strategy+business Winter 2013 : Page 68

B E S T B U S I N E S S B O O K S 2 0 13 / G L O B A L I Z AT I O N Brand Breakouts Ahead 68 The first wave of multinationals from emerging markets have already arrived on the global scene. In fact, several companies, including China’s Sinopec, India’s Reliance, and Brazil’s Vale, have earned spots on the Fortune Global 500. But these pioneers are typically large state-owned enterprises in foundational industries, such as financial services and telecommunications. In their new book, Brand Breakout: How Emerging Market Brands Will Go Global, Nirmalya Kumar and Jan-Benedict E.M. Steenkamp, professors at London Business School and the University of North Carolina’s Kenan-Flagler Business School, respectively, explain why that’s the case. According to the authors, the pioneers are thriv-ing so far because of their preferential access to capital, resources, and large, fast-growing domestic markets, not because they possess strong brands, technology, or other firm-specific advantages. For example, no Chinese or Indian names appear on Interbrand’s 2012 list of the top 100 global brands, and few Western consumers can spontaneously identify a Chinese or Indian brand. This may be good news for established consumer-facing companies from developed nations, but Kumar and Steenkamp believe the current situation is unlikely to last for long. No emerging market has evolved into a developed one without spawning at least a few global brands along the way. The ability of emerging market companies to build powerful brands and migrate up-market and overseas is crucial for the upgrading of the economy as a whole. Kumar and Steenkamp refer to this process as brand breakout and describe eight path-ways that emerging market companies can pursue to launch their global products and services. Some routes are strategic and involve reposition-ing the entire firm, whereas others are much more tac-tical. For example, the highly strategic “Asian Tortoise Route” requires establishing a beachhead niche in a developed market by selling a decent product at a very low price, and then, in an upward spiral of interlock-ing steps, increasing product quality and price until the brand achieves a dominant market presence across the entire price/quality range. This approach was, of course, pioneered by a group of now global Japanese firms, in-cluding Sony and Toyota, and later adopted by a host of South Korean and Chinese firms, including Hyundai, Samsung, and, more recently, Haier. The “Business to Consumer Route” is similarly strategic. On this path, the emerging market firm first enters the industry as a business-to-business contract manufacturer for glob-al retailers (such as H&M or Walmart) or consumer brands (such as Apple or Nike). Then, it enters an adja-cent product category or a higher value-added business with its own consumer products. Witness how China’s Galanz went from being an OEM to being a branded player in microwave ovens. On the other hand, the “Diaspora Route” is far more tactical, and simply requires following first-gen-eration emigrants into developed markets, as many of these potential customers retain at least some of their traditional brand preferences and consumption pat-terns. This provides a foothold from which the brand can subsequently be launched into more and more con-sumer segments. Notable examples include India’s Re-liance BIG cinemas and Malaysia’s Maybank Islamic banks. A variation is the “Reverse Diaspora” path, through which a brand such as Hong Kong’s Mandarin Oriental Hotels or Mexico’s Corona beer successfully expands globally by tapping the awareness generated by tourists and other visitors to its home market. Another tactical path is the “Positive Campaign Route,” which some emerging market firms have used to overcome po-tentially negative consumer perceptions by obscuring the country-of-origin association, among other tactics. Unfortunately, not all of the eight routes are equal-ly compelling, and the last, the “National Champion Route,” seems largely disconnected from the rest and comes across as a bit of an afterthought. It is also un-fortunate that many of the case studies are from China and the automotive industry, as neither author is an in-dustry expert or native to China, so their explanations occasionally sound a bit naive. Nevertheless, Kumar and Steenkamp provide plenty of useful, real-world ex-amples, and the book is well grounded in academic re-search, yet admirably free of scholarly jargon. Beware Rough Diamonds strategy+business strategy+business issue issue 73 73 best books 2013 globalization The large companies described by Kumar and Steen-kamp are probably already on the radar of established MNCs; however, a second wave of lesser-known emerg-ing market firms are just beyond the horizon and rap-idly approaching. These new competitors are smaller, privately held companies from the BRIC nations (Brazil, Russia, India, and China), and some of them are already posting long-term growth rates far higher than those of most of their counterparts in both emerging and devel-oped economies. Under the auspices of the SKOLKOVO Institute for Emerging Market Studies, Seung Ho Park and Nan

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