Observations of an observer

Peeps Forum website
Peeps Forum website

While traveling in the Philippines, one of the most exciting emerging markets, earlier this year, I did an interview with Peeps Forum, a nascent blog for people interested in people. The story was the first to be posted on Peeps Forum when it launched earlier this week.

In the interview I talk about my work as a visual ethnographer and how I’ve developed a methodology applicable in a business context. For instance, when international brands develop products for the booming middle-class in emerging markets, precise, ground-level information about culture, trends and aspirations is crucial in order to become relevant for these consumers.

You can read the entire interview at Peeps Forum.

How To Make Emerging Markets Your Primary Market

 

I recently contributed with an article for ArtRebels magazine on doing business in emerging markets. ArtRebels is a global platform for creative entrepreneurs. Anyway, here’s the article:

Make Emerging Markets Your Primary Market

Entrepreneurs, get out of your comfort zone. Forget about your home market and move to an emerging market to make it yours.

By Jacob Langvad Nilsson

With the economic shift from the developed world to the developing world, you’ve with certainty already heard about the promising opportunities in emerging markets. Whether you’re a multinational corporation (MNC) with consumer products, or a sole entrepreneur with a startup idea (or something in between the two), emerging markets is where you will find future growth opportunities.

Now there has been a lot of talk about the BRIC economies. BRIC is an acronym of Brazil, Russia, India, and China, coined by then Goldman Sachs economist Jim O’Neill in a 2001 paper titled “Building Better Global Economic BRICs”. The term has since become a symbol of the shift in global economic power from the developed economies towards the developing world.

The BRIC economies became mainstream terminology and was a huge success for Goldman Sachs (Mr. O’Neill has since been promoted to chairman of Goldman Sachs Asset Management and is now retiring comfortably at 56).

Since then, a multitude of other acronyms have surfaced. BRICS, when South Africa joined as an entrypoint for the contingent. Next 11 (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam) was supposedly the successors to BRIC. Another fancy acronym, CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) was another economist’s branding of a handful of favored emerging markets.

The BRICs are dead, long live emerging markets

If you are an entrepreneur or small business-owner with emerging market aspirations,you should forget about the BRIC terminology and all its variations. BRIC is for investors, not entrepreneurs. As an investor it makes sense to look at emerging markets from a broader perspective. For investors, there are several exchange-traded funds (ETFs) tailored for emerging markets, including BRICs. Just like an investor can choose to invest in ETFs such as Euro Government 3-5 year, Euro Inflation Linked, or MSCI World.

In my experience neither MNC or small entrepreneurs are looking at BRIC economies as a collective target for their business. They look at continents at best, but increasingly at markets within markets. States, regions, cities. Nieces.

To succeed in an emerging market, an entrepreneur needs to build products that are relevant to the consumer. To do so, the approach needs to be at a ground level to understand the opportunities and potential in a niche market.

The leading practice in building market intelligence is through qualitative research. I’ve been doing business ethnography in emerging markets on behalf of multinational brands for almost a decade. This has proven to be a market differentiator for corporations who want to target the specific needs of various segments of their customer-base but more importantly, help the companies tap into potential new markets by understanding the underlying motivations of their customers.

Whether your company is looking to expand into emerging markets or find a niche in a crowded one, ground-level field research helps your designers, engineers and R&D team connect to real consumers. This makes the difference between designing a good product and a great one.

How to pick a target market

China is a huge country with diversity and sub-markets. As a consequence, refrain from holding up unrealistic objectives, for example, that your 5-year plan is to become the market leader in China within your niche. You need to be more targeted in your approach to market penetration and align your objectives with the realities on the ground.  In doing so, even if you narrowly dominant a specific market in a specific province in China, that’s already a big accomplishment and make it more likely for you to tap into other market opportunities.

Traditionally, a western firm’s China-strategy would be to establish an office in the capital city and spread out from there with one size-fits-all approach to the entire country. Increasingly today, you need to target individual provinces or regions with a custom strategy for each place. For instance, you may need to change communication slightly for each province or make changes in a pattern, stitch, colour, or flavor. Similarly, you can no longer take an existing product designed for a Western market and produce a scaled down version of this for an emerging market. Instead, you want to design a completely new product from the ground up for your emerging market consumer. If your product is good enough, it may subsequently spread to the rest of the world but knowing your targeted consumer is critical.

While mainstream investors continue to talk about the opportunities in Brazil, India, China,  there’s a whole range of other emerging markets ripe with growth opportunities. Each market has its share of obstacles and challenges. Africa for example has been noted as the last untapped market for consumer growth. The Africa middle-class is booming and ready to spend their discretionary income on quality products. However, because many small and mid-sized Western companies today still employ the traditional approaches to market entry (and from the comfort of their home market), building a successful strategy for an African market remains a great challenge. As an entrepreneur, the grass-root approach of qualitative research to create a product market is an opportunity to win big and a custom recipe for success.  

