In the next decade, it is estimated that 55 to 60 percent of the nearly one billion households with incomes higher than $20,000 a year will be in the developing world. If you have a stable business in the U.S., the time is right to start exporting to other countries, especially since 45 percent of the global GDP is estimated to originate from seven emerging economies: Brazil, Russia, India, China (BRIC), Mexico, Turkey, and Indonesia. But before you decide to expand your business to any of these countries, it is vital to understand the many dynamics of expanding internationally.

Simultaneous expansion to multiple countries should be undertaken only if you have significant resources at hand. Otherwise, it’s better to tackle one country at a time. Even then, it is vital to understand the various sub-markets in that country. For example, there are 20 to 40 different sub-markets within China. If your products or services aren’t localized specifically for each sub-market, you may not be making good use of your resources, be they financial resources, human resources, business partnerships, or your supply chain infrastructure.

The following criteria should be considered before making the decision to export to another country:

•  If B2C, what part of the country has the most demand for your products or services?

•  If B2B, what part of the country has the biggest footprint of your clients?

•  What part of the country has more qualified human resources?

•  What part of the country has a more dependable transportation infrastructure?

Your company should respond to these and other questions in as much detail as possible, and the responses should be based on independent market research. For example, if you’re selling a low-end mass-market item, it might not make a good business case to start selling in a region that already has a high percentage of middle class households. However, selling high-end premium goods in such a region might make a perfect business case.

Understanding regional differences

Another important consideration is region-specific consumer behavior. For example, Guangzhou and Shenzhen are both tier-one cities in China, located in the same province and just two hours apart. Yet there is a marked cultural difference between the two, something any company looking to expand into one or both of the cities should note. According to a study done by McKinsey, “Guangzhou’s people mainly speak Cantonese, are mostly locally born, and like to spend time at home with family and friends. In contrast, more than 80 percent of Shenzhen’s residents are young migrants, from all across the country, who mainly speak Mandarin and spend most of their time away from their homes. To be effective, marketers will probably have to differentiate their campaigns and emphasize different channels when reaching out to the people in these two cities.”

When localizing your marketing campaign, accurate translation of your material cannot be underestimated. In the above example, you would not be able to use a single marketing campaign for both cities since one of them uses a simplified version of Chinese and the other uses a traditional version of Chinese. To this end, hiring a language services provider (LSP) to translate your marketing campaign would be highly recommended. LSPs also offer additional benefits, such as a translation memory that helps you establish a linguistically consistent marketing strategy in different regions of a country.

Another language example is the French spoken in Canada, which is different than French spoken in France. Moreover, French spoken in Quebec is slightly different than French spoken in the rest of Canada. If you are looking to do business in Quebec, you would need to localize your material specific to Canadian French spoken in Quebec.

Investing in India and Brazil

In India, your biggest challenge as a foreign company can be building government, customer, community, and business partnerships. Currently there are 42 cities with more than one million residents, and by 2030 there are expected to be 68 such cities. These cities could potentially generate 70 percent of India’s total GDP.

The need to maintain a high credit rating is still a very new concept to Indian consumers. For example, one wireless carrier had a challenging time collecting payments from customers in one of the tier-two cities. Instead of cutting the service off, the carrier decided to be creative. It sent a text message to customers that it would offer two months free service, but the customers must come in to see one of its associates. This is where the non-paying customers were caught and asked to pay up.

This creativity is unique, but if you’re looking to expand to India, then be sure to read up on how to capture and retain low-income consumers in a high-growth emerging market.

While China and India are somewhat new to opening their economy to multinational corporations, Brazil has been open for decades. During that time, some industries paid lot of attention to southern part of the country. However, the recent growth in economic activity all across Brazil resulted in lot of consumers upgrading to higher-end products. Similar to the example mentioned of the two Chinese cities, in Brazil there are cities with varying characteristics as well. Therefore, it is vital that you thoroughly study and understand the city/region in Brazil into which you want to expand.

