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The objective of this study using the Delphi technique was to identify the success factors that contribute to mass market penetration in consumer goods by multinational corporations (MNCs). The research used the perceptions of a panel of industry experts to examine their lived experience and identify the factors that contribute to emerging market success. This dissertation represents a significant contribution to the development of business strategy as it is applied to emerging global markets. It reflects a major paradigm shift from applied strategies to a process of cultural assimilation and integration as reflected by the primary success factors. The primary success factors identified in this study are:
(a) Assembling and developing a strong organizational staff of experienced local managers;
(b) That understands the local culture and marketplace and is able to translate that understanding;
(c) Into product features and options that meet the needs of the local marketplace.
The top three success factors emerged as much more than simple elements of success; taken together, they represent a formula for successful market penetration and are foundational steps for business success.
CHAPTER 1: INTRODUCTION
The past 25 years have been characterized by an unprecedented amount of change. This change has manifested itself in our business communities through the powerful forces of globalization that are fundamentally changing the nature and dimension of business strategy. "Creating change, managing it, mastering it, and surviving it is the agenda for anyone in business who aims to make a difference" (Fishman, 1997).
As world events have changed, the political, economic, and business realities have been forever altered; organizations with long histories of success often find themselves in a struggle for survival. The dynamics of the post modern era have forced business leaders to refocus their attention from traditional objectives to alternative measures of business success, such as core competence (Prahalad & Hamel, 1990), global marketplace penetration, learning organization adaptability, emerging economy market share.
National boundaries and trade barriers have given way to open boarders and free trade agreements opening access to markets that have been historically closed to outsiders. Global investments and joint ventures have allowed foreign organizations to compete with nationals on what is perceived to be a level playing field. Throughout the emergence of global markets, "a few players have prospered by turning the environmental turmoil to their advantage, many more have merely survived--struggling to adjust to complex, often contradictory (market) demands" (Bartlett & Ghoshal, 1989, p. 3). Many business organizations intent on growing globally have yet to find the definitive road to riches.
As multinational corporations (MNC) expand beyond their national boundaries, they generally begin by adopting their domestic business models and attempting to apply these models to foreign market applications. Often, business enterprises that have achieved great success in their domestic markets have attempted to apply the systems that were developed and matured locally to new and foreign global marketplaces with disastrous results (Bartlett & Ghoshal, 1989). Effective business models developed in sophisticated, industrial, and mature domestic economies are often derisory and inapplicable to foreign markets due to inadequate infrastructure, insufficient resources, and local customs (Bartlett & Ghoshal, 1989).
The global business environment has absorbed a tremendous amount of change over the past 20 years. The elimination of trade barriers (Bartlett & Ghoshal, 1989),the demise of most economic forms of communism, and significant reductions in global transportation costs have all altered the competitive landscape in the developed world as emerging and Third World economies compete for market share with low cost labor and devalued currencies. These changes have resulted in the saturation of major markets in the developed world and caused MNCs to turn their attention to emerging economies in countries, such as Brazil, Mexico, Hungary, China, India, and Indonesia, as target markets for sustaining future growth. These emerging economies provide substantial opportunities for business organizations that are intent on expanding their global markets and have a significant domestic market share.
This study will identify the factors that lead to the success of MNCs in emerging consumer economies; answering this question generated an understanding of the key elements of the customer value equation. Knowing, understanding, and applying these success factors allows business organizations to reduce the cost, time, and risk associated with doing business in emerging markets. This strategy provides significant benefits to business organizations and consumers alike.
Background of the Problem:
The history of trade among nations is more ancient than the recording of those transactions. Coins, clay tablets, and the walls of ancient fortresses tell the story of people engaged in economic transactions and weave the threads of civilization to bind as well as to put people of different cultures in a competitive stance. Trade has been the hallmark of great civilizations, in spite of vast distance, significant natural challenges, and the great difficulties associated with transport and logistics (Wren, 1994). Traditional civilizations established significant trading networks with one another in order to exchange both commerce and ideas. The ancient Phoenicians pioneered seagoing commerce across the Mediterranean; they produced products such as dyes, fabrics, glass, and pottery (Encyclopedia Britannica, 2006).
As trade expanded, new routes were developed over land to Central Asia and China and across the Mediterranean to the Middle East, Egypt, and East Africa. The Greeks, Romans, and the Byzantine Empire relied heavily on these trade routes and extended them into India and China.
