Working with Emerging Markets

My work is mainly focused on qualitative research and data gathering for countries called emerging markets.  I thought that I would write about it after gaining a little more experience, but it would be good to write as a first step.  The countries I often request data and research from are (in order) China, India, Indonesia, Malaysia, Vietnam, Thailand, Brazil, Saudi Arabia, South Africa, Turkey, Russia and Mexico.  Including some rare countries, I’ve made requests to approximately 30 countries.  Occasionally there are also requests for quantitative research, however the majority of the inquiries are for brand audit jobs and reports on how certain brands are developing in countries.  Communications (advertising, etc.) and marketing, as well as business trends of those brands are included. 

I experimented with using a format, however because the content that people wanted to know differed depending on the client, I am now using data gathering and research that is formatted to correspond to the requested content.  The fees are mentioned on the website, however I’ve decided to negotiate beforehand because, as with Japan, etc., the amount may change depending on the content.  Negotiations beforehand include confirming each country. 

I began the business a year and a half ago and country expenses have risen between 10 and 20 percent.  When I inquired as to why, I received a letter-sized page covered in words explaining that it is because of the increasing price of goods from South American countries including Brazil.   Also, they will receive contact late at night or early in the morning.  In particular, Brazil asks for prices in line with the West, which by Japanese standards is extremely high.  The response was the same from other countries.  I think that their reasoning is correct, however when I spoke about it with each of our partner businesses in these countries, many are doing well, constructing buildings, relocating to expensive office buildings, and increasing personnel.   It’s no wonder they are increasing fees.  This isn’t necessarily happening in all countries and companies, and there are places that deal with us honestly.  Although it’s best if the costs remain steady for repeat requests, unfortunately there are few places that will do such a thing. 

For delivery to any country there is a tendency to protect.  In difficult cases, contact will come beforehand.  In requests from rare countries, the delivery date is adjusted to meet their own convenience and things are done on “that country’s time.”  Even so, it is sometimes delayed an entire day.  However, looking at the quality of the reports, honestly speaking, on average they are about 70 percent finished.  Because the person in charge also has an influence, it is hard to say country by country.  In particular, China and India often differ depending on the city.  The method I am using now is to first gather data using the internet and then base requests on that content.  When I started the business this was something that was lacking and I only proof-checked what I received.  I didn’t assume that the proof-check had taken place and I don’t know if the searching was poor, however incorrect information was written, and there are many times when outdated information was inserted into the report in order to increase the length.  Also, I was unable to make contact to say that it did not meet the requests, and there are cases where the information created was completely different.  At that time, on average 30 percent was completed and even though the deadline was met, the majority of the content had to be corrected.  While it is an amusing story to clients who really grasp the situations in other countries, it can be difficult to understand for people dealing with this for the first time.  Currently, in order to confirm things beforehand, workflow is being improved and the quality of items sent from other countries has improved as well.  And the earlier mentioned problem has increased to 70 percent.  Of course since I cannot submit something that is only 70 percent complete, I have to re-look up everything and confirm with the local area numerous times before submitting a report.  

The fact that Japanese apologize so often is often mocked, yet when receiving reports full of mistakes, I’ve only received apologies from 2 countries out of 30.  However, many countries will redo the work without any apology.  Instead of an apology, there is a “reverse” negotiation, etc. or possibly a direct phone call from the company boss saying that the fee is insufficient (requested work).  And, when trying to request that additional fees be paid, the content is laughable.  That’s all I can think.

What I’ve written up to now may sound critical, however it is not criticism.  There are probably some complaints.   I thought I had a high tolerance for stress, but I’ve developed three stomach ulcers.  Although the company is still young in terms of time, I’ve tried various methods and in the end, I think with a little more time, I’ll be able to write good reports.  Through this business, I’ve built new relationships and been able to grasp the situation in other countries through the eyes of representatives in each country, which has been huge.  Also, I’ve heard that representatives in other countries have learned a lot and utilize methods from here.  Some countries also have their own businesses.  Thanks to these things, the quality of reports on those countries has increased tremendously and it has become much easier to do business.  Also, I hope to write about ideas, etc. regarding brands in different countries and markets in about half a year from now.

