The market of Azerbaijan Republic can be defined as emerging market in transition economy. There is almost no any directly related literature to Azerbaijan market that can be a good source to identify business strategies that must be pursued in this market. But because Azerbaijan market has all main features of other emerging markets, any literature relating to emerging markets or transition economies can be reviewed to provide companies with necessary insight about how can be successful in this market. The term emerging markets is used to define markets of developing countries that grow very rapidly and that are in the process of industrialization. This term covers many countries in large geographic area from Latin America to Asia. These countries are neither fully developed, nor the newly industrialized countries. The main characteristics of these countries are that their economies grow rapidly; they are usually rich with natural resources, GDP rate is very high, people in these countries are able to buy goods and services that they have not been able to buy before. Therefore, these markets offer new customer base and great market opportunities to foreign companies. But it must be noticed that investment usually carry risk and doing business is not easy in emerging markets.
Transition economies can be explained as a changing economy from centrally planned to a free market. These economies undergo economic liberalization, where prices set by market forces, macroeconomic stabilization, where high inflation is controlled, privatization of government owned enterprises and creation of a financial sector in order to simplify the movement of private capital (Lakatos G. M. 2008). Especially, existence of private property rights is very important indicator for transition economies. The transition process can be seen in many developing countries, including China, the Former Soviet Union and Former Communist bloc countries of Europe. Because the business environment is in transition in these countries, western style business concepts must be adjusted to local conditions (Chadraba and Springer, 2008).
Doing business in emerging markets and transition economies requires attention from companies. Firms must analyze and understand these types of markets and economies very well before making larger investment (Johanson and Vahlne, 1977). As mentioned previously special business strategies must be developed in order to survive in unfamiliar business environment of emerging markets and transition economies. In their article, London and Hart (2004) state that companies must be aware of that ‘western style patterns of economic development may not occur in these business environments’ and argue that although emerging markets offer great opportunities for foreign companies, they also present many challenges for them as well. They describe main challenges in emerging markets as followings:
Social contracts and social institutions dominate – Different...