Emerging Market Champions

• Since the late 1970s, governments have lowered tariff barriers and permitted foreign investments, inviting multinational companies into their economies.
• Initially, it seemed U.S., European, and Japanese corporations would quickly dominate local markets.
• These corporations possessed state-of-the-art tech, financial resources, powerful brands, and top-tier management.
• Poor nations reluctantly allowed transnational companies, fearing local enterprises would be wiped out.
• Research indicates that smart domestic enterprises in 10 rapidly developing economies are holding their own.
• Those Economies are Brazil, China, India, Indonesia, Malaysia, Mexico, Poland, Russia, Slovakia, and Thailand.
• Many domestic companies dominate their markets not due to protectionist policies, but because of their strategies and execution.
• A list of 50 homegrown champions revealed 21 firms exceeded US$1 billion in revenues in 2006.
• The entire group's sales had risen by about 50% between 2005 and 2006.
• A few local companies have successfully fended off foreign competition for at least five years.
• In Brazil, Grupo Positivo has a larger share of the PC market than Dell or Hewlett-Packard.
• Totvs is the ERP software leader in the small- and midsize-company market, ahead of SAP.
• In China, the daily google searches with search engine Baidu exceeds that of Google China by fourfold.
• QQ from Tencent, is ahead of MSN Messenger.
• Online travel service Ctrip has kept Travelsky, Expedia's eLong.com, and Travelocity's Zuji.com at bay.
• In India, Bharti Airtel has surpassed Hutchison Telecom to lead the cellular telephone market.
• In Mexico, Grupo Elektra has created a major retail network, challenging Wal-Mart,
• In Russia, Wimm-Bill-Dann Foods is the biggest producer of dairy products, ahead of Danone and Coca-Cola.
• Many developed-world corporations seek growth and profits in emerging markets, a trend that doesn't automatically spell success.
• A 2006 survey found 2/3 of transnational corporations planned to expand their investments in developing economies over the next five years.
• According to the Economist Intelligence Unit, rapidly developing economies will account for 45% of world GDP and 60% of annual GDP growth by 2010.
• Several Western and Japanese corporations have been unable to enter or have retreated from emerging markets.
• Yahoo and eBay have retreated from China.
• NEC and Panasonic have withdrawn from the Chinese market for cellular handsets.

Reasons For Failure

• Many enterprises mistakenly think these markets are years behind developed nations and will eventually look like them.
• Developing economies neither are behind developed ones nor show signs of converging with them.
• Multinational corporations assume their business models will start delivering results in developing countries.
• China's telecommunications infrastructure is newer and better than that in most parts of the United States.
• Roughly 300 million Chinese live on less than $1 a day, according to the World Bank, this creates unique markets.
• Wireless telecommunication networks allow companies to help customers in rural areas, defying expectations.

Six Common Strands Of Successful Emerging Market Companies

• Local leaders are not constrained by existing products or notions about customer needs.
• Customize products and services to meet different consumer requirements, and they initially go after economies of scope.
• Their business models overcome roadblocks and yield competitive advantages.
• They turn globalization to their advantage, deploying the latest technologies.
• Homegrown champions find innovative ways to benefit from low-cost labor pools and to overcome shortages of skilled talent.
• They go national as soon as possible to prevent regional rivals from challenging them.
• Domestic dynamos possess management skills and talent that multinational companies underestimate.

