Much has been written about creativity and startups in emerging markets – but how do these companies then succeed on the global stage? Emerging economies have a rich cultural history and a range of natural resources – how can their companies build on these strengths while also overcoming negative connotations about their politics?
‘Brand Breakout’ is an engaging and thoroughly illuminating book, covering eight ‘brand breakout’ strategies from emerging economies that have been used to take brands from domestic dominance to international leadership. The audience is business leaders and entrepreneurs in emerging economies, as well as incumbent Western market leaders and policymakers.
Nirmalya Kumar is professor of marketing and co-director of Aditya Birla India Centre at LondonBusinessSchool. His research has been widely published in journals such as the Harvard Business Review and Journal of Marketing Research, and he has published six books. His other recent book is ‘India Inside: The Emerging Innovation Challenge to the West’ (see my book review here http://yourstory.com/2012/10/book-review-india-inside-the-emerging-innovation-challenge-to-the-west/).
Jan-Benedict E.M. Steenkamp is professor of marketing at the University of North Carolina Kenan-Flagler Business School. He has consulted with companies like Procter & Gamble, Kraft, and Johnson & Johnson on branding and strategy, and has written for the Harvard Business Review, The Wall Street Journal and the Financial Times.
The authors themselves grew up in an era of Cold War politics, with the derogatory term ‘Third World’ used to refer to what are now called emerging economies; few even dreamt in the 1960s and 1970s that just decades later their economic resurgence would change the world.
Emerging markets now account for 75 per cent of all global mobile phone subscriptions, 75 per cent of steel consumption, 50 per cent of vehicle sales, 50 per cent of all retail sales, 75 per cent of forex reserves, and 50 per cent of inward FDI!
And yet, there are only a few brands from emerging economies that are well known outside their domestic markets or in the West. But the few that have succeeded in ‘brand breakout’ are inspiring a range of others to succeed on the global stage and have created a wealth of insights into brand strategy and market growth.
“Even during the height of the Industrial Revolution, the UK did not sustain annual growth rates close to what we have witnessed over the past four decades in China and the past two decades in India,” the authors observe.
The bulk of the book focuses on China and India, along with Mexico and Brazil. Case studies are also drawn from Japan and Korea, whose companies began the waves of ‘brand breakout’ from the 1960s onwards (two centuries ago, the US began its breakout as the new emerging economy of that time, eventually surpassing Europe).
One chapter is devoted to each of these breakout strategies, and I have summarised them briefly in Table 1; each chapter makes for a superb read and is backed with references and resources.
Table 1: Brand Breakout strategies for companies in emerging economies
Japanese companies began with the low-cost route, but their automobile companies are now global thought leaders in manufacturing processes and business innovation. They have tapped their inner commitment to design and quality in this regard. South Korean companies like Samsung have also picked up these strategies and now outperform the likes of Sony.
B2B strategies for going global differ for contract manufacturers (example, Chinese suppliers to Apple, Nike, WalMart) and B2B enterprises (example, Reliance Industries, Petrobras, Gazprom) – their business models need to evolve in different directions for adjacent markets and for creating new value networks.
China and India were already known in the pre-colonial era for their cultural and economic strengths, example, chinaware, yoga and ayurveda. Turning their new products into globally recognised consumer brands is the holy grail for many companies in emerging markets (though the book does not address the rise of service companies such as Indian IT and BPO companies).
“We believe and predict that India and China hold the future of cultural branding,” the authors explain. This prediction is based on the ancient cultures of the two nations which hold appeal for people around the world, and can be cleverly leveraged for their emerging brands.
Brazil has a more contemporary allure via its culture of unmatched beach life, music and football, as well as its biodiversity – well harnessed by the Havaianas flip-flops and Natura product brands.
Branding issues arise for other emerging economies as well: Ivory Coast is known for cocoa, Vietnam for coffee, Pakistan for footballs – but there are no global brands from these countries in these sectors. Russia has some global brands largely in B2B space, for example Gazprom. South Africa and Chile are emerging economies which have successfully added a geographic branding component to their wines, and Sri Lanka for its tea.
Tourists, emigrants, and others on temporary work permits or business travel are also the enabling communities for brands to go global (see my earlier book “Many Ships, One Boat” for narratives of such ‘global citizens’).
India’s Reliance BIG cinemas, ICICI Bank, and Dabur have successfully tapped the Indian diaspora as beachhead markets. The ‘Incredible India’ campaign is a good example of the ‘positive campaign’ route of branding. State Bank of India is a national champion which has gone international.
Mexico’s Corona beer successfully tapped the ‘spring break’ networks and communities of visiting US students to establish a beachhead into the US, and also tap the Hispanic communities. Brazil’s guarana exports in Japan and Swedish tourists’ demand for Thai food in Sweden are related examples.
A faster route for growth is acquisition, exemplified by the moves by China’s Bright Food (UK’s Weetabix), TCL (France’s Thomposn) and Geely (Sweden’s Saab); India’s Tata Motors (UK’s Jaguar and Land Rover), Taj Hotels (US’ Pierre), and South Africa’s SAB (US’ Miller). Cautionary tales have arisen, however, in brand damage and culture rift after acquisitions.
Indian companies have an advantage here over China in terms of a more cosmopolitan and diverse work culture and familiarity with English, the de-facto language of global companies. But the Chinese government is way ahead in terms of vision for long-term national champions, global brands, and country-wide infrastructure, despite challenges of governance and corruption.
“Chinese and other emerging market firms are changing from a clear focus on manufacturing and supply chain efficiencies to building brand equities and allocating enough resources behind them. It seems they now realise that the real value of their companies is in their brands,” observes Henry Gomez, Vice-President Business Development for Latin America, Pepsico.
It is crucial to unlock value through ‘the art’ of brand building with tangible and relevant principles, according to Leandro Berrone, Marketing VP Cuauhtémoc Moctezuma, part of the Heineken group.
Trends to watch in the coming years will include not just the rise of brands from China and India but also their growing internal markets – ‘made in China’ and ‘created in China’ will also be accompanied by ‘made for China.’
Chinese companies will soon go ‘Haier and higher,’ the authors observe. China now exports as much in a day as it did in a full year in 1979. Today, the millions of contract manufacturers are becoming millions of dreamers, aspiring to be on the global stage.
Long term success factors for emerging brands include better transparency, more integrity in financial statements, moving from reverse engineering to innovation, management diversity, and a global mindset.
The book has a number of witty and inspiring quotes, and it would be nice to end this review with some of them.
“It does not matter how slowly you go, as long as you do not stop.” – Confucius
“Every disadvantage has its advantage.” – Johan Cruyff, Dutch soccer player
“Products made in China are everywhere in the West, but Chinese brands are rarely seen. Chinese companies now aspire to change this situation.” - Zhuo (Joe) Wang, CEO, Shanghai Jahwa United and Chairman, Herborist Cosmetics
“Geeks in the West should not relax.” – The Economist
“Brand Breakout is the next frontier." - Ravi Kant, Vice Chairman, Tata Motors
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