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Is Your Emerging-Market Strategy Local Enough?

Issued at 2011-08-17



As developing economies become increasingly diverse and competitive, multinationals will need to apply strategic approaches to understanding differences within countries and to concentrating resources on the most promising sub-markets.

 

The appropriate strategic approach will depend upon the characteristics of a national market as well as a company's size, position, and aspirations in it. A "city cluster" approach that targets groups of relatively homogenous, fast-growing cities could work well in China, for example. In India, on the other hand, finding ways to gain substantial market coverage cost efficiently could be more effective.

By segmenting Chinese cities according to industry structure, demographics, scale, geographic proximity, and consumer characteristics, 22 city clusters were identified, each homogenous enough to be considered one market for strategic decision making. Prioritizing several clusters or sequencing the order in which they're targeted can help a company boost the effectiveness of its distribution networks, supply chains, sales forces, and media and marketing strategies.

Often, the challenges of accessing consumption growth cost efficiently are even greater in India than in China, since India is less urbanized and at an earlier stage of its economic development. A hub-and-spoke approach in India should provide opportunities to optimize supply chains as well as sales and marketing networks.

by Yuval Atsmon, Ari Kertesz and Ireena Vittal

 


Source: McKinsey



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