Executive Interviews: Interview with Guillermo D'andrea on Emerging Markets
February 2008 - By Dr. Nagendra V Chowdary

Guillermo D'andrea
Professor of Business Administration at IAE Business School, Austral University in Buenes Aires, Argentina. He is the Research Director of the Coca-Cola Retailing Research Center, Latin America.

• What are the origins of this new found growth avenue? What are the common factors that you think have been majorly responsible for emerging markets' growth story?
  In the past two decades, as markets began to open with wealth slowly spreading around the world and emerging countries became more politically stable, economic growth brought in a significant number of consumers to themarkets. We see the surge of a growing middle class but with a new picture. At least in Latin America, where most of my research takes place, the new middle class is based on successful small entrepreneurs rather than on public employment, and this implies different conditions. The new middle class doesn't have the requirement of a certain level of education, but their success relies more on individual initiative. That brings a different sense of pride and self-assessment. The consequence of this is that they don't feel urged to move up on the social ladder: they made it in their own environment. If they move to the higher side of town they'll be de-classed, losing their identity, hardly gaining any acceptance in this new environment. So they'll rather stay where they feel they belong, but with an improved level of life. The implication of this is they'll keep their ways, rather than aspire to behave in foreign ones. This implies in terms of brands and products consumed.

• Many MNCs 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?
  It's a delicate balance between pioneering products and technologies and adapting to the local needs. Often times we have seen MNCs trying to impose products simply because they are successful in their original markets. Ice tea may be quite acceptable in some markets, but doesn't necessarily fit to the taste of some emerging consumers that grew up having coffee or other native infusions. Cereals are a staple at breakfast in some latitudes, but they can be a popular tasty snack all day long in others. Trying to impose products reminds of the old colonial style, while people in emerging markets have learned to value more their local traditions. I believe willingness to learn and flexibility to adapt are keys that explain success in many cases.

• Do you think First Mover Advantage would give foreign companies a wider wedge in emergingmarkets?
  I don't have doubts that pioneering is exciting, but not necessarily more successful. The key is to understand the real needs of the locals and adapt products or services to meet those needs. Local companies may be better suited to understand the needs of their equals, and followers can learn from the pioneers' mistakes and build success over the precedent failure.

• What do you think would be the critical success factors for operating in emerging markets? What kind of homework do you think that the companies should do before embarking on emerging markets' journey?
  Start by looking at where the mass market is, and go for a thorough understanding of the actual needs. In the end, it's organizations that learn and care for their customers that succeed, independently of their country of origin. It resides in the courage of the local management to fight for their customers wants, many times against their intellectually lazy, one-size-fits-all regional or global management.

• What do you think are the perils of doing business in emerging markets? Especially in BRIMC (Brazil, Russia, India, Mexico and China) countries?
  Emerging economies have strong social imbalances, and while the problems of the left-behind remain unsolved, economic take-off is held back every once in a while by the weight of the excluded. I believe that is the reason why crises repeat every now and then, due to social unrest that can't be muted in modern democracies. Then it's like when the croupier shouts "zero" at the roulette. The crisis wipes out much of the bets. But we must not disregard that though badly hurt, the market stays in place. It is then when consumers see which companies are interested in serving them by adapting their products, or step back waiting for the customers to slowly recover their buying power. The formers will experience hard times, but will come out with strengthened share and loyalty and probably higher margins when the economy recovers, while the latterwill pay a high prize on their later comeback.

• What do you mean by a "retail innovation"? How is it different from product, process, and business model innovation?
  It's innovation in the retail sector. It comprises the business model redefined to suit the local needs in ways unseen in any other markets.

1. ICMR Emerging Market Case Studies
2. ICMR Case Collection
3. Case Study Volumes