Tiers for success: Know your market, know your cities

Editor’s note: “International Business Corner” is a weekly column written by Joan Keston that provides information for people involved in or considering international operations. Keston is an international business consultant. Over the next several months she will be writing about important issues that international businesses face as they compete in the 21st century global business environment.

This article discusses the different development levels within countries.

RALEIGH, N.C. - When developing your strategy for entering and penetrating a given region or country you obviously must know your market. When you think about the U.S. domestic market at least in the retail arena you make distinctions between major metropolitan areas or world cities, and other more regional cities and rural areas.

In developing countries the distinctions between the first tier cities, second and third tier cities, and the remaining rural areas of the country are extremely significant and must be analyzed in the development of your strategy for most, if not all businesses.

First Tier Cities

First tier cities in developing countries tend to resemble other international cities, even those in industrialized countries. This is somewhat of a generalization and must be understood in the context of the country or region you are considering, the essential factors to the venture you are analyzing and the position of the particular country on the spectrum of development. Even though these cities may have more in common with the industrialized world, they are still subject to the political and economic structure of the country and have a very different past from industrialized countries.

Second and Third Tier Cities

These cities will have all of the indices of a country in development, those indices depending on the country and its placement on the development spectrum. The characteristics of these cities will be more firmly embedded in regional issues of the country, and tend to be much more nationalistic, more strongly influenced by religious consideration, less advanced and subject to firmer local political control. The old culture will be much stronger with a greater resistance to outside influence. A product or service that might succeed as is in a first tier city might be totally inappropriate in these cities. On the other hand, limited availability of consumer products may create an initial artificially high demand. These markets must be treated and analyzed as separate markets from the first tier cities.

Rural Areas

The rural areas in developing countries may be so poor and backward that you would hardly describe then as being part of a country in development. They would more likely resemble what are now termed the least developed countries. Basic necessities are barely met in these regions, and priorities may be extremely different from the rest of the nation. These regions must be treated as a separate market and understood to ascertain if there is a market for your goods and services.

Inconsistencies

In developing countries, especially the BRICs (Brazil, Russia, India, China) and other countries considered to be emerging markets or newly industrialized countries, inconsistencies and contradictions are present. The differences between the first tier cities and the rural areas may be extreme, and generalizations about a country impossible to make. Thus the business culture and environment must be understood in the different areas you are studying, both the distinctions and similarities.

About the Author: Joan Keston is the Managing Principal of Keston & Associates, Ltd., an international business consulting firm located in Raleigh, NC, and a Partner at Paladin and Associates, Inc. She has 25 twenty-five years of experience with mature as well as entrepreneurial companies, domestically and internationally, coupled with an executive managerial and legal background. Her firm facilitates international business transactions, and assists companies establish, grow and integrate their international operations. She can be reached at (919) 881-7764 and jkeston@kestonassociates.com.