Global Marketing Management, 5e

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Chapter 18

Marketing Strategies for Emerging Markets

Chapter Overview

1. Emerging Markets2. Competing with the New Champions3. Targeting/Positioning Strategies in

Emerging Markets—BOP or No BOP?4. Entry Strategies for Emerging Markets5. Product Policy6. Pricing Strategy7. The Distribution Challenge8. Communication Strategies for Emerging

Markets

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Introduction

Emerging markets are becoming more attractive as developed markets are saturated.

Some emerging markets are already the top producers for MNCs—McDonalds Moscow.

MNCs also are coming from emerging markets—Tata Motors from India, Zara clothing from Spain.

MNCs still face obstacles to trade in emerging markets.

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1. Emerging Markets

Emerging markets feature rapid growth and industrialization.

Label is indistinct, and membership varies with source. Usual members are Brazil, China, Indonesia and India.

Transition economies—those changing from a centrally planned economy to free market—are also in this group.

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1. Emerging Markets

BRIC—Brazil, Russia, India and China. Predicted to eclipse the G7 economies by 2027.

Next Eleven—Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey, Vietnam. Expected to follow BRIC in surpassing the G7 economies.

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1. Emerging Markets

Key Properties of Emerging Markets Low per capita income and rapid economic

growth High income inequalities High emigration rates to developed world Youthful, growing populations Weak, highly variable infrastructure Underdeveloped technology Weak distribution channels and media

infrastructure

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Exhibit 18-1: Economic and Demographic Comparison: Emerging Markets versus G7 Countries

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Exhibit 18-2: Mobile Phone, Internet, and Broadband Penetration in Ten Emerging Market Countries versus the G7 Countries (2007)

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Exhibit 18-3: The World’s Largest Shopping Malls

2. Competing with the New Champions

46 MNCs from BRIC made the Fortune Global 500 in 2008

In 2009, five of the world’s largest banks were in China

Jollibee’s, a Filipino burger chain, is challenging McDonald’s in Asia and the U.S.

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2. Competing with the New Champions What makes emerging market firms

successful? Create customized offerings Develop business models to surmount

problems Deploy latest technologies (Exhibit 18-5) Cheap labor and in-house training Rapid scale-up Invest in talent to sustain growth

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2. Competing with the New Champions

Strategic options for emerging market firms

Exhibit 18-5: Strategic Options for Emerging-Market Companies

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2. Competing with the New Champions

How do MNCs deal with the newcomers? Go beyond low-cost sourcing in emerging

markets Develop products in emerging markets and

bring them home Copy branding tactics from emerging

markets Team up with emerging market giants Invest in growing mass markets in

developing countries

3. Targeting/Positioning Strategies in Emerging Markets – BOP or no BOP

Bottom of the pyramid or not? Defined as those living on less than $2 per

day. NO

Small, unprofitable market Focus on them as producers, not consumers

YES Represent a lot of untapped money New growth opportunity Can develop into part of core business

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4. Entry Strategies for Emerging Markets

Timing of entry is crucial First movers can fail

Unaware of market pitfalls like lack of demand Underdeveloped infrastructure and distribution

channels First mover advantages

Government support Pent-up demand for foreign goods Access to key marketing resources Higher productivity from marketing inputs Ability to outmaneuver local competitors

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5. Product Policy

Products should be: Affordable Functional Durable

Backward innovation—stripped-down version of developed market product Not as well accepted as before Internet

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5. Product Policy

Branding The wealthy can be sold the global brand The BOP group needs a brand that

emulates local brands

Packaging Smaller sizes advisable Use local materials and be recyclable

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6. Pricing

Thin margins and high volume generally successful

Saturate all price points to shut out local competition

Improve cost structure through frugal engineering

Be aware of demand pooling—combining resources to buy a product such as a cell phone or tractor

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Exhibit 18-7: Hindustan Unilever’s Brand Portfolio

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7. The Distribution Challenge

Be first on the shelf with rural retailers. Be prepared to create your own

distribution system. Managing Distributor Relationships

Select based on competence working with MNCs

Consider direct selling Retain control of critical marketing decisions Resist exclusivity demands of local distributors

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Exhibit 18-8: Project Shakti

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Exhibit 18-9: Alibaba—The World’s Largest Online Global Trading Platform

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8. Communication Strategies for Emerging Markets

Prioritizing promotion tasks—educating about product use, raising brand awareness, and creating brand image—is crucial.

Push strategies are very important. Retailers have more power than in

developed markets People shop more frequently, hence get

more exposure to push strategies

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8. Communication Strategies for Emerging Markets

Pull strategies should be altered Mass media typically less effective Targeted media preferred

Be prepared to use non-traditional methods Vans serving as ads on wheels Loudspeakers on rivercraft Movie trailers on films from traveling

theaters in rural villages