Business domain not needed in a brand name?! A Starbucks story

The new Starbucks brand logo was a hot topic in the news last week.  The simple design eliminates the name “STARBUCKS COFFEE” and keeps only one part of the symbol, the siren (mermaid).  You can listen to Starbucks CEO Howard Schultz talk about the logo design transition online at   http://www.starbucks.com/preview

In the past, Apple Computer became Apple and now product brands such as iPod and iPhone, as well as Byte and Bite, have been developed with only the “apple” mark.  When it comes to famous brands (because of large amounts of communications such as advertising), many create environments that can communicate with only symbols, however Starbucks seems to be a little different. 

Starbucks had been doing poorly in the US, however the company seems to be improving.  According to published articles, its largest market outside the US is China, followed by Canada.  As of last December, the company had 406 stores in China and plans to increase this number to 1500 by 2015.  As part of the company’s 2011 business strategy, Starbucks is focusing on 53 markets outside the US with plans to open 300 stores around the world.  If we know its future China plans, most of these are likely Chinese stores.  

Starbucks is apparently focusing on continuing to develop Starbucks VIA  (Starbucks instant coffee developed two years ago), as well as creating more variations of products such as the Frappuccino for each local market. 

Recently, Howard Schultz made some interesting comments in the Wall Street Journal.  Sales apparently do well in China mainly from afternoon to night.  That’s why from now Starbucks wants to enhance morning and morning coffee.  I heard before that for Chinese who live in cities, breakfast is a light meal and they eat something between morning and noon.  Whether or not this remains a custom is unknown, however they have time to relax and take a breather.  This time is not long and therefore there has to be a store nearby.  This means that opening new stores and continuing to develop VIA instant coffee are probably vital to Starbucks. 

Back to the new Starbucks logo.  The reason for deleting COFFEE is that the company sells other items besides coffee and from now on will continue to focus on developing areas other than coffee.  In addition, for the company’s 40th anniversary the logo is being “rejuvenated.”  The point that feels a little different is that it is disconnected from its hometown or origin (Seattle).  Not only coffee, but also “STARBUCKS” has disappeared from the symbol itself.  “STARBUCKS” naming is derived from its hometown.  Perhaps they are putting effort into making strengthening markets outside the US part of the brand strategy.

B2B companies in emerging economies: SIEMENS in China

According to a recent study by the United Nations Conference on Trade and Development (Unctad), companies are shifting their foreign direct investment focus to emerging markets. The top three target countries until the end of 2012 are China, India and Brazil; the US, which was the number one target country for years, is now in fourth place. Russia and Mexico are in fifth and sixth place respectively, followed by Vietnam, Indonesia, Thailand, Poland and Malaysia.

German engineering conglomerate Siemens is part of this shift. For Siemens, growth in the Asia Pacific region, particularly Southeast Asia and emerging countries, is a primary strategy for the future. The company plans to continue to invest heavily in strengthening operations in key emerging markets, including India and China. Its investment into these countries will add hundreds of local personnel and allow the markets to be responsible for their own business and marketing, a strategy that differs from Siemens’ competitors.

Siemens has a long history of business with China, beginning in 1872 when it exported its proprietary pointer telegraphs to the nation. Today, China is the company’s third-largest market, behind Germany and the US. Siemens employs 43,000 Chinese in 90 joint ventures and has 61 regional offices. In the most recent quarter, Siemens reported a 35% increase in orders from China.

Siemens has continued to invest in China and has generated billions of euros’ worth of orders. The company announced that its environmental portfolio was expected to generate €4 billion in 2010, constituting 40 percent of the company’s China orders for the year. As of September 2009, revenues in China were €5.8 billion, representing 7% of Siemens’ global revenues; recent sales there have grown more than 14 percent.

Siemens China CEO Mei Wei Cheng recently said that the company’s strategy in China is focused on long-term development, and that the company must adapt to the changing market. The outlook for Siemens in China appears bright, as the company’s services can help China in such areas as urbanization, environmental protection, and demographic change. Siemens will focus on being more of a local company (Cheng was recently hired as the company’s first Chinese CEO in China) and on expanding its green technologies, which make up a significant part of its Chinese business today. Siemens also plans to develop its local R&D, as well as to invest in energy-saving and environmentally friendly technologies and solutions in China. Being more local allows the company to serve the entire Chinese market, including rural areas, in all sectors including healthcare. In addition, Siemens hopes that it can be seen as a local company rather than as an importer of high-end products.

