Download Innovating for Emerging Markets PPT

Innovation Management, GSB 2013
Stefan Wuyts
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Emerging Markets
◦ What are Emerging Markets?
◦ Why the interest in EMs?
◦ How do EMs differ from HICs?
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From a colonial mindset… to network orchestration
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EMs as hotbeds of innovation
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United Nations: four categories of countries, based on
score on human development index (life expectancy,
literacy, education, GDP per capita at purchasing power
parity). Low/medium categories ~ “emerging”
World Bank: classification based on Gross National
Income per Capita, adjusted for currency fluctuations.
All up to middle-income categories ~ “emerging”
Burgess & Steenkamp (2006): “countries in which PPPadjusted GDP per capita, converted to US$ and
smoothed for 3-year currency fluctuations, is equal to
or less than the highest ranked country classified as
“middle-income” by the World Bank”
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More restrictive approaches:
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Hoskisson et al. 2000: A country that
satisfies two criteria: (1) a rapid pace
of economic development, and (2)
government policies favoring
economic liberalization and the
adoption of a free market system
Examples from the more restrictive
categorizations:
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Growth in Japan, US, Europe languishes
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High Income Countries are aging rapidly
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Economic reforms in BRIC (Brazil, Russia,
India, China) and other countries
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Globalized competition
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Spectacular rise of local entrepreneurs
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1.
Political and social systems
Governments; Religion; Industrial groups
2.
Cultural system
Schwartz: 3 bipolar dimensions of cultural values
Relations of individual to the group (autonomy versus embeddedness)
Preserving social fabric (hierarchy versus egalitarianism)
Relations people – environment (mastery versus harmony)
3.
Regulative system
Rule of law
Influence of stakeholders
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(Burgess & Steenkamp 2006)
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4.
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Openness (to foreign investments)
Product markets (bottom-of-the-pyramid versus elite;
unbranded competition)
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Labor markets
7.
Capital markets
8.
Infrastructure
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(Khanna et al. 2005)
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Challenges for marketing strategy when moving
from HICs  EMs:
Market orientation
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Market development
Relationship marketing
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Institutional marketing
Customer satisfaction
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Convert nonusers to users
(Sheth 2011)
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Managers have much information at their disposal to
compare countries
◦ GDP, growth rates, PPP
◦ Population composition
http://www.oecd-ilibrary.org/economics/country-statistical-profile-turkey_20752288-table-tur
◦ Global competitiveness index (World Economic Forum)
http://www.weforum.org/issues/global-competitiveness
◦ Governance indicators such as rule of law
◦ Infrastructure
http://data.worldbank.org/
◦ Corruption ratings (Transparency International)
http://www.transparency.org/
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GE Healthcare India first
targeted large Indian clients
(big hospitals and universities)
in Bangalore and Mumbai
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Then attention shifted to smaller towns and villages
Partnerships with medical research institutes, NGOs,
state governments to learn about health care delivery
system and needs
(Radjou & Prabhu 2012)
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Partnership with Manipal
Heart Institute: portable
ultrasound and handheld
electrocardiogram (MAC
400, $800 instead of $2000)
Potential for “reverse
innovation” (think local, act
global)
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GE focuses on the “Next Billion”
Limited resources  affordability as key
design characteristic
Lack of insight in their preferences and buying
behaviors  need to network
Distribution challenge (villages)
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Value Chain Localization
Nokia built a retailer network
>200,000 locations in India
Value for more customers
Nokia Life Tools: deliver agricultural information with SMS
E.g. Market prices for crops give farmers greater confidence
in negotiating with intermediaries
They partnered with Thomson Reuters, Syngenta, Skymet,
telecom carriers, local government bodies, NGOs
Eventually launched also in Indonesia, China, and Nigeria
http://www.youtube.com/watch?v=8sHb6plLELA
(Radjou & Prabhu 2012)
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Nokia Money: mobile banking solutions
Obstacles; Indian central bank, consumers were
hesitant, target populations dispersed
Partnership with Union Bank of India (for banking
services) & Obopay (for mobile banking technology
solutions)
Eventually shut down because of increased competition
from local rivals and because not core (making phones)
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Innovative local NGOs:
Jaipur Foot in India
Grameen Bank
(microlending)
in Bangladesh
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The Economist 2010: “they are coming up with new products and
services that are dramatically cheaper than their Western
equivalents: $3,000 cars, $300 computers, and $30 mobile
phones that provide nationwide service for just 2 cents a minute”
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Financial Times 500 List contains increasing number of BRIC
companies (15  68 when moving from 2006  2008)
Bharat Forge, India (forging):
auto and chassis component
manufacturer
BYD, China (batteries)
Embraer, Brazil (jet aircraft, executive jets, commercial, military, agricultural)
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