Wednesday, March 11, 2009

Value-for-Money Strategies for Recessionary Times - an article from Harvard Business Review


Value-for-Money Strategies for Recessionary Times

Lessons Western businesses must learn from emerging-market companies to succeed -- at home and abroad

NO ONE NEEDS CONVINCING that the economic situation we're facing today is almost unprecedented. Yet much of the advice that executives have received is remarkably similar to what they heard during the recession in 2000. Particularly in Western enterprises, the preferred antidotes seem to be standard ones: Evaluate your risks, develop contingency plans, focus on your core, reduce costs, expect the unexpected, and so on. The unspoken objective appears to be to survive or, at most, to maintain market share.

Like many orthodoxies, however, this will not serve companies well today. The world has changed so much because of, among other reasons, deregulation, lowering of trade barriers, rapid technological advances, demographic shifts, and greater urbanization, that strategies that worked a decade ago are unlikely to do so anymore. Previously, downturns oft en favored incumbents, which possess economies of scale and customer relationships that allowed them to prevail over upstarts. What's different now is that companies from several emerging markets are poised to wrest market share from, or even take over, Western firms. What's more, recessions can alter industry dynamics. Studies conducted by both McKinsey & Company and Boston Consulting Group show that around a third of the companies in the first quartile of their industries tumbled from their perches during the 2000 slowdown. Only 10% of them had clawed back five years later, while 15% of today's market leaders vaulted to the top during that recession.

Smart companies perceive not just threats in a recession but also opportunities. Their goal is to grow so they can emerge stronger from the downturn. In fact, during the Great Depression of the 1930s, companies like General Electric, Kellogg, and Procter & Gamble outmaneuvered rivals to become leaders. They turned adversity into advantage in different ways, but a quick analysis reveals one common thread: During the Depression, these companies developed value-for-money strategies: They grew by delivering products and services that enabled hard-hit consumers to do more with the same resources and become more effective; to do the same with fewer resources, thereby improving their efficiency; or to do less with far fewer resources, which helped them economize.

Value for money has again become a strategic imperative -- and not just because of the recession. Even before the slowdown began, there were signs that it ought to be a major consideration for companies. In developed countries, increases in household income over the past decade have favored the top 20% of earners, while the spending power of most families has stagnated or declined. Many people in the United States, for instance, have found it difficult to maintain their standard of living after paying for such necessities as their mortgage, transport, utilities, and health care without borrowing money. More recently, small salary increases and the steady drumbeat of job losses have turned many consumers into value shoppers, as they tighten their belts.

Unsurprisingly, Wal-Mart has been gaining share from premium retailers, and apart from luxury cars, only sales of small or fuel-efficient vehicles have been growing over the past five years. In Western Europe, according to a recent Credit Suisse study, the market share of value-priced store brands rose by two percentage points in 2007 while that of premium labels fell by the same amount.

In developing countries, consumers are traditionally value conscious. Many have entered the consuming class recently and have limited disposable income. For instance, Credit Suisse projects that the number of Chinese households whose income exceeds their basic needs will rise from around 55 million in 2008 to 212 million by 2013. However, many of them will earn only a little over $5,000 a year. By 2020 in India, the market research firm Information Resources predicts, 5% of the population will be part of households that earn more than $4,000 per annum, but they, too, are unlikely to have much excess income. Meanwhile, upper- and middle-class consumers in both countries must stretch limited earnings to cope with rising aspirations and inflation. Business buyers in developing countries depend on low costs to gain competitive advantage, so they always look for value when purchasing equipment and services.

In both the developed and the developing world, therefore, delivering value for money has become critical. What capabilities must companies possess to thrive in this environment? Our research suggests that instead of refining cost-cutting techniques, companies should develop cost-innovation capabilities. They must learn to reengineer their cost structures in novel ways so they can offer customers dramatically more for less. That may not be good news for many U.S., European, and Japanese corporations, which have usually dealt with low-cost competitors by going upmarket and creating premium segments, both at home and abroad. Because smart emerging-market companies have built cost-innovation capabilities to unlock mass markets, that's no longer a viable strategy. Unless multinational companies learn from emerging rivals and, in some cases, from their own overseas operations, they are unlikely to weather the recession well -- or stay competitive for very long.

Three Dimensions of Cost Innovation

Innovation is traditionally associated with developing new products and services or with adding more functionality and features to existing ones. In both cases, companies expect customers to pay a premium. The idea of innovating to develop offerings that provide greater, or almost the same, functionality but at a lower price is unconventional. Some executives may regard it as silly: Why invest in research to sell products for less than the prevailing price? However, smart companies in emerging markets have done just that to appeal to the great mass of value-conscious customers at home.

