Observations of an observer

Peeps Forum website

Peeps Forum website

While traveling in the Philippines, one of the most exciting emerging markets, earlier this year, I did an interview with Peeps Forum, a nascent blog for people interested in people. The story was the first to be posted on Peeps Forum when it launched earlier this week.

In the interview I talk about my work as a visual ethnographer and how I've developed a methodology applicable in a business context. For instance, when international brands develop products for the booming middle-class in emerging markets, precise, ground-level information about culture, trends and aspirations is crucial in order to become relevant for these consumers.

You can read the entire interview at Peeps Forum.

How To Make Emerging Markets Your Primary Market

 

I recently contributed with an article for ArtRebels magazine on doing business in emerging markets. ArtRebels is a global platform for creative entrepreneurs. Anyway, here's the article:

Make Emerging Markets Your Primary Market

Entrepreneurs, get out of your comfort zone. Forget about your home market and move to an emerging market to make it yours.

By Jacob Langvad Nilsson

With the economic shift from the developed world to the developing world, you’ve with certainty already heard about the promising opportunities in emerging markets. Whether you’re a multinational corporation (MNC) with consumer products, or a sole entrepreneur with a startup idea (or something in between the two), emerging markets is where you will find future growth opportunities.

Now there has been a lot of talk about the BRIC economies. BRIC is an acronym of Brazil, Russia, India, and China, coined by then Goldman Sachs economist Jim O'Neill in a 2001 paper titled "Building Better Global Economic BRICs”. The term has since become a symbol of the shift in global economic power from the developed economies towards the developing world.

The BRIC economies became mainstream terminology and was a huge success for Goldman Sachs (Mr. O’Neill has since been promoted to chairman of Goldman Sachs Asset Management and is now retiring comfortably at 56).

Since then, a multitude of other acronyms have surfaced. BRICS, when South Africa joined as an entrypoint for the contingent. Next 11 (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam) was supposedly the successors to BRIC. Another fancy acronym, CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) was another economist’s branding of a handful of favored emerging markets.

The BRICs are dead, long live emerging markets

If you are an entrepreneur or small business-owner with emerging market aspirations,you should forget about the BRIC terminology and all its variations. BRIC is for investors, not entrepreneurs. As an investor it makes sense to look at emerging markets from a broader perspective. For investors, there are several exchange-traded funds (ETFs) tailored for emerging markets, including BRICs. Just like an investor can choose to invest in ETFs such as Euro Government 3-5 year, Euro Inflation Linked, or MSCI World.

In my experience neither MNC or small entrepreneurs are looking at BRIC economies as a collective target for their business. They look at continents at best, but increasingly at markets within markets. States, regions, cities. Nieces.

To succeed in an emerging market, an entrepreneur needs to build products that are relevant to the consumer. To do so, the approach needs to be at a ground level to understand the opportunities and potential in a niche market.

The leading practice in building market intelligence is through qualitative research. I’ve been doing business ethnography in emerging markets on behalf of multinational brands for almost a decade. This has proven to be a market differentiator for corporations who want to target the specific needs of various segments of their customer-base but more importantly, help the companies tap into potential new markets by understanding the underlying motivations of their customers.

Whether your company is looking to expand into emerging markets or find a niche in a crowded one, ground-level field research helps your designers, engineers and R&D team connect to real consumers. This makes the difference between designing a good product and a great one.

How to pick a target market

China is a huge country with diversity and sub-markets. As a consequence, refrain from holding up unrealistic objectives, for example, that your 5-year plan is to become the market leader in China within your niche. You need to be more targeted in your approach to market penetration and align your objectives with the realities on the ground.  In doing so, even if you narrowly dominant a specific market in a specific province in China, that’s already a big accomplishment and make it more likely for you to tap into other market opportunities.

Traditionally, a western firm’s China-strategy would be to establish an office in the capital city and spread out from there with one size-fits-all approach to the entire country. Increasingly today, you need to target individual provinces or regions with a custom strategy for each place. For instance, you may need to change communication slightly for each province or make changes in a pattern, stitch, colour, or flavor. Similarly, you can no longer take an existing product designed for a Western market and produce a scaled down version of this for an emerging market. Instead, you want to design a completely new product from the ground up for your emerging market consumer. If your product is good enough, it may subsequently spread to the rest of the world but knowing your targeted consumer is critical.

