A quick look at the major media outlets, be they newspapers, magazines, websites, professional conferences or consulting engagements, highlights the global obsession with emerging markets. The rather large bloc of countries in South America, Eastern Europe, and Asia make up the loosely coined term emerging markets. Despite the geographic separation of these clusters of countries they share some very dominant and distinguishing characteristics.

Most of these countries were either socialist economies or controlled capitalist economies. They were closed from the global economy for a long time. All these countries are also characterized by substantial population levels, improvements in physical, intellectual and financial capital. Many of these countries have opened their economies to foreign direct investment and thereby taken a step towards a fuller integration with the global economy. As such, emerging economies seem very similar on many important dimensions.

Although many economies such as Brazil, Dubai, Turkey, and Bulgaria are aggressively developing their economies, it is usually Asia that manages to capture the global attention. Although at first glance such obsession can be waved aside as yet another media frenzy by a curious onlooker, a deeper analysis of the hard facts presents the tremendous evolution happening in the most important of all these emerging markets – Asia.

With a congregation of forty nine countries, a total population of 3.6 billion, a rising middle class of over 300 million, economies growing at an average rate of 6-7%, incredibly diverse customer segments, thriving home markets in which to test new products, an increasing integration of the rural population with the main stream and the rapidly developing markets with immense potential, Asia is indeed a region that commands an ever increasing interest from the global business community. An increasing number of global brands are entering the Asian market to capture a part of the lucrative pie. With the booming economies of China and India leading the region, Asia is leaping towards global business dominance in the coming decades.

A quick comparison of some vital statistics of Western and Asian markets will help explain the recent global interest in Asia as the most lucrative of emerging markets. The US market with its 295 million people is a very mature market. The population is aging, the costs are high due to the market sophistication and consumers are highly empowered. The European market has a much similar story. Europe’s countries have a combined population of around 730 million, a decline in population growth (the population is projected to decline to 696 million by 2025), aging masses, high costs, mature markets, and highly sophisticated consumers. Though the per capita income of people is high with an even higher disposable income in these advanced countries, these markets are quite saturated.

Compare this with the booming markets in Asia. China and India are leading the pack. With a combined population of more than 2.3 billion, these countries are fast becoming the gold mine that all companies are eager to have a piece of. Apart from the handful of developed countries in Asia such as Japan, South Korea, Taiwan and Singapore, most of the others are still grappling with the challenges of morphing into developed economies.

China’s share of the world output has more than doubled since 1991 to 12.7% third only to Europe’s 15.7% and US’s 21%. China’s foreign trade has averaged nearly 15% or more than 2700 percent in aggregate. Further China became the first country since 1980 to overtake US in attracting foreign investment – China attracted US$53.2 billion as against US$52 billion for the US. China has had an average annual growth in GDP of over 8 percent.

Similarly, with a population of over a billion people, India’s economy has grown at an average rate of over 7.5 percent over the last couple of years. India’s GDP growth surpassed expectations to record 9.43 percent in 2005. It attracted over US$ 50 billion in foreign direct investment in 2005, second only to China. Such figures have shown a positive trend since then. Every year since then has recorded an average increase of around 25%. The English speaking technology savvy labor force has made India the outsourcing hub of the world. Further, with more than 60 percent of the population below 35 years, India is the youngest country in the world. All these factors have made India a very lucrative market for global companies.

Apart from China and India, the other Asian countries such as Thailand, Malaysia, Vietnam, Indonesia and the Philippines present immense opportunities for growth. Most of these countries still have a nascent market. Majority of the population is still at or below the poverty line. The markets are not matured. Asian markets are projected to grow immensely during the next couple of decades.

Considering the above statistics, it is no wonder that Asia is fast becoming the global business headquarters. Many of the established global brands have already entered the Asian markets. Many more are in line to capture the lucrative Asian market. In spite of such phenomenal potential and huge market opportunities, Asian countries have failed considerably in producing world class brands that can resonate with customers and create long term value. There are a number of reasons for this lack of Asian brands, but all trace their origin to the Asian mindset.

As most of the Western world traces back the origin of its dominant individualistic behavior pattern to Aristotle, most of the Asian cultures trace back their origin of the dominant collectivistic behavior pattern to Confucius. The important traits of this collectivistic behavior pattern are avoidance of risk, collaboration rather than competition and community before individual. In line with this ideology, most Asian businesses for a very long time have fought best to avoid risk. They accomplished this task by diversifying their businesses to spread the risk, built tangible assets such as buildings, factories, assembly lines and companies and focused on immediate business gains.

