Prof. J.Grant - V SGBED International Research Symposium

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2015 International Brand Conference
Emerging Markets & Global Brands
John Grant
Senior Lecturer
MIT Sloan School of Management
December 10, 2015

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Forces Impacting China’s Economy
© 2015 MIT Sloan School of Management 2
Slowing export, domestic economy and
fixed investment growth rates
Wage increases
• Loss of factor cost advantage
• Movement of some facilities & production
offshore
Producer price declines
Push to increase domestic consumption
Renminbi inclusion as reserve currency

3. Click to edit Master title styleChina’s Growing Wages Increase Middle
Class but Hurt Factor Cost Advantage
Average Wage of Urban Units
¥60,000
¥50,000
¥40,000
¥30,000
¥20,000
¥10,000
¥0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
© 2015 MIT Sloan School of Management Source: China National Bureau of Statistics 3

4. Click to edit Master title style1970s/80s Japan’s Economy & Exports
Expanded Despite Exchange Rate Inflation
0.0
50.0
300.0
5,000,000
250.0
4,000,000
200.0
3,000,000
150.0
2,000,000
100.0
350.0
1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
¥/$
400.0
-‐
1,000,000
6,000,000
$, M
7,000,000
Japan Economic Performance
Exports GDP Yen/$
© 2015 MIT Sloan School of Management Source: World Bank 4

5. Click to edit Master title styleFactors Supporting Japan’s
Building global brands
© 2015 MIT Sloan School of Management 5
Performance in 1970s/80s
Enlightened government policies
Rapid productivity improvement
• “Japanese Management”
• Automation
Growth of high-technology industries
Shift from exports to domestic
consumption
Engagement in multinational enterprise

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Action Learning at MIT Sloan
 Founding principle of MIT – “Mens et Manus”
 Core element of MIT Sloan curriculum
 Integrates course frameworks with practical experience
© 2015 MIT Sloan School of Management 6

7. Click to edit Master title styleMIT Sloan Programs That Cover Brand
© 2015 MIT Sloan School of Management 7
Issues in Developed & Emerging Markets
Global Organizations Lab
Enterprise Management Lab
Global Entrepreneurship in
Emerging Economies Lab
China Lab
India Lab

8. Click to edit Master title style200 Annual Projects: 50% Emerging
Markets (20+ Countries); 15% in China
Developed Markets
Emerging Markets
© 2015 MIT Sloan School of Management 8

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Top 50 Most Valuable Global Brands
© 2015 MIT Sloan School of Management 9Source: Brandfinance, 2015

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Brand Value Matters
Top 10 vs 41-50
Operating Margins: +8.1 percentage points
Return on Equity: +10.9 percentage points
Brand Value: +4.0 times
Source: Brandfinance, 2015; Google Finance© 2015 MIT Sloan School of Management 10

11. Click to edit Master title styleObservations of Global Brand
© 2015 MIT Sloan School of Management 11
Managers in Emerging Markets
 Intense interest in emerging markets (key to
future growth and volume)
 Early focus on global consumer profiles in urban
areas
 Brand & talent acquisitions to localize
 Movement towards middle class preferences
(value vs hedonistic) of 2nd & 3rd tier localities
 “Resource-Based View” on value of the brand
• Focus on human resources, brand management,
performance management
– Data mining of social networks

12. Click to edit Master title styleObservations of Local Enterprise in
© 2015 MIT Sloan School of Management 12
Emerging Markets
 Interest in business model transfer, not brands
 Successful companies pivot towards brand value,
often for defensive reasons
• Loss of marketing talent to MNCs
• Localization by foreign competition
 Leverage Country of Origin brand affinity in
foreign markets
 Increasing focus on human capital development
 New analytics efforts, particularly on Millennials
 Weakness in organization, processes and
governance to compete in global markets

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Some China Takeaways
© 2015 MIT Sloan School of Management 13
 Offensive and defensive need to pursue brands
• Higher value added, profits
• Build customer loyalty
 China as a Brand
• Value realization if brand name association with
quality can be matched with reality (e.g. Haier)
 Invest in human capital to build brand value
 Go global to learn how to compete
 International brands require global organization
• Need to adapt management practices, policies
and governance