While mainstream investors continue to talk about the opportunities in Brazil, India, China,  there’s a whole range of other emerging markets ripe with growth opportunities. Each market has its share of obstacles and challenges. Africa for example has been noted as the last untapped market for consumer growth. The Africa middle-class is booming and ready to spend their discretionary income on quality products. However, because many small and mid-sized Western companies today still employ the traditional approaches to market entry (and from the comfort of their home market), building a successful strategy for an African market remains a great challenge. As an entrepreneur, the grass-root approach of qualitative research to create a product market is an opportunity to win big and a custom recipe for success.  

Use business ethnography to understand your consumer

Business ethnography can be used as a key strategy when an international brand expands into a new market. Ethnography is a social science discipline with roots in anthropology. Literally, ethnography is the study of mankind. Also known as participant-observation, ethnographic methods include entering a subject’s own environment: in the modern world, this includes their living room, school, the supermarket, the beauty parlor, or the streets – settings of their daily existence.

Ethnographers observe what people actually do and how they explain their actions. By documenting actual behavior, this research approach offers valuable insight into the meaning people attach to each action and activity. After a period of fieldwork and data-collection, findings are interpreted and analyzed in the context of people’s actual lives – including relations to family, community, local subculture, and the larger society.

When ethnographic research is taken into a business context, it can be used to gain insights into patterns of behavior that help businesses thrive. Unlike a traditional market researcher, who asks specific, highly practical questions, anthropological researchers visit consumers in their own environments to observe and listen, and interview in a non-directed way.

Qualitative methods, including focus groups and open-ended survey questionnaires, have proven to be valuable strategies to delve deeper into the relationship between the brand and those who buy or use their products. By listening, observing, and interpreting, we can access many meaningful layers that help clients better understand the true aspirations of their customers.

In the end, the goal of getting closer to the consumers is to better understand their cultures and behaviors, and in the process develop aspiring and meaningful products and services relevant to their lives. Business ethnography can help business do just that.

Try harder, get out of your comfort zone

To successfully take advantage of market opportunities, you need management-level officers to have boots on the ground. In a recent report, “Playing to Win in Emerging Markets”, the Boston Consulting Group (BCG) polled over 150 executives from the world’s biggest multinational companies. The report found that on average, these companies were earning 28% of their revenues in emerging markets.

Surprisingly though, most multinationals tend to keep their entire senior management team in their home office, which is largely in the developed countries. The unfortunate consequence is that management is too far removed to tackle the challenges involved in ensuring a competitive market presence and in adapting to the rapidly changing needs of its consumers. But for those firms that have moved at least a couple of their top executives to the new front line, the report highlights that the firms outperformed their rivals.

You don’t have to be a Forbes 500 company to win big in an emerging market. Obviously, capital and a strong idea are necessary ingredients for success. But if you are ready to immerse yourself into an emerging market, meaning literally moving there, you’ll be better positioned to understand the aspirations and culture of your consumer. Thus you’ll have a huge advantage to your average, Western competitor who won’t have the same access to first-hand knowledge on the ground.

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Jacob Langvad Nilsson is an emerging market consumer consultant, visual ethnographer, and serial entrepreneur. With base is New York City, he travels extensively to emerging markets to push the boundaries of human-centered design research and tell stories about globalization, cultural shift, and the aspirations and desires of people living in a changing world.

How to Sell in Emerging Markets

New markets can be full of potential when it comes to rapid maximizing revenue sources, but it should not be forgotten that each market is different and has its own set of unique challenges. Failure to even try to develop an understanding of the market's local customer base is a surefire way to trip over the aforementioned hurdles. In order to break into emerging markets and maximize its full potential, sales executives should learn how to think like a local. One of the major mistakes committed by multinationals is to use strategies that were developed for their home markets, without making any modifications. On the other hand, local players don't always understand just the amount of resources and speed needed to match market needs on a global scale.

