Emerging Markets: Supply Chain Risk

by Sterling J. Scott, Marketing Communications Coordinator, MHI | @mhi_sterling

Emerging markets present great opportunities for businesses. Countries such as Brazil, Russia, India, and China are experiencing increases in income, investment, and employment. Their populations have more money to spend and more time to spend it, which attracts businesses to their markets. However, emerging markets also present great risks.

Poor Regulatory Environments
Many developing countries have unclear requirements for investing and operating within their borders, as many of these countries are not used to receiving the amount of foreign investment that they are receiving now. The flow of money into the country, while beneficial to the population, often leads to protectionism as the government seeks to ensure that domestic production and employment are not negatively impacted. The flow of money into the country also leads to corruption as officials seek to profit from it.

Also, these countries are limited in their abilities and desire to protect intellectual property, which is a deterrent for many global businesses.

Poor Infrastructure
Emerging market countries grow as a result of infrastructure development or they invest in infrastructure development as they grow. Some countries, such as China, have been investing in infrastructure development for a long time. However, others such as India, are relatively new to the process. The lack of developed infrastructure can present opportunities to businesses that specialize in developing transportation, energy, and telecommunications systems. For most, it presents a barrier.

Instability & Natural Disaster
The developing world tends to be less stable politically and economically which can deter international business. Political violence, riots, strikes, and swift policy changes threaten operations and supply chain networks. Many of those countries also experience more natural disasters and are less resilient in facing them due to poor infrastructure and poor regulatory environments.

The more opportunities there are for disruption in global supply chain networks, the greater the risk for businesses and their operations. Businesses need tools to monitor conditions throughout their supply chain networks so that they can respond quickly to potential disruptions. Through data analytics, tracking tools, and following international events, businesses can manage risk in their supply chains.

More information on supply chain trends, recommended strategy, and innovations that drive supply chains are available in the 2014 MHI Annual Industry Report which can be downloaded at www.mhi.org.