When we think of emerging markets, we often think of Brazil, India, Russia, China and now South Africa (BRICS). But as these countries’ development plateaus and they move closer to what we understand as developed nations, what are the next generation of emerging markets for companies that have already conquered the BRICS nations?

There are many contenders for fast-growing emerging markets that rank as high as — if not higher than — some BRICS nations. Forbes has a comprehensive list that includes Bangladesh, Myanmar, Philippines, Vietnam, Indonesia and Ethiopia. Research company Euromonitor International adds Nigeria to the mix when considering the growth of middle class consumers. 

Personally, I have a few favorites worth watching. Let’s start with Indonesia, ranked 37th on the Global Competitive Index produced by the World Economic Forum in collaboration with Columbia University. Its purchasing power-adjusted gross domestic product (GDP) is the eighth highest in the world, right behind Brazil and Russia, and its quarter billion population makes it the fourth largest economy on the planet. Not to mention, its growing number of middle class households is expected to reach 20 million by 2030, making it a very lucrative market of consumers. 

Bangladesh is another hot market, with a population of 170 million and a workforce of approximately 80 million. The International Monetary Fund expects Bangladesh to soon surpass Ireland, Chile and Finland with a 7% growth rate. It has a purchasing power on par with South Africa, and it will likely become one of the world’s 30 largest economies within the next decade. 

Then look at the Philippines, with a population of 100 million. It ranks 47 in the Global Competitive Index. The increase in the county’s purchasing power translates into more discretionary spending on education, medical and leisure goods and services. 

Similar to the early days of entering BRICS, there is one major barrier that ties this next generation of emerging markets together, and that is language. Of course language still presents a challenge with BRICS, but international companies are making waves by ramping up their translation practices and localization is now more manageable thanks to the dissemination of both bilingual data and translation companies. 

Earlier this year, automated translation vendors received a boost when the United Nations released its official Parallel Corpus of 800,000 documents in Arabic, English, Spanish, French, Russian and Chinese. The bilingual training data of slightly over 1.7 million aligned pairs adds a considerable step-up to the bilingual data already available in these languages.

However, if companies want to take the regional approach in the next generation of emerging markets, they will have their work cut out for them in translation and localization issues alone. Of the 120-175 languages used in the Philippines, two are listed as official, and 19 more as regional. Taking a true “be local” marketing perspective would mean localizing content into not only the two official languages, but at a bare minimum the 19 additional regional languages.  

For Bangladesh and Indonesia, the language challenge for initial market entry is somewhat less daunting. In Bangladesh, 98% of the population is fluent in Bengali, and even though more than 700 languages are spoken in Indonesia, only one language, Indonesian or Bahasa as it is known, is universally recognized. 

Leaving language aside for the moment, let’s take a look at what companies should be considering when making a decision to enter an emerging market. 

Challenges vs gains

The decision to enter a new market should not be taken lightly. It can be costly if it goes wrong, and the new market’s stage of maturity will have differing acceptance levels depending on their development. For example, fast-moving consumer goods usually have a higher acceptance rate in economies that are only starting to develop. Whereas business-to-business or educational applications tend to follow as soft infrastructure increases. Therefore, success in entering a new market requires an innovative entry strategy that aligns with both the local buying preferences and institutional policies.

When identifying a new market to enter, what are the criteria that should be met before taking the plunge? Typically, it comes down to sales, and whether the company will sell enough to warrant the entry investment. Companies planning to establish themselves in an emerging market can get started easily with a country portfolio analysis and political risk assessment. 

Two indicators that are frequently used to measure the market’s potential are the size of the new market and its capacity for growth. Calculating this comes from a combination of the emerging country’s GDP, per capita income growth rate, population analysis, exchange rate and its purchasing power parity. Of course, if the investment for a company is too high to earn a profitable return in sales at this point, then the shrewd decision might be to steer clear. 

However, looking past the new market’s potential for sales, in cases where an emerging market might look like a winner on paper, it might not have the right infrastructure to actually be one. Therefore, it is essential to include the market’s soft infrastructure in your assessment. Since the soft infrastructure includes evaluating the market’s institutions, it’s possible to establish whether the local government is stable enough, whether the legal system has the power to enforce any legal implications that may arise when doing business with local partners and resellers. It will also help identify if the local financial market is reliable and whether there is a good education system that will facilitate the growth of local consumers.

