Benefits of Expanding Into Emerging Markets

Being first is almost always the best option. And while most of didn't get in on the ground floor for Microsoft or Apple, there are still many opportunities out there-you just have to predict the future. Easy, right? With more and better data available than ever before, it is possible and emerging markets are where you want to build.

When VinFast set out to construct a $2 billion electric vehicle manufacturing plant in India, the Vietnamese automaker faced both immense opportunity and significant risk. The company recognized India's growing middle class and increasing environmental consciousness as key drivers for EV adoption.

However, navigating India's complex regulatory landscape, local competition, and infrastructure challenges would determine whether this ambitious expansion succeeds or stumbles.

This story illustrates the dual nature of emerging market expansion in 2025. The potential rewards remain substantial, but the stakes have never been higher.

What is an emerging market?

First coined in 1981, emerging markets, or emerging market economies, refer to nations whose economies are growing to become more advanced but are not yet classified as developed countries.

The five key characteristics that define emerging markets are:

Less-than-average per capita income
Recent rapid growth
High market volatility
Developing capital markets
Higher-than-average return for investors

These five defining factors all work together to establish an economy as an emerging market. For instance, less-than-average per capita income incentivizes countries to undergo rapid changes in order to fuel economic growth and build a more mature capital market. Digital transformation has become the primary catalyst accelerating growth across these regions.

Southeast Asia exemplifies this evolution perfectly. The region's internet economy is projected to reach $600 billion by 2030, driven by exceptional mobile penetration rates and digitally engaged populations.

Countries like Indonesia and the Philippines are experiencing unprecedented growth in mobile banking and digital payments. This digital leapfrogging allows emerging markets to bypass traditional infrastructure limitations.

How to find emerging markets

Once companies understand emerging markets, they can determine which emerging market is right for their global growth goals. The landscape has evolved since traditional rankings were established, and current economic projections reveal shifts in market positioning and growth potential.

Based on 2025 GDP projections from the International Monetary Fund, the top 10 emerging markets by economic size are China, India, Russia, Indonesia, Brazil, Turkey, Mexico, South Korea, Egypt, and Saudi Arabia. This ranking reflects both established powerhouses and rising economies that have gained prominence through digital transformation and strategic positioning.

India has solidified its position as the second-largest emerging economy with a projected GDP of $17.6 trillion, while China maintains its leadership at $40.7 trillion. However, "emerging-market equities are becoming more diversified, with the dominance of China receding," reports Laurence Bensafi, Deputy Head of Emerging Market Equities at RBC Global Asset Management. "China's weight in the emerging-market index has dropped to 26% from its 42% peak in 2021," she adds.

Vietnam and the Philippines are compelling alternatives due to their rapid digital adoption and favorable demographic trends. As Bensafi highlights, countries like India, Vietnam, and Mexico present particularly attractive opportunities due to their stability amid current trade tensions and strong domestic growth drivers.

Opportunities and challenges

As emerging markets progress, they often experience the rapid income growth they set out to create. As more people within a country rise out of poverty, a consumer class develops, which leads to a marketplace full of consumers who are hungry for new products and services. Digital transformation has accelerated this process, with mobile banking and eCommerce platforms now providing direct access to previously underserved populations.

With the right offering combined with a strategically chosen market, a company can expect to grow its revenue at a steady rate in the right market. Based on the latest World Bank reports, "emerging markets are expected to contribute over 60% of global GDP growth, powered by infrastructure, technology, and energy investments," says Bart Turtelboom, Chairman and CEO of Delphos.

In addition, emerging markets have begun to drive global innovation. Companies are discovering that emerging markets allow them to innovate at a lower cost, but with the potential to disrupt the status quo. AI adoption and digital infrastructure investments are creating new pathways for businesses to leapfrog traditional development stages.

Companies must navigate competitive pricing and market positioning while adapting to rapidly evolving digital ecosystems and sustainability requirements that now define consumer expectations.

