It has been five years since publication of a landmark Goldman Sachs research paper predicting the attainment of mid-century world economic superpower status by the so called BRIC nations
, Brazil, Russia India and China. Since then, change has been incremental. Nevertheless, a new economic affluence in the steadily growing middle class of BRIC nations is providing new export opportunities for Western businesses.
An article recently published on Knowledge@Wharton titled, “The new global middle class: potentially profitable— But also unpredictable,” quotes projections from McKinsey Global Institute that the middle class of India alone will grow more than ten-fold to approaching 600 million over the next twenty years and that “Countries like India consist of young consumers who are ambitious and save quite a bit, but are also willing to spend on small luxuries like Western brands of consumer packaged goods.” Seemingly immune to the Western economic downturn, the spending power of BRIC nations continues to increase, providing large multinational brands with a potentially lucrative marketplace in comparison to the depressed home market. Eighty per cent the “FORTUNE 500,” have, for example, initiated a presence in China to tap into this new spending power.
The Australian report is testimony to the fact that small businesses can be players in the new global marketplace. However, direct access to these new markets may not be easy. As usual, the economics of scale work against you. Moreover, you need to take into account and make provision for language barriers, differences in business culture, market research factors, government legislation such as quotas, quality of relationships with agents or other intermediaries, possible protectionism or preference for local products and possible issues with regard to distribution.
There are several international trading companies that offer a good and viable alternative to approaching these new markets directly. These trading companies can not only provide access to new markets, but also help businesses in adapting their products for these markets. The number of intermediaries now set up to help Western companies find partners, agents or distributors in BRIC nations is on the rise. These native importers and international trading companies inevitably have contacts, understanding of local markets, knowledge of government legislations and likely business relationships with government officials which is essential in counties such as China and India, where heavy handed bureaucracy is a common stumbling block. Whatever agent or intermediary you choose it is always advisable to carefully word agreements to clearly define the authority the agent has to act on your behalf. Additional factors which bode well for success include:
- Ongoing activity to maintain good relationships
with quality intermediaries
- Focused targeting of the few but growing urban hotspots in BRIC countries with a rapidly growing and upwardly mobile middle class
- Choice of niche products with little native competition
All in all, for those who have done their homework properly, the shift in global purchasing power creates new opportunities in nascent markets. The BRIC marketplace remains buoyant, providing SMEs with an unrivalled opportunity to continue to grow and prosper.