The first and most important step to successfully launching a product or service is to choose the market(s) that are right for your business. Too many companies fail to do their due diligence regarding pre-market entry and then pay the price in poor sales and unforeseen complications and costs. Euromonitor International has developed a four pillar model to bring methodological clarity to selecting new emerging markets. 


The first pillar, market, is perhaps the most fundamental. It incorporates macroeconomic stability, the middle class, the consumer market size and growth, and openness. These elements are essential concerns of any emerging market strategy. Is the country sizeable and stable enough to do business in? Are consumers well-off enough to buy products and services? Are the potential growth rates of the market attractive enough to offset any risk? And are the conditions for foreign businesses right?

Macroeconomic Stability

A fundamental issue is one of macroeconomic stability. It isn’t impossible to succeed in unstable economies, but it is much more challenging and a company’s appetite for risk must be substantial. Many factors can and should be considered, ranging from economic growth and price pressures to external and internal imbalances. Consistent growth with numerous drivers, underpinned by sound fiscal and monetary policies is the ideal. For example, a country which runs a persistent current account deficit financed largely on easily reversible portfolio inflows, such as Turkey, is at risk because these funds can be easily withdrawn if sentiment changes. An economy with strong growth based on a single factor, such as commodities, or highly reliant on a single trade partner is also at more risk than one with broadly-based growth.

The Middle Class

A large and vibrant middle class is often the chief target for many multinationals because a middle class income is an indicator of sufficient spending power to consume non-essential goods. In emerging markets, some of those entering the middle class will have the ability to spend on non-essentials for the first time, creating significant opportunities for consumer goods companies. Gaining first-mover advantage in emerging markets and building a loyal consumer base can therefore be a winning long-term strategy. But what constitutes a middle class income varies dramatically even within a region. For example, in 2013, a middle income household in Bolivia earned just over $4,000 compared to $10,000 in Peru and $20,000 in Uruguay. Spending priorities also vary dramatically by tastes, motivations and aspirations as well as different budgets. Developing a thorough understanding of the middle class is therefore essential.

Consumer Market Size and Growth

The size and scale of the consumer market are both crucial and sometimes can understandably be seen as the only (or major) deciding factor. It is clear that a stable and sound economy with a vibrant middle class is important but very low total consumer expenditure could make an otherwise attractive market too small to be a priority. For example, Turkmenistan has seen rates of economic growth average 11 percent over the past five years...compared to 9 percent in China. In 2013, 67.7 percent of households had a disposable income over $10,000 – a real terms increase of 315 percent since 2005. However, with total consumer expenditure of $16.7 billion in 2013, Turkmenistan remains just one-tenth the market size of the city of Melbourne in Australia.


A lack of openness to trade and foreign direct investment can be a hurdle too far. The most open large-ish emerging markets in terms of their trade to GDP ratios include Vietnam, Malaysia and the UAE. More difficult to quantify, but equally important, is the receptiveness of the population to new products and services, new brands, new tastes, new flavors, new designs and styles and new ways of thinking — in short, openness to new ideas. Euromonitor International’s 2013 Global Consumer Trends Survey shows that, in the BRIC markets, Indian consumers are most likely to describe themselves as liking to try new products and services. Conversely, only 8.9 percent of Russians would describe themselves thus. 


Many of the most important decisions that planners must make should be shaped by demographic realities on the ground. Understanding and being able to harness population trends enables new market entrants to maximize their profitability by targeting the right people in the right place at the right time. Marketers and strategic planners should be posing questions such as:

  • Where do my target consumers live?
  • Where will they live in the future?
  • Which age segment offers the most opportunities?
  • What are the opportunities and challenges that lie ahead?
  • Is my target audience growing and will it continue to do so?
  • Is it geographically dispersed or concentrated?

Size and Growth

In terms of scale, 42.5 percent of the emerging and developing market population lives in just two countries: China and India. Looking at growth, 21 of the 172 emerging and developing countries which Euromonitor tracks are expected to have a smaller population in 2030 than today with Ukraine seeing the largest absolute fall of 3.1 million inhabitants (these figures do not take into account the loss of Crimea). On the other hand, India is set to add a further 247 million people, accounting for 21 percent of the population growth in emerging and developing markets as a whole. To operate successfully in a market where the consumer base is in decline requires a different strategy than one where growth is fast. However, growth is not everything — quality counts, too.