There are currently three imperatives that must be kept in mind by sellers who wish to accelerate growth in emerging markets:

Get on the ground

One key characteristic of emerging markets that make it difficult for multinationals is the fact that hard data on customers and the local market can be difficult to obtain. While large corporations can divert a large amount of funds into data sources and expert consultants, the best results in data gathering will still come from getting a firsthand sense of how the local markets work, and this can only be done by visiting resellers and local areas.

A ground level understanding, powered by substantial business ethnography, will also give sales leader a chance to respond to market changes rapidly or at least see the market's direction well in advance, so that they can make preparations.

Over-invest in the right partners

In fully developed markets, investing in partners is fairly straightforward because the market has matured enough that there are already many capable potential partners, and searching for the right one is easy and carries very little risk.

The opposite is true for emerging markets, as finding a capable partner requires strategic thinking and a lot of effort. Therefore, partners in emerging market should be treated as long term ones. This means if you finally find the right partner in an emerging market, you need to take care of the relationship and invest for the long haul.

Hire and build talent for the long haul

Similar to the case with partners, talent is abundant in developed markets and competition among workers is aggressive, so finding ones is not that difficult, nor is replacing lost talent. In an emerging market, however, skilled individuals is often scarcer. So you have to invest in getting the best talent, or hire raw talent then train them to their full potential. Regardless of which path you choose to take, you need to approach talent while considering them as long term ones.

Training is not always enough, though. Multinationals who want to succeed in emerging markets must also adapt the organization to the local situation if it will result in the talent performing better due to familiarity. It will also help build stronger relationships with talent, so that they don't leave the company and take their skills and knowledge somewhere else.

Thesis on Visual Ethnography Featuring Jacob Langvad Nilsson

A new thesis on Visual Ethnography is using Jacob Langvad Nilsson as one of the case studies. Sarah McMahon, a senior at Indiana University is currently pursuing a double degree in Neuroscience and Ethnographic Photography. The thesis titled "Ethnographic Photography" serves as a great introduction to the discipline for aspiring sociologists and anthropologists and touches on various use cases for Ethnographic Photography.

Using Jacob Langvad Nilsson's work as case study, Sarah McMahon narrowed in on a subset called Visual Ethnography, which basically studies cultures through the use of audiovisual technology in order to come to a conclusion or produce a detailed analysis. Visual ethnography uses either videos or photographs in order to analyze and maintain an accurate description of the culture being studied.

Jacob Langvad Nilsson uses Visual Ethnography in a business context to help companies get a closer relationship to their customers. Business ethnography has proved extremely valuable for international brands breaking into new territories in emerging markets.

Visual ethnographers in this sense do similar work to people who create documentaries, as they must immerse themselves in their subject in order to gain a more detailed insight into the customs, beliefs, behaviors, and even perspective of the society that they are trying to study. This means that their analysis is usually presented in a narrative format, though taking great pains to ensure that the output remains descriptive, informative, and ethical.

In a way, visual ethnography is an exercise in restraint and balance, as the ethnographer's immersion into the culture she is studying, along with the heavier dependence on pictures, data, and text collated firsthand, makes the entire study at risk of straining the boundaries between objectivity and subjectivity.

Anybody who is in the process of an ethnographer's works should maintain a critical mindset and be constantly aware that the images and texts on record appear as the ethnographer represents them, which means the perspective may be limited and subject to the ethnographer's bias.

However, it cannot be denied that what is presented has inherent value in the way they provide a much-needed glance at a culture from the perspective of someone who has taken the time to immerse oneself in their society.

At the end of the day, the key difference between ethnography and visual ethnography is that besides context, visual ethnography relies heavily on the visual narrative.

It is easily the visual aspect, particularly videos and photographs that serve as the key driving forces of visual ethnography, as it helps researchers capture information as it happens, in real time, and present it to people in a way that will let them understand the people, actions, and ideas behind a culture.

The American Anthropological Society currently defines four distinct types of anthropology. First is biological or physical, next is linguistic, followed by archaeological, and socio/cultural.

Cultural anthropology basically delves into a society's culture and practices. It studies the way in which individuals live, organize, and self-realize. The data is then compared against the same data from another society, where the similarities and differences are analyzed and studied with regard to gender, race, class, and nationality.