The first wave of emerging giants offered low-cost products and services primarily by utilizing relatively inexpensive personnel, but the second generation has developed an additional competitive edge through cost innovation. This capability will not only stand those companies in good stead at home during the present downturn but also enable them to break into value-for-money segments in developed markets.

Cost-innovation strategies are disruptive in that they result in products or services that look inferior in some ways to existing ones but are more affordable and easier to use than incumbents' offerings. As we shall see next, they oft en render obsolete the market leaders' assets, capabilities, and experience by changing the rules of the game, by undermining traditional profit models, or by growing those parts of the market that incumbents are ill equipped to serve.

Emerging giants have developed the ability to deliver cost innovation in one or more of three ways:

Selling high-tech products at mass-market prices. Companies oft en apply the latest technology only to the most complex applications or sell it to early adopters. By restricting a state-of-the-art technology to a few segments initially and transferring it to mainstream markets over time, they capture the maximum value throughout its life and enhance the return on their investment in research and development. However, some newcomers from developing countries have found ways to offer the latest technology to mass-market customers at low prices.

By rewriting the value-for-money equation in the battery market, for instance, China's BYD has become a global market leader. Lithium-ion cells allow battery-powered devices -- be they cell phones or electric cars -- to work longer. When BYD entered the industry in 1995, four Japanese companies controlled the market, and they sold the batteries, which were expensive, to power only high-end products. Instead of trying to improve their performance, BYD focused on replacing the most expensive raw materials used to make lithium-ion cells with cheaper substitutes. It also learned to produce them at ambient temperature and humidity, which made it unnecessary to construct expensive "dry rooms" in plants. The company was able to reduce the manufacturing costs of the batteries from $40 apiece to just $12, making them competitive with lower-performance nickel-cadmium batteries. As BYD developed lithium-ion cells for more segments, costs continued to fall, and by 2007 its lithium-ion products enjoyed a 75% share of the batteries used in cordless phones, 38% of those used in toys, 30% in power tools, and 28% in mobile phones. Despite its low costs, BYD has never recalled products, whereas Sanyo and Sony had to do so after their lithium-ion batteries exploded in laptops.

Indian companies have also tried to take the latest technology to mass markets. For instance, the REVA Electric Car Company (RECC) developed its all-electric car for the middle of the Indian automobile market. Set up in 1994 as a joint venture between the Bangalore-based Maini Group and California's AEV, the company launched the REVA (short for Revolutionary Electric Vehicle Alternative) in June 2001. A small hatchback with a maximum speed of 50 miles per hour, it can run for about 50 miles in city-driving conditions when fully charged, at an operating cost of little more than one cent per mile. The REVA is available in several European countries including the UK, where it sells as the G-Wiz for around £8,000, and it is being test-marketed in the United States. It will compete with, among others, the Chevrolet Volt, the electric-gasoline-ethanol hybrid that GM plans to launch in late 2010. The larger Volt will run about 40 miles after a single charge before switching to a gasoline or ethanol engine. However, GM plans to sell it for between $30,000 and $40,000 in the U.S. -- more than twice as much as the REVA costs in Britain. Although RECC has been slow to scale up, the REVA's low price and inexpensive running costs could spur sales as the recession intensifies.

Some emerging giants are disrupting high-tech markets by taking a second look at less-sophisticated technologies. A Chinese company, Zhongxing Medical, transformed the medical equipment business by focusing on direct digital radiography in a novel way. DDR transforms an X-ray scan into a digital signal that a computer can analyze, bypassing the traditional chemical process. There are two types of DDR systems: linescan machines, which work best for standard procedures such as chest scans, and flat-panel imaging systems, which are ideal for sophisticated applications like heart scans.

General Electric and Philips have focused on developing flat-panel machines, which each carry a price tag of between $300,000 and $400,000 and offer the largest profit potential. Meanwhile, Zhongxing Medical's parent, China Aerospace, which bought line-scanning technology from the Russian Academy of Sciences in 1998, developed a DDR machine that was adequate for most hospitals' routine, high-volume radiography needs. It costs only around $20,000 to build, as compared with $150,000 to $200,000 for a flat-panel system. When Zhongxing Medical launched its DDR machine in 1999, it sold well because a large number of second- and third-tier Chinese hospitals could afford it on their limited budgets. Facing loss of market share, GE and Philips cut prices on their flat-panel machines by $100,000 to $150,000. Even so, Zhongxing Medical has a 50% share of the Chinese market today, GE competes at half the price it charged a decade ago, and Philips has withdrawn its line from the country. What's more, by investing its profits, the Chinese company has improved the performance of line-scanning devices, reducing scanning time from 10 seconds to two and making the process more comfortable for patients. Thus, the high-end profit pool that its multinational rivals rely on at home may come under threat soon.