What can you gain from entering a new market? Increased profits is usually top of the list. Access to a new slew of customers that will buy your product or service is usually the number one reason for entering a new market. Not only will going global give access to new customers, it helps companies mitigate risks and avoid putting all their eggs in one basket. 

A good example of tapping into new markets comes from the tobacco company Philip Morris International. The company spent $5.2 billion to purchase the Indonesian cigarette maker Sampoerna. Changing attitudes toward smoking in the United States was causing a drop in tobacco sales and the company needed to find a new, profitable market. Indonesia has the fifth-largest population of smokers in the world, and by buying a local cigarette maker, Philip Morris was able to piggy-back on Sampoerna’s brand and appeal to the Indonesian buying preferences of buying local. 

Reduced costs is another benefit. The great thing about international expansion to emerging markets is the demand for more raw materials, whether it’s human resources or manufacturing materials. Companies selling more are able to reduce their production costs and negotiate better bulk discounts with their suppliers. For example, earlier this year, in a merger between Paddy Power and Betfair, many duplicated operations were cut and in some cases transferred to areas in Europe where resources were more competitive. 

Global brand strength should not be discounted either. One of those frequently heard statements about Coke being the most recognized word in the world after OK proves that global domination by a brand is possible. However, you need to decide whether your brand is adapted to be successful in a new market. Every brand wants to be strong enough to enter a new market without much adaptation, but from our experience some new markets can be tough for an outside brand to become established in. 

Going back to the example of Indonesia, when it comes to brands, Indonesians attach more importance to brands than many other Asian countries. In a survey by McKinsey & Company, 47% of Indonesians considered “well-known brands to be of better quality,” but they also prefer to buy local. Therefore, partnerships with local resellers tend to work best. Paradoxically, they are often less aware of brand ownership, which is why Nestlé’s Kit Kat is considered a local brand by many. But with each new market entry, your brand gets a little stronger. When Nokia entered India, it took a very proactive approach toward localization, and as a result it is considered to be a very strong, high-quality brand in that market. 

Localization in emerging markets

We know that successful global companies should invest in the localization of their content, including websites, customer support and product information when entering new markets. A survey by Common Sense Advisory shows that 63% of global brands offer multilingual services as a means to grow their business and stay ahead of competitors. 

Localization in an emerging market requires a carefully mapped out globalization strategy by senior management that includes collaboration with all stakeholders involved in the new market entry process. Since emerging markets tend to have less market research and language resources available, it’s important to have locals on the ground that can test the localized content for cultural sensitivities. In many cases, a strong local partner network will help overcome ethnocentric issues, while also providing customers with the local brand credibility they prefer. 

It is good practice to have local market knowledge, not only of the local languages spoken, social demographics or purchasing power, but also to have a clear grasp of cultural idiosyncrasies for each buyer type and how they make purchase decisions. When it comes to markets with hundreds of different languages like Indonesia, always question whether you are choosing the right languages for your customers, or alienating them to cut localization costs? By understanding this, you will have a better awareness of what those consumers need to extract from your content in order to make a purchase decision and to have a good experience with your brand.

This in turn should influence what you plan to localize for the new market — text translation, images, video. For example, in Thailand, images and video play a bigger role in influencing online shoppers than, say, text. So it might be a poor investment to translate the same product information that you would ordinarily find on Western websites.

Extensive market research, your budget and entry strategy will play a substantial part in your localization plan. Start with languages that will provide the biggest wins and work from there. The decision on whether to translate, transcreate or a mix of both comes down to your localization plan and whether your audience needs to read all your content.  You should know how they make decisions and the type of content they consume when engaging with your brand. Based on this and on feedback from your local partners, you can take an objective look at whether it is more effective to translate existing content, undertake a complete rewrite or a combination of both. 

In summary, as we move to the next generation of emerging markets the greatest challenge will be generating the bilingual resources that will help generate those automation efficiencies currently seen in more mature markets. This will be achieved by companies working closely with in-market partners to create high-quality bilingual and monolingual data. It will also be partially dependent on the development of the market’s soft infrastructure, as the latter develops, then more multilingual content will be required particularly for governmental, financial and educational purposes. As more companies make the move to enter emerging markets, the potential demand for language services will also increase.