Source: Sarah McMahon Ethnographic Photography Thesis

The Emerging Market Consumer Leads The Way

The US’s National Intelligence Council came up with a study titled “Global Trends 2030: Alternative Worlds”. It is surprisingly cheerful report, which is odd as intelligence agencies rarely adopt a sunny perspective on the world. While the NIC’s report does address a lot of threats; such as cyber-sabotage and nuclear holocaust, it holds firm in the belief that the one thing that will make a difference economically is the strengthening of the middle class. England had to wait a century and a half before it managed to increase their revenue per person by a hundred percent, a feat that America only took 30 years to do. China and India, on the other hand, managed to pull off the same feat, only in significantly less time and on a much larger scale, which resulted in the growth of buying population that has enough money to buy items that are more upscale or are from well-established expensive brands, such as a nice home and a good start for their offspring.

The NIC is not the only organization that came to said conclusion. Even the Boston Consulting Group is predicting that the middle class, stronger and wealthier, will take over via a billion or more people from China and India that are well-to-do that will start to appear by the year 2020. McKinsey & Co, for instance; seems to follow hill shape in the consumption of families, where demand for consumer goods initially rises when citizens earn the maximum amount possible, only to taper off towards the end.

How the West Can Appeal to the New Middle Class

Western companies are now thinking of ways on how they can be attractive to the this new segment that has the purchasing power, and how they can compete with their competition from countries that are just beginning to be economically stable. Two specific works stand out when it comes to addressing this conundrum – first is Michael Silverstein’s “The $10 Trillion Prize” and the second is J. Walter Thompson’s “What Chinese Want.”

Michael Silverstein encourages companies to go in immediately, so that they can join the first movers in hogging the best distribution channels and burn their brands into the minds of consumers early on. Additionally, he stresses the need for the assimilation of local culture. For instance, PepsiCo is aware that people from Indians will end up tasting the standard crisps bland, so they launched a new packed food that caters to people from India.

What Chinese Wants emphasizes that there is a segment that’s on the rise which is a combination of naiveté and sophistication, with Chinese retailers going so far as to get personal assistants that would orient people on how to use products from the U.S. or Europe, but these customers are also able to move quickly to newer technologies. Another example of the paradox is with online games, not everyone in China has internet connection and those with connection don’t get to access all the sites, but those who do are more likely to play online games. The same applies to online shopping.

Fighting for the Rising Middle Class

Very few companies from the West are able to ignore the fight for the rising middle class, as it has a tendency to spill into their space. Emerging market firms are now starting to use spend on products imported from the West. This is actually increasing the price of people’s basic needs. As more wallets start chasing scarce resources; everyone will be affected, and there is nothing anyone can do - but be prepared for it.

Companies from Emerging Markets Take on Developed Countries

It was in 2009 when Mexican company Grupo Bimbo became a baking giant, as they bought part of Weston Foods for $2.3 billion. The acquisition made them the biggest baking company in US soil - a feat they topped a couple of years later when they bought Sarah Lee's American baking operations for $960 million. For the past few months, they're trying to further strengthen their foothold in the industry; by trying to acquire what's left of Hostess Brands' bread business, as the once iconic pastry company starts to close its business. Grupo Bimbo isn't just about buying other properties, though, as the company is responsible for several bread-related breakthroughs, including introducing sliced loaves to Spaniards, as well as being a pioneer in the packaging of bread in clear cellophane. Additionally, Grupo Bimbo has also proven itself to be masters of efficiency and logistics - it is their business savvy and cost-efficiency that allowed them to become successful in foreign soil, boasting of $10.8 billion of sales in 2011 alone.

At the moment, emerging market countries have more than 1,000 firms with annual sales that exceed $1 billion, but many of these firms are operating locally, as they find that their local economies are growing much faster than developed countries. Grupo Bimbo is the exception, as the company has shown an aggressive desire to venture abroad and buy foreign companies. Their drive to sharpen old skills while acquiring new ones has put them at the forefront of a massive shift in the industry.

