In recent years, global manufacturers have been enticed by the enormous business potential presented by emerging markets. But what is required to succeed in these markets whose cultures, customer requirements, labor practices, and regulatory regimes are very different than those in developed markets? How are companies adjusting their product offerings, HR strategies, and supply chains?
Emerging markets as a stimulus for innovations
Emerging markets strategy
Global manufacturing executives should ask themselves these key questions:
- Is your company developing fundamentally new products with cost structures that meet the unique requirements of consumers and industrial buyers in emerging markets?
- Is your company developing innovations in emerging markets that can be brought back to change the competitive landscape in developed economies?
- Has your company evaluated the benefits and challenges of locating R&D capabilities in emerging markets? Are your R&D operations integrated into a global infrastructure that takes advantage of common governance, business processes, and expertise?
- How effectively does your company manage regulatory risks in emerging markets in such areas as intellectual property protection, labor laws, and taxes?
- Is your company able to attract, develop, and retain the key employees it needs in emerging markets and integrate them into its global network?
Global manufacturers will need to look beyond traditional strategies in order to meet the unique needs of emerging markets, while still leveraging the efficiency and expertise provided by their global networks. Deloitte’s Innovation in emerging markets: Strategies for achieving commercial success identifies five challenges that companies must innovatively tackle:
- Build new value propositions
Design products tailored to the special needs of emerging market customers. In many cases, this will be at dramatically lower price points than in developed markets. Tailored products also are more likely to be associated with higher margins.
- Globalize research and development
Locate R&D facilities in emerging markets to acquire deeper customer knowledge, and to build, market and distribute tailored products. To effectively integrate and leverage R&D teams around the world, leading companies are combining traditional face-to-face team building with technology solutions such as databases of innovative ideas and global project teams that collaborate online.
- Tailor talent management strategies
Once seen as an inexhaustible supply of low-cost labor, many emerging markets are now facing the same shortages of skilled labor that are all too familiar in developed countries. Balance the efficiency afforded by the company-wide human resource policies with the need to accommodate local expectations and cultural norms.
- Master the complexity of global value chains
Despite their efficiency, global value chains also need to be adjusted to local realities. Provide autonomy at the local level, while leveraging the strengths of headquarters, including governance and management know-how. While the challenges can be formidable, some companies are using the obstacles as a catalyst to reinvent their operations.
- Build risk management capabilities
Among the greatest concerns are potential threats to intellectual property rights, whether through outright theft of proprietary know how or counterfeiting of products. Achieve risk intelligence by systematically identifying, evaluating, and managing all the risks faced by a company across all the markets in which it operates.
About the report
Deloitte’s Global Manufacturing Industry Practice report, Innovation in emerging markets: Strategies for achieving commercial success, identifies and analyzes strategic initiatives that global manufacturers must take to thrive in emerging markets. The study builds on a survey of 418 manufacturing executives from companies headquartered in 28 countries that assessed their strategies and approaches to innovation. The survey focused specifically on 10 important emerging markets: Argentina, Brazil, China, Czech Republic, India, Indonesia, Mexico, Poland, Russia, and South Korea.
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