Competing for the Global Middle Class

G5 Emblem, the five leading emerging economies...

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Three types of companies are jockeying for position in emerging economies, seeking to capture the loyalty of billions of new consumers.

An excerpt from an excellent article in Strategy+Business by Edward Tse, Bill Russo, and Ronald Haddock

Today, leaders of multinational corporations have a lucrative opportunity on a bigger playing field: a global middle-class market. This worldwide economic phenomenon encompasses a huge customer base. In 2011, it includes about 400 million people in the mature middle classes of the U.S., Europe, and Japan, and another 300 to 500 million people  in emerging economies. This new global middle class is particularly evident in Brazil, China, India, Indonesia, Mexico, Nigeria, Turkey, Vietnam, and other countries with relatively large working populations and rapid economic growth rates.

In a variety of industries — including consumer packaged goods, electronics, automobiles, medical products, and agricultural equipment — corporate leaders are discovering that they must rethink their product and service lines, go-to-market strategies, and operating models to build a presence in emerging economies.

Three types of corporate players are jockeying for position in these markets:

1. Local upstarts are companies that have traditionally provided low-priced goods for bottom-of-the-pyramid customers in their home markets. They are migrating upward into their domestic middle markets as their customers become more prosperous.

2. Global aspirants are local companies that have already developed products for their domestic middle markets. Now, they seek to expand their geographic reach and power, parlaying their existing capabilities and knowledge into serving the global middle class.

3. Multinational incumbents are mature global companies, often from Japan, Europe, and the United States. They are intent on adapting their existing product lines to capture the attractive growth opportunities in emerging middle markets.

Myths and Realities

Because the case for pursuing the global middle market is compelling, and the complexities are daunting, it is understandable that many senior executives at major consumer and industrial product companies are ambivalent about — or even resistant to — the idea. Their resistance, however, should be reconsidered. It is usually based on one or more of the myths below.

Myth: It’s too early to enter the middle markets in emerging economies.

Reality: It may already be too late. The competitive collisions between local upstarts, global aspirants, and multinational incumbents are occurring at different speeds in different industries, and some industries are already becoming saturated with competitive rivals.

Myth: We can’t make money in the middle markets of emerging economies.

Reality: Yes, products aimed at the middle classes of developing nations are usually priced 20 to 40 percent lower than their counterparts in developed nations. But in emerging economies, lower prices do not necessarily mean lower profits, because the sales volume is potentially two to three times greater than the volume in more mature markets

Myth: We don’t need to alter our products — we just need to educate our customers.

Reality: In the near term, many newly minted middle-class consumers cannot afford developed-market products no matter how much they might value them. As the middle classes mature and their purchasing power grow, this will change. Nonetheless, customers in countries such as India, Brazil, and Turkey will continue to want distinctive features and options. Many of their needs, wants, and tastes stem from unique cultural or environmental conditions, and are unlikely to change soon.

Myth: Entering the global middle market will be too disruptive to our operations.

Reality: Companies need a business model suited to the task. The R&D function, for example, should avoid innovation races and the creeping elegance associated with sophisticated and expensive products. Instead, take a more local approach to innovation, designing products for specific markets. The products can then flow elsewhere, finding support and additional markets wherever they strike a chord. Investing in local R&D that can rapidly turn middle-market customer insights into products and services is another key to success.

For executives of multinational corporations, it may take a change in the conventional business mind-set to tap into global middle markets effectively. The most successful companies are establishing new business units; rethinking their decision rights and other practices; and giving their leaders the freedom, authority, financial resources, and talent needed to develop and run these businesses. The opportunities in the global middle market are worth the effort.

Full article @

About Georges Abi-Aad

CEO, electronic engineer with MBA in marketing. Multicultural; French citizen born in Lebanon working in the Middle East and fluent in French, English and Arabic. I have more than 30 years of proven experience in the Middle East with European know how. I am good in reorganization and in Global strategic management business. I am a dependable leader with an open approach in working with people, forging a strong team of professionals dedicated to the Company and its clientele. Perseverance is my key word. Married to Carole and having 2 children: Joy-Joelle and Antoine (Joyante!).
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