Posted By Jeff Moad, November 02, 2011 at 12:11 PM, in Category: Global Value Networks
Emerging markets such as China, Mexico, Brazil, and India will account for 58% of global growth between 2010 and 2015, according to a recent Deloitte projection. By contest, the G7 developed countries will account for only 32% of global growth over the same period.
It's not surprising, then, that manufacturers are increasingly focusing on strategies for tapping into growth in the developing world.
But what works, and what doesn't? According to a recent Deloitte survey, the extent to which manufacturers invest in company-owned operations--production, supply chain, sales and marketing, etc.--in emerging markets has a lot to do with how well and how fast they are able to drive revenues there. The survey indicates that among large companies ($1 billion plus in revenues) with company-owned operations in at least five developing markets, 60% have exceeded their revenue goals over the past three years. Of large companies with company-owned operations in four or fewer developing countries, only 32% reported having exceeded revenue goals over the same period.
"Company-owned operations in local markets may provide advantages such as greater knowledge of customer needs and buying habits, greater brand awareness in the market, and more experience in navigating government approvals and procedures," the report concludes.
Along similar lines, most of the 628 executives surveyed--60%--said organic growth is their number one strategy in developing markets. Only 20% said the strategy revolves around joint ventures with local companies, and only 10% said it is based on acquisition.
So what doesn't work? Forty-one percent said pursuing non-traditional distribution channels hasn't served them well in developing countries. Offering their products in smaller packages at lower cost has been a bust for 28%. And, perhaps surprisingly, attempting to conduct research and development in developing countries has not worked out for 24% of respondents.
How do these experiences match with yours? Is a company-owned, organic growth approach the right tack in every developing country? Under what conditions can alternative strategies work?
Written by Jeff Moad
Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit