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Challenges that For-Profit Firms are Facing in Building Robust Value Networks in Developing Countries

For-profit firms face significant challenges in building robust value networks in developing countries due to inadequate infrastructure, socio-political instability, and cultural disparities. These obstacles hinder efficient supply chains, increase operational costs, and complicate partnerships, making it difficult for firms to adapt their strategies to local markets. Understanding local dynamics and investing in infrastructure are crucial for success in these regions.

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Leesha St. Claire
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4 views2 pages

Challenges that For-Profit Firms are Facing in Building Robust Value Networks in Developing Countries

For-profit firms face significant challenges in building robust value networks in developing countries due to inadequate infrastructure, socio-political instability, and cultural disparities. These obstacles hinder efficient supply chains, increase operational costs, and complicate partnerships, making it difficult for firms to adapt their strategies to local markets. Understanding local dynamics and investing in infrastructure are crucial for success in these regions.

Uploaded by

Leesha St. Claire
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Challenges that For-Profit Firms are Facing in Building Robust Value Networks

in Developing Countries

Building robust value networks in developing nations is the process of establishing linked,
resilient, and sustainable systems of enterprises, organizations, and stakeholders that collaborate
to generate and distribute goods and services. Especially in situations where resources,
infrastructure, and institutional frameworks may be lacking, these value networks are intended to
increase economic opportunities, boost productivity, and guarantee long-term sustainability. As
part of their strategy to take advantage of the new prospects that these markets offer, for-profit
companies have been expanding their operations into developing nations in recent years.
Establishing a strong value network in these areas is still a difficult process, though.

One of the most significant barriers for firms attempting to build value networks in developing
countries is the lack of adequate infrastructure. In many developing nations, infrastructure for
transportation, logistics, and communication is underdeveloped. This limitation makes it difficult
for firms to establish efficient supply chains and distribute products to a broad customer base.
For example, in Sub-Saharan Africa, unreliable road networks, limited access to electricity, and
poor telecommunications services can significantly disrupt the flow of goods and services
(Chikweche & Fletcher, 2012).

The absence of efficient infrastructure also makes it difficult for firms to engage with local
suppliers and partners, as the cost and reliability of transportation, storage, and communication
are key elements of any value network. Consequently, firms often face delays, increased
operational costs, and lost opportunities. For-profit firms may need to invest heavily in local
infrastructure or partner with governmental or non-governmental organizations to overcome
these hurdles, which further complicates their strategies and increases the overall cost of
operations (Simanis, 2012).

In many developing nations, socio-political instability is a key obstacle for for-profit businesses.
Business operations can be seriously disrupted and attempts to create solid value networks
undermined by political instability, violence, and corruption. Developing countries often have
less mature political systems, which can result in sudden changes in policies, government
regulations, or even regime changes that may undermine the firm’s operations (Krause & Choi,
2017). Furthermore, sociopolitical volatility can hinder collaboration and foster mistrust among
partners, which makes it challenging to build solid, long-lasting corporate partnerships.

Cultural disparities provide a serious obstacle for businesses looking to establish value networks
in developing nations. In light of the cultural, linguistic, traditional, and consumption patterns
that differ in various areas, goods, services, and business strategies that work well in developed
markets could not translate effectively in these areas. For instance, a product designed for high-
income customers in Western markets may not appeal to consumers in a developing country due
to differences in income levels, preferences, or lifestyles (Prahalad, 2005).
Additionally, it is essential to understand the dynamics of the local market. A lot of for-profit
businesses undervalue the significance of local expertise, which is necessary for developing
successful marketing plans and establishing alliances with regional stakeholders. For example, in
India, foreign firms have struggled with adapting their products and services to meet the specific
needs and preferences of local consumers, resulting in low sales and inefficient value networks
(Chikweche & Fletcher, 2012). Companies that fail to understand the cultural nuances and
market trends may struggle to create a value network that resonates with local customers and
partners.

References

Chikweche, T., & Fletcher, R. (2012). "The role of infrastructure in the creation of value
networks in emerging markets." International Journal of Emerging Markets, 7(3), 222-238.

Krause, D., & Choi, T. (2017). "Building value networks in the face of political instability."
Journal of Business Research, 70, 218-226.

Prahalad, C.K. (2005). The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through
Profits. Wharton School Publishing.

Simanis, E. (2012). "The Challenge of Building Value Networks in Developing Markets."


Harvard Business Review, 90(5), 45-55.

Nankunda, Elizabeth, Challenges Faced by For-Profit Firms in Building Robust Value Networks
in Developing Countries. (October 11, 2023). Available at
SSRN: https://ssrn.com/abstract=4599406

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