Reprint: R1312J
Companies in developing countries are often so focused on chasing growth that they fail to invest in improving their innovation, operations, and brand management. So despite enormous reach and revenues in the billions, they’re unprepared when demand growth slows and competition from increasingly savvy developed-world multinationals intensifies. The once high-flying Chinese automakers BYD and Chery have landed hard. In contrast, another automaker, Great Wall, and the appliance maker Haier have won early competitive advantage.
In their efforts to compete, emerging-market companies should consider four stages: (1) Seize the moment and invest in the basics, such as payroll, finance, factory operations, and employee management. (2) Build strength by learning (through licensing or contract manufacturing, for example) from established companies. (3) Scale and consolidate, keeping product lines and markets relatively narrow. (4) Move up and out, with a strong portfolio of brands, innovation capabilities, advanced technology, marketing, and sales.
Many of today’s emerging giants face an existential threat they didn’t see coming: The headlong growth that put them on the map isn’t enough to sustain them when their industries mature or their geographic markets experience the kind of cooldown that’s occurring right now in China and India.
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