Abstract
In this chapter, we discuss and appraise conventional entry strategies and their underlying assumptions. Findings from a broad sample of firms (n=105,260 firms operating in the BRIC nations) indicate that firms pursuing high sales growth are less successful than firms focused on profitability. Moreover, firms that started with a high growth strategy were less likely to achieve profitable growth over time compared to firms with the goal of profitability. We review possible reasons why scaling based on the logic of mass consumption for commodities is not effective. We underscore the need to explore fine-grained expectations of middle-class consumers, and argue for profitable growth based on a different type of scaling. Cases highlight the successful experiences of firms operating in China and India.
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Notes
S. H. Park, N. Zhou, and G. R. Ungson, Rough Diamonds: The Four Successful Traits of Breakout Firms in BRIC Countries (San Francisco, CA: Jossey Bass, 2013).
The findings discussed in this section are based on R. D. Buzzell and B. T. Gale, The PIMS Principles: Linking Strategy to Performance (New York: Free Press, 1987). For a reassessment, see
P. Farris, M. J. Moore, and R. Buzzell, The Profit Impact of Marketing Strategy Project: Retrospect and Prospects (Cambridge: Cambridge University Press, 2004).
R. D. Buzzell and B. T. Gale, The PIMS Principles. P. Farris, M. J. Moore and R. Buzzell, The Profit Impact of Marketing Strategy Project. Also see F. T. Knickerbocker. Gale, The PIMS Principles. P. Farris, M. J. Moore and R. Buzzell, The Profit Impact of Marketing Strategy Project. Also see F. T. Knickerbocker, “Oligopolistic reaction and multinational enterprise,” International Executive, 1973. 15 (2): 7–9.
For a good discussion on cost leadership and product differentiation, see Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).
Tarun Khanna and Krishna Palepu, Winning in Emergent Markets: A Roadmap for Strategy and Execution (Boston, MA: Harvard Business School Publishing, 2010).
Jamie Anderson and Costas Markides, “Strategic innovation at the base of the pyramid,” MIT Sloan Management Review, Fall 2007. 49(1): 83–88.
Example drawn from John Quelch and Katherine Jocz, All Business Is Local: Why Place Matters More Than Ever in a Global, Virtual World (New York: Portfolio/Penguin, 2012), p. 212.
While analysts attribute various reasons why these firms failed to realize their goals, a common attribute is the difficulty in scaling. For additional background on how firms can adjust to recent developments in emerging markets, see M. F. Letelier, F. Flores, and C. Spinosa, “Developing productive consumers in emerging markets,” California Management Review, 45 (4): 77–103. Product No. CMR263, 2003.
S. Shankar, C. Ormiston, N. Bloch, R. Schaus, and V. Vishwanath, “How to win in emerging markets,” MIT Sloan Management Review, 49 (3):18–24. Product No. 49309, 2008; “Backlash against multinationals,” Economics Help, August 2008. http://econ.economicshelp.org/2008/08/backlash-against-multinationals.html.
John Quelch and Katherine Jocz, All Business Is Local: Why Place Matters More Than Ever in a Global, Virtual World (New York: Portfolio/Penguin, 2012), p. 212.
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© 2015 Seung Ho Park, Gerardo R. Ungson, and Andrew Cosgrove
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Park, S.H., Ungson, G.R., Cosgrove, A. (2015). Rethinking Conventional Models. In: Scaling the Tail: Managing Profitable Growth in Emerging Markets. Palgrave Pivot, New York. https://doi.org/10.1057/9781137538598_2
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DOI: https://doi.org/10.1057/9781137538598_2
Publisher Name: Palgrave Pivot, New York
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