Offering choice and customization to value customers. Customers usually have to pay heft y premiums if they want a large selection of products or customized offerings. That's because most companies in developed countries, which focus on gaining economies of scale, fear that if they offer a plethora of choices, their operations will spiral out of control. They will spend additional time making changeovers on manufacturing lines and lose money from write-offs on obsolete inventory. But companies in emerging markets have been able to transform the rules of variety and customization by learning to gain economies of scope. First, relatively low human resource costs allow them to hire large staffs to develop customized designs and handle changeovers. Second, they mix automated processes, to deliver quality, with human intervention, to gain flexibility. Third, niche markets are far larger in China and India than in the West, enabling companies to economically support a wide variety of offerings.

The best known example is China's Goodbaby, which sells customers 1,600 kinds of children's strollers, car seats, bassinets, baby walkers, playpens, high chairs, tricycles, and bicycles -- four times more than its rivals offer but at comparable prices. The Shanghai-based company has a product that meets practically every need, from strollers that can handle uneven surfaces to those that fold away with two simple movements. It covers the entire price spectrum, selling the Rolls-Royce of strollers for $600, as well as inexpensive ones that retail for $30. One of its first products was a stroller that could be converted to a child's car seat, enabling cash-strapped parents to do two jobs for the price of one. A $400 million company, Goodbaby can do this, in part, because it invests 4% of its annual revenues in research -- twice the average for the toy industry worldwide. It employs 220 designers at R&D centers in China, Germany, France, the UK, the U.S., and Japan, and it comes up, on average, with two new products a day. By 2008, Goodbaby controlled 80% of the Chinese stroller market and 25% of the U.S. market.

Variety helps some companies in emerging markets retain their leadership. India's United Spirits, for instance, is the country's largest marketer of alcoholic beverages and one of the largest in the world. This $1 billion company offers consumers 140 brands of such spirits as whiskey, rum, gin, and vodka, as well as several types of beer and wine, managing as many as 151 brand variants and almost 3,000 SKUs. The company attracts buyers from most socioeconomic strata because it offers products at just about every conceivable price point. That's a lesson that the Indian tobacco giant ITC, too, has taken to heart. In the early 2000s, the $5 billion company diversified into the ready-to-eat foods market and the grocery business, selling staples such as flour and spices, confectionery products, and snacks. It also entered the personal care products business, offering fragrances, soaps, shampoos, conditioners, shower gels, and deodorants. In both lines of business, ITC presents customers with a larger choice of products than most of its multinational rivals do. This has also enabled the company to get prime display space in India's small retail outlets and crowd rivals off the shelves.

Both variety and customization have been instrumental to the success of Shanghai Zhenhua Port Machinery (ZPMC), which controls 54% of the global market for harbor cranes. Tapping into China's low-cost pool of technical personnel, it employs around 800 design engineers. Instead of experimenting with breakthrough technologies or developing sophisticated functionality, these engineers focus on customizing standard designs. Every port's layout and mix of operations is different, so ZPMC meets customers' requirements by offering them a large choice of models and by customizing solutions quickly, which gives it an edge over rivals.

Turning premium niches into mass markets. Most companies define a niche market as one that consists of relatively few customers willing to pay premium prices for goods and services that meet their specialized requirements. They don't check to see if there may be a wellspring of latent demand choked off by high prices and poor value-for-money offerings. Smart companies from emerging markets -- such as China's Haier, which has captured 60% of the U.S. market for electric wine refrigerators in less than a decade -- have succeeded by tapping into that demand and turning niches into volume markets.

A niche can blossom into a surprisingly large value segment. In 2002, Shinco, the largest manufacturer of DVD players in China, wished to enter the global market. It didn't want to challenge Sony, Panasonic, and Samsung head-on, so it chose to focus on the portable DVD player segment first. Shinco found this niche attractive for three reasons: One, the price of portable DVD players was high relative to tabletop players, which gave Shinco room to increase the value customers would get. Two, the demand for portable players was latent Value-for-Money Strategies for Recessionary Times 72 Harvard Business Review | March 2009 | hbr.org because the prevailing high prices were putting buyers off. Three, Shinco could leverage an error-correction technology it had developed for handling pirated DVDs to compensate for the jumps that occurred when people used its players on cars or trains. Within months, Shinco launched a portable DVD player that was 30% to 50% cheaper than competing products. According to one estimate, the market grew tenfold in the first year after its entry, and Shinco became the industry leader, with a 30% share.

