Survival Strategies for Local Companies in Emerging Markets
Survival strategies for Local Companies in Emerging Markets
In battles for emerging markets, big multinationals don’t hold all the advantages. However, local markets do get affected. The local markets suddenly face foreign multi-national rivals with many advantages: in terms of financial technology, financial resources, superior products, powerful brands, and seasoned marketing and management skills. Often, the survival of the local players in the markets that are emerging is at stake.
Many questions arise in the head of the local player as to define ways to overcome this new but powerful entrant into the local market. Many of the local players seek the help of the government to reinstate trade barriers or any kind or form of support. They have two options:
• To become a subordinate partner to a multinational or
• Simply selling out and leaving the industry.
Two key questions that needs to be addressed by every manager in emerging markets:
✓ How strong are the pressures to globalize in the industry?
✓ How internationally transferable are the company’s competitive assets?
Once these questions have been addressed, a local player can better understand the basis for competitive advantage in the industry and the strengths and weaknesses of the multi-national rivals.
Just because a multinational enters the local market, it does not mean that they have a better advantage over the local player considering the brand that they have developed in the international market.
To answer the first question, the company must understand the products that they are manufacturing. For example, aircraft manufacturers, computer chips and telecommunication switches have to seek to globalize because they have an enormous fixed cost for their product development and they can only survive by selling in multiple markets. Moreover the products that they seek to globalize are standardized products and customers are satisfied with that.
In battles for emerging markets, big multinationals don’t hold all the advantages. However, local markets do get affected. The local markets suddenly face foreign multi-national rivals with many advantages: in terms of financial technology, financial resources, superior products, powerful brands, and seasoned marketing and management skills. Often, the survival of the local players in the markets that are emerging is at stake.
Many questions arise in the head of the local player as to define ways to overcome this new but powerful entrant into the local market. Many of the local players seek the help of the government to reinstate trade barriers or any kind or form of support. They have two options:
• To become a subordinate partner to a multinational or
• Simply selling out and leaving the industry.
Two key questions that needs to be addressed by every manager in emerging markets:
✓ How strong are the pressures to globalize in the industry?
✓ How internationally transferable are the company’s competitive assets?
Once these questions have been addressed, a local player can better understand the basis for competitive advantage in the industry and the strengths and weaknesses of the multi-national rivals.
Just because a multinational enters the local market, it does not mean that they have a better advantage over the local player considering the brand that they have developed in the international market.
To answer the first question, the company must understand the products that they are manufacturing. For example, aircraft manufacturers, computer chips and telecommunication switches have to seek to globalize because they have an enormous fixed cost for their product development and they can only survive by selling in multiple markets. Moreover the products that they seek to globalize are standardized products and customers are satisfied with that.
References: • Niraj Dawar & Tony Frost “Survival strategies for Local Companies in Emerging Markets”, Harvard College, p 123-129