China’s booming economy means more investments in infrastructure and an increased demand for green technologies. According to Peter Löscher, president and CEO of Siemens, “China has a very, very ambitious but very clear energy plan. We just deployed 1,400 kilometers [870 miles] of high-voltage direct current transmission line from Yunnan down to Guangdong, with an overall transmission loss of 5 percent. By 2050 the target of China is to have renewable energies be 25 percent of their energy mix. As they change their energy mix, we are able to help in all areas.” The company hopes to capitalize on the growing demands in the Chinese market. Some examples include:

-Helping China to create the world’s largest high-speed rail network. Last year, Siemens signed a $1 billion deal—one of its largest projects—with the Chinese Ministry of Railways to build the first 100 high-speed trains for the new network that will run between Beijing and Shanghai.

-Expanding global manufacturing for wind turbine plants in China. The plants produced will be used in China as well as exported. Siemens believes that China could become the world’s largest market for wind energy in the coming years.

-Preparing for the healthcare boom in China. The nation is planning to spend $125 billion upgrading its healthcare system, including building hospitals and clinics and expanding healthcare services to almost all citizens. Siemens is looking toward a rapid increase in its medical-imaging sales.  

For Siemens and other foreign industrial companies in China, there is growing concern over China’s handling of foreign investment, intellectual property, and technology transfers; as well as growing competition from domestic companies. However, with a renewed and strong focus on long-term development, local R&D and business, and green technologies, Siemens seems to be in China for the long run.

Brand marketing in emerging markets – VRICs/Lotte Mart

While Walmart expands in China, Brazil, and Mexico, a Korean conglomerate, Lotte, is aggressively moving forward with the launching of their department stores, discount stores, and supermarkets in emerging markets within the VRIC nations of Vietnam, Russia, Indonesia, and China.

The JoongAng Daily reports that Lee Chul-woo, the president of Lotte Shopping Co., has announced that he aims for Lotte Department Store to be among the world’s top 10 by 2014. In revealing the company’s eight-year plan for the flagship retail unit, he noted that they are currently ranked 13th in the world, with 2009 revenues of US$7.73 billion.
Lotte’s ambitions extend not only to their department stores, but to their chain of discount stores (or supermarkets), Lotte Mart, as well. An emerging competitor with Walmart, Lotte Mart has 184 branches, about 100 of which are overseas, with more planned globally. They are known for their success in the VRICs, and their expansion in these regions has been bolstered by M&As, especially in China and Indonesia.

According to the Jakarta Post, the Lotte group announced that it would be investing US$870 million in the Indonesian market within four years in order to become a leader in the country’s lucrative retail market. They acquired Makro Indonesia, a Belgium-based warehouse club (cash and carry wholesaler), in 2008, and are moving forward to become one of Indonesia’s top retailers.
Daniel Surya, chairman of dm-IDHolland, IDHolland group, offered some insights. “Makro was acquired by Lotte Mart in Indonesia recently,” Daniel says. “Makro was set to tap into the wholesale retail market with attractive bargains, but this wasn’t successful, as the stores are located far from the city where other players like hypermarkets Giant and Carrefour are more convenient for consumers to reach.” Daniel also mentions that Makro was known as a “low price and large quantity purchase” store, like Walmart or Sam’s Club. In Indonesia, Carrefour and other hypermarkets are located inside the city, often teamed up with shopping malls. To maintain a balance with other small- to medium-sized enterprises, they don’t operate outside of the city .
Lotte Mart’s challenges in the Indonesian market have just begun. True to their word, they recently launched their hypermarket in the Gandaria City Mall, a modernized mall that is the biggest in South Jakarta.

