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Managing Innovation in Emerging Markets

Gosakan Aravamudan
Friday, October 10, 2008
Gosakan Aravamudan
Emerging markets are creating a wave of product and process innovations that are aiding established companies and a segment of innovators to achieve new price-performance levels for goods and services traded worldwide. These markets are becoming the catalysts and motivators for new product and service innovations. But, tapping the talent and growth potential of up-coming economies requires manufacturers to shed many of their assumptions about customer needs, employee expectations, operations, and innovations that they have learned in the developed economies.

They need to look beyond existing strategies in order to meet the unique needs of these markets, while still leveraging the efficiency and expertise existing in their global networks. Those that do so successfully will be most likely to thrive in the times to come in the global arena of fierce competition.

Emerging markets present a tremendous opportunity for global manufacturers. Not only do countries such as China, India, Russia, and Brazil offer lower operating costs, but they are also home to rapidly growing middle classes that are potentially huge markets for the products and services of global manufacturers.

Executing the right strategy for profitable growth in these markets is critical. Global manufacturers realize competing successfully in emerging markets as key to their corporate strategy. Identifying the opportunity these markets represent, however, is the easier part. The much more difficult task is determining what it takes to hold on in these markets, while overcoming the challenges hurled at the management.

Most manufacturers simply make minor adjustments to existing products, cut prices, and replicate existing distribution channels. Over the long-term, to achieve sustainable commercial success in emerging markets, global manufacturers must embrace a strategy based around innovation. This means that global manufacturers must acquire an entirely new set of skills and organizational structures that address the special requirements of both the consumer and the industrial buyers in these markets. Most significantly, it means that they must offer unique products at dramatically lower prices to match the special needs and lower purchasing power of most buyers in the emerging markets. Using prior knowledge from customer feedback is a useful tool.

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