Learn from the World-Beating Strategies of Emerging Market Competitors, says LBS' Sull

Don Sull is a professor at the London Business School and a power-blogger for the Financial Times. Among his areas of interest is a new wave of global competitors originating in developing economies that are quickly becoming dominant in a variety of industries. Last week, we discussed the impact of these emerging market competitors. Today, we'll dive into some of the strategies and techniques that set them apart.

BNET: These emerging market competitors you discuss come from very different cultures and from an assortment of industries. Are there any commonalities you see among them?

Sull: In terms of the commonalities among these sorts of companies, they are much more willing to experiment. One of the curses of companies that have been successful in international markets over the last thirty years is that they are quite convinced that their ways are the right ways. But there's a deep level of pragmatism among emerging market companies that I've studied. They're open to outside ideas and they are open to anything that works, but they don't slavishly copy anyone. With companies for more advanced economies, if it's not "The Sony Way" or "The GM Way", management has historically not been into those kinds of ideas. Also, because they've overcome structural economic impediments, they have systems that work very well in volatile markets. They are good at creating methods for getting and sharing real-time data that impacts finance, marketing, strategy and operations. If you look at Mittal Steel, for instance, ten years ago, when they weren't such a global empire, they were closing the books on their operations at a very fine level in terms of cash flow, sales, capacity, cost, energy use, efficiency--every single element of their operations--every day. At the time, for the big steel companies like Thyssen Krupp, it might take them a month or two to close the books on their domestic operations. So, you could see they would be in trouble against a company like Mittal that is optimized for competing in a turbulent market.

BNET: The kinds of companies you have studied come from generally poorer countries that represent the vast majority of the world's population. Are their business models more translatable across geographies because of this?

Sull: We see that emerging market competitors have a real willingness to do things cheaply. If you're competing in Mexico, like Cemex, and the core of your customer case has a low income, you have to figure out how to add value on the cheap. A lot of the Cemex consumers were buying cement sack by sack. That's common with most people within the global population; people lack the cash to buy all of the building materials at once for the addition to their house or a barn. Cemex sent managers to live in these poorer areas for months at a time to figure out how people made their purchase decisions and they discovered some very interesting things. They discovered that the poorest families could not even afford a bag of cement, so ten or more families would band together. Each would chip in a certain amount of money each week and once every ten weeks, they would draw the name of a family that would win a bigger sum of money than they could ever assemble on their own. It was often used for home improvement but might be used for a wedding or some ceremony. What Cemex realized is that they didn't just need to provide people cement, but also the infrastructure to help people save money. Cemex started organizing these group saving systems where you would actually get more than the value you originally put in in terms of cement, because you could only use it for cement. They also partnered with building supply chains to provide advice and training on how to use cement properly. So, by taking these low-income consumers very seriously, the figured out how to provide a lot of value in a way that was still very profitable to them--and that could be rolled out globally.