Entering new markets 

New geographic markets
As growth opportunities diminish in domestic markets, attention is shifting to new and emerging economies. These are the markets of the future. According to UN estimates, emerging economies represent a combined market of around 2.7 billion people (40 percent of the world’s population) with a growing middle class. Within this are several hundred million people with incomes comparable to those in the developed world.

Companies should pay careful attention to how they invest in these markets, how they make acquisitions and how they use entry strategies such as joint ventures and strategic alliances. Each country presents its own challenges.

New markets at home
As certain markets reach saturation points, companies are increasingly looking to diversify into new industry sectors or product niches to protect their profitability. If a company sees core products become commoditized or margins squeezed too tightly, it may want to consider how its core skills can be used in another sector.

What common problems may I face when tackling this issue?
Companies have to live with the consequences of their decisions for a long time.

Problems can arise from a lack of market understanding and insufficient forward planning. Decisions made in the early stages ― about corporate structure, market entry strategy or market specific risks ― may likely affect the success of the enterprise.

• Emerging markets ― many of the issues are familiar: taxation, intellectual property, employee remuneration, but a different regulatory framework means you may need to alter your existing working methods.
• New industry markets ― whether a new industry or a new product area, you need to consider innovation, pricing, supply chain, the route to market and long-term strategy.

So what should I do?
Planning and preparation are essential.

• Put in the groundwork ahead of any move into a new market. Be aware of the specific risks and challenges each country or industry sector can present.
• Decide on the best entry strategy. Joint ventures or strategic alliances with an existing competitor may be the best way forward and can mitigate some of the country or market specific risks.
• If an acquisition is the way forward, the post-merger integration issues must be addressed. The negative effect of leaving these unchecked can remove as much as 50 percent of the perceived value off the deal. (“The Morning After”, KPMG International)

In summary
Establishing operations in a new market is not straightforward. A company that has gaps in its knowledge and which fails to anticipate and prepare for the risks associated with entry into a new market will likely quickly find itself with an operation that adds nothing to the bottom line.

How can KPMG firms' professionals help?
By providing advice on:

• investing in emerging markets
• use of joint ventures and strategic alliances for market entry
• making successful acquisitions in new markets and potentially minimizing the post-acquisition integration issues
• locating and establishing new company operations around the world.