James layard growth strategies in emerging markets


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James layard growth strategies in emerging markets

  1. 1. Growth Strategies in Emerging Markets - Examples from India James Layard Partner, Consumer Goods & Services, ASEAN Copyright © 2008 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. Opportunity to build a Globally Significant Domestic Business and a Regional/ Global Operational Base in India • Emergence of a large middle class with higher disposable Consumer income Market • Increase in discretionary spending Growth • Growth in Fast Moving Consumer Goods industry at CAGR of 11% till 2015 & Consumer Durables at CAGR of 6.5% till 2011 • Increase in infrastructure demand and spending Infrastructure • Public private participation Boom • Global companies participating as equipment suppliers, EPC contractors and as infrastructure operators • Skilled and low cost workforce Significant • Technically trained and young population skill base for • India attractive as a low cost sourcing/manufacturing Operations location • India attractive as a Global R&D Hub
  2. 2. India is expected to become the 5th largest consumer market by 2025 with Private Consumption of over US$ 1.5 Trillion CAGR Private consumption 2008 Private consumption 2025 (US$ Bn) (US$ Bn) China 2859 7.9% India 1521 7.3% Brazil 777 3.5% Japan 3687 1.4 % Source: MGI report on consumer market MNCs have capitalized on this opportunity to build large domestic businesses in India with significant exports India Share of Export % of Revenue* Global India MNCs in India ($ Bn) Revenues revenues Maruti Suzuki 6.9 20% 17% ITC (BAT) 6.0 15% Nokia 4.2 6.8% 20% Vodafone 4.2 6.1% HUL (Unilever) 3.8 6.3% 11% LG 2.8 6% 14% Siemens 2.3 2.1% 35% Samsung 1.7 2% 4% Bosch 1.5 2.4% 16% * Revenues are for 2008-09 4
  3. 3. Scale and profitability demand an India- specific strategy. Elements of Strategy Key Implications Become an “insider” • Play in the mass market • Adapt to local conditions • Leverage on global firm – sensibly Develop unique ‘go-to’ market • Understand size & diversity of Indian market ways • Address fragmented markets • Expand into rural markets Work backwards from customer • Address market before setting up manufacturing • Optimize operations, run a tight ship India-centric management • Local team at key management positions • Decision making autonomy Inorganic growth strategy - • Poor Historical performance of alliances pursue but with caution • Acquisitions have worked better – but availability of majority stake in quality assets few and far between Hindustan Unilever has become the largest FMCG player in India with its mass market focus and localization strategy Leveraging Hindustan • Sales ~ $3 Bn. HUL is also one of India’s largest exporters. • Brands strongest in respective categories with over 2/3 of the Indian population using HUL products everyday. • HUL accounts for 27% of Unilever’s sales in the APAC region & 40% of profits Go after the mass market Localize • Wide distribution network covering • Top 6 brands contributing 53% of sales 6.3 million retail outlets are Indian • Deep rural focus with initiatives like • Employs over 40,000 Indians and several Project Shakti covering 50,000 key roles in Unilever worldwide have villages been held by Indians • Low price and low unit pack • First foreign subsidiary to offer equity strategy for the price sensitive % to the Indian public Indian middle class • Aids in community development of India
  4. 4. LG Electronics has become the market leader in white goods through customization of products and India-centric management Life (in India!) is Good • One of the last to enter in 1997 amongst MNCs (Samsung, Sony, Panasonic) • Initially unsuccessful through JVs with Indian partners • Market leader Invest for growth Localize and own mass market • Customized product portfolio • Distribution innovation – High degree of regionalization – Rural penetration with targeted – Local language menus pricing – Innovative differential pricing • Marketing and brand building • Invested in large local – Use of brand icons manufacturing capacities upfront – Association with national passion - cricket • Supply chain efficiencies and distribution focus • Indian Management team Suzuki has become the undisputed king of the auto industry in India by offering an extensive product portfolio supported by vast distribution network Counting on India • Sales $6.9 Bn with profit soaring fifteen-fold in five years • Controls half the car market selling more cars in India than even its home country • Regard for the Suzuki brand is very high. Leads in the customer satisfaction survey year on year Extensive Product portfolio Wide Network • Offers 11 car models with 150 • Largest network of dealerships in India variants for almost all customer covering 230 cities segments • Largest network of service centers • Low cost entry level cars covering 1094 towns and cities • Focus on fuel efficiency • Setting up a network of driving schools • Owns Insurance and Finance endeavors in India
