Emerging Global Brands

Becoming a global brand is exceptionally difficult. Emerging-market firms struggle with limited budgets and unlimited prejudice. Last year, GfK, a consumer-research company, found that only one-third of Americans were willing even to consider buying an Indian or Chinese car.

However, the Chinese telecoms giant Huawei has just overtaken Sweden’s Ericsson to become the largest telecoms equipment manufacturer. It follows Haier, which is already the leading global white goods maker with Lenovo challenging Hewlett-Packard to be world’s biggest PC producer. Emerging-market firms are evolving in much the same way as Japanese firms did in the 1960s and 1970s. In 1985 Philip Kotler observed that Japanese companies had shifted from “injuring the corners” of their Western competitors to attacking them head-on. The same pattern is beginning to repeat itself, but on a much larger scale.

Lenovo is one of several emerging-market firms striving to become global brands. They are no longer content to do the development work for Western firms who brand their products for resale. Non-branded companies typically earn gross margins of 3-8% and are constantly at risk of being undercut by cheaper rivals. Branded firms enjoy fatter margins (15% or more) and more loyal customers.

According to Millward Brown’s ‘Top 100 Most Valuable Global Brands’, of the top 100 brands globally in 2006, there were only two brands from emerging countries, more specifically China. Yet, by 2011, there were 19 from the BRIC countries (Brazil, Russia, India and China) and Mexico. This year, despite their relatively shorter time in the marketplace, emerging market brands currently represent nearly one-fifth of the top 100 global brands. However, the total value of those brands slipped slightly for the first time in 2012 to $330.8 billion because of the business slowdown in Brazil and China.

Western brands are no longer a novelty in many of the BRIC markets. Local brands are improving in functional and emotional appeal. One in five brands in the top 100 was from a fast growing economy. In the year that Russia joins the WTO, the Russian financial institution Sberbank was among the Top Risers in brand value in the Top 100. Sinopec, the oil and gas giant and the traditional Chinese clear liquor Moutai brought the number of Chinese brands to 13 in the top 100. Another telecom group, Airtel, became the second Indian brand in the top 100. The first brands from Chile, retailers Falabella and Sodimac, entered the rankings with MTN, a South African telecom, becoming the first brand from Africa. The first Australian brand also entered Top 100; Commonwealth Bank appreciated in value in part because of its investments in the heated Asian economies

If the growth of the emerging market consumer class persists, it should translate into more influence for local consumer brands. The global emerging markets’ middle class is anticipated to grow from 430 million in 2000 to 1.2 billion by 2030, with China and India accounting for two-thirds of the expansion in emerging markets.

Emerging markets tend to be dominated by a younger demographic, a result of the rapid increase in populations within these markets. The workforce (population aged 15-64) for emerging markets is estimated to increase to 3 billion in 2020 from 2.7 billion in 2010, accounting for more than two-thirds of their total population in 2020. The growing brands in emerging markets appear to be well positioned to serve this demographic shift. Disposable incomes in key emerging markets are rising as well especially which combined with changing demographics, employment and urbanization, are creating the right conditions for income growth.

There’s no definitive formula for brand success. Brands in the same product category, but with radically different personalities, can both succeed. The key is to understand a brand’s personality and then to incorporate those traits into a consistent brand message which attracts consumers from across the globe. The question is whether brands from emerging markets can continue their surge as the growth of world economies slow.

IB-style questions

1. Define the following terms