Mapping Frontier Economies

- Global players in search of double- digit growth are running out of opportunities. Emerging-market giants such as Brazil, Russia, and China are experiencing an economic slowdown. They are increasingly expensive as a base for operations, and it's harder to export to and import from these countries.

- Frontier Economies
 > Politically manipulated markets
 > weak legal systems
 > Low per capita income                          ->   Faltering prosperity , Corruption
 > Faltering GDP                                              Arbitrary enforcement of rules and regulations

Mapping the Opportunities

- Workhorses : Relatively small companies sell to domestic customers and compete with one another using normal business strategies, seeking competitive advantage through product differentiation.
 > Low Government control , Targeting to Domestic Customers
  ex) Unilever makes and sells soap in Africa.
 > Strategies for Workhorses
   o Successful firms adapt and leverage existing capabilities and adjust their marketing and 
   distribution strategies to reflect local tastes and constraints.
   o For Foreign entrants, competing with strong local businesses often requires some disruptive 
   innovation that challenges the dominant business model in the target country and may well require 
   redefining the entrant's product or service as well.
   o Workhorse pockets in rentier or powerbroker sectors are often good target markets for foreign 
   entrants and can serve as a platform for future growth.

 - Cluster builders : Companies in this category compete with one another in export businesses,  often as supply chain partners to large foreign corporations serving developed markets.
 > Low Government control, Targeting to foreign customers
  ex) GAP manufactures clothing in Myanmar
 > Strategies for Export clusters
  o Consumers in the developed world are increasingly sensitive to labour conditions, environmental
  damage, and government oppression in frontier economies; their behaviour can aachange the
  economic picture dramatically.
  o Clusters help to unblock legal restrictions in the developed markets they serve and act as a magnet 
  for aid and development investment.
  o Cluster building in frontier economies is happening high-tech industries as well.

- Powerbrokers : Companies in this category serve the domestic market, as workhorses do, but they operate in industries where political influence has a big role.
> High government control, Targeting to domestic customers
 ex) Symbion supplies power to Tanzania
> In developed countries, businesses of this kind are usually regulated to promote competition or protect customers, whereas In frontier economies regulation primarily directs profits to the government or privileged interests.

- Rentiers : Companies in this category are export oriented, but the terms of their operation, including taxes, royalties, and other obligations, are spelled out in contracts with government.
> High government control, Foreign customers
 ex) Rio tinto mines gold and copper in Mongolia
> Strategies for Powerbrokers and Rentiers
 o In many cases, rentier or powerbrokers sectors projects take on vary public identities that carry
    significant political risks.
 o  Foreign firms reduce this type of risk by increasing and diversifying stakeholders in their
     success. --> Long term



 

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