2. Entry of dominating MNCs
Many local companies lose market share or sell off
Emerging Giants surface as some fight back
Tough survival, vast opportunities
Well-known brands
Efficient systems and processes
Latest sophisticated technologies
Access to and control of large finance and talent
pools
R&D lags
Difficulty building globally recognizable brands
Liberalization of Emerging Markets
MNCs' Huge Advantages
Emerging Market Companies challenged to access capital
and talent efficiently due to Institutional Voids across
local economy (product, capital and labour markets)
INTRODUCTION
3. OVERCOMING THE DISADVANTAGES
In the absence of a well-defined institutional infrastructure, MNC executives struggle
Local companies on the other hand are familiar with the environment
Business groups (Tata Group, Ayala Group) develop internal mechanisms to deal
with it
Costly and cumbersome
Offerings not optimally priced due to cost structure and organizational processes
Local companies can catch up, once improve quality
Emerging giants often catch investors’ eyes
Developed market intermediaries provide services to local businesses
MNCs face the same Institutional Voids in Emerging Markets
Reluctancy of MNCs to tailor needs as per the market
Demonstration of a degree of success enables access to capital and talent
4. MARKET
STRUCTURE
BOTTOM
LOCAL
GLOCAL
GLOBAL
GLOBAL MARKET
GLOCAL MARKET
LOCAL MARKET
BOTTOM OF THE PYRAMID
In the product market, this section consists of consumers who
want offerings of the same quality as those offered in developed
countries and are ready to pay global prices for these products.
In the talent market this tier consists of graduates from top
institutes
In the product market, this consumers of this tier look for
products which are customized but of near-global standard but
need to paid less for.
The talent market consists of top-notch talent ready to work for
local companies at a low pay compared to multinational
companies
In the product market, the consumers are happy with local
products at local prices
The talent market consists of managers who are happy with less
than world class working conditions at higher than average pay
This tier constitutes people expecting least expensive products
5. Understanding idiosyncratic customer needs and distinctive nationalistic characteristics
Knowing the local preferences and tastes of home country's diaspora to develop product for
every need
Investing in development of specialized infrastructure, distribution channels and delivery
systems which MNCs are ill equipped to do
Using their capabilities to expand to other emerging markets by exploiting similarities in
customer needs
Jollibee's burgers for Fillipinos, Nandos chicken for Africans
Haier for white goods catering to the Chinese: modified washing machine for vegetables and
compact ones to wash single set of clothes for coastal climate
Haier becoming a distributor by creating distribution network for urban, semi urban as well
as rural China and providing after sales service
Haier: China->Indonesia->Phillipines->Germany->US
Exploit Understanding of Local Market
6. Leverage Familiarity with Resource Markets
Serve domestic and international customers
affordably by leveraging their understanding
of local talent.
For example, MNCs operating in India
struggle to identify talent because of the
wide disparity in the quality of educational
institutions and people’s skills.
However, local institutions and talent hubs
are familiar to Indian IT firms like Infosys and
TCS who hire technical graduates and
engineers for significantly less pay than
engineers in developed markets.
As talent becomes increasingly scarce in
some urban centers, local companies will
continue to have an advantage because they
know how to attract the best talent from
Tier-2 cities.
Some have also created world-class
enterprises by leveraging their
understanding of regional supply chains and
factors of production.
For example, Taiwan-based Inventec, one of
the biggest producers of servers, and PCs,
manufactures many of its products in China
and sells them to HP and Toshiba.
Customers of Inventec profit from the cheap
labor in China without having to invest in
building factories thereby making use of
China's gifted software and hardware
designers, who have a reputation for
producing products with short life cycles.
Emerging market companies broaden their
footprints in three ways as they get bigger –
1. To being with, they start by looking for
customers in developed markets that they can
serve from their base locations.
2. Then, as domestic factor markets become
oversaturated and consequently more
expensive, these companies search for other
developing
nations that provide similar resources.
3. Finally, these businesses climb up the value
chain by selling branded goods or providing
solutions to niche markets.
Example - Indian IT giants
7. Treat Institutional Voids as Business Opportunities
Intermediaries can be in the form of credibility enhancer, information analyzer, aggregator or
distributer, transaction facilitator, adjudicator, and regulator or other public intermediary
Old Mutual servicing poor people to achieve scales.
Agora filling information void by not only providing news coverage but also acting as a vehicle for
advertisement.
Emerge Logistics by leveraging local transport knowledge to generate profits
Emerging market organizations can take on multinational companies in this aspect in 3 ways:
1) Intermediaries are people-intensive: Since this requires familiarity with local language and culture,
it becomes a solid point for emerging market organization
2) Information intensity: It takes local expertise to access the required information & study the data of
regional aspects.
3) Government mandates: Emerging market org are generally preferred for media, banking, and
financial services kind of services since these are specifically of national importance.
As per the Four-Tiered Structure of Markets, multinational firms are maybe suited to service just the
global (first) tier but the emerging market org are better able to serve the other tiers
Some successful examples of the case:
8. 1. Excellent execution enables a company to
extract the maximum out of the scarce financial
and talent resources in emerging markets.
2. The risk of unreliable contracts can be
mitigated through good governance.
3. Though the laws regarding corporate
governance differs across nations, the companies
that protect the interests of the shareholders and
employees become emerging giants
IMPORTANCE
OF EXECUTION
AND
GOVERNANCE
9. CONCLUSION
The obvious answer to the question "Is it better to be more global"
may be yes as there is a correlation between global scope and
performance but companies need to make sure that global scope
results in competitive advantage rather than being the result of
advantage derived from some other fashion. There is more than
one way in which these emerging giants chose to operate. For
instance, in the Top 50 emerging market companies in the list of
United Nations Conference on Trade and Development the
correlation between size and degree of globalization is 0.4.
Moreover, financial returns of world class companies that have
diversified across countries is not that superior to those that have
not. Therefore, in order to be successful it is not mandatory for
emerging giants to have a global footprint.
10. THANK YOU
Group 04
Neha Gupta (21PGP147)
Prasham Anand (21PGP174)
Rishabh Sabharwal (21PGP188)
Ronnie Rejimon (21PGP195)
Ayush Arora (21PGP267)
Suruti Poddar (21PGP270)