A direct consequence of all these actions has been the lack of conviction and commitment to build brands. The business mindset in Asia dictated that the companies focus more on immediate tangible gains rather than long term intangible gains. Branding, if practiced right, is an ongoing process that requires considerable allocation of financial, managerial and technological resources. This combined with the fact that the results will not be immediate were reasons enough for company’s top management to relegate branding as yet another tactical tool in the hands of marketing managers who have used branding as an optional ingredient in their advertising campaigns.

This article examines this critical lacuna and suggests some strategies that companies in these emerging economies can pursue to build world class brands.

Branding and the Emerging Economies

In discussing the challenges and opportunities for branding for companies in the emerging economies, it will be useful to provide some examples from Asia that would showcase both sides of the coin as it were.

One of the biggest challenges for Asian companies apart from the trading mindset alluded to before is the “Made In” tag. The differences arising from the different Asian countries and their associations have a significant impact on brands. Japan, South Korea, and China are three Asian countries that represent the developed-developing spectrum very well.

Quite early on Japan had managed to build a very positive image as a country – a country of high productivity, high quality and high technological prowess. This positive country of origin effect gave a significant boost to brands that emerged from Japan. “Made in Japan” became a considerable asset and Japanese companies leveraged this to the hilt. True to the outside perception of Japan being a quality and technological powerhouse, many companies such as Honda, Toyota, and Sony introduced breakthrough products and made a mark in the US and the world market.

Korea had to struggle with its association with the Korean War to create an alternative positive country image. The Asian financial crisis of mid 1990s came as a blessing in disguise to Korean companies. Many Korean chaebols (conglomerates) were highly diversified businesses with no strategic focus. But the financial crisis forced these chaebols to prune their businesses and to focus on quality and design to extract a premium. Samsung led the pack and with its single minded focus on world class design, quality and technological superiority, Samsung broke the glass ceiling and became the first Korean global brand. The presence of a strong governmental support and enforcement of stringent intellectual property laws have still facilitated in a conducive brand/business atmosphere.

China on the other hand has had many obstacles to overcome in its ongoing attempt to emerge as a branded giant. China was isolated from the rest of global economy for a long time because of the state controlled economy and the communist regime. When China did decide to open up its economy gradually, it had to counter the negative perception of “Made in China” tag. To add to this is the huge counterfeit market that is thriving in the country. The lack of intellectual property right protection, lack of supporting infrastructure outside the big cities, lack of transparency in business deals, interference of the government have all been highly detrimental to China’s aspirations to become a branded giant. A handful of companies though have managed to break the glass ceiling and emerge in the global market such as Lenovo, Haier and Huawei.

As is evident from these examples, challenges to branding can be fairy idiosyncratic to individual countries. Even in face of such challenges, Haier presents a classic example of branding triumph.

Haier is a classic example of sheer focus, tenacity and clever strategy. Ruimin Zhang has been a shrewd businessman from the early days. The Haier brand is built on quality and a commitment to offer innovative products at a competitive price. Haier’s success in global markets is no surprise at all. Haier is one of the few Chinese companies that chose to follow a careful strategy. Haier’s strategy has been to establish a leadership position in the domestic market before venturing into global markets. Unlike most players how concentrate on the low end of the market by offering cheap products, Haier has focused on offering innovative products at a competitive price and it has paid rich dividends. A case in point is that Haier is the leading brand in the US in mini-refrigerator category. Haier’s commitment to quality and innovation is evident by the 18 international product design centers that it has established in Los Angeles and Tokyo which are in turn supported by production facilities in US, Japan and Italy.

Despite such rare cases of success, there are huge challenges for the many aspiring companies from many of these emerging economies to create resonating brands. Some such important challenges are discussed in the following section.

Emerging economies with its many countries, cultures, business practices and customer segments is much more complex than other any other region in the world. The clusters are made up of certain highly developed countries such as Japan, South Korea, Taiwan, Singapore and Hong Kong with ultra urban and modern consumers with deep pockets, many rapidly growing countries such as Brazil, China, India, Malaysia, Russia, Thailand and others with consumers willing to experiment with new products and a number of other still developing countries such as Argentina, Bulgaria, Chile, Czech Republic, Vietnam, Cambodia, Sri Lanka and others with people living below the poverty line and consuming only the bare minimum. Unlike the markets in US and Europe where markets and customers have reached a certain level of understanding and sophistication, these markets still demonstrate branding infancy. The mindset, the complexity of business structures, the diversity of demographic composition and the huge geographic extant requires certain unique branding steps. Here are some essential steps:

Create a strong differentiation: In many of the still developing countries such as Argentina, Chile, Bulgaria, Sri Lanka and Vietnam, Western brands are still looked up to as people in these countries aspire to own the global brands. With many local companies striving to create similar products at lower prices, the Western brands would do good to create a strong differentiation by leveraging their brand equity. Similarly, local brands that aspire to make it big must tap into the unique cultural associations and local myths to weave the brand into the societal fiber.