Lotte Mart is also looking to improve their business in Vietnam. Byung-Yong Noh, CEO and president of Lotte Mart Co., Ltd., said that after 18 months of operating their first store in Ho Chi Minh City, they have realized that the Co.opMart store chain, Vietnam’s leading retail store, is a favorite shopping destination for Vietnamese consumers.
Lotte Mart is showing interest in cooperating with Co.opMart’s operator, Saigon Co.op. Lotte Mart launched its first Vietnam branch in 2008; there are currently only two branches. However, they are planning on expanding their business by launching up to 30 retail centers by 2018. Saigon Co.op has 45 Co.opMart retail outlets today, and their plan is to have 100 by 2015. It seems that Lotte Mart has found the right partner for their marketing in Vietnam.
The Lotte group is also planning to build a “Lotte Center” complex consisting of a department store, a hotel, an office space and others in Hanoi, Vietnam, in 2013 as part of their increased investment in the Vietnamese market. Much like Indonesia, this is a key market for them if they are to become a global retailer.

In their “Vision 2018,” the Lotte group has set a target of US$18.9 billion for their retail sales, most of which will come from their overseas stores. Like other economic powerhouses, Lotte is foreseeing that their domestic market will soon be saturated. Becoming a global player is something they need to do, not just something they want to do.

From a branding point of view, Lotte Mart may need to consider making their brand more strategically visible than it is now if they are to become a global brand like Walmart and other international retailers. It will be interesting to see how their big leap to become a global player and retail brand plays out.

Brand marketing in emerging markets – China/Walmart

Since the fall of Lehman Brothers, there has often been talk about the fact that the retail industry has slowed.  However, despite this, the top company in 2010 for both the Fortune US 500 and Global is Walmart.  Although well known for its acquisition of Seiyu, Walmart is actually unfamiliar in Japan. 
The US recession helped boost the discount-specialist Walmart.  However, competitors have begun to do similar things and customers are apparently starting to leave Walmart.  In the slow US market, Walmart seems to be getting help from better conditions outside the country. 

There is an impression that Walmart has had some rough times outside of the US.  It pulled out of both Korea and Germany in 2006.   In Korea, it was sold to Shinseigae department store and in Germany to global competitor METRO Group. 
However, Walmart is doing well in Mexico, Canada, Brazil and China.  Over the past several years it has aimed at expanding business in Latin America and China. Same-store sales increased 10.6 percent in China, 7.6 percent in Brazil and 4.4 percent in Mexico, giving Walmart plenty to smile about.  

Why is Walmart doing so well particularly in China?  Before it became successful in China, Walmart didn’t just promote “buying American,” but put a lot of effort into localization.  An article written a while back by Gary Gereffi and Ryan Ong for the Harvard Asia Pacific Review said that in order to make sure items were “fresh” to the Chinese consumer, Walmart imported local fresh markets directly into their Walmart stores. 
For Chinese customers, “freshness” means being able to purchase freshly caught or picked items in a market, as opposed to a packaged item sold in a supermarket.  Over 95 percent of the items sold are supplied domestically in China.  Items produced in China are also imported into the US, which has created criticism over employment issues from the American public.  In addition, Walmart has made large donations to Chinese universities, as well as set up China’s first retail focused research facilities.

As its tagline, “Save Money. Live Better.”says, Walmart is famous for being a discount store.   In order to expand among and attract the middle-class Chinese consumers, Walmart is also putting efforts into making its stores feel “upscale.”  Although they don’t go as far as creating a “high-end” environment, they increase the quality of the displayed items.  This movement to focusing on the upmarket is something being talked about not only in China, but also in the US. 

Recently, Walmart has been increasing plans to open Sam’s Club stores in China.  The first store opened in 2002 in Shenzhen.  Currently there are 3 stores (Walmart China’s website says 3, the media says 4) and there are plans to open shops in Shanghai in December 2010 and Dalian in 2011.  Unlike with Japan or Korea, there seems to be more confidence in opening large size stores in China. 
According to Walmart China’s website, the number of stores including Sam’s Club has surpassed 189.  They site talks about the company’s contribution to China including giving employment opportunities to 50,000 people.  *Considering the employment problems in the US, it is something that can’t be helped even if criticized. 

Where does Walmart China go from here? Walmart is focusing not only on expansion, but also not forgetting to take actions to be “green” and eco-friendly.

