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By Sylvia Carr, 25 January 2007 14:25

NEWS

Businesses that successfully expand into emerging markets exhibit careful planning in four key areas - talent, risk assessment, organisational structure and R&D, according to consultancy Deloitte & Touche.

More and more companies are moving high-value activities such as R&D, sales and marketing into China, Eastern Europe, Latin America and Southeast Asia.

But less than half said they are successful in meeting their revenue goals in the new territories, new research from Deloitte & Touche reveals.

Attracting and retaining skilled workers is a key to thriving in emerging markets. Successful companies avoid applicants with a history of 'job hopping' and provide training, rewards and benefits for their workers. Nearly three-quarters of companies which adhered to these guidelines met their goals, compared to around half which did not, according to the consultancy.

Creating a wholly owned subsidiary, as opposed to hiring a third-party business or engaging in a joint operation, is the best strategy for meeting goals in emerging markets. The key here is to give the business unit enough autonomy that it can react to local trends and opportunities while maintaining centralised control, the consultancy said.

Rigorous risk assessment of issues such as intellectual property, local regulations, business continuity and supply chain must be undertaken in order to succeed in an emerging market. Just 56 per cent of businesses surveyed by Deloitte & Touch undertake such a detailed review before entering a market and most overlook geopolitical issues and the threat of terrorism.

Finally, many businesses that sell new products in emerging markets said they see benefits from conducting R&D locally including lower costs, quicker time to market and better understanding of locals' needs.

China is the market of most interest with two-thirds of executives planning to expand into the country over the next five years. Production and sales are the most popular activities to locate there.

Roughly half of executives said they will expand into either Eastern Europe, India, Latin America and Southeast Asia in the same time frame.

Preliminary findings of Deloitte's annual Innovation in Emerging Markets 2007 report were presented yesterday at the World Economic Forum in Davos, Switzerland. The full report will be published in March.