Nowadays, companies from emerging markets are starting to compete in terms other than price - and for good reasons. The wages in countries with emerging markets are starting to rise, so the advantage of cheap labor is starting to disappear. Fortunately for these companies, they find that they can compete equally well, when it comes to innovation. For instance, Chinese electronics firm Huawei has half of their 150,000 employees working in R & D. Another Chinese company, Alibaba Group, has devised a way to solve one of the main problems in online selling, which is low trust, by starting their own escrow payment service, dubbed "Alipay."

Reversal of Fortune

It is ironic, since a lot of western companies have outsourced or offshored their work due to cheap labor, but emerging giants nowadays are employing lots of western workers. For instance, India's Tata Group is currently employing 45,000 people in Britain, while Chinese car parts maker Wanxiang has 6,000 workers in America.

Nothing is set in stone, though! It appears that the top ranks of the emerging-market multinationals are still more volatile than their Western peers, as half of the companies at the top in 2006 have already been overtaken. Unfortunately for Western companies, the other emerging giants that replaced them have proven to be more sophisticated and ambitious, serving as a dire warning for companies in the rich world that they need to be up on their toes or risk eating the dust of these new emerging titans.

The Growth Potential in Emerging Market Cities

The world’s economic balance is starting to tilt in the favor of the east and the south at surprising speed and scale, owing to a massive wave of migration and urbanization that is encouraging growth across the emerging world. Said wave of urbanization is expected to bring rise to less than five billion people by the year 2025, which is a huge improvement over the mere 1 billion in 1990. These new emerging cities will be able to add almost $25 trillion into the global economy through a combination of investment in physical capital and consumption, which is a very big shot in the arm for a global economy that is still reeling from the pockets of acute fragility.

Few business leaders are paying much attention to the potential in new cities when considering growth priorities. Many surveys of business leaders point out that as few as one in five executives have the good sense to make location decisions at the city level, with the rest only considering the country.

It seems that many executives still write off cities as mere “irrelevant units of strategic planning,” which is a big mistake as the new urban-growth zones start to flourish, companies that fail to look at the details in favor of the big picture will miss out on very important matters, particularly with regard to the potential for proper resource allocation.

The executives’ unfortunate decision to lock in resources and look only at the country level meant that they’ve been missing out on some of the middle class emerging market cities, which are unfamiliar but very, very lucrative.

Cities like Porto Alegre (Brazil), Surat (India), and Foshan (China) are not very famous and may not be part of many executives’ list of priorities. However each of these cities has a population of a almost five million, a booming economy and an active consumer base. Properly targeting these cities may add a lot to a company’s growth than overly saturated and highly contested cities like Madrid, Zurich, or Milan.

Not only are emerging market cities ideal due to their healthy consumer base, companies that try to target them will benefit from being early-movers. This means companies will have to develop better insights into some cities, such as knowing where senior people or retirees, other members of the target segment that have the buying power is growing most rapidly, as well as learning the existing market dynamics present in the cities.

Paying attention to emerging market cities will not only help support their country-level push, it will also help companies polish their marketing strategies at a smaller scale. Additionally, it allows them to use pinpoint accuracy when releasing new products, as product adoption rates are usually tied to local preferences and may vary across different cities within a single country.

These types of preferences are frequently missed by executives and marketers, who only look at strategies at the country level. The awareness of these shifting preferences and dynamics at the city level will both; increase possible income as well as reduce wastage, as companies will be better able to allocate resources and marketing campaigns.

China’s 2013 Economic Forecast

The world’s second biggest economy, China, has successfully kept its head above water as economic crisis continued to overwhelm the rest of the world. Despite the global economic slowdown, China’s economy remains steadfast even with the cautious decisions made by China’s policy makers during 2012. The economy managed stability despite getting just a fourth of the total stimulus amount given in 2008. This alone assures that China’s economy is looking forward to a brighter 2013.

China Resilient in the year of the Water Snake

According to the World Bank, China, along with the rest of the East Asia and Pacific region, will continue to be resilient and even grow stronger in 2013. This due to the fact while the rest of the world is slowly recovering from the crisis, China, though not untouched, has a more stable foundation. Although not as strong as the previous year, 2012 did not bring major losses, which assures a steady first quarter at least. In addition, based on the economy’s 2012 quarterly performance, World Bank predicts growth to up to 8.4 percent this 2013 and will continue to grow an average of 7 to 8 percent by 2014 onwards.