Still, the potential for growth in emerging markets comes with its own set of risks. While most emerging markets have begun reforming their political, legal, and financial systems, challenges still remain. Policy uncertainty and evolving trade dynamics continue to create volatility for international businesses.

For instance, many countries still do not protect intellectual property rights, have a culture of corruption, pass laws designed to impede trade, and have weak financial infrastructure. Additionally, companies now face ESG compliance, digital regulation, and must navigate geopolitical tensions that can impact market access. If companies are not aware of these potential challenges, they may not see the success they hope to in emerging markets.

Trends in emerging markets

Sometimes the biggest challenge for companies expanding into emerging markets is understanding the local culture, market, and expectations. Emerging markets can be complex, and companies will benefit from creating detailed plans and products tailored to a specific market.

Organizations should take the time to observe consumer habits and local customs present in a company's desired market. Key trends shaping emerging markets in 2025 include:

Digital-first consumers who expect seamless mobile experiences and eCommerce integration
Health and wellness priorities, with 80% of consumers willing to pay extra for products promoting well-being
Sustainability consciousness driving demand for eco-friendly packaging and ethically sourced products
Urbanization patterns creating concentrated consumer bases in major cities
ESG compliance expectations from both consumers and regulatory bodies
AI and technology adoption accelerating across all sectors and consumer touchpoints

Bringing a business into emerging markets

Successfully entering emerging markets requires a strategic approach that balances opportunity with careful risk management. Companies that thrive understand that emerging markets require fundamentally different business growth strategies than those in developed economies.

Here are some strategies for success:

Conduct market research and micro-segmentation. Understanding local demand, competitive landscapes, and regulatory environments forms the foundation of successful expansion. Focus on regional differences, technology access patterns, and cultural nuances rather than broad demographic categories.
Prioritize product localization over simple translation. Adapt products, pricing, user experience, and brand messaging to reflect local realities and purchasing power. This often involves developing entirely new offerings tailored to specific market needs rather than forcing existing products into new markets.
Embrace mobile-first digital strategies. Mobile technology serves as the primary gateway to consumers in emerging markets, with exceptional penetration rates driving eCommerce and digital payments adoption. Build for small screens and meet users on platforms they already use.
Establish strategic local partnerships. Partner with local distributors, suppliers, and business experts who bring market knowledge, distribution networks, and regulatory expertise. These partnerships provide cultural insights and help navigate complex compliance requirements.
Implement adaptive pricing and tiered value propositions. Design intentional price tiers that serve both premium and value-conscious customers without compromising quality or brand integrity. Emerging markets often feature significant income disparities requiring flexible pricing strategies.
Focus on regulatory compliance and risk management. Engage legal counsel familiar with local laws and maintain strict adherence to compliance standards. Each country presents distinct business regulations and tax implications that require specialized expertise.
Build trust through local presence and community engagement. Establish genuine service relationships and maintain a visible market presence. Reputation travels quickly in emerging markets, making trust-building a crucial component for long-term success.
Leverage technology for operational efficiency. Adopt digital marketing strategies, eCommerce platforms, and AI-driven analytics to streamline operations and optimize decision-making processes. Technology adoption can significantly enhance customer engagement and market reach.

When expanding into emerging markets, partnering with an Employer of Record (EOR) provides flexibility and local expertise. EORs enable rapid market entry without the cost of establishing local entities, handling payroll, benefits, and regulatory compliance, while companies focus on the core business. This approach is particularly valuable in volatile markets where agility and quick adaptation are crucial elements for success.

Ready to start doing business in emerging markets?

The benefits of emerging markets are many, but there are a lot of details that have to be taken care of-where do you even start? Start with Pebl (previously Velocity Global).

Our Employer of Record service allows companies to hire, pay, and manage talent in 185+ countries without having to establish local entities. We make sure everything is done quickly and correctly while you focus on growth and market development-not administrative complexities. Get in touch to learn more.

Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided "as is," and no representations are made that the content is error-free.