Emerging economies are frequently heralded as an opportunity for Western brands. But are they also a threat? As emerging market brands seek to break out of their native markets and go global, established brands run the risk of being caught napping
Ever heard of Chang beer? Dabur cosmetics? Wanli tyres? Perhaps not, because lists of top global brands, such as the Interbrand Best Global Brands report, are dominated by brands that originate from the developed world. Historically, they come out of the US and Western Europe. But in recent decades, as Japan and South Korea have risen economically to join the nations of the developed world, brands from these two countries, such as Honda, Kia, LG, Samsung, Sony and Toyota have emerged as global brands.
What is remarkable is that despite the rise of the emerging markets, especially China, no emerging market brands are viewed as loved by consumers in developed economies. When asked to name a Chinese brand, Western consumers overwhelmingly draw a blank. Until now the leading global brands have had the Western markets all to themselves.
From their bases in developed markets, global brands such as Apple, Coca-Cola, Danone, Sony, and Toyota have pushed hard to expand their footprint in emerging economies over the past two decades. In these markets, such global brands have encountered nimble local competitors. Historically, the local competitors in emerging markets were satisfied with the domestic market. Now, they are spreading their wings and taking the fight back to the home markets of global brands.
Some of these emerging market brands have already attained leading global positions in their categories, while others are on the verge of “brand breakout”. Even though they are not yet “top-of-mind” for Western consumers, there are some impressive success stories from emerging markets in building global brands.
Lenovo (China) now frequently competes with Hewlett Packard and Dell for the world’s leading personal computer brand in terms of market share. Haier (China) is the world’s leading white goods manufacturer, ahead of famous names such as GE, Whirlpool and Maytag, boasting 8 per cent global market share. Havaianas (Brazil) positioned its casual footwear (flip-flops) on the Brazilian national identity of beach, fun, sensuality, youth and vibrant colours. It now sells on the high street in the UK. Pearl River Piano (China) has 15 per cent world market share in units of pianos. This was followed by attempting to overcome the negative country-of-origin image by introducing Kayersburg and acquiring Ritmuller to create a portfolio of brands. And Emirates Airlines (UAE) actually turns a profit competing successfully against British Airways, Lufthansa, and many national carriers on long haul routes.
Joining the above brands are many more, such as Chang beer, Dabur, Galanz, Geely, Herborist, Huawei, ICICI, Mahindra, Nandos, Natura, TCL, and Wanli who aspire to be global brands. Our research, reported in the book Brand Breakout: How Emerging Market Brands Will Go Global, identifies eight pathways that these brands are taking to becoming global brands:
1. The Asian tortoise route. Migrating to higher quality and brand premium. This is the route that enabled Japan’s Toyota and South Korea’s Samsung to break into the international marketplace. They crawled into the low end of a developed market and crept steadily up to the top drawer.
Brands: Pearl River Piano, Wanli
2. The business to consumer route. Leveraging B2B marketing strength in consumer markets by entering adjacent consumer categories.
Brands: Galanz, Huawei, Mahindra
3. The diaspora route. Following emigrants into the world uses the diaspora to establish a beachhead in the advanced country market, and then subsequently attack the host population.
Brands: Corona, Dabur, ICICI, Mandarin Oriental
4. The brand acquisition route. Impatient emerging markets firms are buying global brands from Western multinationals and migrating the acquired capabilities to help build their own global brands.
Brands: Lenovo, Tata Motors
5. The positive campaign route. Overcoming negative country of origin associations using various marketing techniques such as best in class warranties, strong advertising, humour, and disguising their country of origin to build global brands.
Brands: Chang Beer, Ospop
6. The cultural resources route. Positioning on positive cultural myths of the emerging markets that Western consumers hold.
Brands: Havaianas, Shanghai Tang
7. The natural resources route. Branding commodities in four steps to differentiate the quality and unique history of their products.
Brands: Natura, Café de Colombia
8. The national champion route. Leveraging strong support from the state to become a self-sustaining global leader in the industry.
Brands: Emirates Airlines, China Mobile
Western firms that fail to look over their shoulder for these fast-approaching emerging market global brands will be making a fatal mistake. A golden rule in strategic management is to understand your competitors. This is a crucial prerequisite for being able to develop effective counterstrategies.
In the past, companies ranging from RCA and American Motors to Philips Electronics, Thomson, and Peugeot were caught napping while Japanese and Korean brands entered the global marketplace. Where are these companies now? They are either bankrupt or relegated to a minor position in markets they once dominated.
There is less room for complacency and surprise than ever before. Western managers should plot both counter and cooperative strategies, to forge successful alliances, use mergers and acquisitions, and by no means underestimate emerging market companies attempting to take their brands global as they break out into international markets.
The path to becoming a global brand will not be an easy one. Chinese and other emerging market brands will face many obstacles when marketing to Western consumers. Beyond the associations with poor quality and unsound environmental practices, they generally do not have the marketing capabilities or budgets to build powerful global brands. And many do not as yet understand what Western consumers want in the brands they prefer.
But consider Japan in the 1980s or South Korea in the 2000s, both have built global automobile and technology brands, much to the surprise of their Western competitors. In fact, to the best of our knowledge, there is no historical precedence of a major country becoming an economic power that has not also developed strong global brands.
Nirmalya Kumar is professor of marketing and director of the Aditya Birla India Centre at London Business School. Jan-Benedict Steenkamp is professor of marketing at Kenan-Flager Business School, University of North Carolina. They are authors of Brand Breakout: How Emerging Market Brands Will Go Global