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The End of Corporate Imperialism
Will Glocalization help ?
Overview Imperialism : A policy of extending control or authority over foreign entities
through territorial conquest Corporate Imperialism : Tendency of Western corporates to supply emerging
countries with standard products and adopting similar strategies as in their own countries.
This presentation is about how Emerging markets need to be treated differently
Emerging Markets…How MNCs see them ? Countries with emerging economies and huge populations like India, China,
Indonesia & Brazil are seen as emerging markets.
During the first wave in 1980, MNCs entered in these markets, and : Operated with a imperialistic mind-set. Assumed the emerging markets as new market for their old products. Decisions related to innovations in product and process were taken at
headquarters.
Where did they lose ? Foreseeing the chance to squeeze profits out of their sunset technologies. Not seeing the emerging markets as source for Technical and Managerial
talent. Targeting small segments of affluent buyers those resembling the
prototypical Western consumers. Jumping in the market without assessing the market pyramid.
Way forward..Key requisites.. Understand the Emerging middle class market in these countries and what
business model would serve them better. Understand the distribution networks and their evolution. To foster the opportunity with proper mix of Leadership. Understand that Strategy should be consistent or adaptive for unique SBUs. Understand what role does local partners play ?
The changed world
Understand the Emerging middle-class Starved of choice for over 40 years. Ready to spend for better quality of life. Experimenting and changing brands. Far more different from the Western countries’ middle class. Tier 2, The untapped customer base, with a decent purchasing power.
The Market Pyramid in EMs.
Purchasing power(in US $)
Populations (in millions)China India Brazil
Greater than $ 20,000 2 7 9
$10,000 to $20,000 60 63 15
$ 5,000 to $10,000 330 125 27
less than $5,000 800 700 105
Tier 1
Tier 2
Tier 3
Ideal Business Model Rethinking the price/performance equation : Philips’ Video – CD combo player
is embraced in China whereas there is no western market for this product. Rethinking Brand Management : Coke took two years to successfully establish
their brand in contrast to Pepsi which adopted a campaign oriented toward Indian Market and took the advantage.
Rethinking the cost of Market building : Motorola accommodated Chinese’ preference for using pagers and tapped the market well.
Rethinking product design : Western maker of frozen desserts redesigned one of its product to suit Indian retailers’ refrigerator.
Rethinking packaging : In India customers like to be served in small sachets which could allow them to experiment frequently and buy only what is needed at the moment.
Rethinking capital efficiency : Unilever keeps a supply of signed cheques from its dealers and when it ships an order it simply writes the amount for the order, which is not uncommon in India. SCM is an important tool for changing the capital efficiency of multinationals’ operations.
Distribution Networks. Detailed understanding of the unique distribution system of every market is very
critical to success. In China, distribution is regulated by local and provincial governments, aided by
Chinese joint ventures. In India, national distribution systems is maintained by the help of small scale
industries and banks. MNCs with patience and ingenuity can more easily build distribution system to suit
their needs which would inevitably confer competitive advantage.
GlocalizationPerfect blend of local sensitivity and global knowledge is immensely required. Expatriates transfer technology and corporate culture, and holds a strong voice at corporate
headquarters. Moreover, expatriates those stayed in these countries need to be retained by the companies. The competencies of the expats’ should also be adopted before they move out to another
assignments. Host country leaders are more committed to native markets and offer appreciation of local
nuances. Cultural and language barriers demands local leaders over expatriates. Need to understand and deal with the local political system too needs local leaders.
Consistent or Unique strategy ? Deep study of the market, its political system, existing business units’ strategy will
help decide onto it. Unique strategy for a unique markets like China where government interference is
massive, is absolutely needed. In contrast strategy for India can be developed on business by business basis where
market is large and complex, and state level governments are different from one another.
What role does local partners play ?MNCs used Joint ventures to navigate through bureaucratic process and learnabout the new market, and was assumed to foster mutual benefits. Local partner sees the MNC as a source for technology and investment. The Multinational sees the local as means for participating in the domestic market.
Issues pertaining : Local partners often suggest archaic business practices. Local partners are concerned about the short term returns/profits. There is often a clash on who controls what.
It is advisable to use local partners as medium to understand the market and the reliance
on them should be limited.
Idea in brief Emerging markets should be seen as an opportunity to change the shape of the
MNCs not just as markets for their old products. Centralized corporate power should be replaced by much more dispersed base of
power and influence. MNCs will have to develop new mindset and adopt new business models to achieve
global competitiveness. Glocalization is the best practice for MNCs in all aspects like, Distribution
Network, Leadership, Company Culture, Culture, Product Design, Innovation, etc. As the corporate imperialism comes to an end, more investment would be directed
to the emerging markets.