ASK CHANNELNOMICS: What’s an Emerging Market?

At Channelnomics, we field questions about best practices, partner strategies, and channel programs every day. In this series, called “Ask Channelnomics,” we answer some of the questions we receive most from vendors.

Question: The technology market isn’t uniform. Different regions and countries have different total addressable markets and serviceable market potential. Smaller, less developed markets are often referred to as “emerging.” But what exactly is an emerging market? How can or should a vendor define an emerging market relative to a mature or developed one?

Answer: The definition of an emerging market is contextual; that is, one vendor’s emerging market is another vendor’s mature market (or primary market). “Emerging” is not necessarily a reflection of the state of a respective market or country. It’s related to the ability of the vendor to address the opportunities within the target market.

Maturation is definitely a factor in defining developed vs. emerging markets. Some markets — the United States, France, the United Kingdom, and Germany, for example — are large, stable economies. Their stability is due to well-defined regulations, tax codes, financial confidence, and legal systems. And they benefit from economic diversity, which means they have multiple vertical sectors that consume various technology products and services.

Traditionally, an emerging market is mostly associated with countries where economies are immature or laggards relative to mature markets. In the early 2000s, the BRICS (Brazil, Russia, India, China, and South Africa) were considered the leaders among the emerging markets, as they were underdeveloped and underpenetrated but offered massive potential for growth. Today, emerging markets are often associated with small countries with small economies and poor infrastructure.

A country’s size and infrastructure aren’t always the best indicators of whether it’s emerging or mature. Vietnam, Pakistan, Indonesia, and Uganda are among the fastest-growing economies in the world, but they still lack many of the elemental economic attributes for stability and productivity. Some vendors will classify these countries as developing, while others keep them in the “emerging” column.

A country’s growth doesn’t necessarily make it developing vs. emerging either. While Libya remains a war-torn country with competing factions running different parts, it had the fastest-growing economy in the world in 2021. Then there’s Guyana. The South American country has ranked among the top five fastest-growing economies in the world for several years, but few would classify it as anything but emerging.

And what about market size and stability — or the lack thereof? As it turns out, those aren’t the determining factors for what constitutes an emerging market. For some vendors, an emerging market is an unaddressed or underpenetrated region or country. A vendor entering a new region — expanding from the U.S. to the United Kingdom and Ireland, for instance — could consider the new markets as emerging opportunities as they’re essentially start-ups trying to build market share.

Vendors may classify some emerging markets as nonaligned with traditionally defined regions or laggards within regions. While Europe is a developed and economically mature region, Eastern Europe and the Balkans are behind in infrastructure for supporting advanced technology services. Turkey is a large and robust economy but is often lumped in with emerging markets because of its political instability and hyperinflation.

Emerging and unattended markets are not the same. Unattended markets are those in which the vendor has no direct presence and relies on distributors or other authorized representatives to manage local logistics and sales. Unattended and emerging may overlap, but a country could be mature without local presence.

Coverage is another means of distinguishing mature vs. emerging markets. Even relatively modern economies may be small and lack coverage by a vendor. A vendor may deem a small market — such as Ireland or the Czech Republic — as emerging because it doesn’t warrant a local presence and isn’t covered by a regional inside sales team or by distribution.

So, what is an emerging market? It’s whatever a vendor determines relative to the region’s total addressable market, revenue productivity, and growth potential.

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