HELPING FRAME A GO/NO-GO DECISION ON YOUR MARKET INVESTMENT
We go beyond the surface level to unearth both unforeseen challenges and unexpected opportunities.
Predicting future demand
The dearth of published market data in Latin America makes it very challenging to predict the ROI of your investment. A more realistic approach is arriving at go/no-go decision based upon criteria that abide by the financial growth targets of the client and their risk appetite. AMI has helped dozens of firms both frame and then measure their investment decisions in Latin America.
To get at a go/no-go decision, it’s important to remember that market sizing in Latin America is a nebulous exercise because—aside from very mature product or service categories—growth patterns are often erratic, jumping wildly upwards and collapsing in dramatic fashion when market conditions fall out of favor.
Furthermore, forecasting must account for the growing phenomena of disruption as traditional business models fall prey to imported technology driven models (e.g. Uber, Cargo X, Airbnb, Netflix). Disruption will be felt strongest in Latin America’s inefficient service sectors in coming years.
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Understanding business plan risks
As a middle income emerging market, Latin America is not without its risks. Improved macro-economic management across most countries has decreased the risk of currency collapse but competitive risk remains a challenge to many new investors. Beyond the risks posed by technology disruption, global companies must contend also contend with the less scrupulous tactics of local players, often protected by friends and family in government and able to leverage favorable treatment by regulators into a competitive advantage. Other local competitors fly completely under the radar, operating in Latin America’s vast grey and black markets.
Latin American operating risks can seem overwhelming but one must realize that most risks can be mitigated by partnering with savvy local competitors and/or the hiring of experienced management and external advisors. Predicting risk and to what degree it may be mitigated is the key to making a sound judgement call on your Latin American investment.
More than 3,000 client engagements in LAC have taught us a thing or two about forecasting both the opportunities and risks that come with any new investment. Our advice has guided the first steps of hundreds of billions of dollars of foreign investment in Latin America.
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