Scaling the Tail: Managing Profitable Growth in Emerging Markets | springerprofessional.de

Springer Professional

nach oben

2015 | Buch

Kapitel lesen Erstes Kapitel lesen

Scaling the Tail: Managing Profitable Growth in Emerging Markets

verfasst von: Seung Ho Park, Gerardo R. Ungson, Andrew Cosgrove

Verlag: Palgrave Macmillan US

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

Einloggen, um Zugang zu erhalten

Über dieses Buch

This book presents a framework for a different type of profitable growth for multinational companies in emerging markets: "scaling the tail." This model focuses on specialized market niches, flanking particular segments and product-categories, developing deeply nuanced localization strategies, and installing supportive management systems.

Anzeige

Inhaltsverzeichnis

Frontmatter

What Distinguishes Emerging Markets Today?

Frontmatter

1. Introduction

Abstract

This chapter provides an overview of our core arguments. Although profitable growth is widely acclaimed, there are differences on how to approach it. Traditional strategies for emerging markets emphasize entering large and undifferentiated markets, recalibrating products to make them more attractive and affordable for targeted segments, and capitalizing on economies of scale and scope to reduce overall costs. Our research indicates that this approach is limited, if not misplaced, when addressing the emerging needs of affluent middle-class sectors. An alternative logic focuses on building mass sales at the periphery of the distribution using broad differentiation strategies. This is developed with select partners as an overarching theme throughout the book and supported by field interviews and a survey of consumer goods in select Asian countries.

Seung Ho Park, Gerardo R. Ungson, Andrew Cosgrove

2. Rethinking Conventional Models

Abstract

In this chapter, we discuss and appraise conventional entry strategies and their underlying assumptions. Findings from a broad sample of firms (n=105,260 firms operating in the BRIC nations) indicate that firms pursuing high sales growth are less successful than firms focused on profitability. Moreover, firms that started with a high growth strategy were less likely to achieve profitable growth over time compared to firms with the goal of profitability. We review possible reasons why scaling based on the logic of mass consumption for commodities is not effective. We underscore the need to explore fine-grained expectations of middle-class consumers, and argue for profitable growth based on a different type of scaling. Cases highlight the successful experiences of firms operating in China and India.

Seung Ho Park, Gerardo R. Ungson, Andrew Cosgrove

Scaling the Tail: New Templates

Frontmatter

3. Problematique

Abstract

Historically, scaling for mass markets worked when emerging markets were characterized as low-cost-sourcing destinations, when commodities were the end product, and when local competition was insignificant. In the current environment, affluent middle-class sectors in emerging markets are found to have different consumption patterns, tend to be more brand-conscious, but can also be less secure in their preferences. Local competitors have bolstered their abilities to attend to these segments. Without changing mindsets, MNCs have experienced difficulties in mass merchandising strategies in emerging markets. Using illustrations and case studies, the chapter discusses inflection points that depict a shift from cost-driven to demand-enhancing competition. Instead of a logic based on mass manufacturing, attention has been directed at entering propitious market niches based on broad differentiation strategies.

Seung Ho Park, Gerardo R. Ungson, Andrew Cosgrove

4. New Logics-Scaling the Tail

Abstract

The major premises of Chris Anderson’s “long tail” theory are presented here with implications for emerging markets. Anderson’s formulation is that, under specific conditions, value will not reside in the mean, but in the peripherals (or the tail). Hence, overall sales form peripherals or the “long tail” will outnumber sales from the mean of the distribution. As applied to emerging markets, value-creation reflects a shift from supply to demand considerations: entry in mass consumption markets is ceding ground to investments in smaller but propitious market segments, many of which were largely unfilled in the past. After a review of three types of scaling used in prior studies, we adopt a new type based on features of agglomeration for the clustering of multi-brand linkages—contiguous interconnections.

Seung Ho Park, Gerardo R. Ungson, Andrew Cosgrove

The “P-E-C” Framework

Frontmatter

5. The Diagnostic “P-E-C” Framework

Abstract

A synthetic integration can be realized through a systematic and sequential process that we call the P-E-C Framework. Specifically, it involves P or the positioning of a firm for sustained growth; E or the exploration of relevant drivers for growth; and C or the co-alignment of management systems to appropriate growth strategies. Positioning involves decisions relating to achieving competitive advantages through cost leadership or differentiation, with attention to specialized but unserved niches. The exploration of drivers relates to the question: How to build advantages from either of these strategies? Finally, co-alignment refers to the consistency between strategies and management systems. This framework guides our inquiry and field survey for the study. Details of the survey, specifically differences between higher and lower performing firms, are presented.

