Sunday, July 26, 2015

Emerging Global Markets

Emerging global markets have the potential to provide a testing grounds for some (but not all) disruptive technologies.   Earlier we examined foreign markets with different needs including: notably different budgets, infrastructure availability, market maturity and billions of future consumers.   In this weeks’ reading Clayton Christensen identifies a different type of emerging market made up of disruptive technologies within existing marketplaces.  New entrants introducing  disruptive markets have a few distinct advantages over established incumbents in related fields including greater ability to adapt and take risks.  I would suggest that foreign emerging markets may be an ideal location for well-established and profitable companies to nurture disruptive technology growth in related fields.

Not all strategies and products will work well in all markets.  Nucor’s mini mills require scrap steel that may not be available in all areas1. However in some instances established market players could more easily introduce disruptive technologies in foreign markets than local markets due to resistance from current customers and investors.   These same investors may be eager to invest in well thought out expansion into global markets. 

Introducing disruptive technologies may not be a viable local option for established players yet may provide an uncontested blue ocean opportunity overseas.

Technologies that are successful in emerging foreign markets can later be adapted to meet new and niche local markets while fending off competition.   For instance advances in portable ultrasound that provided China with $1500 models2 have been expanded to offer an additional range of ultrasounds models in the US ranging from $50003-$15,000.  This broader range of products can expand into new local markets such as small veterinary offices or more accessible locations such as nursing stations.   

Developing and selling several million units overseas provides the opportunity to then adapt special purpose units for smaller segments of the US market, while still maintaining a dominant share of high end market devices.   Basic models can be demonstrated in the US as working prototypes, identifying prospective market interest prior to customization.

Overseas market innovations may provide distinct advantage over launching new products in existing local markets.   Similar to Honda’s off road motorcycle expansion, a small overseas sales force can have a minimally invested budget, the freedom to investigate new markets, and fewer restrictions.  Exploratory endeavors in foreign growth markets without the scrutiny/hindrances of established customers, supply chains, investors and headquarters can provide for greater agility to experiment several times in a short period of time.  Such low cost ventures have the capacity to fail without incurring major losses to the primary organization.  HP’s Kittyhawk project on the other hand attempted to invest heavily in a new, unproven high-cost local market.

The willingness for emerging third world countries to embrace low cost solutions that solve notable problems may further create opportunities for government subsidies or support to identify new markets, especially if it might mean building a local factory.  

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