Companies don't lose money when they shift from high-margin to high-volume products and services. For instance, although cellular telephones are commonplace in India today, even among fishermen and farmers, that didn't seem likely when companies started offering mobile telephony services back in 1995. Then, the first mobile telephone operators charged much more than the state-owned landline-based companies did. Mobile devices were expensive, consumers had to pay between $500 and $1,000 to get a connection, and each call cost around 32 cents, which was prohibitively expensive for most Indians. After 2002, leading mobile telephony companies such as Bharti Airtel and Reliance Telecom started lowering prices to grow the market and consolidate the industry. What started as a premium business then quickly became a mass market: By 2007, Reliance Telecom had 100 million customers, while Bharti Airtel catered to 65 million customers. They're still profitable: The Indian companies generate only a quarter of the income that Western companies usually earn from a customer, but they enjoy higher margins because of their low-cost business models.

Counterstrategies for Multinationals

In our experience, companies in developed countries usually defend against emerging giants at home by shifting their focus to high-end segments. This strategy oft en proves ineffective. Volumes at the top end are small, so incumbents end up with insufficient units over which to spread their investment after they've lost the mass market. Production levels quickly become subscale and manufacturing costs rise. Meanwhile, rivals from developing countries can spread the costs of R&D departments and manufacturing infrastructure across larger volumes. Since their revenues from mass-market sales match their fixed costs, they can set a price that covers only their variable costs when they target upmarket niches and grow them into mass markets. As a result, the incumbents' disadvantage intensifies as they retreat to higher-end market segments.

Instead of moving to the high ground, U.S., European, and Japanese companies can capture value-for-money markets all over the world by using one or more of five approaches.

Go beyond low-cost sourcing in emerging markets. Almost all companies in the developed world source directly or indirectly from countries like China and India to cut costs. To grow, they must make bolder moves that involve relocating as many stages of the value chain as possible, from R&D to customer service.

Take computer peripherals maker Logitech, which set up a global production center in Suzhou, China, in 1994 and closed its plants in Ireland and the United States. When that big bet proved insufficient to maintain its competitive advantage, the company added a major design hub in 2005. Eighty designers work at the Suzhou facility, and the number will soon double, since Logitech is shifting most of its product development there. Several other companies are doing the same: Foreign firms were operating 700 R&D centers in China by 2008.

A few information technology giants have shifted the base of their globalization initiatives overseas. For example, in December 2007, Cisco set up a globalization center in Bangalore and located its chief globalization officer there. The CGO implements the company's global strategy, collaborating with functional leaders and developing disruptive business models aimed at creating new channels, markets, processes, and technologies. Earlier, in August 2005, Intel shifted responsibility for its channel platforms group to Shanghai. Running the group out of China allows the company to nurture demand in other emerging markets, as well as in segments of the developed world that need advanced technology at inexpensive prices. Cisco and Intel want their India and China operations to take their cost-innovation capabilities global -- something their Silicon Valley headquarters may not be able to pull off, being, as they are, far away from unfamiliar markets and oriented toward selling high-tech products for dollars, not low-tech goods for pennies.

Develop products in emerging markets and bring them home. Few multinationals have exploited the full potential of the innovations developed by their foreign subsidiaries. The primacy of the parent organization and the idea that the home base is the font of all innovation die hard. Faced with today's complex challenges, however, some forward-thinking multinationals are reassessing the role of developing markets in their innovation strategies.

In 2006, Diageo, the London-based alcoholic beverages manufacturer, set up an innovation group in Hong Kong. This group seeks technologies and spots trends in Asia that will help create innovative products for the company's global portfolio. Unilever has long used India as a source of innovation, developing products there that it can sell globally. More than 250 scientists work in two research centers in Mumbai and Bangalore, and they have bagged around 600 patents. Recently, the two centers led the development of Pureit, an inexpensive water-purification system that meets the stringent criteria of the U.S. Environmental Protection Agency. Hindustan Unilever launched the product in India in 2008, and it plans to sell Pureit in other emerging markets in Africa and South America in the future.

