Avoid making life difficult: Choose markets based on your network

Choosing a market for developing your BOP project is a classic dilemmato which there is no universal approach. But new interesting ideas are developing based on experience from existing BOP ventures.

One of the essential ideas is that your company should focus on countries and markets where you are already present, either through sales partners, sales offices, or even own production sites and subsidiaries. This would often be large markets with upper, middle and low-income consumers, as the BRICs and Mexico, opposed to frontier markets as e.g. Mozambique.

The process of choosing markets

Endeva, a German Institute creating knowledge to develop and implement inclusive business models, has recently released the publication Inclusive Business Guide which gives interesting thoughts on market selection.

Christina Gradl , Director at Endeva and contributor to the Inclusive Business Guide, explains Endeva’s approach to market selection: “First, the company needs to look inside, where it has the best capacities, resources, and expertise to develop a project on the ground. In most cases, it would make no sense to venture into a new country just in order to get to the BOP market. Typically, companies go abroad with their standard business model and then take it from there.”

A strong local partner is essential in building a sustainable business, but it is only rarely sufficient: “Partner selection then happens locally or based on established networks. But only in rare cases, or when looking at the purchasing side, would a good local partner suffice to build a solid BOP business.” says Christina Gradl.

Using your network to develop ideas and obtain embeddedness

There are two key benefits of using your local network sales partners, sales offices, own production sites, or subsidiaries: Using your local connections to develop ideas and opportunities; and secondly using the embeddedness of your local partner to find the right people and information.

Christina Gradl points out the advantage of using your local network: “Companies are able to use their local partners to get a sense of the opportunity, possibly also concrete project ideas, definitely local information and embeddedness, i.e. local contacts and networks, knowing how things are done etc.”

Siemens is an example of how a company has utilized its local network to generate business opportunities by creating an ideas competition among all its subsidiaries on BOP innovation. As a result, Siemens has developed a solar kiosk on the Victoria Lake in Kenya.

In addition to sourcing ideas and opportunities, you should use your local network to obtain embeddedness. Embeddedness is a concept introduced by sociologist Mark Granovetter describing “the degree to which individuals or firms are enmeshed in a social network”.

David Barnekow, Consultant at DIBD, notes: “When Danish companies are developing their BOP ventures, one of the main issues is bridging the gap between the Danish headquarter and the potential customers in emerging and frontier markets. If the company has local representatives, it is often possible to use their embeddedness and thereby gain inside knowledge on the specific industry and market.”

Implications: Understanding the value of your network

There are many approaches to market selection and there is no universal approach for selecting countries for BOP ventures. There are however advantages of bearing in mind the following points when considering which markets to enter:

1. Consider where your organisation has the best capacities, resources, and expertise to develop a project on the ground
2. Use your local partners to source business ideas and local information
3. Utilize the embeddedness of your local partner to develop your network and get to know how things are done locally