Mapping Out your Strategy to Win in the Frontier Economies
Chloe Xu, Australia, Premium Member
Global players in search for double-digit growth are believed to be running out of opportunities. As a result, multinationals are turning to so called “frontier economies” as both new product markets and manufacturing bases. Musacchio & Werker (2016) defined that a “Frontier economy” is a country possessing one or more of the three characteristics:
Multinationals are able to avoid certain competition in frontier economics and are therefore likely to enjoy higher profit margins for longer periods once they target the right sectors with the right strategies. Musacchio & Werker (2016) offered a framework to help companies map out whether and where to play and how to win in the selected sectors. The framework requires companies to use two dimensions – government control and customer orientation (domestic or overseas) – to access the competitive environment of their industries first. It then provides business strategies to companies depending on which category their industry falls into.
- FALTERING PROSPERITY. Either the country has an annual per capita income of less than US$ 1,500 and / or it has a drop of over 20% in real GDP per capital in a six-year period over the past two decades.
- CORRUPTION. The country’s industries are driven by politically engineered market falsifications or state-given concessions rather than innovation or competitive differentiation.
- ARBITRARY ENFORCEMENT. The country’s leaders have broad power to do as they please without rules and regulations.
Tapping into "frontier economies" may seem risky, but patience, careful analysis of long-term growth, and an appropriate choice of strategy will reward companies that smart and brave to make the step outward.
Source: Musacchio, A. & Werker, E. (2016), Mapping Frontier Economies, Harvard Business Review, 94 (December), 41-48. Retrieved from hbr.org/2016/12/mapping-frontier-economies.