Emerging Marketing strategy

Topics: Economic growth, Mexico City, Gross domestic product Pages: 16 (3149 words) Published: February 12, 2014
A P R I L 2 0 11

s t r a t e g y

p r a c t i c e

Is your emerging-market
strategy local enough?

The diversity and dynamism of China,
India, and Brazil defy any one-size-fits-all
approach. But by targeting city clusters
within them, companies can seize growth
Yuval Atsmon, Ari Kertesz, and Ireena Vittal


Is your emerging-market
strategy local enough?
Yuval Atsmon, Ari Kertesz, and Ireena Vittal

The diversity and dynamism of China, India,
and Brazil defy any one-size-fits-all approach.
But by targeting city clusters within them,
companies can seize growth opportunities.

Creating a powerful emerging-market strategy has moved to
the top of the growth agendas of many multinational companies, and for good reason: in 15 years’ time, 57 percent of the nearly one billion households with earnings greater than $20,0001 a year will live in the developing world. Seven emerging economies—China, India, Brazil, Mexico, Russia, Turkey, and Indonesia—are expected to contribute about 45 percent of global GDP growth in the coming decade. Emerging markets will represent an even larger share of the growth in product categories, such as automobiles, that are highly mature in developed economies.

Figures like these create a real sense of urgency among many multinationals, which recognize that they aren’t currently tapping into those growth opportunities with sufficient speed or scale. Even China, forecast to create over half of all GDP growth in those seven developing economies, remains a relatively small market for most multinational corporations—5 to 10 percent of global sales; often less in profits. To accelerate growth in China, India, Brazil, and other large emerging markets, it isn’t enough, as many multinationals do, to develop a country-level strategy. Opportunities in these markets are also rapidly moving beyond the largest cities, often the focus of many of these


In terms of purchasing-power parity (PPP).


companies. For sure, the top cities are important: by 2030, Mumbai’s economy, for example, is expected to be larger than Malaysia’s is today. Even so, Mumbai would in that year represent only 5 percent of India’s economy and the country’s 14 largest cities, 24 percent. China has roughly 150 cities with at least one million inhabitants. Their population and income characteristics are so different and changing so rapidly that our forecasts for their consumption of a given product category, over the next five to ten years, can range from a drop in sales to growth five times the national average.

Understanding such variability can help companies invest more shrewdly and ahead of the competition rather than following others into the fiercest battlefields. Consider Brazil’s São Paulo state, where the economy is larger than all of Argentina’s, competitive intensity is high, and retail prices are lower than elsewhere in the country. By contrast, in Brazil’s northeast—the populous but historically poorest part of the country—the economy is growing much faster, competition is lighter, and prices are higher. Multinationals short on granular insights and capabilities tended to flock to São Paulo and to miss the opportunities in the northeast. It’s only recently that they’ve started investing heavily there—trying to catch up with regional companies in what is often described as Brazil’s “new growth frontier.”

As developing economies become increasingly diverse and competitive, multinationals will need strategic approaches to understand such variance within countries and to concentrate resources on the most promising submarkets—perhaps 20, 30, or 40 different ones within a country. Of course, most leading corporations have learned to address different markets in Europe and the United States. But in the emerging world, there is a compelling case for learning the ropes much faster than most companies feel comfortable doing.


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