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Published: November 27, 2012
 / Winter 2012 / Issue 69

 
 

Best Business Books 2012: Strategy

The fourth strategy, that of global brand builders, represents the most dramatic approach. Just a few years ago, many EMNCs either were original equipment manufacturers or sold low-value branded products. Today, many of these companies have developed global brands known for their high quality, including not only familiar names like HTC and Wipro, but also, as noted earlier, Natura Cosmeticos and Apollo Tyres. This transformation is especially ambitious, but it holds the promise of the highest margins and a position of parity with the best companies in the world.

The authors contend that to succeed on the world stage, EMNCs aspiring to be global brand builders face two challenges: one concerning the need to establish a business of global scale, and the other related to building a global brand. “Without a sustainable global business model, building a global brand is a waste of time and resources,” they write. “On the other hand, a global business built on an unbranded commodity basis is not likely to be very profitable or sustainable long term.” Both are essential and each one reinforces the other, yet they require very different capabilities, confront different obstacles, and move at different rhythms.

One might argue that all MNCs, no matter their country or era, have faced these twin challenges, but the authors think that the challenge facing EMNCs today is greater. Achieving global scale in the 21st century, when incumbents are already large and well developed, calls for particular care. For some, it means avoiding direct confrontation by expanding first in peripheral markets; for others, it involves large and complex acquisitions, such as Apollo Tyres’ acquisition of Dunlop, Tata Motors’ purchase of Daewoo Trucks and Jaguar, and Lenovo’s takeover of IBM’s personal computer division. Developing a global brand, meanwhile, calls for a step change in how an EMNC presents itself and is perceived by customers around the world.

Not surprisingly, the authors, who are marketing professors, devote much attention to the topic of brand building. But they are wise to note that without a solid organization to back it up, efforts to establish a powerful brand will eventually come to naught. Creating a sustainable business model is achieved through the hard work of attracting and retaining talent, of pursuing innovation and quality, and of building processes that can handle daily tasks including procurement, logistics, and sales. They quote Priti Rajora, Wipro’s head of talent management, who commented that one of Wipro’s greatest challenges was to evolve from being an Indian company to being one in which any employee from anywhere in the world had an equal opportunity to rise within the company.

Such a view is especially important in light of recent history. Looking back just one generation, several Japanese companies, including Matsushita and Toyota, succeeded in creating brands with global appeal and shattered the “low quality” image of Japanese products. But they struggled to solve the problem of attracting and retaining local talent, and to become global in outlook. A new crop of EMNCs would do well to acknowledge how one source of strength — a strong and distinctive culture — can become a limitation on the broader global stage.

The New Emerging Market Multinationals is an important addition to the strategy bookshelf because it helps us understand the logic behind the rise of companies from emerging markets, including many new powerhouse firms in electronics, vehicles, services, healthcare, and other industries. The book serves a broader purpose as well, and reminds us of eternal strategic questions, such as how to identify, develop, and sustain a competitive advantage in crowded and unforgiving fields.

Confucius Says

A complementary perspective is provided by Pragmatic Strategy: Eastern Wisdom, Global Success, by Ikujiro Nonaka, professor emeritus of Hitotsubashi University’s Graduate School of International Corporate Strategy, and Zhichang Zhu, a lecturer in management at the Hull University Business School in the United Kingdom. Like the authors of The New Emerging Market Multinationals, Nonaka and Zhu cite evidence of the tectonic shift in global competition caused by the growing number of emerging market multinationals, in particular mentioning those from East Asian nations. But rather than looking to business activities — such as brand building, market segmentation, and leveraging of capabilities — to explain this trend, Nonaka and Zhu examine the broader societal elements of culture and philosophy.

 
 
 
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