Transcript Innovation as a Strategic Approach to the D&E Markets

Innovation as a Strategic
Approach to the D&E Markets
Led by Eleanor Eaton
Eaton & Company
AGENDA
In this seminar, we’ll discuss how to create innovative
process of evaluating, prioritizing, entering, and winning
in the D&E markets:
• Creation of information sources and data base.
• Market prioritization based on collected data, cultural,
legal, and political issues.
• Evaluation of alternative entry strategies.
“The real growth will only come from developing and
emerging markets. The developed markets in the U.S.
and Western Europe are saturated and may grow only
through an upgrade of existing market offerings. In
terms of volume growth, one has to look to China,
India, Russia, Brazil, Vietnam, Central Asia, and points
beyond.”
A. G. Lafley
Chairman
The Procter & Gamble Company
The Emergence of New Markets
U.S.
Western Europe
– Stable Market
– No longer a
major supplier
U.S.
Western Europe
- Supply Competition
from Asia
U.S./Western
Europe:
- Major Suppliers
China:
- Major Supplier
- Major Market
China:
- The Biggest Market
- Demand Grows
Exponentially
- Global Involvement
Middle East:
- Oil Supplier
- Strong Market
Russia
Eastern Europe:
- Pent-up Demand
Russia
Eastern Europe:
- Growing Markets
Mexico/Brazil:
- Oil Supply
- Growing Demand
China:
- Becomes a
Supplier
1980
Vietnam:
- Supplier
India:
- Supplier
- Growing Market
1990
Vietnam:
- Supplier
- Pent-up
Demand
Central Asia:
- Consumption
2000
2008
The Appeal and Challenges
for the D&E Markets
Challenges
Appeal
-
Cultural Issues
No Market Data
Language Barrier
Different Habits Require
Different Products
- New Political Climate
- Possibility for Corruption
- No Means of
Validation/Vetting Partners
- Size
- Growth
- Unmet Demand
- Low-Cost Outsourcing
- Innovation Capabilities
- Sourcing
Where does your
company stand?
Questions & Issues for the New Markets
1.
2.
3.
4.
5.
6.
Where do I start?
Where do I get the data?
How do I enter?
Is the government a help or impediment?
What are cultural and legal issues?
How can I be flexible and still adhere to main business
requirements?
Process of Evaluating the New Market
Define Your
Needs/Goal
s
Develop
Entry
Strategy
Develop
Screening
Criteria
Evaluate
and
Prioritize
Markets
Defining Your Needs
A.
Lower Production Costs
Outsourcing
Own Manufacturing Facility
B.
Search for Innovations
Licensing Technologies
Joint Venture
Supply Source
C.
Volume Growth
In the Specific Market
Use One Market As a Hub to
Enter the Region
To prioritize the new market opportunities, develop screening
criteria based on the market attractiveness and ease of
entry…
Example Of The Screening Criteria Template
(An Assessment of Water Purification Markets.)
Elements
Market Attractiveness
Size
Growth Potential
Level of Income of Population
(Annual)
Government Support and Level of
Investment in Specific Projects
Degree of Urbanization
Rating
Hi
Medium
Low
$100M +
$50 - $100M
< $50M
15%+
10 – 15%
< 10%
$10K +
$3 – 10K
< $3K
$1B
$500K - $1B
< $500K
5 + Major Cities/
Zones of
Activities
2 – 5 Major
Cities/Zones of
Activities
1 – 2 Major
Cities/Zones of
Activities
Criteria Template (continued)
Elements
Ease of Entry
Rating
Hi
Medium
Low
Government Support / Imports
$200B +
$100B - $200B
< $100B
Education Level of Population –
Literacy
50% +
30 – 50%
< 30%
Major Retail Chains
3+
1–3
<1
Major Distribution Networks
2+
1–2
<1
15 – 20%
20 – 70%
70%
Perceived Need for the Product
Developing your own data base in the new market
requires creativity, persistence, and legwork.
Information gathering when published data is not available…
Ethnic
Communities in
U.S.
Local
Academics
Compatriots/
Expats
DATA
COLLECTION
U.S. Universities
and Think Tanks
Industry Experts
Local
Government
Organizations
Rules of Data Collection
Rule #1 – Reliance on face-to-face interviews
Rule #2 – Visual observation plays a big role in the market assessment
Rule #3 – Check all data, at least 3 times
Rule #4 – Create market data as a mosaic pattern
Rule #5 – Throw the net wide – talk to everybody
Rule #6 – Talk to local competitors – they may become partners
Cultural differences can determine the
products you may offer…
Examples of Cultural Differences
by Geography
Consumer Need – Body Hair Removal