Use business ethnography to understand your consumer

Business ethnography can be used as a key strategy when an international brand expands into a new market. Ethnography is a social science discipline with roots in anthropology. Literally, ethnography is the study of mankind. Also known as participant-observation, ethnographic methods include entering a subject’s own environment: in the modern world, this includes their living room, school, the supermarket, the beauty parlor, or the streets – settings of their daily existence.

Ethnographers observe what people actually do and how they explain their actions. By documenting actual behavior, this research approach offers valuable insight into the meaning people attach to each action and activity. After a period of fieldwork and data-collection, findings are interpreted and analyzed in the context of people’s actual lives – including relations to family, community, local subculture, and the larger society.

When ethnographic research is taken into a business context, it can be used to gain insights into patterns of behavior that help businesses thrive. Unlike a traditional market researcher, who asks specific, highly practical questions, anthropological researchers visit consumers in their own environments to observe and listen, and interview in a non-directed way.

Qualitative methods, including focus groups and open-ended survey questionnaires, have proven to be valuable strategies to delve deeper into the relationship between the brand and those who buy or use their products. By listening, observing, and interpreting, we can access many meaningful layers that help clients better understand the true aspirations of their customers.

In the end, the goal of getting closer to the consumers is to better understand their cultures and behaviors, and in the process develop aspiring and meaningful products and services relevant to their lives. Business ethnography can help business do just that.

Try harder, get out of your comfort zone

To successfully take advantage of market opportunities, you need management-level officers to have boots on the ground. In a recent report, “Playing to Win in Emerging Markets”, the Boston Consulting Group (BCG) polled over 150 executives from the world’s biggest multinational companies. The report found that on average, these companies were earning 28% of their revenues in emerging markets.

Surprisingly though, most multinationals tend to keep their entire senior management team in their home office, which is largely in the developed countries. The unfortunate consequence is that management is too far removed to tackle the challenges involved in ensuring a competitive market presence and in adapting to the rapidly changing needs of its consumers. But for those firms that have moved at least a couple of their top executives to the new front line, the report highlights that the firms outperformed their rivals.

You don’t have to be a Forbes 500 company to win big in an emerging market. Obviously, capital and a strong idea are necessary ingredients for success. But if you are ready to immerse yourself into an emerging market, meaning literally moving there, you’ll be better positioned to understand the aspirations and culture of your consumer. Thus you’ll have a huge advantage to your average, Western competitor who won’t have the same access to first-hand knowledge on the ground.

Jacob Langvad Nilsson is an emerging market consumer consultant, visual ethnographer, and serial entrepreneur. With base is New York City, he travels extensively to emerging markets to push the boundaries of human-centered design research and tell stories about globalization, cultural shift, and the aspirations and desires of people living in a changing world.

Building Brands in Emerging Markets

US and European manufacturers of fast moving consumer products (FMCG) are looking to emerging markets in Asia, Africa, and different parts of Latin America due to the slow growth at home. Many of said companies spent over $10 billion just to widen their reach over these markets, and they occupy more than 40 percent of global sales of grocery products and clothing. However, many of these companies eventually realized that expensive branding and administrative protocols actually limited their capability get to the portion of the market with lesser spending power.

Studies on international brand makers that operate in areas where consumerism is getting stronger reveal that companies tend to have more supporters in areas where the lower class resides when they adopt local organizational and branding strategies, which is usually different from the practices in first world countries.

Most companies that managed to enter emerging markets did so by first acquiring an already established local competitor, which meant that they were buying their way into sellers and production companies stationed locally.

They then proceed with growing the brand and distributing the products to more economically stable countries, who have their own set of evolved manufacturing and sales procedures. Additionally, many of these multinational corporations tried to go back to the old practice of unifying all management and procedural processes into their parent company. However, the cost of production is distributed to the regional offices. More often than not, these extra expenses force the companies to raise prices.

The approach works in developed countries; because, the consumers are affluent and will have to spend for products that are carrying the names of companies that are more established and known. But in emerging markets, where the majority of the consumers have limited budgets, the approach tends to price products straight out of the general segment, giving local competitors a huge advantage in terms of cost. In these cases, it’s not surprising that multinational companies lose hold of a huge portion of their consumers.

Two Distinct Approaches for Building Brands in Emerging Markets

In order for global manufacturers to successfully compete and build brand equity in an emerging market, they must realize and accept that the portion of the market with more purchasing power and the low price market need to be approached differently. The high income segment will respond products and brands that were able to establish their relationship with the consumers and build their image. The lower class will respond better if the global manufacturers try to localize their image or make it relatable to the local culture, through the following ways:

1. Retain the employees that live in the area where they are distributing their products – these managers do not favor changing of products, promotion, and packaging extensively. And studies have shown that they are right in doing so, as the companies that opted not to make changes eventually recovered and started earning revenue. Those that went for drastic changes failed to show any growth, sometimes even wrote in losses.

2. Work on lessening production cost and making processes more efficient – product reformulations and marketing efforts are not very effective on people who are looking for the cheapest working option and do not want to take risks. Companies that rely on managers who are singularly focused on branding and marketing tend to waste resources on areas of operation that wouldn’t affect general profitability.

