How Local Firms Beat Multinationals
Wal-Mart doesn't always win when it enters a new market.
In business, David can beat Goliath, or at least maintain competitive advantage, by understanding weaknesses inherent in big companies and strengths to be derived from playing smart in your own backyard.
The subject of how small can beat big is explored on a transnational scale in How Local Companies Keep Multinationals at Bay in Harvard Business Review, written by Boston Consulting Group consultants Arindam K. Bhattacharya and David C. Michael.
BSG studied the strategies of local companies in 10 rapidly developing countries that had been the battlegrounds of fierce competition from multinationals. The results were surprising.
They have staved off challenges from multinational corporations in their core businesses, have become market leaders or are catching up with them, and have often seized new opportunities before foreign players could. Many of them dominate the market today not because of protectionist economic policies, but because of their strategies and execution.Here are the six lessons culled from 50 successful companies that took on Goliath.
- Customize. Native companies take advantage of their local knowledge to customize products and services.
- Turn obstacles into advantages. Use local knowledge to understand and overcome domestic business obstacles long before your competitor encounters them.
- Exploit technology. Invest and leverage the latest technology to reach customers and lower costs while your competitor is locked into older technology.
- Utilize local labor. Use low-cost labor pools to overcome shortages of skilled talent and add value while your opponent relies on automation.
- Scale up quickly. Reap benefits of scale by going national as quickly as possible.
- Top managers are key. Multinationals often underestimate the skill and knowledge of local managers. It pays to recruit and retain the best talent you can get.