MNCs face tough competition in the emerging market

By SiliconIndia   |   Tuesday, 31 August 2010, 10:11 Hrs   |    7 Comments
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MNCs face tough competition in the emerging market
Bangalore: Multinational companies requires a new "scale at speed" approaches to penetrate the developing world's increasingly prosperous consumer markets. The rapidly growing ranks of middle-class consumers span a dozen emerging nations, not just the fast-growing countries and include almost two billion people, spending a total of $6.9 trillion annually. Next decade this will increase onto $20 trillion during the next decade. This will be about the double as the current consumption in the U.S.

This offer an opportunity for early winners to gain lasting advantages, to become winners they have to be distinctive, companies need to figure out how to grow, sharpen their brand image, and at the same time improve their return on investments. During the time of development the companies in Europe and U.S. did the same. For example, a recent study found that the market leader in 1925 remained the number-one or number-two player for the rest of the century. These companies include Kraft Foods (Nabisco), which led in biscuits; Del Monte Foods, in canned fruit; and Wrigley, in chewing gum.

Chinese beverage maker Hangzhou Wahaha, for example, has built a $5.2 billion business against global competitors such as Coca-Cola and PepsiCo by targeting rural areas, filling product gaps that meet local needs, keeping costs low and appealing to patriotism. Multinational companies face challenging competition in emerging markets, despite having strong global brands, as these economies already boast aggressive local players that have captured a significant portion of spending. If you look at the retail industry, the successful retailers have to learn to constantly adjust to people's buying habits, even in a recession. Despite all these they do feel that even with the consolidation of recent years, the industry is ripe for transformation.

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