Monday, October 10, 2011

Going Global by Going Local

By Virgil Carter

Many non-profit organizations are looking for growth by developing strategies aimed at emerging-market nations.  And for good reason. Consider the fact that “in 15 years’ time, 57 percent of the nearly one billion households with earnings greater than $20,000 a year will live in the developing world.  Emerging markets will represent an even larger share of the growth in product categories, such as automobiles, that are highly mature in developed economies”, according to a recent article in the McKinsey Quarterly. Seven emerging economies—China, India, Brazil, Mexico, Russia, Turkey, and Indonesia—are expected to contribute about 45 percent of global GDP growth in the coming decade. Authors Yuval Atsmon, Ari Kertesz and Ireena Vittal write that there are significant growth opportunities for organizations that develop the right strategy to tap into these markets.  What’s the right strategy?

According to the authors, as developing economies become increasingly diverse and competitive, global organizations will need strategic approaches to understand the variance within countries and to concentrate resources on the most promising submarkets.  The authors suggest a concept they call “city clusters”, a collection of relatively homogenous, fast-growing cities.  They quickly point out those countries such as China, India and Brazil different significantly in their development and markets, making a one-size-fits-all strategy ineffective.   Of course, most leading corporations have learned to address different markets in Europe and the United States. But in the emerging world, there is a compelling case for learning the ropes much faster than most companies feel comfortable doing.

The appropriate strategic approach will depend on the characteristics of a national market (including its stage of urbanization), as well as a company’s size, position, and aspirations in it. What’s clear, according to the authors, is that traditional country strategies and other aggregated approaches will miss the mark because they can’t account for the variability and rapid change in these markets. As the battle for the emerging-market shifts into higher gear, organizations that think about growth opportunities at a more granular level have a better chance of winning.

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