From 2005 Walmart set some overall goals including the following:
1)     To be supplied 100 percent by renewable energy
2)     To create zero waste
3)     To sell products that sustain the world’s resources and environment
(Source: Walmart China Factsheet – Walmart China website)

Along with its top 200 suppliers, Walmart has made promises to make improvements in the energy efficiency of its factories.  Walmart has also promised to reduce its greenhouse gas emissions from its global supply chain by 20 million tons by the year 2015. 
Even in China, “green” activities are being promoted and there are goals to head toward building low-carbon supermarkets.  Although the content is a little unknown, there are promises to build new stores that use less energy and save more water.  Overall, by the year 2013 Walmart is aiming to reduce its greenhouse emissions by 20 percent of its 2005 levels.  By using LED lights and energy-saving refrigeration, there are apparently actual results.   

Besides these initiatives, Walmart has also created its Direct Farm Program and announced plans to sign contracts with 1 million farmers in China by the year 2011.  The same program is also being setup in Mexico and India. Green activities in a number of Walmart China stores are being promoted along with the Chinese government. 

Looking at Walmart China’s recent movements and trends, it seems as if the company is aiming to strengthen its global supply chain even further, however, as we touched upon in an earlier blog entry, it seems as if there is some relationship with the building of eco-cities. 

In 2008, Walmart revamped its logo design and changed its name from Wal-Mart to Walmart.   The day when “Walmart” becomes the pronoun for the next generation’s global supply chains and global retailing is likely not too far away.

Asia’s low cost carriers take off

The low cost carrier (discount airline) industry has taken off in Asia and in a very big way.  Now the world’s largest aviation market, Asia is home to dozens of low cost carriers from domestic start-ups to regional arms of legacy carriers.  According to market analysts, low-cost carriers in Asia could grow 20 percent over the next year alone and profits by these airlines are expected to be the biggest of any region this year.

While many North American and European discount airlines, which have been around for years (Southwest Airlines began in the US almost 40 years ago and Ryanair in Europe in 1991), are hurting along with the large legacy carriers, the Asian discount airline market has grown by 50 percent during the global recession.

Two trends taking place in Asia are increased competition and innovation.  As these airlines become larger and more successful, Asia’s (and other regions) large airlines are losing market share and starting low-cost brands of their own.  These tie-ups have the advantage of larger networks, resources for innovation and promotion, newer facilities, and established brands (as well as images of safety, service, etc).  For new entrants, the uncertainty of whether low cost carriers, who focus on short-haul/low-fare flights, can successfully transition to long-haul/low-fare flights, is another advantage at this time.  Competition will continue to increase as ASEAN countries move toward Open Sky policies set for 2015.

As competition increases and passengers have more options, innovation becomes key.  In addition to new routes, new markets, and promotions, innovative ideas include:

-Tiger Airways is considering “standing-only” (a vertical seat) tickets as an even lower cost option for passengers.

-AirAsia X marked its entry into New Delhi with promotional fares as low as INR 1.  This route features its new “Premium flatbed seats” which are standard in its business class.

-AirAsia recently implemented a Royal Bank of Scotland foreign exchange solution for its online ticketing.  The system automatically sets prices in any one of five global currencies (Australian dollar, Hong Kong dollar, UK sterling, Singapore dollar, US dollar) giving customers certainty about credit card charges and making it easier for the airline to mind cash flow.

What about Japan?

Once a market leader in Asia, Japan’s airline industry is in turmoil.  According to the International Air Transport Association, Japan has fallen behind due to a failure to cut costs, liberalize or make other necessary reforms to keep competitive.  Also, because the nation’s two legacy carriers, JAL and ANA have tightly controlled the domestic market, there is little competition (low cost carriers or even low fares).  Japan needs to make changes fast and the country’s closeness to China and strategic location as an entry point into Asia are huge opportunities.

Some of Asia’s low cost carriers have started to enter the Japanese market as well.  AirAsia plans to launch flights by the end of the year that will fly between Kuala Lumpur and Tokyo’s Haneda Airport and China’s Spring Airlines will fly between Shanghai and Ibaraki.  Faced with this new competition, ANA recently announced plans to launch its own low-cost carrier within the next year.  The to-be-named airline is expected to offer competitively priced international flights within six hours of Japan.  Will this airline be able to compete and will it be innovative enough to survive?

