Today, emerging markets account for 36% of the global GDP. Some estimates indicate they will represent a US$30 trillion opportunity by 2025. By that time India, China and other Asian countries will represent the lion’s share of global middle-class consumption, leaving the EU, the US and Japan trailing behind. It is where growth is going to come from and where some of the most important innovations and competitors will emerge. Yet most MNCs are currently doing a poor job exploiting these opportunities and earn just 17% of their total revenue from these markets. Why is this? What obstacles are preventing MNCs from growing their business in emerging markets and what can be done to convert these challenges into opportunities?
All companies operating in emerging markets face two major hurdles: low purchasing power and a high number of institutional voids (e.g. poor infrastructure, limited access to health and education, pollution, lack of transparency and a weak regulatory framework). Succeeding in such an environment requires addressing both issues simultaneously. While a local company like Tata in India might be familiar with this, it is a new and inconvenient reality for large foreign MNCs that have concentrated most of their resources and focus on developed markets. These organizations have to learn how to serve customers with very different purchasing power and needs.
From mobile money to eye surgery, frugal innovations that characterize the art of offering 80% value at 10% of the price have been the hall mark of success of many local firms in emerging economies. Offering high value at a low price requires the difficult task of combining product innovations with innovative ways of reconfiguring the delivery system. Given the importance of governments and regulators in many of these economies, an understanding of how to navigate through regulatory minefields is also critical for sustaining competitive advantage in these markets.
The goal of this module is to help students develop an intuitive understanding of strategy as a process which will be useful when we apply this process directly in the context of innovations for emerging Asia. While we cover a set of strategic tools, the emphasis is not on filling in frameworks and applying standard recipes. On the contrary, students will be expected to challenge recipes, question received wisdom, and exhibit an understanding of how to apply the frameworks to solve strategic obstacles.
While the cases and the examples used in the module are primarily based on Asia, the lessons from this module apply more generally to emerging markets across Africa and Latin America. Rather than looking for one “right” answer, this module encourages debates and discussions. In some ways, this module is a cross between an executive education module on strategy formulation and implementation and a module on Asian business. Our goal is to help students develop the strategic intuition and tools they need to succeed in these emerging battlegrounds for tomorrow.