Sunday, July 12, 2015

Crossing Borders

Bottom-Line Up Front (BLUF) – Companies that aspire to have a fully global presence need to understand how competitors operating in emerging markets will affect their total market share.  Additionally, they need to ensure that their company is ready to compete with cheaper yet similar services offered by companies in emerging markets.

Brazil, Russia, India, China, and South Africa or BRICS are among today’s leading emerging markets and according to the Economic Times, in 2013 trade among them was estimated at $350 billion dollars.  As these countries continue to emerge and the political systems adopt to allow global capitalism, leading companies in the United States need to be prepared prior to them entering into developed markets.  Companies in developed markets will need to prepare strategies designed to adapt to competition from emerging markets. 

While reading “What happens next? Five crucibles of innovation that will shape the coming decade”, I was particularly interested in crucible number 3 and 4; the global grind and pricing the planet.  The authors brought to light that trade flow is increasingly growing along with cross-border capital flows and the flow and availability of information in emerging markets.  Emerging market companies are finding ways to provide similar products offered by developed companies and a much lower price point.  As these companies begin to provide their products worldwide, companies in developed countries will need to find innovative ways to stay competitive.  Take the Indian company Bharti Airtel for example.  They have found innovative ways to provide an outstanding wireless service by keeping their costs below the industry average, outsourcing, and improving the cost of base stations.  Although their revenues are only 10 – 15 percent of their developed-world counterparts, they are using techniques that would make them competitive to the world’s competition. Once they begin to tap into developed countries markets, they will pose as a threat to companies if they can continue to provide great service at a low cost.

Prior to entering into emerging markets, companies need to find extremely innovative ways to offer similar versions of their western products at a price competitive to the market.  Companies need to follow in GE’s footsteps.  They were able to offer a product in India at 20% of what it would cost in Europe or the United States.  Finding ways to cut product costs also allowed them to eventually lower the price on their developed world model.  This is a great example of understanding your market and adapting to provide what the consumers demand at a competitive price.

Overall, it is going to be incredible important to monitor what competitors in emerging markets are doing.  Understanding how they are providing services and what threat they can eventually pose to similar developed country companies will play a paramount role.  Being proactive and revamping strategy to stay competitive needs to happen prior to these new competitors entering the market.

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