Issue III: Succeeding in Emerging Markets
It is not easy to succeed in emerging markets, which often present significant challenges that may discourage the most well-intentioned companies. For instance, the roads in some emerging markets may still be impassable, or local products may be sole at price well below the cost of production. Other markets have local products with intensely loyal customers. How can multinationals succeed in such markets? A recent study of successful multinationals suggests some common best practices. Successful multinationals:
•Enter the mass market to achieve economies of scale.
Although multinationals in the past would target only premium segments, it is becoming increasingly evident that the mass market presents significant opportunities.
•Localize as much as possible.
If companies take the time to understand local market needs, they increase their chance of succeeding. Consider the case of Procter & Gamble and its reformulated toothpaste crest in fruit and tea flavors with herbal elements. Such localization gives the product a very local flavor.
•Develop a good-enough mentality.
Rather than focusing on the upscale or low-end target, successful multinationals develop products that are of the low end but not in the premium category. Such products then become more affordable to the local population.
•Hire local managers rather than expatriates.
Local managers have better knowledge of the local market.
•Make acquisitions that have strong business fit.
Consider the case of Gillette (Owner of Duracell) and its acquisition of Fujian Nanping Nanfu Battery in china. By acquiring the company, Gillette not only acquired its main competitor but also got access to a state-of-the-art manufacturing company and a network of three million retailers.
Issue III: Succeeding in Emerging MarketsIt is not easy to succeed in emerging markets, which often present significant challenges that may discourage the most well-intentioned companies. For instance, the roads in some emerging markets may still be impassable, or local products may be sole at price well below the cost of production. Other markets have local products with intensely loyal customers. How can multinationals succeed in such markets? A recent study of successful multinationals suggests some common best practices. Successful multinationals:•Enter the mass market to achieve economies of scale.Although multinationals in the past would target only premium segments, it is becoming increasingly evident that the mass market presents significant opportunities.•Localize as much as possible.If companies take the time to understand local market needs, they increase their chance of succeeding. Consider the case of Procter & Gamble and its reformulated toothpaste crest in fruit and tea flavors with herbal elements. Such localization gives the product a very local flavor.•Develop a good-enough mentality.Rather than focusing on the upscale or low-end target, successful multinationals develop products that are of the low end but not in the premium category. Such products then become more affordable to the local population. •Hire local managers rather than expatriates.Local managers have better knowledge of the local market.•Make acquisitions that have strong business fit. Consider the case of Gillette (Owner of Duracell) and its acquisition of Fujian Nanping Nanfu Battery in china. By acquiring the company, Gillette not only acquired its main competitor but also got access to a state-of-the-art manufacturing company and a network of three million retailers.
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