  5. 5. Pepsico India has done everything from mega-marketing, lobbying, to contract farming to become the “right choice “ in India Pepsi : “Ye Dil Mange More ! “ Entered in 1988 – by creating a joint venture with the government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas India Ltd..In 1994 it bought out its partners It is the 4th largest consumer products company in India Holds nearly 40% market share of Carbonated soft drinks (volume),19%of juice & fruit-based beverages and nearly 13% bottled water Localization Globalization Strategy • Local adaptations • Sustained advertising and marketing – Introduced returnable glass activities to engage with the bottles to cut the cost customers – Small bottles for lower unit cost • It has more than 36 bottling plants – In keeping with local tastes, including 13 Company & 23 Pepsi launched its Lehar 7UP in Franchise owned ones the clear lemon category • Has invested extensively in CSR in – “Nimbooz” as an adaptation of India and has fostered partnerships local flavour was a great success with farmers and suppliers • Employs over 150,000 Indian employees Holcim has become the market leader in Indian Cement and is now pursuing unique partnering initiatives Cementing Leadership • Late entrant in the Indian market among multinationals. • Unsuccessful initially (in 2002) – JV with small Indian players • Became market leader in India with approx 25% market share and ( 15%+ of its global capacity ). Acquire Big Become part of fabric of society • Acquired two very large players to • Efficient penetration strategy obtain market leadership – Greenfield plants with focus on • Left no room for global less represented regions competitors to grow inorganically – Strategy to tap rural markets. Innovative partnerships Strategy to capitalize on the real estate boom
  6. 6. Growth Strategies in Emerging Markets - Examples from India James Layard Partner, Consumer Goods & Services, ASEAN Copyright © 2008 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. Mcdonald’s India is the epitome of a successful model based on global innovativeness and Indian sensitivities to establish a rich brand identity Mcdonald’s India: As Indian as you and me Entered in 1996 – has nearly 177 outlets in India today Nearly 18% in the quick service category in northern India JV in India between McDonald’s and two local Indian partners (Connaught Plaza Restaurants Pvt. Ltd. and Hardcastle Restaurants Pvt. Ltd. in the West) Localization Global Support with Local Management • Product customization • Joint-venture company managed by – Includes vegetarian selection Indians with complete flexibility to run the business – Absence of pork and beef from menu to cater to Indian culture • Set up an extensive cold chain – Indian items such as aloo tikki distribution system to cut down operational wastage – Separate veg and non-veg kitchens • Identified and developed local • Suitable Pricing Strategy suppliers for its India business – Purchasing power based pricing • Employs over 5000 Indian employees – Availability at different price points
  7. 7. Nokia has become one of the largest MNCs in India through deep penetration and understanding the needs of the Indian consumer Connecting India • Entered in 1995 – One of the largest MNCs in India today • Over 60% Market share in India vs. 35% market share globally. • 2nd largest Market for Nokia globally in revenue terms. Understand the consumer Defend leadership • Invested early to understand the • Ventured into CDMA to target Indian consumer customers of next generation • Pricing and product customization telecom users – Comprehensive portfolio • Set-up manufacturing base in 2006 – Unique offerings targeted to • Sustained advertising and marketing India market characteristics activities with eye towards regional • Unique Distribution Strategy preferences and brand icons India has become Vodafone’s largest market by virtue of a single acquisition and it is now leveraging its global solutions You and I(ndia) • Organic entry not an option - no additional licenses sanctioned. • Capitalized opportunity to buy Hutch stake from exiting partner • India’s 40 mn subscribers - the largest base for it worldwide. Acquire Big Integrate and Localize • Acquired 4th largest operator • Handset bundling for $ 11 Bn • Network sharing • Greater rural focus to touch 100 mn customers by 2010 • Innovative product offerings – Blackberry and iPhone • Increased focus on customer service
  8. 8. India has the 4th largest GDP in the world. With ~10% growth expected, it will soon have GDP greater than Japan GDP (PPP), 2009 GDP Growth Rate, 2010 - 2015 USD Trillions Percentage EU 14.5 EU USA 14.3 USA China China Japan Japan India X India Germany Germany UK UK Russia Russia France France Brazil Brazil Source: International Monetary Fund 15 Evaluating impact of cultural differences on business can be assessed along relationship, regulations and reasoning Relationship – How do we relate to others? Foreigners... Relationship TASK RELATIONSHI • focus on the task at “How do we P hand relate to DIRECT INDIRECT • are direct in others?” INDIVIDUA GROUP communication L • are time efficient Regulation – How do we make decisions? • follow a well-defined, Regulation fact based approach RISK RISK “How do we TAKING AVOIDING to issues make TIGHT LOOSE decisions?” SHARED CONCENTRATE Indians… D • are focused towards Reasoning – How we think? • Relationships Reasoning • are implicit in LINEAR CIRCULAR communication “How do we FACTS THINKING • are not high on time think?” adherence SIMPLE COMPLEX • value logical reasoning with Source: TMA Country Navigator Model Foreigners Indians complex thinking 16
  9. 9. Some key success factors emerge from evaluating successful MNCs in India Key Success Factors Unique products customized to Indian tastes Unique Products to cater to Mass market Products Comprehensive product portfolio Innovative pricing and pack sizes Innovative Significant discounts to retailers to drive volumes in consumer Pricing durables Extensive Extensive distribution network Distribution Rural focus Localized Supply Local manufacturing and local to reduce cost Chain India specific positioning, focus on regional preferences and use Priority to of brand icons Marketing Front end marketing precedes manufacturing Advertising and promotions on key products/new launches 17