Establish a strong distribution network: Brazil, Russia, India and China, which constitutes four of the biggest economies of the emerging block are very vast countries and distribution in these countries holds the key to success in many industry sectors. A major percentage of the population lives in rural areas which are not usually covered by the major brands. But with an increased migration of consumer from the rural side into main stream economy, success in these rural areas will prove critical. Some major brands such as P&G, Unilever have benefited from such a focus in India. Coca-Cola has also recognized this emerging phenomenon and has expanded beyond the urban cities of Shanghai and Guangzhou and into the heartlands of China.

Glocalize: As the emerging economies mature gradually, they start developing a strong sense of individual consumption identity. This is evident from the increasing demand for products which are localized to suit the local preferences of customers. Global brands which enter these markets must retain their brand identity at the strategic level but localize the tactical implementation such as the communication, product offerings and so on. This combination of global brands with local products will allow the global companies to weave their brands into the fabric of the local society and make the brand a part of the community. Similarly, local brands must leverage their knowledge of the local consumer must create a brand identity that not only appeals to the customers but also crates pride about the origins of the brand.

Leverage cross-border synergies: In spite of the many differences between these countries, companies can leverage the scale of operations and supply chain across borders to optimize profitability. The relatively lower cost of production offers companies a fine platform to serve the entire region. By standardizing the major part of the product and fine tuning the final offering to suit the local tastes, companies can minimize cost and gain scale.

Recognize and respond to the unique regional markets: Asia, Eastern Europe and South America are mosaics of cultures and rich heritage. Each country has a unique pattern of consumption. Companies should be careful not to generalize across them as a homogenous region by ignoring the glaring regional and national uniqueness. Managers aspiring to participate in these booming markets need to have a good appreciation of the above challenges. As each country is fast evolving and integrating with the global economy, none of these challenges and market situations are static. Businesses should develop the flexibility to quickly react to the changes in the market and adapt their strategies to successfully compete and survive.

Collaborate and co-create: Many global and regional companies entering these new markets have collaborated and leveraged the resources of the local companies. The combination of strong brand equity, financial prowess and the business acumen of the global brands and the local networks, established distribution channels and the strong knowledge of local customers of the local companies would offer a winning scenario. Such collaboration would not only facilitate a quicker entry into the market but also would allow the entering company to learn the nuances of the local business market.

Leverage the unique Asian culture: Companies that plan to build brands in these emerging economies must leverage the unique local culture to relate to the customers. Each country in thee cluster has a very strong history and heritage that has for long influenced the local cultures and practices of both companies and consumers. Companies should tap into these specific details and incorporate them in their brand personalities and identities so that customers can be offered an authentic experience.

Brand Case 1: Unilever and Nokia - Glocalization as Branding Strategy

Unilever is a classic example of a global brand which has pioneered serving the locals with products that address the local sensitivities. Unilever’s Indian subsidiary Hindustan Level Limited (HLL) has been the leader in recognizing the tremendous opportunity lying at the bottom of the pyramid – customer base that aspires to consume products but in smaller quantities and at lesser prices. HLL literally invented the shampoo sachets – small plastic packets of shampoo for as less as INR 1 (USD0.022). This became such a rage among the rural consumers that many other brands started offering products such as detergent, coffee and tea powder, coconut oil and tooth paste in sachets. Even though the unit price was higher, rural consumers were able to afford to purchase the smaller quantity at their convenience. Another example is of the leading mobile brand Nokia. Nokia also recognized the growing importance of rural customers in the Indian mobile telephone market which grew from a mere 300,000 subscribers in 1996 to a whopping 55 million subscribers in 2004. Nokia introduced its dust-resistant keypad, anti-slip grip and an inbuilt flash light. These features, albeit small, appealed to a specific target of truck drivers initially and then to a broader segment of rural consumers. These features endeared Nokia to the Indian consumer as Nokia displayed a genuine commitment in responding to local customer needs.

