You have been assigned a project to identify approaches to defend against the entry of multinational companies into an emerging market. Use two examples from Chapter 7 to illustrate your strategic options.

Question

What will be an ideal response?

Answer 1

As stated in Chapter 7, the competitive prospects for local companies facing global giants are by no means grim. Studies of local companies in developing markets have disclosed five strategies that have proved themselves in defending against globally competitive companies.

1. Develop business models that exploit shortcomings in local distribution networks or infrastructure.
2. Utilize keen understanding of local customer needs and preferences to create customized products or services.
3. Take advantage of aspects of the local workforce with which large international companies may be unfamiliar.
4. Use acquisition and rapid-growth strategies to better defend against expansion-minded internationals.
5. Transfer company expertise to cross-border markets and initiate actions to contend on an international level.

In China, WeChat has been able to surpass international rivals because by better understanding Chinese customer needs, it can anticipate their desires. WeChat added features that allow users to check traffic cameras during rush hour, purchase tickets to movies, and book doctors appointments all on the app. Booking doctors appointments is a feature that is wildly popular with the Chinese customer base due to common scheduling difficulties. Essentially, WeChat created its own distribution network for sought after information and goods in busy Chinese cities. WeChat also understands local customs that international rivals can't match.

In India, where information technology firms such as Infosys Technologies and Satyam Computer Services have been able to keep their personnel costs lower than those of international competitors EDS and Accenture because of their familiarity with local labor markets. While the large internationals have focused recruiting efforts in urban centers like Bangalore and Delhi, driving up engineering and computer science salaries in such cities, local companies have shifted recruiting efforts to second-tier cities that are unfamiliar to foreign firms.