Property Stocks Dip, Monetary Adjustments to Tighter Reforms

China’s bright 2013 economy may be hard to believe given last year’s disappointing performance in the stock market. The past four years saw investors abandoning stocks because of the global economic crisis with the 2012 ending with a bang and shows Shanghai Index at its lowest with 6 percent fall. This confirms the economic slowdown that plagued the last quarter of the year which in turn discouraged investors from coming.

However the prospect of a better year is affirmed by the president and CIO of Shah Capital, Himanshu Shah. According to Shah, the monetary tightening that was implemented for the past two and a half years is now over so earnings growth is likely to improve. In addition, investors are likely attracted to the economic reforms like liberal interest rates. In fact, despite ending the year on a rather sour note, some Chinese industrial companies started picking up in September 2012 with profits showing 7.8 %.

Growth in the Banking Sector for 2013

Banks like Standard Chartered and HSBC also shares optimism for the year 2013. While Standard Chartered predicts that the improved corporate profits and GDP growth will have Chinese stocks rising up to 13%, HSBC is foreseeing the share values to go up 19 to 26 percent.

Even across the seas, people’s interest in China’s economy is unwavering that it seems all eyes are looking at the powerful country. Not for a light reason as China has a great influence on the global economy. The undeniable sway of China on equity and commodity markets makes it the economy to watch out for. That, and the fact that China is a huge market in itself with more than a billion citizens, makes nations hope and cheer for China’s economy to stay strong.

Pessimistic Outlook Despite Growth

Although experts see a lot of signs to forecast a rather sunny 2013 for China’s economy, there are still those who remain cautious. And smartly so, since businesses should never just decide based on optimism. According to Citi Investment Research’s Regional Strategy Head, Markus Rosgen, they still prefer the Hong Kong equity market to the (still) underweight China. Despite the talks of economic reforms, Phillip Chan, Shenyin Wango Securities’ director, believes that it will take time before significant effects starts showing in China’s economy.

Even Chief China Economist Zhiwei Zhang believes that China’s economic fate remains in limbo due to the tightening the control of credit supply. If this happens, then it’s going to be impossible to sustain the current growth recovery.

The New Gold Rush: Digging for Billions in Emerging Markets

One of the most important events in our modern, economic history, even surpassing the Industrial Revolution in significance, is the rise of emerging markets. Nations that used to be written off as mere consumers of international products if not bilateral foreign aid, are fast maturing, getting empowered and are starting to exercise influence over international trade. The advent of the consumers in emerging countries and the industrial revolution in the 1700s are interestingly worth comparing, as the latter required almost two hundred years to reach maturity and double the country’s economic output, while the former only took a couple of decades at the most, exhibiting roughly ten times the speed and a hundred times the scale of economic acceleration.

Many CEOs of global firms are already aware that emerging markets have become the key focus in their long-term strategy, but only a few of said CEOs actually understand the complexity of the undertaking needed to seize the opportunity. In fact, many of them are puzzled by the fact that their greater size, larger capital bases, superior technologies, and more sophisticated marketing still fail them when competing against local upstarts from the emerging markets.

It has highly divided commerce and trade such that the biggest companies are now getting just a little bit less than 20 percent of their profit from emerging markets. It is important to consider that these countries contribute 36 percent of the international GDP. It is also projected that their GDP contribution will balloon to 70 percent or more by 2025.

