Wharton School Publishing
Emerging Markets: Executing on the Opportunity

Until recently, most "first-world" executives paid scant attention to emerging markets. There couldn't possibly be enough revenue to be worth the trouble, could there? But, thanks to the work of C.K. Prahalad, Stuart Hart, and others, many companies have begun to recognize these markets' potential. Some even view them as tomorrow's most promising source of rapid, sustainable growth.

If the opportunity is immense, executing on it is immensely challenging. How do you sell electronics without reliable electricity? How do you distribute consumer goods without reliable transportation? What does your brand mean to your new customers? How do you introduce innovations that align with their deeply held values and beliefs?

In The 86% Solution: How To Succeed in the Biggest Market Opportunity of the Next 50 Years, recently published by Wharton School Publishing, Vijay Mahajan and Kamini Banga offer specific, realistic guidance for profiting in developing markets — and some very creative strategies.

Begin by designing products that reflect local environment and culture, say the authors. In building a car for rural India, Hindustan Motors recognized its true competition: not Ford, but the traditional cattle-drawn bullock cart. Hence, the boxy Rural Transport Vehicle: slender enough for narrow streets, with a tight turning radius, high clearance, excellent shock absorbers, eight gears, and folding seats for hauling up to two tons of cargo — or 20 people.

How do you sell "time-saving" laundry detergent where hand scrubbing is a powerful symbol of familial love? You reformat it as a bar of soap, adding superior hard-water performance. Now, mothers throughout the developing world can continue to show their love in time-honored ways — and get cleaner clothes, too.

Many obstacles can be recast as opportunities, say Mahajan and Banga. For instance, where infrastructure or technology doesn't exist, you may have an opportunity to "leapfrog." (Classic example: the breakneck growth of wireless networks throughout Africa, where reliable wired phone service is scarce.)

Similarly, you can sometimes gain competitive advantage by building your own distribution systems, or effectively leveraging idiosyncratic channels that already exist — such as the tiny shops known as sari-sari stores in the Philippines, tiendas de la esquinas in Mexico, and paanwallas in India. Create multiple levels of distribution, the authors recommend — and exploit temporary "distribution bubbles" such as carnivals and market days.

Finally, don't neglect the "ricochet economy": global social networks connecting emigrants with friends and family back home. Increasingly, companies are marketing products that can be paid for in North America but delivered to relatives half a world away.

Mahajan's previous work has earned a lifetime award from the American Marketing Association. So it's not surprising that he's especially strong on marketing issues. In particular, he carefully walks you through the tradeoffs associated with localizing existing brands, buying and harnessing local brands, or building new local brands from scratch.

Unlike some recent writing in this area, The 86% Solution goes beyond reaching "the poorest of the poor." The authors certainly introduce techniques for marketing to impoverished customers. (For instance, they discuss single-use packages, a.k.a. sachets, which account for roughly $1 billion of Hindustan Lever's sales on the Indian subcontinent. That's roughly equivalent to the revenues of leading Indian IT outsourcer Infosys.) But they also offer guidance on accurately segmenting emerging markets, so you can reach fast-growing middle classes and the newly affluent.

The 86% Solution's diverse case studies range from room-temperature "ready-to-eat" meals to MTV's localized programming initiatives (the Osbornes make no sense in India). "Day-in-the-life" snapshots add humanity to the authors' strategies and statistics. Here are devout Muslims wearing chadors and plastic surgery bandages. Photographers earning their livings with battery-operated HP cameras and printers. Unilever distributors working on foot in rural villages. Here, too, are South Koreans watching the flat-screen TVs built into their LG refrigerators (which also contain Web-connected video cameras, so they can oversee their children from work).

While all these customers fit into the "86%" of the world with average annual per capita GNP below $10,000, they obviously inhabit very different markets. Still, there are commonalities. For instance, most emerging markets are disproportionately young — and more brand-aware and quality-sensitive than you might expect.

Emerging markets are evolving rapidly, and in certain respects, their evolution can be predicted. Mahajan and Banga offer seven strategies for "developing with the market": from uncovering opportunities associated with the "growing pains" of development, to exporting locally-made products back to North America.

Simply stated, The 86% Solution heralds a new era in the relationship between western businesses and emerging markets: the moment when you can move beyond discovering opportunities, and start delivering on them.

The 86 Percent Solution: How To Succeed in the Biggest Market Opportunity of the Next 50 Years
By Vijay Mahajan and Kamini Banga
Wharton School Publishing
Publication Date: October 14, 2005
List Price: $26.99 USD
ISBN: 0131489070

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