Multinationals, with their big Western hats on, often try to force-fit conventional business models to emerging markets. That is a recipe for disaster.
According to the authors of Winning in Emerging Markets, the most important feature of any market — and the key differentiator between emerging and developed markets — is the ease with which buyers and sellers can come together. While developed markets have mature mechanisms that make this interaction easier, emerging markets have ‘institutional voids.’ The lack of enabling mechanisms — physical infrastructure, credit card issuers, market research firms, head-hunters — makes it tough to do business. The key to success, their refreshing take says, is to spot these voids, and work around them, or fill them.
Internet auction site Deremate.com, for instance, succeeded in Argentina despite low levels of Internet penetration and underdeveloped payment systems and delivery infrastructure. Unlike eBay’s consumer-to-consumer stance, it positioned itself as a business-to-consumer site: “A pricing guide for customers outside urban centres and without access to other information intermediaries and a useful tool for consumers with low incomes, in particular, to monetise assets.”
The book has case studies of multinationals that have navigated this tricky environment, like GE, GM, McDonalds, L’Oreal, Metro Cash and Carry, The Home Depot, Monsanto, Tetra Pak and Microsoft.
The good thing is that unlike a lot of other ‘emerging markets’ books, the authors don’t restrict themselves to India and China examples. A substantial section of the book offers cases studies of emerging multinationals from Russia, Argentina, Turkey and Brazil, and how they can compete.
There has been a lot of literature on the whole emerging markets theme, so this book frequently treads old ground. But its value lies in the frameworks and tool kits it offers to help one understand their institutional context better. Winning in Emerging Markets: A Roadmap for Strategy and Execution.
By Tarun Khanna and Krishna G. Palepu with Richard J. Bullock; Harvard Business Press; 247 pages; Rs. 695
(This story appears in the 18 June, 2010 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)