Bureaucracy a Key Threat in Emerging Markets

Logistics and transport professionals expect emerging markets to contribute 36% of their global revenues on average by 2017, more than double the share today, according to the Business Perspectives on Emerging Markets 2012-2017 Report by Global Intelligence Alliance (GIA). The 17 logistics and transport professionals surveyed said that China, Brazil, India and Russia will remain the industry’s top four emerging markets to over the next five years, followed by Indonesia, Vietnam, Singapore and Chile.

“Looking to 2017, large operators have the opportunity to leverage their scale, streamline processes, and business models to manage the regional complexities in fast growing markets,” according to Carsten Gayer, managing director Germany, for GIA. “A quarter of the survey respondents say they see emerging markets as future large markets. One such market is China, particularly in the area of cold chain logistics. The Chinese central government’s plans to overhaul food safety means that up to 90% of meat, fish and fruit products will be required to utilize cold chain logistics by 2015, up from only 10% to 45% today.”

Gayer adds that bureaucracy and red tape as well as poor infrastructure will be top threats. This is particularly true for landlocked regions or archipelagos.

“This won’t be lost on APL Logistics, a global container transportation company, which is expanding India’s double-stacked train operation to connect key ports and major North Indian industrial centers by 2016,” he added. “By taking the initiative to address India’s under developed infrastructure, APL Logistics is better positioned to win in this third-ranked emerging market.”

Another example of hard-to-access markets is Indonesia, which has more than 1,700 islands. According to PT Maersk Indonesia, a liner shipping company, the crowded ports and shallow berths in Indonesia are preventing direct links to markets such as Europe, and are forcing the country to feed goods overseas through terminals in Singapore.

“To win in the long term, logistics and transport companies say the top success factors will be a localized competitive positioning, access to customers as well as product and service quality,” Gayer noted.

GIA survey respondents also indicated they would like to have done something differently in how they planned and executed their emerging markets strategy. Some would like to have made greater efforts to adapt to local conditions, while others regret not addressing supply chain issues sooner or the lack of strong local talent and partners.

Many would have entered emerging markets earlier or ensured they had better local market intelligence and due diligence. Overall, availability, accuracy and completeness of market intelligence on emerging markets are an issue for any industry. In total, 60% of the over 400 companies featured in the cross-industry study say that decision making is delayed because of lack of information, while 75% doubt the accuracy and completeness of the information they do have on emerging markets.

“Emerging markets present a lot of uncertainties but by understanding the facilitators of growth and the unique characteristics of each market with local market knowledge and partners, transport and logistics companies will be better poised to take advantage of the forecasted growth to 2017 and beyond,” Gayer concluded.

Related Articles:

Inland Ports Growing in Strategic Importance

U.S. Manufacturers Bringing Production Home

Local Distribution Key to Success in Emerging Markets

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