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This article talks about some of the way that smaller companies keep larger multinational companies at bay in developing countries
This article talks about some of the way that smaller companies keep larger multinational companies at
bay in developing countries. The first argument is that the larger companies and they are so used to
being able to charge a premium for their product. This makes it difficult because the smaller more local
companies can charge less for the same product and from there it is simple economics. Consumers will
choose the lowest priced item. The second reason is the larger companies rely on different properties that
developed countries have such as consistent telephone communication and internet access. Without
these elements the bases of the larger companies begin to crumble and lose its efficiency, which allows
the smaller companies to compete. Lastly, the larger companies have a tendency to be rigid and remain
in the strategies that worked for developed countries when they need to realize that developing countries
wants and need are very different. It is because of this that the larger companies lose touch with their
consumer base and offer them what they think they should want. The smaller companies however are
very close to the consumer and aren’t hindered by rules and preconceived notion; therefore, they can
provide the consumer with exactly what they want.
he Idea in Brief
If you're setting out to compete in rapidly developingeconomies, beware: Smart domestic
enterprisesare staving off the challenge from global market leaders. And they're seizing new
opportunitiesbefore multinationals can.
Consider: In China, search engine Baidu is used seventimes more than Google China every day. In
India, Bharti Airtelhas trumped Vodafone as the market leader in cellular telephony. And in Mexico,
Grupo Elektrahas beaten Wal-Mart as the country'stopretailer.
Domestic dynamoslike these dominate foreignrivalsby applying six strategies. For example, they
use their deep understanding of consumersin their countriesto create highly customizedofferings.
They leverage cutting-edge technology to keepoperatingcosts down. And they tap into pools of
cheap locallabor instead of relyingon expensive automation.
To prevailover localwinners on their turf, set aside your tried-and-true strategies, advise
Bhattacharyaand Michael. Instead, understand--and emulate--domestic players'tactics.
The Idea in Practice
Bhattacharyaand Michael identify a blend of six strategies domestic winners use to succeedin
Create Customized Offerings
Simple customization techniques, based on intimate knowledge of localconsumers, have sparked
major successfor homegrown champions.
India's CavinKare packages shampoo in single-use sachets, making the product affordable for
Indians who can't affordbig bottles and regard shampoo as a luxury. CavinKare is the largest local
player in India's $500 million shampoo industry.
Develop Business Models to Overcome Obstacles
Smart local companiesidentify key challenges posed by domestic markets, then design business
models to overcome them.
Shanda has avoidedthe software piracy problemplaguing global video-game leaders in China by
developinghighly popular multiplayer online role-playinggames. These are impossible to pirate,
because they're live experiencescreatedby many playersover the Internet.
Deploy Cutting-Edge Technologies
Local winners use new technology to controloperatingcostsand deliver quality offerings.
Brazil's Gol Linhas AereasInteligentes (Gol), SouthAmerica's first low-cost airline, uses the latest
model Boeing 737 in its single-model fleet. The youngfleet requires less maintenance, so Gol
manages quick turnarounds, which lowerscost per available seat. Gol's use of e-ticketsand
unmanned check-in kioskshas further drivendown costs.
Tap Low-Cost Labor
Local champions leverage cheaplabor pools rather than relyingon automation.
China's largest outdoor advertisingfirm, Focus Media, has installed LCD screens in 130,000
locationsin 90 cities. Instead of linking the screens electronically throughexpensive technology, it
uses employeeswho go from building to building on bicyclesto replace advertisement DVDs. This
decreasesoperating costs, enabling the company to offer advertisersimmense flexibility cheaply.
Build Scale Quickly
Successfullocalcompanies fend off multinationals and other regional playersby rapidly expanding
Focus Media initially facedmany rivalsacrossChina. To gain nationwide reach, it pursued an
aggressive acquisition-led strategy. Itsnational coverage attractedadvertisers, diminished regional
rivals'competitiveness, and vaultedit past two global leaders involvedinChina's outdoor advertising
Use Management Talent to Sustain Growth
To avoidthe problems that can come with high growth, domestic dynamos put the right
management talent in place.
Russia's Wimm-Bill-Dann Foods, founded by five entrepreneurswith borrowedfunds, changed its
management structure when multinationals began encroaching on its localdairy and fruit-juice
markets. The founders hired a new CEO with extensive industry experience andgave him free rein.
They also brought in seasoned managers from multinational companies. WBD now has 34% of the
Russian market for packageddairy products.