Dealing with increasing competition – a different approach to emerging markets

Here’s an interesting newsbit from China Daily News on the experience of global brands in the increasingly noisy Chinese market. Some highlights,

He won’t say it but it is clear that sheer brand power will not carry the
day, or the cash register, any more. It is not just a gentleman’s contest among
themselves, but also against aggressive domestic competitors.

"This is a new strategic challenge for multinationals. The emergence of
strong local companies is creating a formidable challenge," he says.

[…]

Gary Coleman, global managing director of Manufacturing Industry Practice
with Deloitte says, "Emerging markets around the world offer significant growth potential, but
the most successful and profitable companies will be those that really
understand their customers and take a different approach,"

What would be this different approach?

"You can’t survive in China without becoming a Chinese company. That includes
local technology development, product design, procurement, manufacturing and
sales," says Yun Jong-Yong, chief executive of Samsung Electronics

And from Coleman again, "Companies will need to acquire a new set of competencies and organizational
structures to generate a continuing stream of innovative products tailored to
the needs of consumers and industrial buyers in emerging markets."

To summarize the messages from the article:

  1. You need to really understand your local customer and how they’re similar to your existing customers. More importantly, where and how they differ from your local customers.
  2. The entry strategy should come from these insights – products, pricing and promotion. I’d say the 4P’s but the fourth P is "place" and that will drive the other three.

A strong global brand will only go so far, or provide initial round of profits based on high margins. Locally entrenched brands are better known in many cases and formulated to suit tastes and culture.

Price will become a factor, innovations in supply chain strategies and local options may be required to stay profitable. In the case of Samsung, designing and developing products for the Chinese market in China is more cost effective than bringing them in from Korea.

What’s happening in China will happen or is happening in India too. Unlike most of the other developing nations, both have had ‘protected’ markets for a significant period of time without much awareness of international products and brands. I’ll come back to this point, it’s an interesting thought.

From the article again,

…multinationals should not use traditional ways to grow
profitably in emerging markets like China, despite their strong international
management experience.

I wouldn’t be surprised if indeed what’s worked in the past, elsewhere, or even conventional wisdom in ‘International Marketing’ just doesn’t apply anymore. The rules are changing. I’d be curious to seek how.

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