SIVA SIVANI INSTITUTE OF MANAGEMENT

ARTICLE REVIEW SESSIONARTICLE TITLE: VALUE FOR MONEY STRATEGIES FOR RECESSIONARY TIMESBY - PETER J. WILLIAMSON AND MING ZENG

NAME:M.HARISH,BIFAAS(NRP),2B4-15

AUTHORS PETER J.WILLIAMSON MING ZENG

INTRODUCTION 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

Value for money

A utility derived from every purchase or every sum of money spent. Value for money is based not only on the minimum purchase price (economy) but also on the maximum efficiency and effectiveness of the purchase.

IMPORTANCE OF COST INNOVATION

The importance of cost innovation in this process is stressed in terms of the three ways that emerging giants have developed the ability to deliver cost innovation: Selling high-tech products at mass market prices Offering choice and customization to valued customers Turning premium niche markets into mass markets

Selling high-tech products 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 choice and customization to valued customers

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.

Turning premium niche markets 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.

COUNTERSTRATEGIES FOR MULTINATIONALS

Go beyond low-cost sourcing in emerging markets Develop products in emerging markets and bring them home Invest in brands as you would in emerging markets Combine your capabilities with those of emerging giants Invest in growing mass markets in developing countries

STRATEGY - 1 Go beyond low-cost sourcing in emerging

marketsMultinationals should launch in their home markets the products their overseas subsidiaries have developed.

EXAMPLE Hewlett-Packard's laboratories in India are developing a simple and inexpensive device that local retailers can use to track inventory. The company is finding that small U.S. enterprises will constitute a lucrative market for the device, as well.

STRATEGY - 2 Develop products in emerging markets

and bring them homeEnterprises can treat developing nations as more than cheap manufacturing bases

EXAMPLE Logitech has located its global product design center in China, which allows it to draw on relatively inexpensive local talent. Chinese engineers not only develop products quickly but also design them in such a way that they can be manufactured relatively inexpensively.

STRATEGY - 3 Invest in brands as you would in

emerging marketsCompanies should deploy at home the cost-effective marketing techniques used in developing countries.

EXAMPLE Taiwan's Acer puts its name on the luggage trolleys at several airports in Asia, which gives its products tremendous visibility relatively inexpensively

STRATEGY - 4

Combine your capabilities with those of emerging giants

Companies in the developed world can team up with emerging giants

EXAMPLE 3Com in the U.S. and Huawei in China have forged an alliance that has enabled them to give Cisco a run for its money in the networking business. The venture has launched several new products and is offering them at prices lower than Cisco's.

STRATEGY - 5 Invest in growing mass markets in

developing countriesWestern firms must invest in growing mass markets in developing countries

EXAMPLE Nokia initially went after the top end of China's cellular telephone market, but its share declined as local companies developed better value-for-money products. Only when Nokia targeted consumers in the middle and bottom segments did it become the leader.

Conclusion

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 pay off the debt racked up to cope with the current financial crisis , calls for 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.