(ISBN 978-1-4221-6695-6)Associations and Emerging Markets
According to the IMF, the Economist and The Conference Board, emerging markets are forecast to grow on average by more than 6.0% annually through at least 2020.
Recently I read a fantastic book that has a number of important lessons for associations that want to grow, especially in new, emerging markets*.
"Winning in Emerging Markets" is written by Tarun Khanna and Krishna G. Palepu, and is published by Harvard Business Press. In their book, these two authors have helped to define what an "emerging market" is.
More importantly, they also define those key elements that are critical to business that we take for granted in advanced economies that are missing from many emerging markets. They have also provided a strategic framework to determine when and how an organization should approach an emerging market opportunity.
What follows is a short summary of key ideas put forth in their book and how these apply to associations.
Although the book is written primarily for corporations, almost all of the concepts and frameworks the authors put forward can be applied to professional and trade associations alike. I highly recommmend it to anyone in a senior leadership position that has an interest in global growth strategies.
How does "Winning in Emerging Markets" apply to associations?
Emerging markets have been and are slated to continue to be the greatest source of economic growth in the world. Emerging markets are also defined as much by what they are missing as for the opportunities that their rapid growth makes possible.
The lack of supporting services, institutions and structures in emerging markets represent serious obstacles. However, they also represent real opportunities for the associations that can fill certain of these strategic voids and unmet needs.
Common Emerging Market Voids and How Associations Can Benefit
Credibility enhancers - Emerging markets are often very fragmented and include numerous small players. The lack of reputable major brands make it difficult for the local market to identify quality products and services. Associations are ideally suited to provide a level of quality assurance (real or implied) through one or more of it services including membership, credentials, standards or certification. In addition, local participants (individuals or companies) can raise their professional profile and credibility through volunteer roles, as speakers and authors, or by exhibiting at industry events.
Especially in emerging markets where the local participants struggle to differentiate themselves from one another, affiliation with a prestigous association is highly sought after as a real competitive advantage.
Information analyzers and advisers - Emerging markets suffer from a lack of readily available market data and information. Often it is difficult or impossible to know the size of markets or market segments because they are fragmented and there are no mature market data services.
Associations, by bringing market participants together help to bring a new and much needed level of transparency by identifying market players, measuring the size and scope of the market, and potentially conducting important market research.
Aggregators and distributers - The fragmented and chaotic nature of emerging markets makes it difficult and inefficient for buyers and sellers of services, information and goods to come together. This applies across all sectors, whether you are in the healthcare arena as a professional society or you are involved as a trade association in business to business transactions.
Associations help to facilitate buyers and sellers in a given market to more effectively and efficiently find one another through conferences and exhibitions, membership networks or directories, or through advertising and sponsorship opportunities. Associations have traditionally played the role of convenor for industry and professional sector participants. Emerging markets often lack this facility, providing a unique opportunity for associations.
Transaction facilitators - Traditionally, emerging markets are characterized by personal networks of buyers and sellers that have developed on a person to person basis over many years. These networks are neither transparent nor are they easy to access.
Associations have an opportunity to provide open and transparent platforms for buyers and sellers to find one another and to make the markets more efficient (buyers and sellers can represent professional individuals looking for new information and professional development for example). A simple example would be an online job market that is provided as a member benefit.
Adjudicators - The rule of law, and more importantly, the ability to enforce the laws that exist, are a key element of mature economies. Emerging markets are often characterized by weak, corrupt or bureaucratic legal systems.
Aletrnative dispute resolution mechanisms, such as arbitration or mediation, are a possible solution. An example that is commonly used is the arbitration facilities of the American Arbitration Association. Binding arbitration decisions have the advantage of being enforceable in a large number of countries making it easier to get satisfaction in case of a dispute.
Regulators and policy makers - Although it is not feasible to expect associations to assume the role of regulator or policy maker (except in some extremely rare instances), associations can be major influencers and educators for policy makers and regulators.
Emerging markets typically are heavily involved in the development of new regulatory schemes in order to comply with free trade agreements or to gain access to Western markets. This regulatory change environment represents opportunities for associations to play a role as new regulations and policies are formed in these new markets.
Key questions for Associations and emerging markets?
When considering the opportunities in a particular emerging market, organizations have a number of options that they should consider regarding if and how to enter the market:
Replicate or Adapt?
Should you replicate your domestic business model and approach or do you need to adapt your business model for a given market? If you have to adapt, at what point do you start to lose the advantages of scale and efficiencies you have built in to your current business model?
Avoid or Attack Market Voids?
Given the numerous voids typical in an emerging market, do you try to navigate around them and avoid the obstacles, or do these voids represent opportunities that your association is well suited to fill?
Should I stay or Should I go?
Many markets are simply not ready to be exploited in a sustainable or profitable manner. Associations should consider if the time is right or if it is premature to enter certain markets given the current conditions. Also, how long do you stay in a market if your strategy is not working?
Compete or collaborate?
Associations quite often opt to partner with a local association or institution when entering a new market but does it make more sense to enter as a more direct competitor? There is no "right or wrong" answer to this question but instead a series of trade-offs to consider. Partnering gives you access to local knowledge but you might also be educating your future competitor. Competing on your own can lead to market dominance but also requires more resources and entails higher risk.
Conclusion
There are many more insights that can be taken from this excellent book. For me, it offers another view point to consider strategic issues when developing an international growth strategy and opens up a way of identifying market opportunities for associations that heretofore, were viewed only as obstacles.
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*The FTSE (a financial markets firm jointly owned by The Financial Times and the London Stock Exchange) maintains a list of "Advanced Emerging Markets" and "Secondary Emerging Markets", taking into consideration transparency of financial reporting and controls, economic development and political stability. As of late 2011, the "Advanced Emerging Markets" and "Secondary Emerging Markets" were listed as...
Advanced Emerging Economy Countries:
Brazil, Czech Republic, Hungary, Malaysia, Mexico, Poland, South Africa, Taiwan, Turkey
Secondary Emerging Economy Countries:
Chile, China, Colombia, Egypt, India, Indonesia, Morocco, Pakistan, Peru, Philippines, Russia, Thailand, UAE
The Union of International Associations (UIA) is a non-profit, independent, apolitical and non-governmental institution in the service of international associations. Since its founding in 1907 the UIA has focused on documenting the nature and evolution of international civil society, including international non-governmental organizations (NGO) and inter-governmental organizations (IGO). 
This landmark report provides a roadmap to those countries that hold the most promising prospects for economically sustainable growth. 