Succeeding in Russia

In Russia, the field is quite different. For one, many Western brands have already become quite established since the breakup of the Soviet Union. If you want to succeed in Russia, you will have to have a strategy that addresses getting past the competition, not to mention that you will need to be more hands-on involved when it comes to distributing your products or services.

Moreover, you will also have to address some of the everyday realities such as poor infrastructure, confusing legislation, red tape, corruption, high taxes, organized crime, and the changing political landscape. All of these will increase time and cost of doing business in Russia. Nonetheless, Russia should not be perceived as all things negative. According to Russia Retail, Russia became the seventh country in the Commonwealth of Independent States (CIS) “by retail sales turnover growth in the first half of 2011.”

To that end, many companies starting out in Russia have opted to initially import their products instead of manufacturing them in Russia. This approach might work to gain an initial share of a certain market, but it is not sustainable in becoming a market leader. Even when you’re importing your products initially, you have to really focus on localization of your sales, marketing, and support operations. When your employees in Russia are not engaged in manufacturing in one way or another, the connection with the customer will not be as solid.

On the other hand, manufacturing in Russia poses a set of challenges—some of which are mentioned above—that must be addressed. One of the biggest challenges in Russia is distribution. If your products will depend on existing distribution channels, you might be in for a surprise if you do not take the time to carefully study how the distribution channels work in Russia.

Beyond BRIC

While the BRIC countries have recently been grouped together due to their similar economic growths, the market realities in each of these countries are quite different from one another. There is no single common denominator, and the company that fails to consider that when planning BRIC expansion is the company that doesn’t realize its full potential.

There are three other countries that are also considered emerging markets that offer as much potential of success, if not more. These countries are Mexico, Turkey, and Indonesia. According to one scholar, Mexico and Turkey are going to be the next superpowers within the next 100 years.

We all know many companies that have successfully expanded to Mexico. Fortunately, or unfortunately, expanding to Mexico might be the easiest choice. But when it comes to Turkey and Indonesia, you not only need to study the current market realities, you also need to understand their histories.

Turkey, in fact, used to be a superpower (from 1299 to 1923) with a great deal of economic infrastructure that included parts of Europe, the Middle East, North Africa, and South Asia. But from 1924 to roughly 1990, Turkey was considered the “sick man of Europe.” However, from 1990 to present day, Turkey has been positioning itself for not just economic stability, but political stability as well. You’ll be surprised to know that Turkey has one of the best-educated and skilled workforces in the world—and that it is very affordable. Moreover, its location offers proximity to a few very important markets: Europe, the Middle East, and South Asia. If you’re looking to set up a central branch serving these three continents, Turkey is your ideal choice. Many Turks speak multiple languages, most commonly Turkish, German, and Arabic. This capability alone can be used as a competitive advantage to not only establish a market share, but to increase it as well.

Indonesia, on the other hand, has been an emerging market for many decades now and offers many advantages not offered elsewhere. Consider this: Indonesia is the world’s 18th largest economy, is a member of the G-20, and is the founding member of the Association of Southeast Asian Nations (ASEAN). However, like other countries, there are a great deal of issues to be addressed if you’re considering expanding there. The country is made up of 17,500 islands with over 300 ethnic groups and is divided into different provinces, with each province having its own language, religion, and history, not to mention that most people will define themselves locally instead of nationally. When you consider all of these market realities, it’s easy to understand why your business expansion must be accompanied by first-class knowledge of the region(s) into which you want to expand.

The bottom line

No matter which country you decide to tackle first, there are some things that are applicable across the board:

•  Understanding of the sub-markets in the country

•  Strategy to create and maintain relationships with various entities

•  Localization of your marketing campaign(s)

These aren’t in any particular order, yet each is equally important in its own respect. In the end, successful expansion will completely depend on your thorough planning of these considerations. wt