Brand Case 2: Indo-Japanese Collaboration in the Indian Auto Market

Many Japanese brands have collaborated with Indian brands to enter the Indian market and have been highly successful. The Indian automobile market especially is a case in point: Kawasaki’s collaboration with Bajaj (Indian motorbike brand) and Honda’s strategic alliance with Hero (Indian automobile brand). Both Kawasaki and Honda entered the Indian market long before the current boom in the Indian market, a time when the Indian market space was still an enigma for many foreign brands. By strategically leveraging the capabilities of local brands of Bajaj and Hero respectively, the Japanese brands gained an instant access into the complexities of the Indian market, the distribution channels, and the Indian consumer mindset. This partnership has also benefited the Indian brands which rode high on the equity of the Japanese brands which have traditionally been recognized for the technological prowess and high quality. It will be such collaborations that would help brands within the complex markets of Asia.

The dominant branding strategies

Given these examples and brand cases it becomes apparent that there is no one size fits all strategy for companies from the emerging economies to build global brands. But as has been comprehensively discussed elsewhere including my book, there are three dominant strategies that can be pursued by such companies in their quest to build global brands.

Organic growth strategy: An organic growth strategy is where companies grow their brand on their own potential without exploiting the possible synergies of other established brands. Companies strive to grow organically by expanding in the same market or other markets by having full management control over their brands. This strategy has its own advantages and disadvantages. As the company is the sole owner of the brand, it gives the company a lot of leeway to decide on its positioning and personality. It also provides companies with the freedom to invest in and continuously manage the brand across all touch points.

The disadvantage of this strategy is that companies potentially might not be able to extend their brand beyond a certain set of product categories and market segments due to high resource requirements. This makes it challenging for companies to launch new brands as the investments are significant. Moreover, as the brand would have built in certain entrenched personalities in consumers’ minds, branching out into different product lines could prove challenging, depending on how large the resource requirements are in order to establish and communicate this.

Alliance growth strategy: An alliance growth strategy is one in which companies enter into beneficial strategic alliances which affords both companies the combined strengths of two brands. Further such a strategy optimally utilizes the synergies between the two companies with a result that the products and services offers by such an alliance would have the backing of two brand names. As with any strategy, this too has its own advantages and disadvantages. When two companies decide to combine two distinct brands (or a portfolio of brands), both companies reap the advantages of access to new markets, distribution channels, customer segments and products.

But on the downside, it faces the risk of confused positioning, and ineffective management of the brand’s identities. This happens especially when the two brands stand for two distinct things in the marketplace, catering to two distinct customer groups. As such, companies must ensure the presence of regular brand tracking procedures to assist in maintaining balance in the alliance.

Acquisition growth strategy: An acquisition strategy is one where one companies acquires another company or brands to leapfrog and grow. This strategy demands a huge financial outlay on part of the acquirer which can be an obstacle in itself. Further, more than the acquisition itself, the post acquisition integration poses tremendous challenges to companies. Integration involves multiple functions within a company including people, processes, operations and brand practices. This integration process often proves more challenging that the actual acquisition process itself. Though quite arduous, this strategy proves very helpful for companies that venture into newer markets with other well known brands.

These three dominant strategies offer companies considerable choice in pursuing their branding blueprint depending on their internal resource capabilities, their core competencies and the nature, tenor and character of the external competitive landscape in which they operate.

Conclusion

The changing market conditions have morphed branding from being a luxury for an elite few to a strategic necessity to all businesses that wish to survive and thrive in the long run. Companies across Asia, South America and Eastern Europe are gradually starting to understand that if they want to emerge as serious contenders on the global scene and integrate with the developed economies, they will have to invest in branding. The dominant economic model of the previous era of closed economies no more operate in the present day. Countries across the world are increasingly becoming connected. The world indeed is becoming flat. Given such changing rules of the global economic landscape, emerging economies cannot merely rely on established models of business and be complacent about their strategies.

Asian companies have taken the lead among emerging economies to show that changing from the old to the new is possible. For a very long time, Asian companies managed to do business without building resonating brands due to a number of factors such as government protection from global competition, localized markets, and low cost. But with the raising economic power of China and India in the global scene, the confidence levels of many Asian companies are growing and more companies are aspiring to venture into the global market.

Similar is the case with many South American companies. Corporations across Brazil, Chile and Argentina are not only realizing the increased importance of interaction with the developed economies, but are also gradually cruising down the path of brand building. Finally, Europe is seeing some fundamental transformations too. The gradual integration of many of the Eastern European economies into main stream European economy is paving way for both learning and developing new business models.

The addition of billions of people from these emerging economies is bound to change the underlying character of the global business landscape. The integration of such new producers and consumers into the main stream economy combined with capitalistic economic policies, globalization of trade and breaking down of trade barriers will bring about an enormous change in the global business order. If companies in these emerging economies realize the tremendous opportunities that lay in times to come and embrace branding as a strategic tool in order to exploit such the tremendous opportunities, the next generation of economic super powers may very well emerge from these economies!