US manufacturers bully on global, laggards on localization

Adjust font size:

Manufacturing News, Source : The Manufacturer US
Published : 26 Jul 2006 16:26

Hyundai got it right, when it entered the Indian market. It adjusted its design so Indian women wearing traditional saris could get in and out of the cars easily.

So did Procter & Gamble, which created a laboratory with high-temperature, high-humidity environment, to customize its products for such markets as Mexico and China. (Consider how, for example, laundry detergent clumps on humid days.)

Those examples aside, global manufacturers are falling short in recognizing the impact of emerging markets with the foresight to source, develop, manufacture and sell their products in high-growth regions, according to a new report released by member firms of Deloitte Touche Tohmatsu (“Deloitte”). Innovation in Emerging Markets: Strategies for Achieving Commercial Success details how manufacturers say they know what they need to do to succeed in growing markets, yet largely fail to follow through.

Almost half (47 percent) said their companies offer very similar products in emerging markets as they do in the U.S. Only 14 percent said their companies sell products that are significantly different in other markets.

“The most profitable companies are looking beyond traditional strategies to generate a continual stream of innovative products tailored to the needs of consumers and industrial buyers in emerging markets,” said Gary Coleman, Global managing director of manufacturing at Deloitte.

Research and development historically is one of the most significant factors in helping companies achieve success in emerging markets. Almost half (49 percent) of the companies that sell differentiated products in different markets said they conduct R&D locally. These executives said cited “better understanding of the local market,” “faster time to market” and “lower R&D costs” as the top reasons for conducting R&D in emerging markets.

Doug Engel, vice chairman and U.S. manufacturing industry leader for Deloitte & Touche USA LLP, added, “Long-term success requires more than simply tinkering with existing products, lowering prices, and developing new sales channels. Manufacturers must understand the unique needs of each local market and develop new offerings accordingly.”

Deloitte identified five challenges that global manufacturers companies must tackle innovatively to succeed in emerging markets:

o Build new value propositions to deliver different products that meet the unique needs of emerging-market customers. In many cases, this will be at dramatically lower price points than in developed markets.

o Globalize research and development by locating R&D facilities in emerging markets to acquire deeper customer knowledge, and to build, market and distribute tailored products.

o Tailor talent management strategies to the unique needs of employees in emerging markets, rethinking how to effectively recruit, develop, deploy and connect people.

o Master the complexity of global value chains to provide autonomy at the local level while leveraging the strengths of headquarters, including governance and management know-how.

o Build risk-management capabilities to effectively detect, correct and manage the unique profile of risks presented by emerging markets, such as the protection of intellectual property.

The research involved a Global online survey completed by over 400 senior executives from a broad range of manufacturing sectors, 12 in-depth case studies, and points-of-views developed from the experience of Deloitte member firms in advising major manufacturers operating in emerging markets.

Comments on this story

no comments yet...

click here to add a comment

You must be registered & logged in to add comments
Please register

The Manufacturer Magazine : Promoting best practice in Manufacturing