A Local Strategy in Emerging Markets
One of the key strategies for success in emerging markets is to adapt to local conditions. This could mean redesigning products and services from the ground up or merely tweaking products or packaging to meet consumers’ needs. With an ever expanding list of big-name failures in emerging markets, and tighter economic conditions in some countries, a local strategy is crucial to safeguard success.
Generalise at your peril
The importance of this can be amply seen when comparing markets which on the face of it may seem to have lots in common. For instance Bulgaria and Romania are two emerging Eastern European countries, with almost identical per capita expenditure – but the data behind this headline figure reveals some interesting differences between the two countries. The same can also be said of Colombia and Peru, and many other not-so-similar markets.
Source: Euromonitor International from national statistics/Eurostat/OECD/ UN
Local tastes, local flavour
There are many ways of incorporating a local flavour into products and services:
- Starbucks have done so by creating design studios around the world in an effort to make their branches appear less generic and in their words “so that our designers can fully understand the communities they serve. The mission of each designer is to create a spectacular Starbucks café experience that is steeped in the local culture and designed to reflect the unique characteristics of each neighborhood”;
- Ikea has contributed to its success by visiting homes in its markets to ensure a deep and detailed knowledge of its consumers. It does so each and every year. Ikea can then use this knowledge to understand how its customers live their lives and tailor product ranges and plan store layouts and promotions accordingly. This willingness to change has become ever more important alongside Ikea’s increasing global expansion – crucial for a company with plans to enter India – a furniture market worth US$10.8 billion in 2013, with strong growth prospects underpinned by favourable demographics, increasing incomes and a liberalising retail sector;
- SABMiller, the South African brewer, has launched Chibuku across Africa including Ghana, Mozambique, Uganda and Botswana. Chibuku is an opaque beer aimed at low-income consumers and competes with home brew. The beer is tailored to local tastes by using a different balance of ingredients in different countries; ingredients which are often locally grown. Africa’s fast-growing consumer markets represent a huge opportunity for brewers. In Ghana for example, volume sales of beer doubled between 2009 and 2013 to reach a total market size of US$819 million in 2013. Here Chibuku competes with Pito beer – generally home-brewed and sold by informal retailers and bars;
- Samsung has a “Built for Africa” range of products including a smartphone with dual-sim capability so that users can switch networks in order to find the best signal, a washing machine that uses 30% less water, and refrigerators that are designed to keep working even if electricity cuts out for several hours. Its multi-power TV can be powered by battery and solar cells as well as electricity from the grid, is energy-efficient and can cope with electricity surges. All of Samsung’s TVs in Africa can also cope with high humidity and temperatures;
- Mondēlez International has tailored its Oreos product offerings to suit local markets by introducing new flavours to suit its consumers’ taste buds; including green tea ice cream flavour and mango and orange flavour in the Chinese market. It is these tactics that have helped Oreo to become the brand leader in sweet biscuits in China, accounting for 16.2% of a US$4.2 billion market in 2014.
Understand your consumer
Respecting different traditions and values and acknowledging different lifestyles and tastes, whilst accommodating different income levels and distributional challenges, is key. This kind of strategic flexibility also allows multinationals to compete more effectively with established local players and entrepreneurs – allowing them to be agile and responsive to changes on the ground. The degree to which this happens should of course vary according to company culture, product or service and country in question; but ignoring the existence of unique local demands can be a costly and embarrassing error.