The Strategies of Emerging Market Competitors

When I was in China several years ago, I felt that the firms there would eventually become leading global players. It’s happening now, and a new book, The New Emerging Marketing Multinationals by Amitava Chattopadhyay and Rajeev Batra (with Aysegul Ozsomer) explains how. The authors report a study of some 39 firms that have made a move toward global prominence.

There are four strategies that have been employed by Emerging Multinational Corporations (EMNC):

1.  Acting as a cost leader by leveraging local low-cost human resources to provide low-end products, often starting with private-label brands that gain volume sales in their home market and in other assessable markets as well.
2. The knowledge leverage-er who draws upon specialized knowledge of customer needs when the conditions are privative and the income is low. The answer is often simple, rugged and inexpensive products that can often find a market elsewhere, eventually. Because TMNCs (triad multinational corporations—firms from Japan, the US or Europe) cannot be prevented from accessing low-cost resources or learning about their markets, it is not clear how sustainable these strategies can be.
3. The niche customizers, such as India’s Godrej that focuses on hair color, soap and household insecticides and targets South Asia and Africa. They take advantage of their cost structure and operations to adapt and customize for small segments that the TMNCs, who instinctively standardize as much as possible, have difficulty reaching. The strategy is to out-localize the TMNCs.
4. The global brand builder with focused innovation to enhance the cost advantage and to develop customer improvements. The key is to have a narrow innovation menu. HTC, for example, focused on smart phones and is now the third leading player. The innovation can also be directed to enhancing the customer experience. Lenovo has a brand essence of “innovation that makes a difference to customers.” Innovations like its ultra-thin, ultra-small, wide screen Thinkpad notebook and its laptop that boot up 20 seconds faster are examples. The innovation is significant enough to break out of the clutter and be noticed by the customers and the trade.

I am particularly intrigued by the last two strategies and the fourth specifically. My belief, as described by my book, Brand Relevance, is that the path to growth is to create customer “must-haves” that render competitors irrelevant. That is what at least some of the new emerging marketing multinationals are doing in part supported by their low-cost R&D.

“The path to growth is to create customer “must-haves” that render competitors irrelevant.

A key to their efforts is brand building. They recognize that a brand is necessary in order to be a global player in not only the premium segment but also the middle market. But the interesting finding is that innovation rather than advertising is taking the lead in brand building. Thus, firms like LG, with front loading washing machines, and Brazil’s Natura, with its biodiverse ingredient-based cosmetics, have been able to create high-end brands.

This is the future, and this study provides an early view of what the winning competitors are doing and will continue to do.