The whole world is now a frontier market

POSTED Dec 10, 2020 BY Sjouke de Vries
This year has been proven to be tumultuous for business because of the Covid-19 pandemic. This is even more true for businesses in frontier and emerging markets. Where businesses in developed markets are supported by government to soften the impact of Covid-19 measures, there is little or no support for businesses that operate in emerging markets. The opposite is even true: governments themselves are desperate for tax income and are going after companies to cover their own budget deficits. However, many businesses in emerging markets prove to be remarkably resilient in this crisis. Also, the emerging economies as a whole proof to be relatively strong. While the world bank predicts the first recession in Sub-Sahara Africa in 25 years, it also predicts only slowed growth for diversified economies such as Kenya, Côte d’Ivoire and Ethiopia.
 

Why are companies in emerging markets resilient?

So why is this? How can many companies in emerging markets survive these extreme conditions relatively well without any government support? The answer lies largely in the characteristics of emerging markets. Extreme uncertainty and a complicated business environment were always constants for doing business. Corona is an extreme version of events that companies in emerging markets already face on a regular basis, such as Ebola, wars, terrorism, election problems and a hostile business environment. 
 
1. Companies that are not able to cope with major disruptions will never make it in emerging markets. Successful companies are already organized to quickly scale up when opportunities materialize, but also to quickly scale down when issues arise. 
2. Although business schools teach us that focus is the best way to achieve growth, in emerging markets many successful companies are diversified. Putting all your eggs in one basket is simply too risky in the turbulent emerging markets. When one revenue stream dries up, a completely different business line can help the company through rough times.
3. Doing business in emerging markets has never been for the faint-hearted. Successful leaders in emerging markets are used to deal with crises and high levels of uncertainty. They have a hands-on approach, great focus on operations and get into the trenches when required. 
 

Companies in developed markets can learn from companies in emerging markets

Given the lowered growth predictions for the developed world, more Western companies will continue looking for growth in Africa and other emerging markets. What makes them successful in their home markets does not necessarily make them successful in their new endeavors. Also, now that the whole world experiences extreme uncertainty and low visibility of the future, companies in developed markets can learn from how companies in emerging markets organized themselves to be successful.
 
In his 25+ years international career the writer of this guest blog, Sjouke de Vries, gained broad business experience in a wide range of industries. He has lived and worked in 4 countries and travelled to over 30 countries for business. The past ten years he has been starting and growing business in emerging and frontier markets. 
 

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