Age Structure

Expanding on our Indian example, where will the 247 million people come from? Between 2014 and 2030, the largest increase in population will be amongst those aged 35–69 (accounting for almost three quarters of population growth). During this same period, the population aged less than 9 years will actually decline. So the demographics underlying the market for baby care products are much less favorable than for those offering products aimed at middle-aged adults. Another example can be found in Poland where the overall population is in decline, but the population aged 40–54 is actually increasing. This segment is a key one in Poland because it is also the one with the highest average gross income. At $14,766 in 2013, this segment earned 15 percent more than the average income of those aged 15 or older.

Vital Statistics

Vital statistics (incorporating fertility, birth and death rates, as well as migration and life expectancy) are key to understanding what is driving overall changes in the population. This matters because growth driven by migration leads to a different demographic make-up than growth driven by natural increase. Migration tends to swell the working age population, rather than children or the elderly. It can also have an impact on the ethnic mix of the country and lead to interesting opportunities to target niche nationality groups.

Life expectancy of the population is another interesting measure. For example, in Nigeria, a person born in 2013 has a life expectancy of 52.5 years whereas for someone in Chile, it would be 80.0 years. This equates to 27.5 more years of purchasing over the average Chilean lifetime and, of course, means a far larger potential market for products aimed at older consumers in particular. 


Urbanization benefits consumer goods companies through accessibility, and urban populations are generally more open to new ideas and are often (but not always) wealthier. Both the degree and speed of urbanization vary significantly across emerging and developing economies. 

An interesting trend to note is that some countries that are seeing their total populations decline are still seeing an increase in their urban populations. Chief amongst these are European emerging economies such as Poland, Hungary and Belarus. This means that implementing a strategy to target only urban consumers could still be a winning one. The urban landscape also differs from country to country with some countries focused on one or two major urban centers and others with a larger number of important commercial centers. For example, Georgia’s capital, Tbilisi, was home to 49.3 percent of the total urban population in 2013; in contrast, Indonesia’s capital, Jakarta, accounted for only 9.1 of urban population in 2013; and the top 10 cities combined accounted for just 25.5 percent. A market which is more concentrated should be easier to enter so it could be strategically worthwhile to enter only the main city or cities.


The practicalities of market entry are also key and should be considered in terms of infrastructure, Internet, partners and the retail landscape. 

  • Will it be difficult to get your products to market? 
  • Are consumers easily accessible for both direct sales and marketing and promotional activities?
  • Would a local partner facilitate market entry? Or is a local partner even a prerequisite?
  • Is the retail landscape modern or traditional?


Inadequate infrastructure adds significant costs to doing business in many emerging markets. Roads, ports, railways, airports, telecoms and electricity supply help businesses and the economy run efficiently. Yet poor infrastructure can and is being overcome by corporations, and can also offer additional opportunities for business. Electricity is a key challenge because stable power is needed for running factories, shops and consumers’ homes if they are to purchase electrical products. In India, urbanization, an increasing middle class and economic growth have all put a strain on electricity infrastructure. Many businesses have installed their own generators to combat the frequent power outages, but this cost affects the bottom line.

Godrej and Boyce launched what has been fêted as the world’s cheapest refrigerator in 2010. The refrigerator retails for $69 and was designed to target poor, rural consumers. In a country with 854 million rural inhabitants, this market is huge with a lot of potential. The ChotuKool refrigerator from the outside looks like a box, consumes half the electricity of a standard refrigerator, and stays cool for hours with no power due to its superior insulation.


A lack of Internet access complicates building brand awareness and makes communicating with consumers more difficult. It also poses considerable challenges for those operating in online retailing. Internet use is growing quickly and, in 2013, emerging and developing economies accounted for 68.5 percent of the world’s Internet users. In actual terms, this means that there were 1.8 billion Internet users across emerging and developing economies, but that also means there are still 4.3 billion without Internet access.

Mobile connectivity is increasingly important with many markets leapfrogging fixed broadband in favor of smartphones. Mobile ownership is much more widespread with 89.8 percent of emerging and developing market consumers having mobile phone subscriptions in 2013. 

Retail Landscape

The retail landscape can vary significantly from country to country. For instance, the top five retailing operations in Thailand account for 28 percent of retail sales, but in Vietnam the figure is far lower at 7 percent. It’s not easy supplying hundreds of thousands of mom and pop stores because they require frequent, but small, deliveries. To meet these distribution challenges, many successful companies employ their own innovative distribution methods. For instance, micro-distributors or “village entrepreneurs” are being used by multinationals across Asia, Africa and Latin America. 

