I wanted to discuss this topic on this blog after I was chatting with one of my supplier about why they should invest in the French market. Indeed, he was arguing that European markets, as they are mature, are not a priority for the investments of its company, as the growth is now in the emerging markets.
This is to me a cliché. Indeed, sales growth settles for sure in emerging markets, were a large number of people experience a high growth of salary and lifestyle. And hence, as you start from the bottom, there is a lot of room for growth. And a lot of big companies have invested a lot in those countries, with success.
I am not going to hide the fact that indeed a lot of US and European companies have been able to meet their growth target thanks to their investments in emerging countries. But as the time go buy, we have seen that investing in the emerging market, even though still a priority, is as important as investing in mature market.
A company needs to be able to compete in a mature market
Hence, how could a company not be able to compete in a mature market if it wants to stay in the long run? Earning fast marketshares surfing on the economical growth of India or China is an easy game, especially because this growth most of the time has been financed with the money from mature market. But once the market is mature, and growth harder to get, then you need to be able to make profit out of it.
And competing in a mature market requires for sure large investment.
Mature market is often where innovation comes from
In mature market, you need to have concrete and real innovation. You can't fake it as your competition puts a lot of money down inR&D. It is once you are able to innovate in a mature market that you will be able to set presence abroad.
Most of the time, emerging markets are reached with low cost versions of the European products. It is what was made for instance by l'Oréal in India, where they sold to beging one portion shampoo bottles to allow people to buy from time to time shampoo.
This is to me a cliché. Indeed, sales growth settles for sure in emerging markets, were a large number of people experience a high growth of salary and lifestyle. And hence, as you start from the bottom, there is a lot of room for growth. And a lot of big companies have invested a lot in those countries, with success.
I am not going to hide the fact that indeed a lot of US and European companies have been able to meet their growth target thanks to their investments in emerging countries. But as the time go buy, we have seen that investing in the emerging market, even though still a priority, is as important as investing in mature market.
A company needs to be able to compete in a mature market
Hence, how could a company not be able to compete in a mature market if it wants to stay in the long run? Earning fast marketshares surfing on the economical growth of India or China is an easy game, especially because this growth most of the time has been financed with the money from mature market. But once the market is mature, and growth harder to get, then you need to be able to make profit out of it.
And competing in a mature market requires for sure large investment.
Mature market is often where innovation comes from
In mature market, you need to have concrete and real innovation. You can't fake it as your competition puts a lot of money down inR&D. It is once you are able to innovate in a mature market that you will be able to set presence abroad.
Most of the time, emerging markets are reached with low cost versions of the European products. It is what was made for instance by l'Oréal in India, where they sold to beging one portion shampoo bottles to allow people to buy from time to time shampoo.
Mature markets are reliable
Mature market don't experience much roller coaster, which can be the case in emerging markets. Companies' status (leaders, challengers, premium niche) are challenged on a daily basis as new competition can show up at any time.
Also as we have seen this year, a lot of large European and US companies have delivered delivered deceiving figures due to currency changes. Mature markets don't have floating currencies as emerging market does. It has been the case of most of European retailer such as Carrefour, DIA or Casino.
Emerging market will become less and less attractive
Emerging markets growth are slowing down, competition becomes tougher, wages are going up: Emerging markets are going soon to reach a plateau where they will need to change their modells to keep up with the pace. And as they are loosing competitivity, then old markets start to be attractive.
It all comes back to the first point, a company need to be able to compete in a mature market. Because I believe that at the end of the day, this is what really matter: having a reliable profitable business.
What do you think about it?
Mature market don't experience much roller coaster, which can be the case in emerging markets. Companies' status (leaders, challengers, premium niche) are challenged on a daily basis as new competition can show up at any time.
Also as we have seen this year, a lot of large European and US companies have delivered delivered deceiving figures due to currency changes. Mature markets don't have floating currencies as emerging market does. It has been the case of most of European retailer such as Carrefour, DIA or Casino.
Emerging market will become less and less attractive
Emerging markets growth are slowing down, competition becomes tougher, wages are going up: Emerging markets are going soon to reach a plateau where they will need to change their modells to keep up with the pace. And as they are loosing competitivity, then old markets start to be attractive.
It all comes back to the first point, a company need to be able to compete in a mature market. Because I believe that at the end of the day, this is what really matter: having a reliable profitable business.
What do you think about it?