Factors to Consider in These Growing Nations

In order to win a decathlon, an athlete needs to master 10 separate events. When it comes to winning in emerging markets, a company similarly needs to master ten separate capabilities, such as:

  1. Look into cities or towns that don’t get attention – countries with emerging markets usually have smaller cities, but they offer big opportunities, as Wal-Mart proved 50 years ago when it opened its first store in Rogers, Arkansas
  2. Know when to sell expensive products – when it comes to emerging markets, knowing when and where to sell is crucial to success. Demand for products usually exhibit an S-curve instead of a linear one, so don’t try to push expensive products – especially non-commodities – when the S curve is at the lower points. Push it hard when the market is exhibiting explosive growth
  3. Localizing Products According to Local Relevance and Global Scale – Multinationals must learn how to custom tailor their products and services so that they will appeal to local tastes both in price and features
  4. Learn how to redeploy resources rapidly but consistently – developed markets need to be willing to embrace huge changes fast, as local competitors will overtake those who are too slow to adapt to local trends
  5. Uncompromised Quality on different Price Points – one key thing about emerging markets is that the consumers aren’t as affluent as the ones in developing countries, so multinational companies need to be creative and build their best products with twists that will make them applicable and affordable in emerging markets
  6. Establish a credible brand name – emerging market consumers are novice buyers, so the opportunity is rife for building brand loyalty and trust
  7. Know how your product will reach the consumers – in emerging markets, it is important to learn how to manage the way in which consumers encounter products at the point of sale
  8. Organize in Advance – emerging markets have more volatile trends, and local competitors are usually small enough that the organization doesn’t have much complexity. Multinational companies, on the other hand, are not able to adapt to rapid changes on the queue, so they need to be prepared in advance
  9. Focus on Farming Talent – unskilled workers are abundant in emerging markets, but multinationals may need to exert more effort just to find skilled managers
  10. Lock in Support of Key Stakeholders – this part is true for any business regardless of where they wish to do business. They need to lock in the support of key stakeholders in civil society, government, and local media if they want to succeed

Building Brands in Emerging Markets

US and European manufacturers of fast moving consumer products (FMCG) are looking to emerging markets in Asia, Africa, and different parts of Latin America due to the slow growth at home. Many of said companies spent over $10 billion just to widen their reach over these markets, and they occupy more than 40 percent of global sales of grocery products and clothing. However, many of these companies eventually realized that expensive branding and administrative protocols actually limited their capability get to the portion of the market with lesser spending power. Studies on international brand makers that operate in areas where consumerism is getting stronger reveal that companies tend to have more supporters in areas where the lower class resides when they adopt local organizational and branding strategies, which is usually different from the practices in first world countries.

Most companies that managed to enter emerging markets did so by first acquiring an already established local competitor, which meant that they were buying their way into sellers and production companies stationed locally.

They then proceed with growing the brand and distributing the products to more economically stable countries, who have their own set of evolved manufacturing and sales procedures. Additionally, many of these multinational corporations tried to go back to the old practice of unifying all management and procedural processes into their parent company. However, the cost of production is distributed to the regional offices. More often than not, these extra expenses force the companies to raise prices.

The approach works in developed countries; because, the consumers are affluent and will have to spend for products that are carrying the names of companies that are more established and known. But in emerging markets, where the majority of the consumers have limited budgets, the approach tends to price products straight out of the general segment, giving local competitors a huge advantage in terms of cost. In these cases, it's not surprising that multinational companies lose hold of a huge portion of their consumers.

Two Distinct Approaches for Building Brands in Emerging Markets

In order for global manufacturers to successfully compete and build brand equity in an emerging market, they must realize and accept that the portion of the market with more purchasing power and the low price market need to be approached differently. The high income segment will respond products and brands that were able to establish their relationship with the consumers and build their image. The lower class will respond better if the global manufacturers try to localize their image or make it relatable to the local culture, through the following ways:

1. Retain the employees that live in the area where they are distributing their products - these managers do not favor changing of products, promotion, and packaging extensively. And studies have shown that they are right in doing so, as the companies that opted not to make changes eventually recovered and started earning revenue. Those that went for drastic changes failed to show any growth, sometimes even wrote in losses.

2. Work on lessening production cost and making processes more efficient - product reformulations and marketing efforts are not very effective on people who are looking for the cheapest working option and do not want to take risks. Companies that rely on managers who are singularly focused on branding and marketing tend to waste resources on areas of operation that wouldn’t affect general profitability.

3. Last but not the least - keep the operations of the local manufacturers separate. Share a few key beneficial roles such acquisitions of locally-sourced products and logistics, but do not try to force the local manufacturer to adapt to an alien environment, especially since what they have at the moment is already optimized for their market. Parent companies should act as venture capital firms.