How should the supply chain work in emerging economies?

In general, emerging economies are those represented by countries with low to middle income per capita and a relatively stable economic growth and fairly high living standards. This means that countries with emerging economies are those who are moving closer to more developed economies.

Countries included in the list of emerging economies are some of the most powerful and wealthy nations in the world. Some examples are Brazil, India, China, and Russia (the BRIC countries). Mexico and some Eastern Europe countries are also included in the list of emerging economies.

Talking about a supply chain in these countries can be rather challenging. This happens because these countries have certain characteristics and needs that should be addressed when thinking about the sort of products that should be supplied there. However, the fact that this is a challenging mission doesn’t make it an impossible one.

In this article, David Kiger will share some important bits and pieces about the way supply chains should work in countries with emerging economies.

Market Segmentation

Thinking about the consumer who is going to be linked to the supply chain in emerging economies is quite a task. First, because of supply chains, in general, are not always aligned with the consumer’s needs. Secondly, because emerging economies hold a wide variety of consumers. These consumers change according to the geographical region and average income.

When we think about the source of income of consumers in emerging economies, we need to think about the place where they live as well. Individuals with a higher source of income in emerging economies are those who live in urban areas. On the other hand, the “poorest” people are those who live in the rural area.

In most South American and Asian countries, the largest amount of the population lives in urban areas (at least 70% of the population). This should give companies some hints about the way they need to manage their supply chains in order to meet the needs of consumers both in urban and rural areas.

Another important thing that needs to be kept in mind when managing a supply chain in an emerging economy is expectations. Consumers in emerging countries expect to have access to the same products that are being produced and delivered in developed markets. A great example here is technology. People around the globe expect to be served by technology equally, regardless the stage of development of their economies.

Product design

When we talk about product design in emerging economies, we need to go beyond the aesthetic elements of the product. We need to design products that are affordable for low to middle-income consumers.

A company that has actually nailed it in this field is Motorola. Designers were able to come out with the idea of low-cost handsets for the emerging economies. Also, the company Procter and Gamble was able to increase its sales in Brazil by introducing products that were less sophisticated and unisex. This way they were able to reduce costs and gave consumers different products that could adapt to their needs.

For those in charge of managing the supply chain inside their companies is vital to understand the needs of people in emerging economies. There are thousands of opportunities hidden under the wide variety of circumstances people living in emerging economies need to go through. For instance, Nokia was able to develop a headset based on the difficult circumstances people in India need to go through. The company created a phone that had a dust cover, a flashlight and had a tight grip.

Nokia also developed a product for Chinese rural consumers based on their circumstances. This time it was a phone that included Chinese characters in a stylus system. This system had nothing to do with the way characters were always presented in other phones meant to be sold in western countries.

OLYMPUS DIGITAL CAMERA
Image courtesy of tuija2005 at Flickr.com

By considering these circumstances, supply chains have more chances of being successful. They will always be thinking about the market’s conditions, and the package and distribution of products will be easier to sustain in time.

Product size

This aspect is also related to the way products are designed. However, it is important to place great emphasis here. People in emerging economies usually live in smaller areas, this means that they don’t have too much room to store things. However, as it was said before, they want to have access to the same things developed economies have.

For companies to be able to give consumers in emerging economies what they want, supply chain managers need to resize products. This will allow more consumers to access those products and will make logistics easier.

Another thing that is important to consider here is that channels of access are not always in good shape in emerging countries. For this reason, having to deliver smaller amounts of supplies or products with a reduced size can be also beneficial for companies.

* Featured Image courtesy of BDO Global at Flickr.com

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s