What does the future of global market entry look like in the next 18 months?

Dr. Janet L. Walsh
CEO and President, Birchtree Global, LLC

Global market entry activity is increasing because of a rise in Covid vaccinations, a reduction in cases in some countries, and the easing of travel restrictions.  Companies are entering and re-entering global markets to overcome supply chain disruptions, sell new products, provide services, support manufacturing expansion, and reduce costs.   This global expansion is still uneven in 2021 with countries like the US, Mexico, and China experiencing faster returns to normalcy and countries like India, Brazil, and Canada taking longer to overcome Covid problems (Henderson, 2021).  While business and financial services industries look to return fairly quickly and robustly, recovery in the consumer travel industry and customer facing industries remains slow.

Oxford Economics (2021) has raised its global economic forecasts again in May 2021 and expects world GDP to grow 6.3% in 2021 and 4.6% in 2022. Business leaders are feeling good about the global economy. In the April McKinsey Global Survey (2021) on economic sentiment, 73 percent of respondents said they believe that conditions will improve in the next six months. The share of executives expecting conditions to worsen has shrunk by more than half in the past three months. Sentiment is most buoyant in North America and Greater China and most negative in India and Latin America.

Saudi Arabia wants to establish its capital, Riyadh, as the pre-eminent business hub in the Middle East, drawing business away from and eclipsing existing regional hubs in the UAE, Qatar and Bahrain.  They wish to exchange access to lucrative state-backed contracts for companies that establish their headquarters in Riyadh.  

Specific industries such as medical devices and healthcare are poised for robust growth.  Hospitals are increasing their adoption of digital technologies, which will push further product development.  However nursing homes and retirement care facilities occupancy rates are significantly lower than pre-pandemic, with at-home care programs growing. 

Artificial intelligence in new products is driving process innovation, which can be seen in multiple industries including the gaming industry. Artificial intelligence will drive process innovation suggests John McEleney (2021) co-founder of Onshape. AI will be used more and more during 2021. As Daniel Newman has suggested in Forbes, the timing is simply right. AI is being increasingly integrated now with chips from Intel, NVIDIA, and Qualcomm, as well as with cloud platforms from the likes of AWS, Azure, IBM, and Oracle.

There is a rising global demand for consumer electronic goods, home appliances, and automobiles.  The result of which has been a sharp rise in the demand for and a related shortage in the semiconductor industry.  Given the number of production facilities for these products in China, relationships with China and the US will continue to affect the sourcing and delivery of these products.

It is important to remember that the majority of economic predictions from the fall of 2019 did not envision the massive disruption from the global pandemic.  Disruptions that might affect global market entry in 2022 include the effect of climate changes on crops, the environment, cities, and migration, digital inequality, economic stagnation, political changes, terrorist attacks in person and in the cyberspace. 

As a result of the pandemic generated dynamics businesses are becoming more customer-centric and increasing the speed and agility of their responses.  Rising numbers of businesses are allowing employees to work from home full or part-time, resulting in a reduction in overhead costs, workplace costs, and commercial real estate. 

All of the global market entry opportunities are tempered by the challenges.  The Harvard Business Review illustrates the challenges by noting most businesses do not succeed in their global market entry efforts. In an analysis of 20,000 companies in 30 countries it was  found,  “that companies selling abroad had an average Return on Assets (ROA) of minus 1% as long as five years after their move” (Harvard Business Review, 2015).

Research shows there are many barriers to successful entrepreneurship and innovation in emerging and transitional markets.  However the number one reason for failure to reach full market entry potential is the lack of preparation.  Companies need to be able to formulate competitive strategy and tactics to have a clear picture of how to enter a new market.  If companies don’t have a clear focus at the at the earliest stage of the process and acquire the bench strength to integrate the talent into the business, failure at some level is guaranteed.  Companies that don’t acquire, upgrade or integrate new business skills into their global market entry programs will be unable to form viable, ethically governed, and competitive organizations (University of Texas, 2021).

Skill building in employees is requirement for successful customer-centric high performance.  In a recent McKinsey Global Survey, 69 percent of respondents said that., “building the skills of existing staff is more important than any other method of talent building, including hiring. It’s time for companies to strategize talent development and identify the most effective options, including digital learning and in-person workshops,” (McLaughlin  2021).

In conclusion, there are emerging opportunities for global market entry particularly in the US, Mexico, China and specific industries such as healthcare and electronic goods.  Rising consumer demand post-pandemic is fueling these opportunities, and demand is growing.  Being financially successful at global market entry, however, requires a workforce that is trained and educated in global market entry.  Companies with employees skilled in global market entry will outperform companies that are not prepared.

References

Economist Intelligence Unit. (2021). Are Saudi Arabia’s plans to become the main business hub for the Middle East achievable or a step too far? Economist Intelligence Unit.  London, UK.

Executive Briefing, McKinsey and Company. (May 12, 2021).  Retrieved from: https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business

Henderson, C. (2021).  When will international travel return: A country by country guide to recovery.  The Points Guy.  Retrieved from: https://thepointsguy.com/guide/reopening-soon-a-country-by-country-guide-to-coronavirus-recovery/

John McEleney, J. (2021, January).  What’s Ahead for Product Development & Innovation in 2021: Four industry predictions from a manufacturing-tech strategist. Industry Week. Retrieved from: https://www.industryweek.com/technology-and-iiot/article/21153054/whats-ahead-for-product-development-innovation-in-2021

Kalish, I.  (2021, May).  Weekly global economic update.  Deloitte.  Retrieved from: https://www2.deloitte.com/us/en/insights/economy/global-economic-outlook/weekly-update.html

Lim, R.  (2021, April 15).  Top 10 main causes of project failure.  Project Management. Retrieved from:  https://project-management.com/top-10-main-causes-of-project-failure/

McLaughlin, K.  (2021, May 5). COVID-19: Briefing note #53.  McKinsey & Company
Retrieved from:  https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business

Oxford Economics.  (2021 May).  Global Economic Forecasts May/June.  Retrieved from: https://www.oxfordeconomics.com/

Stadler, C., Mayer, M.,  and Hautz, J.  (2015).  Few Companies Actually Succeed at Going Global.  Harvard Business Review.  Retrieved from: https://hbr.org/2015/03/few-companies-actually-succeed-at-going-global

University of Texas at Austin. (2021).  Center for Entrepreneurship.  Retrieved from: https://business.utsa.edu/center-global-entrepreneurship/

World Economic Forum.  (2021). The Global Risks Report, 16th Edition.  World Economic Forum, Geneva, Switzerland.