1. 17. Marketing Strategies for Emerging Markets

2. Chapter Overview 1.Emerging Markets 2.Competing with the New Champions 3.Targeting/Positioning Strategies in Emerging Markets— BOP or No BOP? 4.Entry Strategies for Emerging Markets 5.Product Policy 6.Pricing Strategy 7.The Distribution Challenge 8.Communication Strategies for Emerging Markets 2

3. 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. 3

4. 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. 4

5. 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. 5

6. 1. Emerging Markets Characteristics of Emerging Markets – Low per capita income and rapid economic growth – High income inequalities – Chronic shortage of resources – Huge diversity within market – Weak, highly variable infrastructure – Unbranded competition – Technology is underdeveloped – Weak distribution channels and media infrastructure 6

7. Exhibit 17-1: Economic and Demographic Comparison: Emerging Markets versus G7 Countries 7

8. Exhibit 17-2: The World’s Largest Shopping Malls 8 17-2

9. Exhibit 17-3: Challenges in Myanmar’s Business Environment 9 17-3

10. 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. 10

11. 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 17-5) – Cheap labor and in-house training – Rapid scale-up – Invest in talent to sustain growth 11

12. 2. Competing with the New Champions Strategic options for emerging market firms 12

13. Exhibit 17-5: Strategic Options for Emerging-Market Companies 13

14. 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 14

15. 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 15

16. 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 16

17. 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 17

18. 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 18

19. 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 19

20. Exhibit 17-7: Hindustan Unilever’s Brand Portfolio 20 17-7

21. 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 21

22. Exhibit 17-8: Project Shakti 22

23. Exhibit 17-9: Alibaba—The World’s Largest Online Global Trading Platform 23

24. 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 24

25. 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 25