A quick look at a few of Asia’s discount carriers:

AirAsia (Malaysia):  The region’s low-cost carrier pioneer.  Since beginning service in 2001, AirAsia has become the dominant carrier in Southeast Asia.  Flights are no frills–no free food or drinks, no tickets or seat assignments (first Asian airline to do this), no refunds, no business lounges, and no loyalty program.  Aircraft is utilized as much as possible with an extremely short turnaround time.  The airline only uses one type of aircraft, uses secondary airports single type of aircraft is used, uses secondary airports, point to point network and lean distribution system (mainly internet sales via credit card, few sales offices and avoiding travel agents as much as possible).  AirAsia X, the airline’s long-haul/low-fare arm affiliated with Virgin and Air Canada was launched in 2007.  The network covers destinations over four hours from Kuala Lumpur.  AirAsia has continued to expand its network recently set a world record by selling half a million seats on the first day of its “Mind Blowing Fare” campaign.

Tiger Airways (Singapore):  Singapore’s largest low-cost airline in terms of passengers carried.  Tiger Airways’ cost structure is modeled after Europe’s Ryanair and includes carefully examining every aspect of the business to remove non-essential costs.  The airline charges for products and services, which they call “Tiger Add-On(s)” and includes charging for luggage based on weight, fees for preferred seats, and convenience fees for reservations and changes.  Tiger Airways also flies a single type of aircraft, a narrow body aircraft, and turns planes around fast.  They don’t spend money on advertising or marketing more than necessary and offer very few special promotions.  In an alliance with Thai Airways, Tiger Airways plans to launch a new low-cost carrier, Thai Tiger Airways, which will begin service in Thailand in 2011.  The new airline targets the domestic market, which has a huge potential for growth–only six million out of 65 million Thais have ever been on an airplane.

Spring Airlines (China):  China’s first low cost airline and based in Shanghai.  The airline began service in 2005 and flies a single type of aircraft to routes within mainland China.  Spring Airlines only sells tickets online and offers no complimentary food onboard.  Its first international route will be to Ibaraki Airport in Japan, followed by new routes to Korea and other Southeast Asian countries.  Thanks to dramatic growth in China, Spring Airlines has been profitable for the past five years and is looking to expand its fleet.

The industry is growing at an incredible rate and changing not only the industry itself, but also the lives of the people and the countries they service.  How will this effect business in Asia’s developed and emerging nations as well as global marketing and branding?  This is something we will keep watching.

Brand marketing in emerging markets – China/P&G

With stagnant markets and shrinking sales at home, companies around the world have turned to selling their products overseas, particularly in emerging markets such as China and India.  Nearly everyday we hear of Western corporations and their businesses in these countries. In business today having an emerging market strategy has become a necessity.

Our last blog post touched on P&G’s activities in India and today we take a look at China.  Be sure to check back for more posts and reflections on business in emerging markets.

China

Western companies have been in the Chinese market for decades, and for many, China is now one of their most important markets.  However, over the last several years there has been increasing pressure from the Chinese government and growing hostility toward multinational corporations (i.e. Google, Rio Tinto, etc.).  Doing business in China has become more difficult for US and European companies with increasing restrictions, limits on imports and exports, and protectionist policies and “buy Chinese” measures.  The growing friction presents problems not only for foreign businesses, but also foreign governments and the Chinese themselves.  The Chinese obviously have their own point of view on this topic and it is important for us to understand it.  (When conducting business in another country it is essential to understand the local point of view and ideas, even those that are difficult or different.)  Global marketing today has moved beyond a simple chess-like strategy.  Today, it is about pursuing each other’s profits and each country’s own elements have been mixed into a hybrid.  This means that understanding and respecting each other is of the utmost importance.

Setbacks and problems aside, China still remains a huge market (and the world’s second largest economy) with massive opportunities.  But simply going overseas and selling your product doesn’t necessarily mean success.

P&G in China

One company that has been successful in China is US consumer goods giant, Proctor & Gamble.  P&G has a 20% market share in China and is top in most of the categories in which it competes.  An interesting example is P&G’s disposable diaper business.  P&G failed when they first tried to launch disposable diapers in China over a decade ago because there was simply no market for the product.  Not only did P&G have to convince Chinese mothers that their product was the best, but they also had to persuade them that diapers (and disposable ones) were even necessary.  Simply selling a lower-quality, cheaper version of the Western product didn’t work.  (Side note: apparently due to China’s one-child policy, parents have a strong love for their only children, which translates into a strong desire to provide them with the best, including the best products.)