In Brazil in 2010, Nestlé launched an Amazon barge — a “floating supermarket” with 100 square meters of selling space which travels to 18 small cities and 800,000 potential consumers. The barge contains well-known Nestlé brands, including Ninho (packaged milk), Maggi (soups and seasonings) and Nescafé (instant coffee). As well as supplying consumers, the barge also supplies micro-distributors in the area. 


Apart from exporting directly or selling via a distributor, there are three main choices when entering a new market — go it alone, enter into a strategic partnership or acquire a local company. The business’s attitude to risk should form a large part of the decision alongside the operational realities and challenges on the ground. Government regulation must also be taken into account. Going it alone can be costly and patience will be required because building a presence in a new market from scratch cannot be achieved overnight. A strategic partnership lessens risks and capital outlay while boosting access to local knowledge, talent and the supply chain. Making an acquisition enables the business to integrate the target company into its operations and maintain a higher degree of control of the market.

The French retailer, Carrefour, is expanding into Africa via a partnership with CFAO to open stores in eight African countries by 2015. CFAO is a distributor and a large supplier of cars, trucks and pharmaceuticals. Carrefour hopes to benefit from CFAO’s local business and government connections and the deal enables it to expand into Africa at relatively low risk.

Business Environment

The friendliness of the business environment is also a crucial factor. The practicalities of doing business, the regulatory environment, corruption levels and the skills available in the workforce can all make or break a business. Business can thrive in countries where these factors are not favorable but a carefully thought out strategy is a must.

  • Is there a level playing field between domestic and foreign investors?
  • Is the rule of law sufficient?
  • How can the business beat corruption?
  • How can the business recruit and retain talent?

Ease of Doing Business

A weak business environment adds costs in terms of both time and money and this should be factored into any expansion plans. The World Bank’s Doing Business Report can be useful in gaining an overview of the business environment. In terms of emerging and developing economies, Malaysia ranks highest in 6th position overall, beating the UK, Australia and Canada amongst others. At the other end of the rankings comes Chad – the most difficult country in which to do business from a ranking of 189 economies. In practical terms this means that it takes 16 days to start a business in Malaysia compared to 183 in Chad. Chad might not be at the top of mind for many businesses looking to expand into emerging markets for the first time, but even large economies such as India (134th) and Brazil (116th) fare badly. 


Looking at The Heritage Foundation’s 2014 Business Freedom indicator, which represents the overall burden of regulation as well as the efficiency of government in the regulatory process, Georgia, the Maldives and Lithuania are the best-placed emerging and developing economies with North Korea, Eritrea and Cuba at the bottom. In terms of the largest emerging markets (those with a GDP above $200 million), Malaysia is the best performer followed by Colombia and Mexico, and India brings up the rear. India is overly bureaucratic and has inefficient administrative and judicial systems. Foreign investors do not receive the same treatment as their local counterparts and foreign ownership caps exist in some sectors. In Malaysia, the government has been liberalizing the rules governing foreign direct investment (FDI) and the opening up of the economy has extended to most economic subsectors.


At the country level, corruption is strongly linked to economic stability and inflows of foreign direct investment. It affects competition, government efficiency and income distribution. At the business level, it is fraught with risk, not only legal and financial but also reputational. Transparency International collects the most well-known corruption data. Their Corruption Perceptions Index 2013 ranked 177 countries against perceived levels of public sector corruption. Chile, UAE and Qatar were the three best-placed of the large emerging market economies (with total GDP of more than $200 million) while Iraq, Venezuela and Nigeria were the worst performers. 

Human Capital

Both finding and keeping talent can be a huge challenge in emerging markets. Recruiting local talent can really help in building a successful brand. Local managers will have a deep understanding of cultural norms which is crucial to success. However, skills shortages can be a problem and staff retention is often difficult. These kinds of pressures lead to wage inflation. Between 2008 and 2013, China saw a 45.2 percent increase in wages in manufacturing compared to a 1.5 percent rise in the USA. The days when emerging markets were seen as a source of cheap labor are now over in many countries.

Tailor Made for Success

All markets are not the same. All have unique challenges and opportunities. The first and most important step when planning an expansion strategy is to select the market(s) that are right for your business. Our four pillar model, encompassing market, population, access and business environment, brings methodological clarity to selecting new emerging markets. Our model should be tailored on a case-by-case basis because there are sector-specific and business-specific factors which should be added to the matrix. In addition, the importance assigned to each of our 16 factors will differ according to industry sector and company profile. An emerging market strategy is a long term one, and step one on the path to success is to choose wisely.

Note from the editor: A shorter version of this article was previously published at