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APRIL 2015 BRIEFING
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SH INTERNATIONAL LLC


APRIL 2015 BRIEFING


Emerging Markets Vision, Not Illusion
 
Dear Clients & Friends of SH International:
 
It is critical, as executive of a globally expanding company, to not adopt oversimplified views on emerging markets business based on media buzz. Emerging markets are complex and constantly changing, and analysis of current affairs as related to your business trajectory requires nuance and continuous reassessment.
 
This month we will take a deeper look at the recent economic détente in Cuba and share our contrary opinion on the implications for the Cuban cigar. We will also dig deeper into the commonly used acronym “BRICS.”

Expand your business into emerging markets with vision, not illusion.
Cuban Smoke and Mirrors
Consumer Pricing Complexities
 
In December, US President Barack Obama and Cuban President Raúl Castro initiated a series of talks leading to a historic warming of US-Cuba relations. While this comes with opportunities for growth, for many companies timing will prove immature. Cuba is not yet an emerging economy.

Companies like Airbnb and Netflix have used the high level of public interest in this development to their advantage, generating serious buzz with their expansion into Cuba. Some of this is overly hyped. Airbnb is listing homestays that have been available for decades, and Netflix still lacks viable pricing.

A popular cocktail party discussion lately has been the eventual elimination of black market trade and expected decrease in price of the island nation’s sexiest export, the Cuban cigar. As of now, US sales distribution channels remain illegal, and there is a 100 USD customs limit placed on individuals entering the US.
 
This view on expected price decreases fails to recognize the complexity of consumer pricing. 

Savvy marketers will keep the Cuban cigar's luxury image alive, and continue to charge premium prices. In fact, they will depend on the consumer's misperception of “getting a good deal” to promote inflated prices. Note that cigar prices were already quite reasonable where available outside the US.

"Smoke and mirrors" may not even be necessary to support such pricing once US trade of the Cuban cigar is legalized. The resulting increase in demand - from uninhibited access to the large US consumer base - could easily outstrip supply. After all, there is a natural land constraint on how much tobacco a small island nation can produce. 
Forum for International Trade Training Twitter Chat             
Beyond BRICS
Which markets fit your company?
 
While you read that companies should expand into “BRICS” countries, these countries may not be the right fit for your company’s emerging markets expansion plans.

There is a flood of international demand to do business with BRICS countries, making it harder for your company to argue with a gross overvaluation of commercial opportunities. Also, emerging markets growth is not always aligned with transparent and ethical business practices, key to your expansion success.
 
While all expansion plans need to be tailored to the company, we offer the following as food for thought:
 
B- Brazil could be on the verge of a recession and its largest oil company is in the midst of a bribery scandal. Consider Colombia instead.
 
R- Both Romania and Hungary are easier to trade with than Russia.
 
I- While India’s economy is projected to grow next year, so are the economies of nearby Thailand and Malaysia.
 
C- Indonesia and the Philippines are both easier to trade with than China.
 
S- Mauritius, while a small economy, is easier to trade with than South Africa.
 
A Leap of Faith Into Emerging Markets - @HaqCast
Reflections from Sara
3 Power Strategies for Networking in Emerging Markets - @HaqCast
Reflections from Sara
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ABOUT SH INTERNATIONAL LLC

We expand businesses into emerging market countries through hands-on consulting services. Half of global commerce is now conducted in emerging markets, and access to these markets defines the future prosperity of US companies.

We offer multilingual expertise with practical experience in five continents. We go beyond theoretical market analysis, operating on a results-oriented basis to open up emerging market opportunities to companies of all sizes. We leverage a proprietary network of resources, specialists and partnerships to achieve powerful results.

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