Similarly, Hewlett-Packard's laboratories in India are developing the Shop Owner's Management Assistant, a simple, low-cost device that small retailers can use to track inventory. It's basically a Linux-based computer with retailing soft ware that can help shopkeepers with inventory management and billing for both bar-coded and nonbar-coded commodities, and even generate a few standard reports. HP meant the product to be used by India's mom-and-pop retail stores, but the company has found that wholesalers and manufacturers also want it, because it enables sales representatives to track customer inventory. The company intends to sell the device throughout the developing world, and it anticipates a market for it in the developed world, too, among many small and medium-sized enterprises that can't afford more conventional inventory-tracking systems.

Invest in brands as you would in emerging markets. The current crisis is, we hope, a once-in-a-lifetime event in Western markets, but waves of political coups, hyperinflation, downturns, and currency fluctuations are common in developing countries. Executives in developed economies can learn something from the marketing strategies and branding tactics that work in such volatile environments. For instance, Western companies oft en think of TV advertising as a primary brand-building vehicle. However, they can't afford the daunting cost and high wastage rates of TV ads when launching value-for-money products. Executives must find alternative ways to get the message out -- which cannot include the internet in many developing countries.

The Taiwanese computer maker Acer uses a novel channel. For more than a decade, it has put its name on the heavy-luggage trolleys and small carts used inside Asia's airports. Business fliers and vacationers who can afford to travel by air are both potential laptop buyers. They can read Acer's message for five or 10 minutes, as they walk from cars to gates or from baggage claims to exits. The amount of time the Acer name and tagline are displayed to potential customers is the equivalent, therefore, of 10 to 20 half-minute television ads, which represents a high impact/cost ratio.

In fact, emerging giants oft en use cost-effective tactics to break into developed markets. In July 2004, when Haier was trying to build awareness of a new line of air conditioners in the United States, it teamed up with Target. They set up a temporary Target store filled only with Haier products in Times Square in New York and offered customers free delivery and other promotional incentives. Haier sold 7,000 air conditioners in seven hours -- a feat that received coverage in the media and set off a lot of chatter on the web.

Combine your capabilities with those of emerging giants. Multinationals have traditionally formed joint ventures with local companies to break into developing countries. Now, however, they must find ways to combine their skills with local firms' cost-innovation capabilities. Yesterday's one-sided joint ventures must give way to alliances that both broaden penetration in emerging markets and target value-for-money segments in developed economies.

For instance, when 3Com and Huawei joined forces in 2003, they hoped to win share from Cisco all over the world. For its part, 3Com brought its brand, a global distribution network, detailed knowledge of customers in the United States and Europe, and a set of product add-ons that completed the Chinese company's offerings. Huawei brought its product line, sizable market shares in developing countries, cost-competitive service capabilities, and design and engineering resources. The alliance enabled 3Com to compete effectively with Cisco by revitalizing its product range. It helped Huawei accelerate the global penetration of its technologies, enhance its reputation, and learn how to build a multinational company. So successful was the tie-up that in 2008, Huawei and 3Com decided to merge -- a move that the Bush administration thwarted. It may not be easy for a deficit-laden U.S. government to prevent such deals in future.

Acquisitions are another way to absorb new capabilities. In October 2001, Emerson Electric paid $750 million for Avansys, one of the world's leading producers of power supply devices for telecommunication equipment providers and data centers. At the time, experts felt the price was too high, but Emerson argued that Avansys was an outstanding company that brought complementary products, a young and talented workforce, and capabilities it could leverage to enhance its business worldwide. The move has paid off handsomely: Emerson Network Power has become a global leader, generating sales of $3.6 billion in 2008 -- an 11% increase over 2007 -- and margins of 12.6%. In the same way, in 2005, PalmSource, which made operating systems for mobile devices, bought China MobileSoft. The Chinese company had developed a wide range of soft ware for mobile phones, including a dozen applications, operating soft ware for smartphones and feature phones, and a version of Linux optimized for mobile devices. The combination has provided PalmSource with a line of soft ware that enabled it to power mobile phones at practically all price points in all regions. That's partly why in May 2005, Japan's Access, a rival provider of soft ware for mobile devices, acquired PalmSource for a heft y $324 million.

Invest in growing mass markets in developing countries. In the past, many Western multinationals concentrated on small but profitable high-end segments in the developing world, particularly as an entry strategy. Since growth in the developed world has stalled, it is no longer enough to view sales in emerging markets as the icing on the cake. It's not just that developing countries offer the biggest potential for growth: Western multinationals that don't meet emerging multinationals on their home turf will give them free rein to build scale and experience. So developed-country companies must invest heavily in growing mass markets in developing countries.

