Challenges in developing products and services for emerging markets
Many first world companies have been lured to emerging markets by the promise of easy profits from selling low-end products and services to the so called “bottom of the pyramid” of society. One of the reasons is the belief that they will be able to sell their low-end products and services in high volume. The other reason for companies to follow this approach is that most high-end products and services are supposedly already widely available in these markets for the few who can already afford such luxuries.
Despite this supposedly grand opportunity to exploit untapped demand, a fair number of western companies are experiencing stiff challenges in entering emerging markets. The reason, according to Eyring, Johnson and Nair in their article New Business in Emerging Markets is as follows: Companies have “struggled not because they can’t create viable offerings but because they get their business model wrong.” Simply adapting techniques and products that are successful in developed countries is not enough to ensure success. In other words the same product, just downgraded does not equal profits and success in emerging markets. 
The emerging market consumer is looking for something that is tailor made to his very specific and unique requirements which exist under conditions that do not exist in the developed world. For example the sms cell-phone based money transfer facility that is widely used in Africa now days was developed out of the basic need for people to send money home safely and make payments on microloans without having to travel to the nearest bank branch which in some parts of the country could be hundreds of kilometres away.
This is all in the context of very different cultural, political, legal and financial circumstances, not to mention logistical, with respect to the first world.
Steps companies need to take to achieve this
When a company from the developed world takes the decision to enter into an emerging market economy, the best strategy to adopt is one that a typical start-up company would take: instead of looking for more outlets to offer the same product or service that are currently been offered in the emerging market, they should rather focus on identifying and addressing the “unmet needs” of that market. In other words, the company that can address the unmet needs of the emerging market profitably is in the best position to ensure success. Such unmet needs may not only be in the product or service range, but also pricing, distribution and marketing.
This is what the authors of the article cited above call “starting in the middle.” It involves focusing on two areas of the customer value proposition: 
1) Affordability – offer something that is cheap and gives the best value for money. (For example the Tata Nano car)
2) Access – the product must be easily accessible by people in remote areas (The reason why the cell phone payments system described above works and creates value)
Looking at the argument from another angle, a recent report by Accenture Consulting on Emerging-markets Product Development and Innovation highlights four essential challenges that a firm must meet in order to develop competitive products for emerging markets: 
- Defendable Niche – companies must have a clear and distinct emerging market strategy and operating model. This must be linked to their long term corporate strategy and specifically drawn up to take on the unique characteristics of emerging markets.
- Talent Pool – the talent already present in emerging markets should be employed to develop products and services that are unique to the emerging market environment. People in emerging countries already know their environment. As a result they are best positioned to come up with ideas to solve their specific needs. 
- Cost Advantage – Emerging markets generally have a cost advantage over the developed world. The advantage of operating in a low cost environment is obvious but cognisance should be taken of the fact that quality must still be adhered too.
- Differentiated products – innovation must be built on the specific and relevant values of the market; adapted specifically for local needs, cultures, social and economic preferences and conditions 
The authors of the Accenture article above go on to say that given the generally unique and un-homogenous nature of emerging markets and although there is a temptation to focus on the so called bottom of the pyramid, it would be prudent for firms to also keep a look out for opportunities in other segments as well. Although the bottom of the pyramid is always looking for a no-frills basic functional product to meet their needs, there is also a growing and upwardly mobile class in emerging markets which is a tempting attraction to the exclusive luxury goods and fashion houses. This sector too presents a fantastic opportunity for growth but products should be adapted to meet local requirements such as cultural norms, heritage and lifestyle. 
What is also imperative for companies working in emerging markets to bear in mind is the need to pay careful attention to how the market reacts to the product and to be flexible in adjusting the product or service to market demands. Thus considerations and approaching business with an open mind are fundamental when working in emerging markets.
7 – Matthew J. Eyring, Mark W. Johnson, and Hari Nair (January 2011) New Business Models in Emerging Markets, Harvard Business Review, Page 3 & 5, R1101E
8 – Ana Mundim, Mitali Sharma, Praveen Arora and Ryan McManus (2012) Emerging-markets Product Development and Innovation – A new competitive reality, Accenture Consulting, Page 10 & 11, 11-2282 / 11-4602
9 – http://experientia.com/perspectives/designing-for-emerging-markets/ Date of access: 26 December 2012 Time of access: 08:31 (GMT + 2)