How was P&G successful?  A huge key to the company’s success was creating a solid understanding of the Chinese consumer’s habits by conducting thorough R&D and fieldwork to learn about the culture and mothers and their babies.   After coming up with a product that fit the market, P&G  launched the diapers with a huge marketing campaign in 2007.  Today, P&G’s Pampers is the top selling brand in a category that barely existed before P&G’s launch in China.

P&G is well-known for its research and ability to understand markets.  They don’t simply localize their famous Western brands, but rather take a product and understand the culture in which they will sell that product.  In some cases, they work to change consumer behavior to create a market for the product, as they did with diapers.

Another interesting example is P&G’s focus on the countryside/rural Chinese market, which is a huge opportunity, but can be extremely complicated as it is made up of mostly first-time buyers with low incomes.  Rural areas in China are also incredibly diverse and most customers buy products only from tiny mom and pop stores.  In order to understand these potential buyers, P&G sent researchers into villages and stayed with families to really understand the cultures, buying habits and traditions.  While price is obviously important, developing products that match with the culture and tradition is the key.  (Example: Urban Chinese consumers purchase more expensive and exotic flavored toothpaste, but rural Chinese prefer the cheaper, Crest Salt White version because traditionally they believe that salt whitens teeth.)  P&G’s thorough research and development means more profits and often more brand loyalty, as well as increased choice for customers.

Today there is more competition from both foreign and domestic brands in China.  In order for foreign companies like P&G to remain competitive and successful, it is vital to focus beyond simply the language or numbers and data and to look at how consumers really live and how a product or service fits into the daily lives and culture.

Brand marketing in emerging markets – India/P&G

The number of companies introducing products and services into emerging markets is increasing.  Emerging markets are seen as lucrative spots and with enormous populations in China, India and Indonesia, success means huge profits.

Established fast moving consumer goods company, P&G (Proctor & Gamble) has been in the Indian market for over 20 years.  It is now one of the leading companies to have introduced dozens of products that are indispensable to the daily lives of Indian consumers.

Although it is unclear when they first began to “sew seeds” in the market, P&G began to penetrate the Indian market between 1984 and 1985.  At the time, their products were relatively high priced and they were only able to hold onto a small share of the market.  From around 2000 the company focused on lowering the prices of detergents like Tide and Ariel and introduced new categories and new products.  The major product was feminine product, Whisper.  While they are learning from their failures, P&G’s continued battle is admirable.*Note: The detergent brand Tide was developed for the North American market and Ariel for the European market.  The Tide brand is the focus for the Indian market, however Ariel is also sold in the country.  There are differences in shapes and features.

P&G creates brands.  For each brand, P&G develops a category that fits with a country and region’s characteristics as well as the preferences and uses of the consumer.  In other words, they are very good at making sub brands.  In the case of the Japanese market, the number of brands often ends up increasing because there is a belief that brands themselves should be renewed.  Brands disappear from store shelves in a flash and new ones appear.  For the Japanese, this is not really a problem.

However, P&G’s market size is the entire world.  For a global brand strategy, the fewer the number of brands (categories), the easier to it is to manage.  And, the company hopes to hear people say, “The detergent I use is Ariel!” across country borders.  In order to hear this, management is P&G-like.  It’s not an exaggeration to say that P&G and its product brands are being “raised” by people around the world.

P&G’s competition in India is Unilever or Hindustan Unilever, a long established business of over 75 years.  With advertising expenditures of close to 100 million dollars, Unilever has not lost its grip on the Indian market.  However, it’s price battle with P&G may mean Unilever is loosing some of its hold on the market.  This is a topic that is heating up in the American and European media.

P&G faces more than just a market share battle with competitors.  A Forbes article in April pointed out that in order for P&G to succeed in emerging markets it will need to increase the number of senior positions from the home countries and markets.  Compared with rival Unilever, P&G lacks diversity.

Also, as with other companies, P&G targets the middle-income group with a large number of brands and products.  Whether price battles with competitors were intended or not, there is movement toward expanding into the low-income group, an important market from now on.  P&G brand products are still expensive for the lower-income consumers who avoid them.