Business Today

How to Win the World

A must-read for emerging market companies which want to build global brands.
Madhukar Kamath        Print Edition: Aug 18, 2013

Brand Breakout: How Emerging Market Brands Will Go Global
By Nirmalya Kumar and Jan-Benedict E.M. Steenkamp
Palgrave Macmillan
Pages: 272; Price: Pound 17.99

Coca-Cola is perhaps the world's most iconic brand. It has penetrated some of the remotest corners and stood the test of time. Like many other resilient global brands, it had its origins in the US, the world's leading economy. Indeed, the best global brands of the last century have all come from Western economies. While this has begun to slowly change, examples of successful brands from other parts of the world are still few.

The co-authors of Brand Breakout - Nirmalya Kumar, former London School of Business professor who recently joined the Tata Group to guide its marketing strategy, and Jan-Benedict E.M. Steenkamp, professor at UNC Kenan-Flagler Business School, US - start out by tracing key global economic trends to show how the world has changed dramatically in the last few decades. With several developed countries in the doldrums and others experiencing a marked slowdown, it is increasingly clear that future growth will be led by the widely divergent economies clubbed together as 'emerging markets'. The attention of MNCs is now sharply on Asia, particularly China and India. The reasons are clear.

Brand Breakout: How Emerging Market Brands Will Go Global
Brand Breakout: How Emerging Market Brands Will Go Global
The share of emerging markets in global output grew from 20 per cent in 1990 to 40 per cent in 2010, and is expected to overtake the share of developed countries by 2050.

The authors, however, also note that to date these countries have failed to throw up global brands. To illustrate, the 2012 list of Fortune magazine's 500 leading companies ranked by sales, included 73 Chinese firms, second only to the US's 132. Despite this, there is no Chinese presence in the top 100 brands listed by Interbrand in its Best Global Brands 2012. In fact, only two Asian brands managed to make it to the top 10 - Samsung (South Korea) at No.9 and Toyota (Japan) at No.10.

The authors ask: how many western consumers can spontaneously recall a brand from an emerging market like China? How many have heard of Haier? Or, for that matter, coming closer to home, of the Tata brand? "There would appear to be a yawning gap between the economic muscle of the emerging markets and their ability to spawn global brands," they conclude. "Branding is not only about differentiating products; it is about striking an emotional chord with consumers. It is about cultivating identity, attachment, and trust to inspire customer loyalty," the authors note. By logical extension, since brands do their magic in the intangible realm of association, perception, belief and emotion, they also tend to be coloured by the overriding image of their country of origin.

This can prove a formidable obstacle. The overriding perception of Chinese products, for instance, is one of shoddy quality, unethical practices and lack of concern for the environment. China's GDP is as large as that of the next four largest emerging economies combined (Brazil, India, Russia, and Mexico). It is the world's manufacturing hub, yet the term "Made in China" has negative associations.

Still, the authors are sanguine that it is possible for local brands to make a breakthrough. Their optimism is rooted in the wide-ranging research on real life cases they conducted across countries, industries and companies which have succeeded in spawning global brands. Brand Breakout provides eight possible routes by which brands from emerging economies can transform themselves into global brands:

The Asian Tortoise route: This is the mother of all routes and has been used effectively by Japanese and South Korean automobile and electronics companies to establish a beachhead in a developed economy. It involves selling a decent product at a very low price and then migrating step by step up the quality-value ladder to a premium position. Best examples: Toyota and Samsung.

The Business to Consumer (B2C) route: Launching a consumer brand from scratch in developed markets is prohibitively expensive. So, this route leverages a company's B2B (business to business) strength to gain entry into the B2C segment, as did China's Huawei, the world's largest mobile network equipment company, to enter the handset market.

The Diaspora route: It taps into the cross-border flows of people living outside their country of origin but who want to retain some brand preferences and consumption patterns. Dabur, Reliance Media Works and ICICI Bank have all used this route.

The Brand Acquisition route: It is for those who wish to expand rapidly and aggressively into Western markets (and have deep pockets). They do the unimaginable - acquire giant global brands from Western MNCs, as did China's Lenovo from the US's IBM, and India's Tata Motors from the UK's Jaguar. Having acquired the brand, does the acquirer retain it for its unique brand positioning or merge it over time with its own brand? Both strategies have been used with success -Tata keeping the Jaguar brand while Lenovo preferred to migrate.

The Positive Campaign route: It seeks to overcome negative associations with the country of origin and has been used successfully by Hyundai (South Korea) and Chang Beer (Thailand). The strategies here aim at altering consumer perceptions through branding techniques.

The Cultural Resources route: It leverages itself on the axis of positive cultural associations, such as silk from China or yoga from India, by positioning the emerging market brand on these specific attributes. The original Havaianas footwear made of rubber was popular in Brazil but was considered cheap. To tap the international market the company, Alpargatas, grew the product line from two to 25 models with different colours that appealed to a much wider audience. The result? Havaianas now sells in developed markets for $16 to $200 a pair.

The Natural Resources route: While natural resources are usually sold as commodities, the concept of a "Natural Resources brand" has gained in popularity. The best known example is that of champagne. Only wine made from the grapes grown in the Champagne region of France can claim to be champagne. All others are just sparkling wine. Others that have used this route are Habono cigars of Cuba or Café de Colombia. How the organisation of coffee growers of Colombia succeeded against Nescafe, the strongest coffee brand in the world, makes for interesting reading.

The National Champion route: It involves leveraging strong support from the state - either directly or indirectly obtaining preferential treatment to strengthen its position domestically, thereby supporting its overseas venture. Dubai's Emirates airline, is an instance.

Brand Breakout is a must-read for all those who dream of crafting global brands - especially large Indian firms which operate globally. The writing is highly readable and replete with concrete examples.

The reviewer is Group CEO and Managing Director, DDB Mudra Group

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