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Competitive Strategy For Developing Markets


Competitive Strategy For Developing Markets

Traditional competitive strategy involves beating rivals on key selling points that matter deeply to a brand’s most important customers. This approach can lead brands to provide ever fancier, more complex offerings to a thin slice of demanding customers who supply the greatest profits—It brings us sport utility vehicles (SUVs) from Cadillac.

This is a solid approach for established markets because those Cadillac SUVs generate high revenue. However, it can utterly fail in tackling new markets, especially in developing countries. In such settings, direct competitors often do not exist, and success comes from addressing barriers to market development rather than beating out other brands.

It is hard to observe something that has not yet happened. On the other hand, competitors are easy to spot, and it is persistently tempting to focus on what is readily seen. Resist this urge. Competitors may be your allies initially in generating demand. Rigorously charting barriers to consumption and your strategy for surmounting them will help to keep the focus where it belongs.

Competitive weaknesses, of course, should be exploited. In some emerging markets, and especially in the world’s smaller economies, the cozy, cartel-like nature of competition among a small number of brands creates ample opportunity to undercut prices. If an upstart is targeting customers who are relatively unimportant for existing brands, the incumbents often will hold back from lowering their prices to match the entrant. The new brand may fail for any number of reasons, and it would be difficult both economically and politically for the established brands to raise prices back to their former level. While it enjoys a price advantage, the new brand can hone a low-cost business model and build a formidable market position before the incumbents start to counterattack.

The Power Of Distribution

Success in emerging markets often hinges on one variable: distribution. Take, for example, the soft drink industry. The developing world generally can be divided up between red and blue countries, where either Coca-Cola or Pepsi dominates. Each company’s market position has little to do with local tastes but rather results from an ironclad control of distribution networks. It is amazing how in a village miles from the nearest road, with no power lines and little clean water, there can be a stand selling soft drinks. The sophistication of these networks is truly remarkable. The networks frequently are proprietary, and if a merchant were to start stocking a rival’s products, he could find himself quickly cut off from supply of the dominant brand. Worse, his refrigerator could be repossessed by the bottling company. With few ways to win a foothold in the market and scale economies being a critical factor in distribution, it is very hard for a soft drink upstart to gain traction in a new territory.

With developing countries being so diverse, brands need to map out what advantages translate effectively between national markets. After all, customers in Uruguay are not going to care all that much about a company’s leading position in Bangladesh.

Advantages that can transfer across countries may include:

  • Brand. The allure of global brands is somewhat overstated, given that in consumer products they tend to concentrate in sexy industries such as sport and fashion that have worldwide stars. However, in business-to-business (B2B) markets, there can be more potential. It is challenging to cost-effectively create a B2B brand with the power to pull in potential customers, but creating case studies of success in relevant environments is more feasible. Software companies, for example, make good use of implementation case studies to illustrate their impact.
  • Economies in research and development (R&D) and production. In some fields, global scale means cheaper sourcing and more advanced offerings. In aircraft, semiconductors, and automobiles, big worldwide companies tend to rule. That doesn’t preclude emerging market firms becoming such behemoths (witness the rapid growth of Chinese car brands and Brazil’s Embraer in aircraft), but it definitely raises the barriers against their doing so.
  • Technology pipeline. Western market leaders can have abundant in-house expertise and technology to create cost-effective offerings for emerging economies. The challenge may lie in fighting ingrained impulses to engineer expensive solutions that lose sight of real market needs. When company leadership pushes staff to stay customer-centric in their thinking, technology pipelines from developed nations can convey real advantages.

The Blake Project Can Help You Expand To New Markets. The Brand Growth Strategy Workshop

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

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