3. Last but not the least – keep the operations of the local manufacturers separate. Share a few key beneficial roles such acquisitions of locally-sourced products and logistics, but do not try to force the local manufacturer to adapt to an alien environment, especially since what they have at the moment is already optimized for their market. Parent companies should act as venture capital firms.

Source: McKinsey

Africa’s Dream of Economic Growth From the New Middle Class

When we think of Africa, usually what comes into mind is political conflicts, if not bloody wars, poverty and famine. But something has changed. Looking closer and you will discover the growth of the middle class, which will big part of an answer to the future growth development of Africa. According to a recent report it is projected that in the next 50 years the middle class of Africa will have its growth to more than a billion people. Wall Street Journal`s Patrick McCarty delivered a report from African Development Bank that says challenges will keep on closing on middle class among continents economic powers. (more…)

Africa’s Economy Converging to Consumer Market

Africa is the hot prospect for most international investors and multinational organizations. Often dubbed the next China, the rising, Africa consumer is now in the center attention. In this article we will look at the development in consumer market in mainstream Africa, since it levels to the other countries which competes on Fast Moving Consumer Goods (FMCG) and consumer-discretionary products. (more…)

Searching for Latin America’s Economic Transformation: Photo Essay

Costanera Gran Torre Santiago Chile
Costanera Gran Torre Santiago Chile

Additional photographs from the recent editorial commission “Searching for Latin America’s Economic Transformation” for Nordea Invest. You can read the entire article on Nordea’s website.

Cityscape from Edificio Italia, São Paulo, Brazil
Cityscape from Edificio Italia, São Paulo, Brazil
Motoboy Company Brazil
Motoboy Company Brazil
Motoboy Company São Paulo Brazil
Motoboy Company São Paulo Brazil
Salon in Favela Paraisopolis, São Paulo, Brazil
Salon in Favela Paraisopolis, São Paulo, Brazil
Middle-class Family in Favela Heliopolis, São Paulo, Brazil
Middle-class Family in Favela Heliopolis, São Paulo, Brazil
Favela Heliopolis, São Paulo, Brazil
Favela Heliopolis, São Paulo, Brazil
Middle class family in Santiago de Chile
Middle class family in Santiago de Chile
Buenos Aires Cityscape
Buenos Aires Cityscape
Casa Bahia in Favela Paraisopolis, Brazil
Casa Bahia in Favela Paraisopolis, Brazil
Carlos Figueroa
Carlos Figueroa
Military in Santiago de Chile
Military in Santiago de Chile
Santiago de Chile
Santiago de Chile
Costanera Gran Torre Santiago Chile
Costanera Gran Torre Santiago Chile

Searching for Latin America’s Economic Transformation, Nordea Invest Magazine No. 3 2012

Additional photographs from the recent editorial commission “Searching for Latin America’s Economic Transformation” for You can read more about the story and see the video from the story here. You can read the entire article on Nordea’s website.

Great Santiago Tower

São Paulo, Brazil

Motoboy Company São Paulo Brazil

Motoboy Company São Paulo Brazil

Salon in Favela Paraisopolis, São Paulo, Brazil

New middle class in emerging markets

Favela Brazil

Emerging middle class in Latin America

Buenos Aires Argentina

Casa Bahia in Favela Paraisopolis

Carlos Figueroa, Santiago de Chile

Military in Santiago de Chile

Cityscape of Santiago de Chile

Santiago de Chile

Tear Sheets from Nordea Invest Magazine No. 3 2012 – Latin America

“Searching for Latin America’s Economic Transformation” is a 14-page feature on the economic transformation in Latin America for Nordea Invest. Together with journalist Nola Grace Gaardmand, I traveled to Brazil, Argentina and Chile to document life and development as seen from the perspective of the citizens living in these booming economies.

Searching for Latin America's Economic Transformation

Searching for Latin America's Economic Transformation

Searching for Latin America's Economic Transformation

Searching for Latin America's Economic Transformation

Searching for Latin America's Economic Transformation

Searching for Latin America's Economic Transformation

Searching for Latin America's Economic Transformation

Searching for Latin America's Economic Transformation

Kenya’s Technology Start-Up Scene Will Bring Prosperity To The Region

Kenya`s strategy on welcoming visitors to its capital Nairobi gives a break on a particular game on a mobile phone which is downloadable basically came out in many countries. It is Kenya`s start-up impression on its technology getting it on top of the board. This mobile game is based on the city of Nairobi`s road condition which inspired Planet Rackus to innovate technology introducing it to the market. (more…)

Searching for Latin America's Economic Transformation: Video Reportage

From economic crisis to booming growth lead by a new, large middle class, the countries of Latin America is undergoing an economic transformation. Together with journalist Nola Grace Gaardmand, I traveled to Brazil, Argentina and Chile for Nordea Invest, to document what is hidden behind the impressive statistics. The result is this short video embedded below, a feature in Nordea Invest Magazine, in print and on a new iPad App, as well as a travel journal on Facebook. Spoiler: speak and texts available in Danish only.