Nokia's experience in China demonstrates the benefits of such a strategy. The cellular phone manufacturer started out by focusing on upper-end segments, where margins were attractive, but had to reconsider its strategy when the foreign companies' share of the mobile phone market fell from 95% in 1999 to 45% by 2003. That's when Nokia and other multinationals decided to invest in the mass market, a strategy that raised their share to 65% by 2007. Once outflanked by local competitors that offered customers a large choice of models, the Western multi nationals have expanded their product ranges considerably. They now even offer such popular features as recognition of handwritten Chinese characters for text messaging.

Nokia launches two or three new models every month in China, having mastered the trick of delivering variety at low cost. Instead of introducing initially high-profit devices to a small market and gradually lowering the price as demand increases, as it does at home, Nokia, like its Chinese counterparts, has invested in producing a wide variety of products in the expectation that the volume of demand these offerings create will generate profits. The company invested around $5.7 billion in China between 2002 and 2006. It targeted the low and low-middle segments of the mass market with phones that retail for less than $40 (without any subsidy from the telecommunications operator); some sell for as little as $8. As a result, Nokia became the leader in the low-end segment, while still dominating higher-priced segments, enjoying a 40% share of the entire Chinese mobile phone market in 2006.

To consolidate its position, Nokia has since appointed 100 distributors in cities across China, established 300 franchised sales outlets, and recruited more than 5,000 salespeople to promote its products in every corner of the country -- not just on the eastern seaboard, where many of its Western competitors remain. The company has merged its four joint ventures into a single holding company in China that is one of its five regional units worldwide. Tellingly, Nokia's China manager reports directly to the mobile phone division's head at its Espoo, Finland, headquarters.
* * *

Clearly, companies in emerging markets are transforming the value-for-money equation. The threat that poses to Western multinational giants, combined with the squeeze on future incomes that the developed world will feel as it pays off the debt racked up to cope with the current financial crisis, calls for a change in mind-set. Rather than wait for the recession to run its course, Western companies must rethink the role of emerging markets right away if they wish to develop cost-innovation capabilities that will help them secure long-term competitive advantage.

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IDEA IN BRIEF

• Despite the global recession, the value-for-money segment -- made up of people who want to be more effective (do more but spend no more), become more efficient (do the same for less), or economize (do less and spend less) -- is likely to grow in both developed countries and emerging markets.

• Companies from emerging markets are better prepared to cater to this segment than Western multinational giants are.

• Enterprises can employ several approaches -- using their subsidiaries in developing countries to design new products and teaming up with emerging giants, to name two -- to break into these markets worldwide.

• This recession is the right time for Western companies to develop the capabilities that will allow them to crack open the value-for-money market and thereby remain competitive.
3 Types of Cost Innovation

Today's emerging-market companies are dominating value-for-money segments at home and abroad not just by taking advantage of lower labor costs but through sophisticated cost-innovation capabilities, which generally take one of three forms:

Selling cutting-edge technology at mass-market prices

BYD turned into a global market leader by bringing down the cost of manufacturing lithium-ion batteries so dramatically that they became viable substitutes for the lower-performance nickel-cadmium cells.

Offering a large choice or customizing products

UNITED SPIRITS has maintained its position as India's largest alcoholic beverage manufacturer by using flexible processes to offer 140 brands of spirits that cover almost every price point in the market.

Blowing up niches into mass markets

HAIER captured 60% of the U.S. wine-refrigerator market in less than a decade by lowering prices so much that a small, unguarded niche became a volume business.

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by Peter J. Williamson and Ming Zeng

Peter J. Williamson (p.williamson@jbs.cam.ac.uk) is a professor of international management at Judge Business School and a fellow of Jesus College, University of Cambridge, in the United Kingdom. Ming Zeng (mzeng@alibaba-inc.com) is the executive vice president of strategy at the Hangzhou-based Alibaba Group and an adjunct professor of strategy at Cheung Kong Graduate School of Business in Beijing. They are the coauthors of Dragons at Your Door: How Chinese Cost Innovation Is Disrupting Global Competition (Harvard Business Press, 2007).

Source: Value-for-Money Strategies for Recessionary Times. By: Williamson, Peter J., Ming Zeng, Harvard Business Review, Mar2009, Vol. 87, Issue 3

1 comment:

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    ReplyDelete