Most companies are failing at building significant new businesses in BRIC countries. The same lackluster results are reported by export brands attempting to build scale in the USA or North American brands seeking acceptance in Europe. Why ? The fundamental reason is that brands are treating giant, new market opportunities as “another export market” with policies and practices similar to tactics used in smaller “export only” markets. As a result, exporters are falling behind the pace of multinationals in these critical new frontier markets. Recapped below are a few of Export Solutions success strategies.
CEO Commitment to 3-5 Year Plan
Changing eating habits and practices and pioneering new categories is difficult work. Your team needs the backing of your CEO to a 3-5 year investment plan. Ultimately, results will be directly proportional to your investment in people,research, and marketing.
Focus on 1-2 BRIC markets, not all
Few companies have the financial resources and organizational depth to tackle four tough markets at the same time. Pick one -two markets, with the highest potential. ALL BRIC markets have extreme complexity and barriers to entry.
Personally, I like India and Brazil. India has a lower cost of entry and a middle class more aligned with international brands than China. Brazil success can also serve as a hub for your South America business. Brazil is suffering now, but thgis translates to a lower cost of entry.Very few brands appear to be doing well in Russia,as most brand owners do not possess the patience or language skills to maneuver there. China may be the “Big Enchilada”, but most companies have conducted business there for ten years now. Results to date are modest, with some companies selling more to Hong Kong than Mainland China. Still China is attractive for those willing to make a strategic commitment.
Market Research Investments
Companies must invest in qualitative research and syndicated data.
Marketers must understand local consumer behavior, shopper insights, and attitudes to new product concepts. In BRICS, there are regional differences that must be considered. Success may be dependent on your ability to adapt your core competencies to local tastes and habits. This may be achieved through a unique marketing approach, adjustment of a flavor profile, or a distinct package. Syndicated data allows companies to study trends and calibrate the “size of the prize”.
Create a Local Team
A first step is to establish a local office, even if your short term plan is to work through a distributor network. Your first employee should be a trusted company veteran who maintains credibility with senior management and knows how to get things done at corporate. This missionary can hire local marketing and sales managers to teach him the subtleties of the market. Your finance manager should also be from corporate or speak your language fluently. Nothing will blow up an operation quicker than financial misunderstandings with a new foreign employee without company loyalty.
Consider Acquisitions or Joint Venture
The quickest way to gain scale is to “buy” it. This provides a platform to launch your brand and expand through an established supply chain. Acquisitions can be risky, as multiples of quality companies are high and you risk purchasing a problem. Joint Ventures (jv) are also an option.
These arrangements provide similar benefits as an acquisition with a lower price tag. Unfortunately, many joint ventures end in divorce, through strategic differences, control issues or diminished interest by in country jv partner.
Local Production
Manufacturing facilities close to your consumers supplies a tremendous competitive advantage.
Direct benefits are sourced from reduced overseas logistics costs and duties. This translates to lower shelf prices or more money to invest in marketing or higher gross margins. Factories may be expensive, but co-packing may represent another option.
Regional or Channel Approach
Shanghai and New Delhi both claim populations of around 30 million, larger than total Australia.
Test markets may focus on strong efforts in one large city with high income consumers or one trade channel such as upscale supermarkets or 4-5 Star Hotels. Better to concentrate resources at “over delivering” in a narrowly defined area than applying resources thinly across an enormous country. “Crawl, Walk, Run,Fly”.
USA: Bigger than BRIC’s
The USA offers an affluent population of 332 million citizens, including the addition of 45 million people since 2000. USA consumers are open to brands from around the world and maintain the disposable income to purchase them. All international brands sell to the USA, but per capita sales are always small relative to potential. USA cost of entry is higher than BRIC’s,. but ultimately most companies will create a higher return on investment in the USA versus emerging countries.
Export Solutions has helped exporters with success strategies and partner identification in Brazil, India, China, and of Course the USA. Contact Greg Seminara at [email protected] to discuss your project.
