The Communications, Media and Technology Practice of London-based law firm Norton Rose Group today released a study called The Search for Growth that provides a good “heads up” for market assessment and market entry strategy — areas that we work in and are interested in.
We attended this introduction to hear the gleaned insights from 4 Norton Rose partners as well as from 4 outside panelists — Scott Richardson-Brown, Corporate Finance and Investor Relations Director, CSR Plc; Ian Stoodley, Intel Capital EMEA, Patrick Ugeux, VP Corporate Development, Chellomedia (a Liberty Media company); and Jeppe Zink, Amadeus Capital Partners. The Search for Growth study was based on in-person interviews with key personnel at 40 global TMT firms with collective revenue in excess of £100 billion and very dispersed globally. Some highlights:
Sources of Growth
BIC not BRIC was a key takeaway. “The interviewees overwhelmingly felt that Russia would offer little opportunity for revenue growth over 2- and 5-year time periods.” Jeppe Zink did think that Russia was attractive for start-ups given the technologies emanating from there. As you would expect the rest of BRIC is viewed as a huge opportunity. Some other possible surprises were: 1) that Eastern Europe recovery was taking longer than expected; 2) as a converse to overall Russia lack of attractiveness but start-up favourable was China being very attractive in general but unfavourable for start-ups; and 3) the general view that Japan isn’t attractive, meaning these companies don’t see the recovery from Japanese malaise and it’s a difficult market to deal with.
Opportunities and Risks of New Markets
Keeping an eye on corruption and business ethics was another key takeaway. The Norton Rose team emphasized that the Bribery Act that will come into force in April 2011 “marks a new era in the international community’s commitment to eradicate corruption.” Its teeth are far sharper than FCPA. Patrick Uguex gave an example by highlighting some of the things that one needs to look out for in media. Piracy and the basic rule of law are obvious risks to factor in, but one they kept a close eye on was “underreporting of subscriptions”. If someone says that you will get 1 million subscriptions in a market. you need to assume that it will take 1.6 million gross subscriptions to achieve 1 million net, as a certain percentage of actual ones aren’t reported to the western owner.
The chart below shows the overall view of new market entry risk in TMT:
A good summary of the situation was made in reference to regulatory barriers: “Many countries, particularly in developing countries, have shiny ‘state of the art’ legislative documents, but what matters is how they are applied in reality.
Current Sentiment Regarding Market Entry Opportunities
Finally, as relates to what we do in helping clients assess these types of markets and opportunities, there was a panel discussion of whether opportunities are looking as good at the end of 2010 as they appeared to be earlier in the year. The short answer is no. One panelist said, “The recent negative sentiment is being driven by reduced demand coming from end consumers.”
While this study focused on the TMT sector, the rules and learnings seem applicable to most other sectors as well. They point out how we need to really assess markets to see what is attractive and what isn’t. Here we learn that Russia may not be for everyone. And we realise that we need to keep our eyes open to what market entry hurdles might be relevant to our particular product and/or service. Subscription reporting was the example cited here. What is it for your sector? This is the type of work that a small (but not too small) firm like Faculty Partnership is good at helping you with. Please contact us if you would like to discuss issues like this, or visit www.facultypartnership.com. Thanks to Norton Rose for sharing their insights.