How Local Companies are Outperforming Multinationals

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HOW LOCAL COMPANIES ARE OUTPERFORMING MULTINATIONALS Sameer Mathur, Ph.D.

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Sameer Mathur smathur.com Asst. Professor (Marketing) 2009 – 2013 Ph.D. and M.S. (Marketing) 2003 – 2009

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Agenda

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Some Top Performers

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Creating customized offerings Developing business models to overcome obstacles Using cutting-edge technology Tapping into low-cost labor and in-house training Building scale quickly Using management talent to sustain growth 6 Ways in which Local Companies are Outperforming their International Rivals

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Local companies know people’s preferences by region, income level, gender, age group, etc. They understand the markets in which they operate, allowing them to offer customization inexpensively . Customized Offerings

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India’s CavinKare holds 16% of the market share. It packages shampoo in individual sachets that can be sold at very low prices so people living on day-to-day salaries can afford it. Unilever and P&G have copied CavinKare’s strategy. Customized Offerings

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Local companies develop ways to overcome key obstacles that stall multinational corporations. e.g. lack of distribution channels and infrastructural hurdles (Limited telecommunications bandwidth). Specialized Business Model

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To get around piracy issues in gaming, China’s Shanda developed online MMORPGs that are impossible to pirate. Shanda started selling prepaid cards for the game in local retail locations to minimize need for credit card use. Specialized Business Model

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Local companies use new technology to keep operating costs low and quality high. Local companies are not limited by old investments. Cutting-Edge Technology

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Brazil’s Gol purchases the newest and biggest planes. Bigger planes increase capacity per flight New technology reduces the cost per seat Cutting-Edge Technology

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Local companies are using low-cost traditional labor and in-house training instead of relying on technology from abroad. By coming up with less expensive and more efficient ways of accomplishing goals, they are gaining market share. Low-Cost Labor & In-House Training

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Focus Media in China has employees ride from billboard to billboard on bikes to refresh the screens . Manual labor is cheaper than buying technology to keep the screens synchronized. Also allows companies to pick and choose which billboard will display their ads. Low-Cost Labor & In-House Training

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Apollo Hospitals in India has invested in its own training facilities so it can can make sure the doctors are up to Apollo standards. Low-Cost Labor & In-House Training

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Mergers and acquisitions enable the national expansion that is necessary for increased success. Scale Up Quickly

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Focus Media led an aggressive strategy involving acquisitions to reduce competitiveness of regional rivals. Through this strategy, Focus Media overtook America’s Clear Channel Communications and France’s JC- Decaux , two major rivals. Scale Up Quickly

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China’s GoodBaby has set up 35 companies in different Chinese cities and provinces. There are over 1,600 standalone GoodBaby stores. Scale Up Quickly

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Local companies are minimizing management turnover . Institutionalized management allow the companies to conquer issues that may arise with rapid growth. Talent to Sustain Rapid Growth

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Russia’s Wimm -Bill- Dann Foods hired a new CEO in 2006 and gave him a free hand to reinvigorate the system. Part of the changes in the company involved linking salaries with performance and offering stock options so employees were motivated to help the company do better. Talent to Sustain Rapid Growth

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Why Are Multinational Companies Failing In India?

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Multinationals believe that developing economies are just like those of the developed world, just years behind. They are following a new path to development so new strategies need to be developed . Misperceptions about Development

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Use some of the locals’ strategies. Develop strategies that local companies cannot easily copy. Use global expertise to differentiate from locals. What Should Multinationals do?

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“How Local Companies Keep Multinationals at Bay” by Arindam K. Bhattacharya & David C. Michael References

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Summary

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Recommended Reading

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Over 500,000 views from more than 95 countries http://www.slideshare.net/ProfessorMathur/ Sameer Mathur smathur.com http://www.facebook.com/ProfessorSameerMathur/

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