Think BR: Disrupting markets and building brands

By Amitava Chattopadhyay, brandrepublic.com, Tuesday, 11 September 2012 08:00AM

Emerging-market companies are using a host of new strategies to become global brands, writes Amitava Chattopadhyay, L'Oreal chaired professor of marketing-innovation and creativity, Insead.

Amitava Chattopadhyay, L'Oreal chaired professor of marketing-innovation and Creativity, Insead

Amitava Chattopadhyay, L'Oreal chaired professor of marketing-innovation and Creativity, Insead

In the past decade, a new breed of challenger businesses and brands has burst upon the world stage, and in many categories has built up significant new branded busi­nesses with a broad international footprint.

Consider Taiwan’s HTC, the company behind Sprint’s 4G Evo and Google’s Nexus. Since entering with its own HTC branded phones only a half dozen years ago, it has been on a tear, with sales of its state-of-the-art smartphones growing exponentially to become the world’s third largest smartphone producer in 2011.

HTC is not alone. China’s Haier has a global share exceeding 5% of the 'white goods' category, making it the fourth largest player in the category. Turkey’s Arcelik has 10% of the European appliance market, and India’s Wipro and Infosys have achieved higher profitability levels than their IT industry competitors EDS and Accenture.

These emerging-market economies are known more for firms that produce inexpensive products of dubious quality or for firms that serve as contract manufacturing sources to the more dominant triad-based multinational corporations (TMNCs), than for firms with world-class branded businesses that are viable competitors on the global stage.

Today, however, these emerging market multinational corporations (EMNCs) are strong, profitable, branded players that have managed to wrest significant share away from much larger TMNCs - even though they started out small and disadvantaged, with very lim­ited budgets, commodity products, and poor-quality perceptions.

We are left wondering exactly how these relatively small, under-resourced EMNCs have managed to build sustain­able and profitable branded global businesses, fighting and win­ning against much larger incumbent market leaders.

It usually takes enormous R&D and brand-building investments and deep organisational skills - resources they do not possess - to create a large, sustainable, and profit­able branded global business.

How then did these small, under-resourced, businesses go about "competing from below"? What can small, disadvantaged challenger businesses everywhere learn from their strategies and tactics?

In our new book The New Emerging Market Multinationals we explore the findings from our in-depth study of 39 cases of such EMNCs. They face two key challenges: they need to build global businesses and they need to build global brands.

In our research, we have identified four types of strategies these EMNCs use as they go about this. One of these exciting strategies we found in our research is the new class of EMNCs we call Global Brand Builders.

For any company, it is well recognised that building and owning strong brands is a key strategic competency; after all, strong brands allow companies to charge higher prices and garner higher mar­gins; win above-normal market shares and retain them in the face of competitive attack via higher customer loyalty; build greater market power against distribution channels and other intermedi­ary customers; grow revenues via brand extensions into contigu­ous product categories; attract and retain the best employees; and, as an outcome, build a more highly valued enterprise.

For the EMNCs we interviewed, the stakes are even more fun­damental, given their brands’ low initial awareness levels and neg­ative country-of-origin imagery.

A strong brand means more trust and confidence and more invited proposals. To quote Hüsamettin Onanç of Tur­key’s Vitra: "Brands are very important. If you are not a brand, you cannot capture the value-added sufficiently.

"There are enough commodities in the world. There are always people who will make them cheaper than us. That’s why it’s a 100% must for us to be a brand."

It has been claimed that EMNCs are unlikely to ever have the resources and skills needed to build global brands on the same scale that TMNCs have. We will demonstrate that this is apparently no longer true.

We are witnessing the quantum leap to a qualitatively dif­ferent type of EMNC: one that competes not only on low costs and high-volume manufacturing, as well as emerging-market knowl­edge and skills, but also on its ability to innovate and lead in tightly focused product-market spaces - and to use such innovation as the foundation for attention-getting, image-changing brand building. And this competing-from-below business strategy is worth consid­ering by challenger businesses everywhere.

These firms build their own brands via focused innovation: a strategy of developing inno­vative technologies and products, but only in very narrow slices of the market.

These EMNCs have realised that rapid, unexpected innovation not only creates superior differentiated products; it also garners media and influencer attention and plaudits - it builds the quality and leadership reputations that we believe are the foundation of truly superior global brands.

This new-wave strategy is in sync with, and benefits from, sev­eral important 'disruptive' forces in today’s global economy.

The new marketing communications environment we see today is one in which the flow of consumer-to-consumer information via the internet, blogging, and social networking favours those marketers.

Today’s global flows of technology, knowledge, skills, and talent now also make it easier for companies in the 'economic periphery' to build high-tech plants and lead informed marketing and branding efforts with the same calibre of people that run them for companies headquartered in the triad nations.

As Infosys’s former global head of marketing, Srinivas Uppaluri, told us: "New models are disrupting the world" and EMNCs are aggressively taking advantage of these disruptions.

Amitava Chattopadhyay, L'Oreal chaired professor of marketing-innovation and creativity, Insead.


Excerpted from The New Emerging Market Multinationals: Four Strategies for Disrupting Markets and Building Brands, by Amitava Chattopdhyay, Rajeev Batra and Asegul Ozsomer.

This article was first published on brandrepublic.com

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