Distribution In Emerging Markets
Companies Should Listen to the Locals as They Expand Across the Globe
Trading Uncertainty for Untested Markets - The chemical distribution market is undeniably being challenged by uncertainty surrounding the current economic conditions, in Europe and other regions. Despite this demanding situation, Fecc's outlook on the sector remains positive but vigilant. As the chemical industry continues to follow the globalization trend, international trade issues and emerging markets play an increasingly important role within the companies' business strategies.
Markets and regions such as India, Russia, Brazil and others from Asia and the Middle East offer various opportunities to increase business potential for distributors. "The distribution industry in these markets is being fueled by acquisition of local companies and new distribution agreements with regional producers. We expect these opportunities to bring increased growth to our industry in times of economic stagnation in Europe," said Franz Saif, sales director at BTC Europe and Fecc's International Trade Committee chairman.
Industry Expands Geographic Reach
Having a well-established network in central and much of Eastern Europe, the chemical distribution industry is testing new waters by delving into business possibilities in Turkey, South Africa, Ukraine and other former Soviet countries.
"We are carefully observing the local market habits and together with local people developing the business," said Pavel Kratochvil, executive vice president at Barentz. "Within the Barentz Group we always look further, knowing that each region may lose its emerging attraction. This is why we are now very present in the Middle East and setting up businesses in African countries, where we see huge potential for further development."
The negotiation of new free trade agreements (FTA) and economic partnerships between the EU and countries in Latin America, Asia and other regions will open more doors further for the industry.
‘Humility And Respect'
Taking advantage of these opportunities requires companies to be prepared to face unique local challenges.
When entering any emerging market, distributors will encounter not only the usual business and financial demands, but also cultural and social differences. Kratochvil explained these cannot be ignored: "Regardless where you enter, in which country, the most important rule is to enter with humility and respect for local habits, local people and the local market rules and to adapt your business plans or business model to that. It is a challenge to enter emerging markets, but if you want to be successful in the long term, you cannot ignore local culture. Through our experience in emerging markets we have learned to follow local rules and listen to what the locals have to say."
Cultural and social complexities aside, distributors looking to do business in any emerging market should carry out a thorough preparatory process that includes asking themselves, as Kratochvil highlights, questions such as, "How does the country or region fit in the strategic plans of the sales division? Is there sufficient growth potential? Is your product portfolio adequate for distribution in the market? At Barentz we also make sure that we have the necessary local knowledge, people with the right experience and good connections to customers." Understanding what these challenges mean, and more importantly, identifying the right strategic options is key to thrive in this new competitive environment.
"Fecc has an expert committee on international trade, that not only monitors the trading environment in the emerging markets, but also researches and identifies relevant market challenges and opportunities for our members," said Dr. Uta Jensen-Korte, Fecc's director general. The committee regularly produces fact sheets containing macroeconomic and chemical-related data in emerging markets, provides regulatory and compliance information and invites experts who give presentations for the members on how to facilitate business in these regions. "At Barentz we see Fecc's preparation of all kinds of market and economic analyses, reports or studies about specific markets as great added value for Fecc members," Kratochvil said.
Transcending Trade Barriers
The Fecc committee looks at various trade barriers, how these are likely to affect distributors in emerging markets and how they can be tackled. Focus is currently being given to the negotiation of the EU and US trade and investment partnership, free trade agreements with Colombia, Peru, Thailand, Singapore, Korea and Japan, among others. Agreements such as these should open new markets for goods and services, increase investment opportunities and facilitate trade. "By closely studying the agreements, Fecc aims to provide assistance to our members to make the most of the market potential arising from such FTAs," Jensen-Korte said.
Knowledge of the various market trends and opportunities is only one side of the coin, as Saif explains it: "Fecc is working on attracting distributors from the emerging markets to become members of the association, as knowing a local distributor might be a key factor to entering into these markets."
To foster cooperation within the industry, Fecc regularly offers networking occasions to its members. Activities include workshops on topics, such as distribution agreements and country-specific committee meetings. Recent meetings have focused on Turkey and the Maghreb with Russia and China in the pipeline.
The European chemical distribution industry is working hard to position itself to stay ahead of the game, anticipating and preparing for a variety of scenarios. Although there is no single formula for success, Fecc and its members constantly adapt to drive sustainability, growth and innovation in the supply chain.