I’ve talked before about operating models for international expansion, and where insurers are focusing their expansion efforts, and this week I’d like to focus specifically on emerging markets.
When it comes to emerging markets, what worked in developed markets may not necessarily apply. Accenture believes that emerging market entry requires a strong strategy—one that is aligned with broader business goals, and accounts for the success drivers and unique characteristics of each market.
Where will you play?
It sounds simplistic, but the first step in emerging market entry is to identify the market. Specific criteria will depend on your business objectives, but two are generally applicable:
- Market attractiveness. What’s the future profit potential of this market?
- Potential to create advantage. What are your prospects for earning superior profits in the emerging markets sphere?
How will you enter?
Entry barriers can vary greatly between markets, regions and nations. When establishing an entry strategy, insurers should assess the feasibility of three options:
- Go it alone. This offers control over brand, quality, practices and intellectual property, not to mention all the rewards from market success. However, it can also take longer to establish a presence, and gaps in local market knowledge can result in expensive mistakes.
- Find a partner. This can create a win-win situation, enabling insurers to capitalize on local market knowledge and established operations. However, it can also mean less control, divergent objectives and reduced profits.
- Acquire. This provides a ready-made local position that can add value to global operations. However, insurers must be very clear about what they are buying into and lock in value through retention payments, distribution and supply contracts.
Next week, I’ll talk about two more considerations for emerging market entry: building a profitable position and integrating emerging market activities into a global business model.
To learn more, download Emerging Market Entry: Keys to Success.