Preferred
Methods
U.S. –
Wet Shaving
Middle East –
Epilators


Europe –


North – Waxing
South Depilatories
Even within the same ethnic group people may have
different usage for products based on country culture…
Example of Different Product Usage for
Average Russian vs. Polish Women
Russian Women
Products
Polish Women
For babies only
- Soft Toilet
Tissue
For the whole
family
Too expensive to
use
- Facial Tissue
- Paper Towels
A “must” for a
woman
Use as a gift
- Decorative
Paper Napkins
Too expensive to
use
All countries differ in their relations toward
foreign entrants…
Comparison Between Partnerships
in China and Russia
Necessary Partners
And Their Interest
In China
In Russia
- Government Authorities
- To retain a high degree
of control
- To profit on a deal
- Local Representative
- To advance in the
organization of a
foreign partner
- To increase his share of
the business with the
foreign partner
- Best Business Partner
- A businessman with
expertise
- A businessman with
contacts
- Best Manufacturing
support
- Inside China
- Outside Russia
Results -- Market prioritization. (Example)
We have applied this screen to major countries/geographic areas…
Resulting Classification of Best Markets for
Water Purification Products
Market Attractiveness
 US
 China
 Other Asian
Countries
 Russia
 Ukraine
 Brazil
 Western Europe
 Taiwan
 India
 Chile  Eastern
Europe
Argentina
Ease of Entry
Africa
Central America
Development of alternative entry
strategies…
 Joint Ventures
 Sub-Contracting
 Partnerships
 Creation of Own Network
 “Greenfield” vs. “Brownfield” approach
The process has to be flexible and creative in each of its
steps – based on actual local conditions…
Example #1 – A Major Knitwear Company
Needs
Entry into the
Russian market
SOLUTION
- Identified a small textile
factory
Reality
Planned Strategy
A purchase of a
major textile plant
Major textile plants
are structured in old
soviet style with poor
maintenance, low
level of skills, and
huge overhead.
- Created a subcontracting arrangement
- Used their modest
distribution for slow but
sure growth
- Achieved large cost
saving by selling subcontracted items in the
West
Example #2 – A Baby Formula Manufacturer
Needs
Entry into China
SOLUTION
Reality
Planned Strategy
Development of a
door-to-door
distribution system
through local
communities
- China just outlawed
door-to-door
distribution
- Government
tightens control
over food items
- Determine the
government interest in
accelerated
development of babies
- Create baby
development centers in
partnership with
maternity wards
- Offer baby formula as a
part of educational and
health products
- long-term, create a local
manufacturing base
Key Learnings
• Key Learning's 1 – D&E markets are lucrative but highly challenging.
To win in these markets requires strong commitment, out-of-the box
thinking, creativity and flexibility
• Key Learning's 2 – In conducting market assessment in the
markets/countries where no statistical data is available, the key is to
throw the net wide and reach out to sources from all elements of the
country: government, business, consumers, academia, competitors
and companies with similar experience
• Key Learning's 3 -- In searching for alliances in the new market
environment, do not rush to create permanent arrangements
Contact Details
Company: Eaton & Co
Phone: 1-817-946-2302
Email: [email protected]
Web-site: www.eleanoreaton.com