Benefits & Downfalls of Doing Business with Economies in Transition

According to the World Investment Report, global foreign direct investment flows dropped by 2% in 2016 to $1.75 trillion. And the situation is looking worse for investments in developed countries, as they fell by an entire 14%.

However, global economic prospects for many economies in transition have straightened this year, which means now is the right time to make a smart business move and exploit worldwide market potential.

In the process of becoming more developed, countries in transition present lucrative opportunities for small or medium-sized companies looking to expand their operations. Why? Because these types of nations need innovations, which is precisely the main reason to enter a new market.
Then again, there are always two sides of a coin, so let’s see which one will prevail.

Domestic firms might have a leverage when it comes to countries in transition. If we take a look at the successful example that occurred in 1991, we can note that one local company with insufficient means managed to beat tough competitors such as Apple and Samsung. A Chinese entrepreneur who founded Mindray Medical International at that time had to compete with already established foreign brands.

With a goal to become “the first Chinese company” people will turn to for quality products, he soon became a leading manufacturer of medical devices in China. But the corporate development didn’t stop there, as Xiaomi also became one of the leading companies in India as well.

What started as a minor domestic business quickly turned into a powerhouse with a rapidly growing international presence, surpassing some of the biggest names in the game along the way.
That being said, multinational enterprises can outperform the local businesses, simply because they have more resources. However, in the long-run, the rise of the local competitors may strip them of their benefits – economies in transition like Serbia, for instance, are still a good market for potential investors.

According to Nebojša Stanković, companies looking to expand their presence on the global market can take advantage of Serbia, still, there are a couple of requirements they should be aware of.

One of the biggest advantages with countries in transition is precisely the opportunity to be the first business of that kind on the market.

No matter the risks of potential domestic competition, if an SMB or an enterprise sets up a branch and builds early success, they have an upper hand in creating prosperous local partnerships. This will definitely help to lower the impact of any emerging businesses with similar offerings on the market.

Nevertheless, it’s all about the economy. Due to the transition process, these countries basically offer untapped capital. By grabbing this chance, small companies can further develop in emerging markets, especially if they have already reached their limits domestically.

Putting it simply, doing business in economies in transition amplifies the brand’s lifespan of products and services currently on offer, even if they become less popular on the market.

There are a few prospective disadvantages when it comes to doing business with countries in development, including:

• list text hereCultural differences that may result in different expectations than ones established by a business.
• list text hereEconomies in transition usually don’t have evolved ethical and legal protection from corruption.
• list text hereEvery country has corporate and tax laws business owners should thoroughly inspect before starting an international collaboration.
• list text hereThe brand might have to succumb to rebranding if the particular territory already has a business with a similar title or if the name of the label carries a different meaning in that country.
• list text hereExpenses might increase if something goes wrong.
• list text hereIf a company works alone and without a local partner, business owners take all the risks on themselves.
  

Every new business venture is risky, but the reward of entering an emerging market can be worth the risk. Such markets are craving new things that will bring the much-needed stability and the chances are mostly in your favor. However, you should do meticulous research ahead of time to create an unbeatable strategy. Only then can a business remain safe from threats and grow internationally.