Emerging giants: building world-class companies in developing countries

Companies in developing countries display certain advantages in their markets over multinationals. First, they know how to operate in an environment that lacks easy access to capital and a good transport infrastructure.

by Harvard Business Review

When developing nations open their markets, multinationals find it easiest to market to the richest consumers who want the same quality and attributes as goods and services in the developed world. And they pay the same prices.

However, multinationals find it hard to reach other markets such as those at the ‘bottom of the pyramid' who can only afford the least expensive. The lack of market research makes it hard for outsiders to understand the different consumer segments; and the poor infrastructure makes it hard for them to deliver in the hinterland.

Local companies, however, take advantage of their knowledge. For example, Jollibee Foods does well because it knows that Filipinos like their burgers to have a particular soy and garlic taste. In China, Haier modified its washing machines so that rural consumers could use them to clean vegetables (which they were already trying to do).

Global giants from the developing world grow in three ways: first, they look for customers in advanced markets that they can serve from home; second, they look for new developing countries to operate from once their home base becomes too expensive; and third, they sell branded products or serve niche markets to gain more value.

Emerging giants: building world-class companies in developing countries
Tarun Khanna and Krishna G Palepu
Harvard Business Review, October 2006

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