Success Strategies

• Domestic enterprises outperformed competitors by following several strategies, customize products/services, starting with regional preferences.
• They know consumers' preferences by region, income, age, and gender, allowing low-cost customization.
• Goodbaby, the leader in the Chinese market for baby-related products as diverse as strollers, sells 1,600 items in 16 categories.
• User-generated customization technologies, In China, consumers send messages on PCs and cellular telephones over e-mail.
• Tencent is the leader in the Chinese market, QQ had 70-80% market share in 2006
• QQ has 220 million active users and $375 million in revenues in 2006.
• Companies package products innovatively to make them affordable.
• Hindustan Unilever and P&G are the leaders with 36% and 27% respectively of India's is 500 million hair care market
• CavinKare gives them a run for their money 16%, the Chennai-based start-up, established in 1983, packs shampoo in sachets.
• Single-use plastic sachets are convenient and easy to store, and they minimize product waste
• CavinKare's relatively cheap Chik shampoo brand has allowed the company to become the largest local shampoo player in India, undercutting P&G and Hindustan Unilever.
• Smart companies identify challenges/design strategies to overcome; multinational enterprises later copy the tactics, but by then the local ones have sharpened their first-mover advantage.
• In China's video game market, Shanda has developed a thriving game business by developing massively multiplayer online role-playing games due to software piracy of console games.
• Shanda has tackled the online-payment problem by taking transactions off-line with pre-paid game cards.
• Grupo Elektra wanted to be successful but created a bank that had a banking business along the way.
• Grupo Elektra started consumer financing to sell big-ticket items such as washing machines and refrigerators.
• In 1987 Grupo Elektra operated 59 stores, now runs more than 1,600.
• Wal-Mart, Mexico’s largest retailer, obtained a banking license in November 2006.
• In 2002, Grupo Elektra set up Banco Azteca, with branches inside Elektra stores, and over the past five years assets under management have increased 133% annually.
• Since customers have no credit histories, the bank has developed novel process using a corps of 4,000 loan officers who uses motorcycles to do home visits.
• Banco Azteca's repayment rate in 2006 was 90%.
• Younger companies in particular invest in newer options to offer customers novel features.
• Gol Linhas Aéreas Inteligentes, South America's first low-cost airline, has shaken up the market since it started flying with five aircraft in January 2001.
• Because the fleet is young, a fleet makes for quick aircraft turnarounds
• Low cost operations stem from high aircraft utilization, latest voice recognition call centers and promote online ticket sales, with 82% of tickets sold online or via kiosks
• Gujarat Cooperative Milk Marketing Federation (GCMMF), India's largest dairy company, manufactures and markets under the brand name Amul.
• Processes 6.5 million liters of fresh milk every day from close to 13,000 villages in the western state of Gujarat.
• Satellite communications coordinates all the back-office functions and analyzes data in real time to forecast imbalances between the demand for milk products and milk supplies

Low Cost Labor

• Many local champions have at their core a business model that taps a pool of low-cost labor instead of relying on automation.
• Focus Media, China's largest outdoor advertising firm, places LCD displays engineered in-house in more than 130,000 locations in 90 cities.
• Skilled talent is hard to find and difficult to retain in emerging markets, so, Grupo Elektra, Gol, China Merchants Bank, and India's ITC invest heavily in in-house training.
• India's Apollo Hospitals has developed a great reputation from best doctors that allow high prices on services.
• Establishing a foundation in 1998 to finance new teaching institutes, joint venture with NIIT to offer online medical classes, as well as specialized programs.

Scale Up Quickly

• When a new business opportunity becomes apparent in emerging markets, quickly, several companies crop up to capitalize on it.
• Scale economies after generating economies of scope.
• For example - Focus Media faced many rivals scattered across China's cities when it started out in 2003 so it pursued an aggressive acquisition-led strategy.
• Goodbaby has set up 35 companies, each operating in a Chinese province or city, to strike local distribution agreements and to open new points of presence quickly.

Sourcing Talent

• Retaining a large talent pool helps to sustain growth.
• Smart organizations minimize senior management turnover/institutionalize management systems to tackle complexities.
• Wimm-Bill-Dann Foods leased a production line at Lianozovsky Dairy Plant near Moscow to make fruit juices and decided to make a foray into their production and distribution.
• Hired a new Coca Cola trained CEO to streamline HR, operations and production.

Integrating the Strategies

• What distinguishes winners is utilizing all strategies at once.
• Ctrip, China's largest travel consolidator and online travel agent, has been able to do precisely that.
• Established a call center where 3,000 reps can handle 100,000 customers daily
• 70% of of Ctrip's revenue comes from offline sales,
• They established Six Sigma customer operational standards and fostered teamwork.

Competing with Local Providers

• First emulate strategies and create uncopiable strategies.
• Yum Brands, restaurant chains such as KFC, Pizza Hut, and Taco Bell, is thriving in China thanks to it’s varied approach.
• Nokia became market leader by offering fast services with IT structure.
• Hyundai identified needs from local communities and built cars accordingly.