Senior Management Programs
Strategies for Emerging Markets

Emerging markets offer key opportunities for future growth, but these markets require different approaches for success. Although 86% of the world's population is in countries with a GDP per-capita of less than $10,000, most corporate strategies focus on the 14% of the world with per capita wealth above that line. "We don't know what globalization means," said Professor Vijay Mahajan of the University of Texas at Austin during a session of the Wharton Fellows: Mastering the Future program.

Even managers who have traveled extensively or worked in other countries still don't understand these global markets. This is a world, as Time magazine reported, in which "4 million people are expected to be online in 1999 although not even half of them have toilets." Mahajan noted that while the MIT Media Lab is working on a project to build a computer into a jacket, maybe they should be looking at building a computer into a toilet for the developing world. "There are 5.6 billion people who have no toilet," he said.

"There are huge opportunities in these developing nations," he said. Capitalizing on these opportunities requires rethinking approaches to product design, pricing, and other aspects of marketing. Small domestic companies in these emerging markets are sometimes better positioned than their large international rivals because they can actually see these opportunities. "Kottler's book Marketing Management is totally useless for this 86% of the world population," Mahajan said. "And it is the part of the world that is growing fastest."

Saris in the Passenger Seat, Selling Coke by the Glass

Some sources of difference that provide opportunities are:

• Home appliances: Homes in developing nations are much smaller. Samsung understands this and has created smaller appliances. This has made it one of the dominant appliance retailers in the Indian market (to the extent that many Indians think it is a domestic company) and other parts of the world.
  
  
• Electricity and water: Weak infrastructures can also create opportunities. A low-cost inverter can help store power when the electricity is up to keep things running during frequent power failures. The plastic water bottle was developed in Mexico as a way of providing safe drinking water. Other companies are creating filtering systems. "Since I have been born, politicians were promising to give water and electricity to everyone," he said. "Don't believe them."
  
  
• Designing cars for saris: Mahajan described the process of an Indian woman getting out of the back of a car while wearing a sari. He noted that few car designers even think about this challenge let alone design a car to meet it.
  
  
• Bicycles: Although developing nations rely heavily on bicycles for transportation, the developed world has given this little attention. "There is not a single innovation in the bicycle for the 86% of the population," Mahajan said. "All the innovations are for mountain bikes or racing bikes. The largest bicycle company in India is from Korea. Korea and India are paying attention to the bicycle industry in developing countries."

The distribution channels can be quite different, with informal networks and distribution by bicycle and motor scooter to remote villages. An entrepreneur in Mexico may buy a large bottle of Coca-Cola and sell it out the back window by the glass. Financing is different as well, with large black markets and thriving micro-financing, but this also creates opportunities.

These huge markets are often overlooked because companies don't feel the small returns are worth it. "There is an assumption that there are haves and have-nots and only the haves are worth focusing on," Mahajan said. "It is not true. Just because I have two pesos, don't insult me. McDonald's has built a multi-billion dollar business on $1.99 sandwiches."

• Wharton Fellows: Mastering the Future

• Wharton Executive Education
  
  
• The Wharton School

This month's articles:

• Thought Leaders
  In tough times, Charles Schwab CEO David Pottruck says rigorous marketing is more important than ever.
  
  
• Senior Management Programs
  What does it take to reach the 86% of the population in the emerging markets that most marketers ignore?
  
  
• In the Classroom
  Participants in Wharton's Marketing Metrics program get behind the wheel and test drive marketing dashboards.
  
  
• The Last Word
  In stormy weather, marketers need to learn to "fly by instrument."
  
  
• Education à la Carte
  Wharton offers a wide selection of programs on marketing — and other business drivers.