Five Rules for Winning Emerging Market Consumer

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Presentation transcript:

Five Rules for Winning Emerging Market Consumer Strategic Management Summer 2001

Strategic Importance of Emerging Markets Top 10 (China, India, Brazil, Mexico and Indonesia, Korea,Turkey, Thailand, Argentina, Poland) Total 44% of world’s economy Responsible for 2/3 of world’s economic growth over last decade Consumer base - hundreds of millions Young Growing 3 times faster than developed world

                 World Fertility Rates, 1997                                                       

Strategic Importance of Emerging Markets Future growth in consumption concentrated in emerging markets Big 5 (China, India, Brazil, Mexico and Indonesia) Among 12th largest economies in world Combined purchasing power half of Group of Seven (US, Japan, Britain, France, Germany, Canada, and Italy)

Winning Strategies in Emerging Markets Reach the Masses Manage Affordability Consumer base significantly poorer than in Group of Seven Consumers must balance price/performance equation more than Western consumer Challenge to rethink product lines Re-evaluate product development process Re-evaluate investments Avoid being a “market skimmer” with “first-world” products

Winning Strategies in Emerging Markets Be Ubiquitous Invest in Local Distribution System Supermarket and hypermarkets miss 50-90% of the consumer base Alliances with local producers as distributors rarely work - few incentives Be creative Exclusive distributors Eliminate wholesalers - i.e. Coca-Cola in Japan

Winning Strategies in Emerging Markets Create Desirability Build Strong Brands Branding extremely important Aspirational attraction Badge categories Quality guarantee Advertise to spread the word about your brand Use umbrella brands where possible Invest in local brands that have some customer loyalty - i.e. Coca-Cola’s Thums Up in India

Winning Strategies in Emerging Markets Play to Win Pick Your Markets Well Avoid timid investments Build leading or strong #2 position Achieve critical mass Demonstrate long-term commitment Gain access to local management talent Identify attractive product categories Develop appropriate products for local needs

Winning Strategies in Emerging Markets Be Local Foster Emerging Market Entrepreneurs Volatility and unconventional business practices require local expertise and skills Raging inflation, currency swings, new taxes, changing regulations, interest-rate instability Provide adequate global support Provide freedom to make decisions quickly Retool traditional planning and budgeting systems

Winning Strategies in Emerging Markets Be Local Foster Emerging Market Entrepreneurs Compete with unconventional competition Product counterfeiters, product diverters, informal competitors Understand and properly manage power networks Unique challenges to organizational structure and career development

21st Century Growth Most multinationals not well-positioned Reflect carefully on Uniqueness of emerging markets How to redesign Western strategies and business models Growth in most emerging economies Outpaced required improvements in Financial institutions and systems Government institutions and policies