Mercantilism became the foundation for commerce in the 17th century and was not a particularly successful economic policy. Adam Smith became the first advocate of free trade with the advent of laissez faire economics (Encyclopedia Britannica, 2006). Smith intended to remove mercantilism and to show that national wealth depended on trade, not the balance of power, and on free markets, not on the care and feeding of the uneconomical enterprise. This historical context has exerted a profound influence on the international business environment, which has been molded by dynamic, economic, political, and social forces.
By the early 1900s, enterprises quickly learned that their survival was dependent on capturing the scale of economies made possible by mass production, and this propagated their expansion into international mass markets .However, in these early days of global expansion, there were significant barriers to entry, such as language, currency, and culture, which made the process of globalization expensive and limited its effectiveness.
During the early 20 century, most products followed well-established national preferences that differentiated one country's consumer demands from those of another country. Similarly, there were significant barriers related to global integration that influenced the competitive marketplace. These influences were created by higher transportation costs, logistics inflexibility, tax considerations, cultural preferences, and nationalistic pride.
In the post-World War II environment, many U.S.-based organizations recognized that they could capitalize on knowledge developed in their home market by transferring it to less advanced overseas economies.
By the 1960s and 1970s, this knowledge transfer became commonplace throughout the industrialized world and applied not only to technological innovation but also to marketing and managerial capabilities.
By the 1980s, fundamental changes in political ideologies and economic systems among a large number of developing countries led to significant shifts in the way that governments perceived their interests and the interests of their constituents. Thus, many governments developed friendly attitudes to MNCs, which corresponded to what some called the epoch of globalization.
By the early 1990s, the world of international trade was reshaping itself into three major economic blocs: North America (Canada, United States, and Mexico), the European Union, and the Pacific Rim (Asia). The Uruguay Round of GATT ended with agreement in 1993, and the World Trade Organization was established to monitor and regulate international commerce. The international business environment has grown appreciably over the past 50 years; it has become both more complex from the perspective of competition and simpler in terms of logistics and operational considerations.
Statement of the Problem:
As first world markets have become increasingly competitive, MNCs have begun to focus their attention on emerging economies, such as India, China, Brazil, Mexico, and Hungary, which offer considerable potential for the consumption of goods and services . MNCs have traditionally focused their attention on the wealthy minority in EMs using business models comparable to the successful models used in their home environments. Most MNCs have found that they can sell their existing home market products to the wealthy minority in emerging economies, without incurring significant redesign or new product development costs.
This study will focus on identifying the success factors that are associated with successfully penetrated emerging market economies which are founded upon an understanding of the key elements of the customer value equation in emerging markets. This study will provide an understanding of the key elements of the consumer value equation and its relationship to the success factors in emerging mass economies.
Purpose of the Study:
The purpose of this qualitative research using the Delphi technique is to understand the elements of the consumer value equation and thereby identify the factors that contribute to successful mass market penetration in consumer goods by MNCs. This study will use the perceptions of a panel of acknowledged industry experts to examine their lived experience and seek to identify the factors that contributed to their emerging market success. This research will study developed an understanding of the consumer value and identified the success factors that are common to MNCs and their ability to penetrate mass consumer goods markets. This study will also explore the similarities and differences in approaches as well as the manner in which different organizations have defined success. The research will examine each successful encounter in sufficient detail to identify those elements that contributed to success. Similarities and patterns emerged that were applicable to similar products, markets, situations, and circumstances. For the purpose of this review, the focus will be on secondary data rather than primary forms of literature.
The research questions for this study relate directly to the purpose of identifying the unique attributes associated with the consumer value equation that contribute to MNC success in emerging economies. This study used the Delphi method to determine the array of success factors as well as identifying both similarities and differences in the lived experiences.
The purpose and intent of this study is to apply Delphi methodology to identify, discover, and explore the experiences of industry experts and to identify the success factors of MNCs in emerging consumer markets. This chapter examines the academic and theoretical literature about MNCs, emerging markets, and the success factors associated.
This comprehensive literature assessment will be broken into three sections. First it addresses the definition and the context of MNCs to create a foundation for this research- the framework of the current process of globalization, the business models and modus operandi of MNCs, as well as the criteria and elements that qualify an organization for MNC status, were examined, the benefits and challenges associated with MNCs in the global environment.
The second segment examines EMs and progresses toward a working definition that could be used as a basis for this research. An in-depth examination of the dynamics of EMs, as well as the identification of their unique characteristics within the global environment, was investigated. The discussion of EMs concluded with an examination of the strategies employed by the governments of EM countries to obtain an understanding of the policies used to promote rapid market expansion.
The final section will examine the success factors within the context success factors, the general business environment, the global business environment, and from the perspective of MNCs.