TOC: Emerging Market Multinationals
The New Emerging Market Multinationals: Four Strategies for Disrupting Markets and Building Brands, A book by Amitava Chattopadhyay and Rajeev Batra, with Aysegul Ozsomer
The New Emerging Market Multinationals: Four Strategies for Disrupting Markets and Building Brands
Amitava Chattopadhyay and Rajeev Batra
With Aysegul Ozsomer
Introduction and Overview
1 Choosing Consumer Segments and ExpandingInternationally
2 Strategic Competency Building
3 International Expansion Through Acquisitions
4 Brand-Building Strategies and Road Map
5 Building Brand Awareness on Limited Budgets
6 Building Perceptions of High Quality, Leadership,and Trust
7 Global Brand Associations and Architecture
8 Managing a Global or Regional Brand
9 Key Takeaways
In the past decade, a new breed of challenger businesses and brands have burst upon the world stage from the “emerging markets”– with names like Arcelik (Turkey), Dilmah (Sri Lanka), HTC (Taiwan), Lenovo (China), Mahindra & Mahindra (India), Modelo (Mexico), Natura (Brazil), Tata Motors and Tata Global Beverages (India), and Savola (Saudi Arabia)—and have in short order established themselves as robust competitors. Much has been written about their increasing stature, but exactly how these relatively-small, under-resourced firms have managed to build sustainable and profitable branded global businesses, fighting and winning against much larger incumbent market leaders, remains unanswered. This is the focus of the recently released book “The New Emerging Market Multinationals: Four Strategies for Disrupting Markets and Building Brands” authored by Amitava Chattopadhyay and Rajeev Batra, with Aysegul Ozsomer.
There are several reasons for the success of these emerging market firms. First, is their new mindset. Through supply contracts as OEM or ODM suppliers to developed market MNCs, these firms have learned about developed-country market needs; they have acquired the needed technological competencies, by investing in innovation; and have established the quality-control, management, and supply chain processes needed to run global operations through learning by doing. Now they are eager and prepared for the next stage of the game, which they are pursuing through four strategic paths that we have identified.
Many of the EMNCs we talked to, e.g., Arcelik, TCL, and Mahindra Tractors, have created large-volume operations internationally. What is important to recognize is that these firms have done so by focusing relentlessly on driving down costs through innovation. Thus, BYD has changed the way Li-Ion batteries are made by introducing the inexpensive, modular, flexible, and scaleable “clean box” to replace the hugely expensive “clean rooms”. The innovation has catapulted BYD to a leadership position in Li-Ion batteries–today it owns 25% of the global cell phone battery market!
India’s Mahindra & Mahindra markets vehicles overseas that build on their knowledge of how to create tough, rugged vehicles that less affluent consumers seek, and that perform, notwithstanding the bad roads and rudimentary service facilities that characterize emerging markets. We call this the knowledge leverager strategy, as these firms are applying the knowledge of their home market conditions and the needs and limits of poor consumers, to other similar market environments. Not only can the emerging market giants meet the needs of consumers in these markets, but they can manage in these markets more effectively, as they are more conversant with the volatile and less-transparent economic-political-regulatory regimes that these markets tend to have. Given the growing importance of emerging markets as a source of global market growth, knowledge leveragers are tapping into a very significant competency to extend and grow their branded businesses.
Marico focuses on pre- and post-wash hair care, targeting South Asia, the Middle East, and North Africa. Upon entering the Gulf countries, Marico quickly discovered that the local water had much higher levels of chlorine than elsewhere in the world. To deal with this, it developed a hair cream that protects against the damage from highly chlorinated water, creating a significant business. It followed up with an alcohol free hair gel, playing on the taboo on alcohol among Muslim consumers, which has become a successful offering from the Arabian Gulf, all the way through to Egypt. This strategy we call the niche customizer strategy, as it targets the needs of relatively small pools of customers that the global giants ignore, through harnessing EMNCs ability to innovate and manufacture frugally and build brands through careful resource deployment, creating sustainable growth platforms for the future.
Global Brand Builders
The fourth strategy, the global brand builder strategy, sees a group of EMNCs build global brand platforms organically (e.g., Haier, HTC, LG, and Natura) and/or through acquisition (e.g., Geely, Lenovo, Tata Global Beverages, and Tata Motors). Thus, HTC has built up a branded reputation among consumers worldwide as the “quietly brilliant” smartphone company. It is now the world’s third biggest smartphone manufacturer, known for its innovations in leading-edge hardware design and easy-to-use user interfaces. In seven years since it launched its own brand, it had grabbed a leading market share in the smartphone category in the US (Q3, 2011) and was reporting operating profit margins on par with that of RIM (BlackBerry)–over 16%.
A second way to build a global brand is through acquisition. Thus, Tata Motors acquired Land Rover and Jaguar in 2008 having paid what critics claimed was too much. Yet, today, it accounts for the majority of Tata Motors’ profits. This acquisition driven strategy is noteworthy for three reasons: (1) it enables EMNCs to scale up quickly by internalizing capabilities which might otherwise take years to build; (2) since acquisitions can be financed through borrowing while brand building cannot, it affords EMNCs the opportunity to build a global brand–something that might otherwise not have been possible; (3) contrary to what many strategy scholars have argued, emerging market firms do not lack the skills to integrate and leverage international acquisitions—EMNCs do this as well as their global competitors.
The new threat that this first wave of EMNCs is posing cries out to incumbent multinationals to think carefully about how to respond. As GE CEO and Chairman, Jeffrey Immelt, in a 2009 Harvard Business Review article warned ““GE has tremendous respect for traditional rivals… But it knows how to compete with them; they will never destroy GE. However, the emerging giants very well could” .
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