3 Ways Emerging Markets Can Build Breakout Brands

As India and China build their economies, local companies are going international.

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A recent compilation of the 100 Best Global Brands by consultancy Interbrand contained not a single global brand from the two most populous countries on Earth. “Ask Western consumers about either China or India, and the first thing they’ll say is they never heard of any brand names from there,” Nurmalya Kumar, a member of the group executive council of Indian conglomerate Tata Sons, said at a recent presentation sponsored by The India Business Initiative at the Chazen Institute. “The next thing they’ll say is they expect poor quality and poor workmanship. Why would they buy something ‘Made in China’ or “Made in India’?”

Kumar, who also taught at the London Business School and is co-author of “Brand Breakout: How Emerging-Market Brands Will Go Global,” expects all that to change over the next decade. China will be the first modern emerging market to establish global brands, followed closely by India.

Kumar described the brand-building process pioneered in other former emerging markets by such names as Japan’s Toyota and South Korea’s Samsung: Initially they gained a foothold abroad based on price. Over time they improved quality until they came to define best practices. They gradually pinched off market share from competitors until now they are among the top marketers worldwide. “The halo of the brand eventually extended to the image of the country,’ he said.

China, in particular, has a running start since literally thousands of its manufacturers already make world-class products for Western companies. “If 100 go the private label route then start to market on their own, 10 may eventually become global brands,” said Kumar, mentioning such up-and-comers as Haier Group, a consumer electronics company, and China Media Capital.

Although it has a long way to go before it achieves China’s manufacturing prowess, India is a world-class marketer, said Kumar. And that's a prerequisite to selling across borders.

One proviso: Kumar stressed that the strategies he outlined apply to mass consumer brands. Luxury and technical business-to-business brands target a much smaller marketplace and require a more directed approach.

3 Ways to Get There

In his talk, Kumar noted that of the eight strategies described in his book that emerging market companies can adopt to establish a global brand, three are particularly suited to China and India.

The Diaspora Route: When emigrants move to other countries, they tend to set up communities that allow them to retain some flavor of their homeland — they gather where the language is spoken, eat in restaurants that specialize in their ethnic cuisine, and celebrate holidays associated with their ancestors. Both China and India are fortunate, since both have established and growing populations in the West.

Companies that have established a well-loved brand at home can use these diaspora as a springboard to a wider consumer audience, as long as they target the “right” emigrants. Not only must the emigrants have nostalgia for the home country but they also need to assimilate so they can spread the brand message to their new friends and colleagues. And the diaspora must have enough disposable income to afford the brand, which needs high profit margins to attract distributors willing to carry it. 

Companies that have successfully followed emigrants into new markets include Chinese bank HSBC, and Indian theater operator Reliance MediaWorks and herbal hair and healthcare products maker Dabur.

In his book, Kumar pointed to the Industrial Credit and Investment Corp. of India (ICICI Bank), as a brand that tapped the diaspora to expand internationally. Noting that 10 percent of its global remittances came from Indian migrants, ICICI provided large Indian worker populations with a new low-cost remittance service. The bank gradually expanded services to higher-value products such as mutual funds. To encourage customers to refer their (non-Indian as well as diaspora) friends, a marketing program offered a calling card worth 500 free minutes to India. By 2012, foreign operations accounted for 11 percent of ICICI's total revenue.

The Cultural Resources Route: To counter any negative implications that may swirl around a country’s products, companies using this strategy hitch their brands to positive cultural perceptions that are globally recognizable. Kumar mentioned associations such as silk from China and yoga from India.

One example of a company that successfully deployed this strategy is Herborist, a cosmetics line based on the practices of traditional Chinese medicine but delivered through Western technology and manufacturing techniques. Outside of China, the brand is primarily sold in Europe, aimed at “cosmopolitan, 40-something women, who are culturally sensitive, looking for something exotic, bored with using the established Western brands, and skeptical about chemical ingredients,’ Kumar noted in his book.

Some emerging market companies have turned the cultural resources strategy on its head by acquiring Western brands that come with built-in global recognition. For example the Haier Group recently bought GE’s appliance division, giving the Chinese parent instant access to consumer credibility and distributor clout. Kumar said Tata Motors Ltd. was even more brand conscious when it bought Jaguar Land Rover. “The English won't buy Tata cars, but they will buy Jaguar and Land Rover brands,” he said. “We could develop a better car, but can't create the magic and history of Jaguar.”

The Natural Resources Route:. One advantage many emerging markets enjoy is a wealth of natural resources. But these resources are typically sold as commodities and use low prices to attract buyers — unless the country, the region, or its companies brand them. Notable examples from emerging markets include De Beers diamonds from South Africa, Colombian coffee, and Russian caviar.

This strategy must have — or create — four conditions for success:

  • The resources must come from a defined geographic region that can be marketed as mythic in some way.
  • The product needs a unique aspect, and usually high price, which sets up a barrier for entry to competitors.
  • An independent body needs to provide an authentication process with regular seals of approval.
  • And international branding must create awareness of the brand and region, communicating how its resource differs from competition.

Why Companies Bother

Kumar acknowledged that a global strategy is an expensive proposition that fails more often than it succeeds. So why would emerging markets — especially India and China with their vast populations — bother with global brand creation? “The logic to be global is plain,” he said, when considering the financial benefits. Beyond national pride and simple global ambition, local companies face rising labor costs; neither home country can rely on low-cost production any longer and need to get their margins through more expensive channels. A global presence improves management capabilities and opens new, usually more affluent, consumer markets.

The stakes are high not only for emerging market brands, but for established companies, Kumar warned. “American companies need to focus on what is coming,” he said. Western companies were “blindsided 60 years ago by Japan, then again 30 years later by South Korea. Do they want to be blindsided by China and India?”

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