2012-2017 Report said they are investing in emerging markets in order to gain a foot hold in future large markets,” according to Inn.
“But success will depend on a number of factors, the primary one being distribution and access to customers.
“Localised competitive positioning, product quality and pricing are other key success factors,” he says.
Chemical companies have been at the forefront of globalisation. Low or zero tariff barriers have been the key and aided the creation of global supply networks.
But competitive export-based businesses - as well as local production-based businesses - rely on good market knowledge and the development of adequate supply and distribution networks.
In most fast-growing markets a strong local partner is essential if not a pre-requisite of doing business in the target country.
Inn highlights Dow Chemical's tie-up with China's largest coal producer, the Shenhua Group, as an example of how leverage on local relationships and a wider distribution and stronger clientele base has been achieved in an emerging market in chemicals. BASF diversified its production and local distribution networks by setting up facilities in all the BRIC countries (Brazil, Russia, India, China), he notes.
Companies of all sizes in chemicals are advancing emerging market strategies – and gaining greater local knowledge for businesses that are growing fast.
Often that growth is a much-needed supplement to only lacklustre domestic demand. The sovereign debt crisis in Europe, for example, weighs heavily on European industry and chemicals demand. Chemicals production growth in developed markets in Europe, the US and Japan this year is expected only to be weak.
Making significant inroads into fast growing emerging markets has never been easy and is unlikely to get easier given the increasing intensity of local competition.
“By understanding the facilitators of growth and the unique characteristics of each market, chemical companies will be better poised to take advantage of the forecasted growth to 2017 and beyond,” says GIA's Inn.
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