Seung Ho Park, Gerardo R. Ungson, Andrew Cosgrove

6. Positioning Firms for Profitable Growth

Abstract

Multinational corporations in emerging and developing markets are occasionally blindsided by nascent changes in the environment that they fail to recognize. If such changes are identified, unsuccessful firms tend to simply ignore or underestimate them. In doing so, positioning strategies can be seriously compromised and can lead to ineffective strategies and poor performance. On the basis of survey results, we report that higher performing firms can be differentiated from lower performing firms in terms of the following positioning elements: (1) a focus on balanced, not unqualified growth; (2) assessment of environmental volatility for granular growth; (3) resolution of contradictions; (4) securing data analytics and financial sources for investment; (5) attachment of high priority to emerging markets; and (6) a systematic mode of expansion.

Seung Ho Park, Gerardo R. Ungson, Andrew Cosgrove

7. Defining the Drivers of Profitable Growth

Abstract

In this chapter, we discuss various drivers based on survey results and field interviews focusing on the differences between higher and lower performing firms. Our objective was to define fine-grained, micro-level decisions, using the following drivers of performance in the survey: (1) channels of competitive advantage; (2) strategies for future revenue growth; and (3) strategies for cost reduction. Although most, if not all, firms indicated that they pursued a differentiation strategy, there are various ways of reaching this objective and excelling in the process. Some differing characteristics among the firms include the following: (1) exploring all sources of competitive advantage; (2) assessing localization through affordable innovation; (3) exploiting sources of synergies; (4) scaling product categories, not products; and (5) exploring strategies for cost reduction.

Seung Ho Park, Gerardo R. Ungson, Andrew Cosgrove

8. Co-aligning Strategies with Management Structures and Systems

Abstract

There are key differences between higher and lower performing firms in regard to their approaches to execution: (1) what to centralize or decentralize; (2) recognizing external barriers to execution; (3) knowing the internal barriers to implementation; (4) investing in local human capital; and (5) creating a performance-based corporate culture. In all, higher performing firms are more likely to delegate authority to local management whom they regard as having good ability and competence. Lower performing firms do not consider their local management in the same regard. Higher performing firms see external barriers that limit both demand and supply. Lower performing firms see regulation and poor infrastructure in general as barriers. Finally, higher performing firms regard an unsupportive local culture as a key impediment to execution.

Seung Ho Park, Gerardo R. Ungson, Andrew Cosgrove

9. A Synthesis of Our Findings

Abstract

Our objective is to examine the dynamics of profitable growth in emerging markets. Collectively, our findings are as follows: First, growth and profitability can be viewed as interspersed in sequential stages. Firms might initially focus on profits or growth, and would purposefully seek a balance of optimal states in the future. Second, the dynamics, however, are tempered by significant changes in the external environment. Third, while emerging markets are generally viewed as fast growing, growth is not uniform, but granular. Not all local markets are the same, nor do they respond to foreign multinational products and services in the same way. Specific pockets of demand develop quicker from their nascent states than others. Understanding the dynamics of scale for different market segments is the critical strategy.

Seung Ho Park, Gerardo R. Ungson, Andrew Cosgrove

10. Recommendations

Abstract

This chapter presents our recommendations for multinational corporations operating in emerging markets with implications for profitable growth: (1) focus on product categories; (2) distinguish between the traditional emphasis on mass consumption based on logic of manufacturing cost strategy to marketing and merchandising that is based on the logic of ifferentiation; (3) do not interpret localization narrowly as product refinements; it is a learning process that incorporates product adaptation, attention to nascent preferences of a targeted segment, and a proactive approach to developing local talent; (4) go beyond the traditional belief of simply hiring locals. Successful firms train and develop them; and (5) to manage profitable growth in the future, develop a systemic strategy for identifying growth segments and exploring opportunities for “scaling the tail.”

Seung Ho Park, Gerardo R. Ungson, Andrew Cosgrove

Backmatter

Titel: Scaling the Tail: Managing Profitable Growth in Emerging Markets
verfasst von: Seung Ho Park
Gerardo R. Ungson
Andrew Cosgrove
Copyright-Jahr: 2015
Verlag: Palgrave Macmillan US
Electronic ISBN: 978-1-137-53859-8
Print ISBN: 978-1-349-57200-7
DOI: https://doi.org/10.1057/9781137538598

Weitere Formate
Fachgebiete
Bücher
Zeitschriften
Themenseiten
Jetzt Einzelzugang starten
Zugang für Unternehmen
Referenzkunden
SLX-Digitalkonferenz: Zukunftswerkstatt 2024