That China and India are fueling the global economy with its more than 3 billion consumer market and thriving national economies is well acknowledged. Equally well acknowledged is the quest of many global companies to gain a substantial market presence in these economies in order to grow and be competitive in the new business landscape, as can be evidenced by the ever growing foreign direct investment into both these countries and the number of global companies entering these markets.
Not so apparent is the gradual emergence of local powerhouses that have managed not only to challenge the market leaders that invariably tends to be global brands but also to usher in new ways of competing that are challenging the well established competitive routines of the mighty incumbents. The increasing salience and relevance of the bottom of the pyramid (BOP) market in emerging economies is actively providing hitherto non-existent opportunities for companies to capitalize.
Local companies in emerging markets are leveraging their knowledge of the market, customer mindsets and access to local human, social and intellectual capital to bring to market products and services that not only compete head on with market leading brands but also that have managed to grab market share from the incumbents. Given their geographical proximity combined with their insider status allows for these local companies to edge out global competitors quite aggressively in a gradual but steady manner.
Two examples will drive home the point. Baidu.com is the leading search engine in China. Buoyed by an initial investment by Google in 1999, Baidu.com has perfected the art of attracting Chinese users and offering them services that even Google is finding difficult to compete against. Baidu.com has not only outsmarted Google in its own game of online search but has also managed to build substantial relationships with all the key stakeholders such as the regulatory authorities who play a substantial role, intermediaries and customers in the Chinese market to ensure its long term status of leader of the Chinese online search market.
A second example is that of Micromax, a rapidly emerging mobile phone company in India. Micromax, founded in 1991 has been successful in grabbing market share from the market leader Nokia by customizing its phones to the different rural markets it targets. Unlike Nokia, the global behemoth with established routines, norms and infrastructure that can constrain potential changes to its global and local strategies, Micromax, with its small size, lack of entrenched routines, and a driving spirit characteristic of entrepreneurial ventures, has been able to sell 1 million phones each month and capture 4% of the Indian mobile phone market. And not surprisingly, its market share has come at the cost of Nokia’s presence in those very markets.
There are many such examples of local companies outcompeting global players in countries such as Brazil, Russia, Thailand, Philippines and others. Global companies once thought of as unassailable with their enormous resource base, portable experience of operating in multiple global markets, and networks with stakeholder capable of erecting barriers to entry for other players are now being challenged by local players that lack all or most of those strategic capabilities.
This begs the obvious question: how to achieve sustainable competitive advantage in emerging economies? Or even, is competitive advantage transitory at best and non-existent at worst in emerging economy markets? And finally, can local companies really challenge these global behemoths in the long run or these examples just minor triumphs that are random at best and transitory at worst?
The above two examples are from very different industries. Online searching deals considerably with providing minimal and basic utility to customers by offering technological features that can ease the process of search on the Internet. In other...
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