For years, large international companies have understood the strategic importance of the developing world as a source of raw materials and suppliers of cheap and efficient industrial labor. Today, a time when the U.S. and other industrial economies are mired in a period of extended sluggish growth, the developing world represents a different kind of opportunity for multinational companies - a source of growing and often untapped demand for a wide range of consumer goods and services, from breakfast cereals to automobiles, from fast food to life insurance.
For large industrial organizations, like IBM, Unilever, and Coca Cola, few developing-country markets are unfamiliar. Yet, even seasoned multinationals are now forced to confront markedly different competitive conditions in developing-country markets.
The changes have in large part been sparked by the phenomena of market liberalization and privatization, which, in the last five years, have swept through more than 50 developing countries in Southern Europe, Central/Eastern Europe, Latin America, and Asia/Pacific. Throughout these regions, economic policy priorities have been - and continue to be - fundamentally reformed, as countries compete to create the most hospitable conditions for increasingly scarce investment capital. As trade barriers tumble, price controls are withdrawn, and state companies are privatized, a whole new competitive environment has taken shape, with new players, new products, new consumers, new distribution and retailing channels, and rapidly changing consumer tastes.
Understanding the nature and implications of this structural reform/market liberalization phenomenon is critical for assessing medium- and long-term demand for specific products and services. To meet this need, The Futures Group has developed a practical analytical tool, called Structural Reform Analysis (SRA), to illuminate market implications of economic reform policies in developing-country markets. SRA is particularly useful as a means of identifying and prioritizing choices for market entry.
SRA is essentially a system for organizing and evaluating critical information on countries' economic policies and market structures. In contrast to conventional country risk assessment, which tends to concentrate on more short-term indicators, SRA focuses on underlying drivers of medium- and long-term market growth and development. Among the most important of these underlying drivers are the following: