Growth Strategies in Emerging Markets - Examples from India

Transcription

1 Growth Strategies in Emerging Markets - Examples from James Layard Partner, Consumer Goods & Services, ASEAN Copyright 2008 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. Opportunity to build a Globally Significant Domestic Business and a Regional/ Global Operational Base in Consumer Market Growth Emergence of a large middle class with higher disposable income Increase in discretionary spending Growth in Fast Moving Consumer Goods industry at CAGR of 11% till 2015 & Consumer Durables at CAGR of 6.5% till 2011 Infrastructure Boom Increase in infrastructure demand and spending Public private participation Global companies participating as equipment suppliers, EPC contractors and as infrastructure operators Significant skill base for Operations Skilled and low cost workforce Technically trained and young population attractive as a low cost sourcing/manufacturing location attractive as a Global R&D Hub

2 is expected to become the 5 th largest consumer market by 2025 with Private Consumption of over US$ 1.5 Trillion Private consumption 2008 (US$ Bn) Private consumption 2025 (US$ Bn) CAGR China % % Brazil % Japan % Source: MGI report on consumer market MNCs have capitalized on this opportunity to build large domestic businesses in with significant exports MNCs in Revenue* ($ Bn) Share of Global Revenues Export % of revenues Maruti Suzuki % 17% ITC (BAT) % Nokia % 20% Vodafone % HUL (Unilever) % 11% LG 2.8 6% 14% Siemens % 35% Samsung 1.7 2% 4% Bosch % 16% * Revenues are for

3 Scale and profitability demand an specific strategy. Elements of Strategy Become an insider Develop unique go-to market ways Work backwards from customer -centric management Inorganic growth strategy - pursue but with caution Key Implications Play in the mass market Adapt to local conditions Leverage on global firm sensibly Understand size & diversity of n market Address fragmented markets Expand into rural markets Address market before setting up manufacturing Optimize operations, run a tight ship Local team at key management positions Decision making autonomy Poor Historical performance of alliances Acquisitions have worked better but availability of majority stake in quality assets few and far between Hindustan Unilever has become the largest FMCG player in with its mass market focus and localization strategy Leveraging Hindustan Sales ~ $3 Bn. HUL is also one of s largest exporters. Brands strongest in respective categories with over 2/3 of the n population using HUL products everyday. HUL accounts for 27% of Unilever s sales in the APAC region & 40% of profits Go after the mass market Wide distribution network covering 6.3 million retail outlets Deep rural focus with initiatives like Project Shakti covering 50,000 villages Low price and low unit pack strategy for the price sensitive n middle class Localize Top 6 brands contributing 53% of sales are n Employs over 40,000 ns and several key roles in Unilever worldwide have been held by ns First foreign subsidiary to offer equity % to the n public Aids in community development of

4 LG Electronics has become the market leader in white goods through customization of products and -centric management Life (in!) is Good One of the last to enter in 1997 amongst MNCs (Samsung, Sony, Panasonic) Initially unsuccessful through JVs with n partners Market leader Invest for growth Customized product portfolio High degree of regionalization Local language menus Innovative differential pricing Invested in large local manufacturing capacities upfront Supply chain efficiencies and distribution focus Localize and own mass market Distribution innovation Rural penetration with targeted pricing Marketing and brand building Use of brand icons Association with national passion - cricket n Management team Suzuki has become the undisputed king of the auto industry in by offering an extensive product portfolio supported by vast distribution network Counting on Sales $6.9 Bn with profit soaring fifteen-fold in five years Controls half the car market selling more cars in than even its home country Regard for the Suzuki brand is very high. Leads in the customer satisfaction survey year on year Extensive Product portfolio Offers 11 car models with 150 variants for almost all customer segments Low cost entry level cars Focus on fuel efficiency Owns Insurance and Finance endeavors in Wide Network Largest network of dealerships in covering 230 cities Largest network of service centers covering 1094 towns and cities Setting up a network of driving schools

5 Pepsico has done everything from mega-marketing, lobbying, to contract farming to become the right choice in Pepsi : Ye Dil Mange More! Entered in 1988 by creating a joint venture with the government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas Ltd..In 1994 it bought out its partners It is the 4th largest consumer products company in Holds nearly 40% market share of Carbonated soft drinks (volume),19%of juice & fruit-based beverages and nearly 13% bottled water Localization Local adaptations Introduced returnable glass bottles to cut the cost Small bottles for lower unit cost In keeping with local tastes, Pepsi launched its Lehar 7UP in the clear lemon category Nimbooz as an adaptation of local flavour was a great success Employs over 150,000 n employees Globalization Strategy Sustained advertising and marketing activities to engage with the customers It has more than 36 bottling plants including 13 Company & 23 Franchise owned ones Has invested extensively in CSR in and has fostered partnerships with farmers and suppliers Holcim has become the market leader in n Cement and is now pursuing unique partnering initiatives Cementing Leadership Late entrant in the n market among multinationals. Unsuccessful initially (in 2002) JV with small n players Became market leader in with approx 25% market share and ( 15%+ of its global capacity ). Acquire Big Acquired two very large players to obtain market leadership Left no room for global competitors to grow inorganically Become part of fabric of society Efficient penetration strategy Greenfield plants with focus on less represented regions Strategy to tap rural markets. Innovative partnerships Strategy to capitalize on the real estate boom

6 Growth Strategies in Emerging Markets - Examples from James Layard Partner, Consumer Goods & Services, ASEAN Copyright 2008 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. Mcdonald s is the epitome of a successful model based on global innovativeness and n sensitivities to establish a rich brand identity Mcdonald s : As n as you and me Entered in 1996 has nearly 177 outlets in today Nearly 18% in the quick service category in northern JV in between McDonald s and two local n partners (Connaught Plaza Restaurants Pvt. Ltd. and Hardcastle Restaurants Pvt. Ltd. in the West) Localization Global Support with Local Management Product customization Includes vegetarian selection Absence of pork and beef from menu to cater to n culture n items such as aloo tikki Separate veg and non-veg kitchens Suitable Pricing Strategy Purchasing power based pricing Availability at different price points Joint-venture company managed by ns with complete flexibility to run the business Set up an extensive cold chain distribution system to cut down operational wastage Identified and developed local suppliers for its business Employs over 5000 n employees

7 Nokia has become one of the largest MNCs in through deep penetration and understanding the needs of the n consumer Connecting Entered in 1995 One of the largest MNCs in today Over 60% Market share in vs. 35% market share globally. 2 nd largest Market for Nokia globally in revenue terms. Understand the consumer Invested early to understand the n consumer Pricing and product customization Comprehensive portfolio Unique offerings targeted to market characteristics Unique Distribution Strategy Defend leadership Ventured into CDMA to target customers of next generation telecom users Set-up manufacturing base in 2006 Sustained advertising and marketing activities with eye towards regional preferences and brand icons has become Vodafone s largest market by virtue of a single acquisition and it is now leveraging its global solutions You and I(ndia) Organic entry not an option - no additional licenses sanctioned. Capitalized opportunity to buy Hutch stake from exiting partner s 40 mn subscribers - the largest base for it worldwide. Acquire Big Acquired 4 th largest operator for $ 11 Bn Integrate and Localize Handset bundling Network sharing Greater rural focus to touch 100 mn customers by 2010 Innovative product offerings Blackberry and iphone Increased focus on customer service

8 has the 4 th largest GDP in the world. With ~10% growth expected, it will soon have GDP greater than Japan GDP (PPP), 2009 USD Trillions EU 14.5 USA 14.3 China Japan Germany UK Russia France Brazil X Germany GDP Growth Rate, Percentage EU USA China Japan UK Russia France Brazil Source: International Monetary Fund 15 Evaluating impact of cultural differences on business can be assessed along relationship, regulations and reasoning Relationship How do we relate to others? Regulation How do we make decisions? Reasoning How do we think? Source: TMA Country Navigator Model Relationship How do we relate to others? TASK DIRECT INDIVIDUA L Regulation How do we make decisions? RISK TAKING TIGHT SHARED Reasoning How we think? LINEAR FACTS SIMPLE Foreigners ns RELATIONSHI P INDIRECT GROUP RISK AVOIDING LOOSE CONCENTRATE D CIRCULAR THINKING COMPLEX Foreigners... focus on the task at hand are direct in communication are time efficient follow a well-defined, fact based approach to issues ns are focused towards Relationships are implicit in communication are not high on time adherence value logical reasoning with complex thinking 16

9 Some key success factors emerge from evaluating successful MNCs in Key Success Factors Unique Products Unique products customized to n tastes Products to cater to Mass market Comprehensive product portfolio Innovative Pricing Extensive Distribution Innovative pricing and pack sizes Significant discounts to retailers to drive volumes in consumer durables Extensive distribution network Rural focus Localized Supply Chain Priority to Marketing Local manufacturing and local to reduce cost specific positioning, focus on regional preferences and use of brand icons Front end marketing precedes manufacturing Advertising and promotions on key products/new launches 17