Three professors of marketing, 39 companies and innumerable challenges and solutions, The New Emerging Market Multinationals is an excellent collection of ideas and examples that should inspire companies in emerging markets looking to build brands and markets anywhere. The authors, Amitava Chattopadhyay, Rajeev Batra and Aysegul Ozsomer, take challenges faced by companies beyond classrooms and analyse experiences of 39 EMNCs (emerging market MNCs) that have risen to pose a challenge to their peers in developed markets, the triad MNCs or TMNCs.
The challenge for these firms was to build global businesses and global brands in the same breath. Business in developed markets would need a strong brand presence, which, in turn, cannot be established unless the business is large and brings in the numbers to be accepted as a brand. This symbiotic relation is the clue for success for any company in a new geography. The authors explore how this really happened.
The reasons were four-fold: such expansion was a chance occurrence for some, while for software firms, Y2K brought in opportunities. Others went abroad to lower the risk of business cycles, while the last group went out to learn global standards to match TMNCs operating at home. These EMNCs, which were earlier satisfied being low-margin, high-volume suppliers for private labels and OEM goods, moved to the next level by acquiring licences and technological competencies to establish in these regions.
The book talks of four types of strategies that have been used for this purpose. The first is to leverage existing low-cost structures and become cost leaders. Second, harness existing resources and knowledge of home consumers and apply them elsewhere. The third: combine these low-cost advantages to develop niche offerings in other emerging markets. The last is to take these capabilities and build branded businesses in developed markets. An insight provided by the authors is that markets are typically divided into premium brands, mass market and no-brand economy segments. The trick is to work in the areas that give best returns. The premium brand segment provides returns of 12-15 per cent, while the mass market offers 3-5 per cent. The economy segment gives just about 1-2 per cent, and it is just impossible to compete with the Chinese, who are present everywhere making competition difficult. Brands, hence, have to be build to grab attention and change image.
These real life experiences serve as a guide for companies looking to enter developed countries. At times, it becomes more like a textbook as the authors explain how strategic competencies are built on four pillars, which include mixing the right blend of labour and capital (Nano car), conversion of fixed overheads to variable costs (Airtel with Siemens), lowering of raw material, distribution and marketing costs (Apollo uses IT while Natura of Brazil ties up with university talent rather than develop in-house research) and, finally, organisation culture. The examples make for interesting reading.
The authors are, however, less certain of the success levels in acquisitions. Their research leads them to believe that not more than 50 per cent of such acquisitions add value to the acquirer, be they TMNCs and EMNCs. Their approach to brand building is also fascinating, especially when they trace companies such as LG in the US; how it became a leader. It did not place products in Walmart but in Sears to register its brand as a premium one. Here, the authors feel the brand really matters and we need to identify with the best through colours, logos, shapes, etc., which denote quality, leadership and, above all, trust. Interestingly, they put the overall impact as a pyramid that starts from a trademark and evolves to a trust mark and matures to a lovemark. An innovative way.
The New Emerging Market Multinationals: Four strategies for disrupting markets and building brands By Amitava Chattopadhyay & Rajeev Batra with Aysegul Ozsomer Mcgraw Hill Pages: 335 Price: Rs 595
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