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Executive Interviews: Interview with Marshall Van Alstyne on Emerging Markets
February 2008
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By Dr. Nagendra V Chowdary
At the beginning of the 20th century,
three separate platform technologies
competed to become the automobile
standard: steam, electric, and
gasoline. Before the invention of the
electric starter, the internal
combustion engine was actually less
popular among many consumers
because it not only required
specialized fuels, but improper hand
cranking to start the engine that could
cause a kick back capable of breaking
the driver's arm. These markets are
two-sided because the fuel supplies
are essentially incompatible. Who
wants to supply one type of fuel until
consumers have committed to a
particular engine type and who
wants to commit to a particular
engine type until there's a ready
supply of fuel?
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It's fascinating to me
that a century later, a transition back
toward electric vehicles confronts this
problem in reverse. Technology
immaturity is clearly a problembut so
is chicken-and-egg adoption. Electric
fuel cells aren't readily available
because there aren't enough cars that use them in part because they aren't
readily available. -
How do you describe the slow but
confident burst of growth in emerging
markets? Is this growth here to stay or
do you see this as an irrational
exuberance?
I don't think this is just an irrational
exuberance. With increasing
connectivity across global markets,
sources of inexpensive but skilled
labor stand to gain. In fact, I've put a
healthy fraction ofmy own retirement
investments into markets like Brazil,
India, and China so I do believe these
markets will continue to grow. -
ManyMNCs are already present in
one or more emerging markets.
However, not every company from
the same emerging economy reports a
success story. Why is it that some
companies are able to be successful
while many others aren't?
You could ask this question of any
economy, not just emerging markets!
The four year survival rate of new
businesses (not just MNCs) in the US
ranges from a low of 10% to a high of
40% depending on the industry
sector and who's doing the
estimating! For distinct challenges
faced in emerging markets, let me
reemphasize on being nimble,
culturally aware, and fair. -
Do you think First Mover
Advantage would give foreign
companies a wider wedge in
emergingmarkets?
Yes I believe it helps, but this is not
definitive in terms of establishing
market dominance. Companies with
established two-sided networks
already have a working business
model, working technology, and cash
streams that they can use to subsidize
the launch of such networks in virgin
markets. Yahoo launched online auctions in Japan ahead of eBay and
still dominates that market. Their
continuing strength nicely illustrates
how hard it can be to dislodge an
incumbent protected by strong
network effects. But a better example is Baidu, the
largest search engine company in
China. It competes directly with
Google and went public only in 2005.
Baidu benefits from a cultural
preference to support Chinese
companies but they also exhibit an
indigenous cultural sensitivity that
helps build their market share. I've
heard if you search for the word
"tiger" on Google that, in addition to
the animal, you're more likely to get
"Tiger Woods" and a version of the
Apple Macintosh operating system.
In China, you're more likely to be
interested in the zodiac Year-of-the-
Tiger or other cultural references to
the animal.
1.
Emerging Markets Case Study
2. ICMR
Case Collection
3.
Case Study Volumes
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The Interview was conducted by Dr. Nagendra V Chowdary, Consulting Editor, Effective
Executive and Dean, IBSCDC, Hyderabad. This Interview was originally published in Effective Executive, IUP, February 2008. Copyright © February 2008, IBSCDC
No part of this publication may be copied, reproduced or distributed, stored in a retrieval
system, used in a spreadsheet, or transmitted in any form or medium electronic,
mechanical, photocopying, recording, or otherwise without the permission of IBSCDC. |
