A Road Map for Building a Business in Emerging Markets, Part II
After the completion of the business plan and getting the green light to pursue the venture, the entrepreneur’s next phase in starting a business in an emerging market is the actual setting up of the startup. This is a critical phase that lays the foundation for the business-to-be, and thus requires careful attention to every step below:
- Dealing with local authorities
- Finding the right local partner
- Establishing relationships
- Hiring the management team
- Securing additional sources of funds
1. Dealing with local authorities: Although in Part I, From Idea to Business Plan, I advocated minimizing the time spent with politicians, there is usually no escape from getting certain approvals from local authorities to set up a foreign-owned business in that emerging market. This step should be done in parallel with the next few steps and requires a fair amount of patience and respect for the local business culture. One should try to keep this effort to the minimum needed to get things done.- 2. Finding the right local partner: There is a real benefit to finding a local industry partner in these markets. It can save time in setting up the business, can provide certain expertise—especially on the production side—and it usually saves investment funds in the initial phase. The challenge is to identify the options available and then make the right choice for a partner. This is a long-term decision that needs careful examination. In many cases the best choice would be a company with the right top manager, who is committed to making the business association work.
- 3. Establishing relationships: In every business there are key relationships that need to be solidified during this phase. As an example, in our Pepsi venture in Romania we had to sign an Exclusive Bottling Appointment with PepsiCo, making us the official Pepsi licensee for that market, before we could commence our operation.
- 4. Hiring the management team: This may be the most crucial step of this phase. Finding quality managers for a startup business in emerging markets is quite a challenge, and this search usually takes place outside the particular market. Once credible candidates are identified, it is important to bring them to that market so that they become familiar with it, and at the same time it is an opportunity to test the candidates in that environment.
- 5. Securing additional sources of funds: Depending on the type of business being considered, there are a number of possible sources for funding available: The World Bank, banks specializing in emerging markets, regional funds and even commercial banks. The problem is that in most cases it takes a while and involves a fair amount of bureaucracy before funding can be secured. These sources obviously can only complement funds committed by the investors creating the business.
To find out more about the Pepsi venture in Romania read my book: “An Unimaginable Journey”
For more tips and insights on entrepreneurship and business management, or to share your journey, visit me at www.AviadMeitar.com
Excellent article. These are good points to consider for starting a business in emergin markets, especially with so many people considering entrepreneurship with China. Good job!