Tuesday, May 26, 2009

Is intra-BRICs business the next big thing?

I saw this article in Financial Express today, quoting my classmate, Rakesh Vaidyanathan who now lives in Brazil and promotes trade on the Brazil-India-South Africa axis. It reminded me to put up a piece I'd written earlier (through Rakesh's kind offices) for Gazeta Mercantil. It appeared in Portuguese in the paper (http://gazetamercantil.ideavalley.com.br/flip/?idEdicao=ad58ae373442e1022c60b3e25b48cf15&idCaderno=a510ff08c63e35ccd45b29a74f522c3e) but I hope they don't mind if I offer the original English version here. I am curious to know if y'all see intra-BRICs trade as something that will considerably increase in the future.

Building Brands, BRIC by BRIC

When I traveled by cabs in California in the late 90s, the Indian and other Asian cabbies would often refuse a tip from me. They said they couldn’t possibly take money from someone who lived in India, and was therefore, by definition, poor. Then, after the dotcom boom when a lot of Indian firms became successful through technology, they said “Are you from India? Do you work in technology? You must be rich!” It’s changed now. They assume anyone from India is involved in IT and by definition intelligent. I’ve even had complete strangers in the US now say “You’re from India? Are you in IT? You must be smart!” The success of Indian IT has transformed India’s country brand in just ten years. It also mirrors the progression of the industry – from cost arbitrage, to disruptive business models, to innovators.

In many ways this shows the progression of the BRIC – Brazil, Russia, India, China. From being seen as laggards just a decade ago, today we are seen as economic growth engines, creating innovative business models that challenge the incumbents. From being just a market for the brands of multinational firms we have started to create world-beating firms ourselves. The global consulting firm BCG publishes the Top 100 Global Challengers from rapidly developing economies. India has 20 companies in that list, including my firm, Wipro. Brazil has 14 companies in that list. Other than the size of these firms, what is notable is the speed of their growth. How have they been able to achieve market salience so fast? How were they able to challenge existing firms on such a low budget?

I marketed products as diverse as tea, soap, mobile phones and magazines in India before I started marketing IT Services to the USA, Europe and Japan for Infosys, iGATE and Wipro. Building global brands for these organizations that have upstaged the existing IT services world order on a relatively frugal budget was possible by adopting the new trends in marketing and communications ahead of the curve. These trends continue to develop and evolve, especially as the revolution in communication and delivery channels make the world flat.

Increased communications, digitization of large parts of work and cheaper transformation have lead to the flattening of the world described by Tom Friedman in his book, “The World is Flat”. By removing intermediaries and bringing down the cost of communication to virtually zero, the flat world is also changing the marketing landscape, and a firm on a tight budget can leverage this. There are many relatively small firms with world-class offerings which can use the economic disruption to outclass the competition. During times of turbulence, larger, established firms can be pre-occupied with survival and maintaining profitability, providing a window of opportunity to others to capture market-share. The make or break determinant will be how well they are able to market themselves.

Each market has its own structure and history, and an understanding of that will help you beat the incumbents in these new markets, even if you are much smaller than them. This has been achieved by the likes of Wipro and Infosys, from the Indian IT industry in North America and Europe, and by Embraer of Brazil and Samsung on a global scale.

It is important for our sustained growth that not only do we create more world-beater firms, but that we also create global brands. Companies can either build global brands organically, or use funds generated through successful domestic operations to acquire them, or use a combination of the two. For example, Indian conglomerate Tata has acquired Corus a steel firm and the automobile firm Jaguar Land-Rover. Both these acquisitions gave it a larger footprint outside India, and also raised global awareness of its brand. Wipro has acquired a number of firms to give it scale in chosen technology areas eg Enabler a Portugal headquartered firm with operations in Portugal and Brazil which has expertise in the Retail industry.

Currently the world is going through economic turmoil and it is a good opportunity for firms with a large cash balance and operations in lesser affected countries to benefit. It is a good opportunity for acquisitions (valuations are low), geographic expansion (rentals and land prices are low), building market awareness (advertising rates are low) and hiring key personnel in potential markets. The investments you make in this market could determine the success of your firm in years to come.

Based on my experience with the Indian IT industry, I have some suggestions on how BRIC countries can build more world-class brands.

Think Flat – harness globalization to treat the world as your potential marketplace and potential supplier base.
You can look beyond your home country to sell your service or product. This allows you to broaden the potential pool of your customers. For example, while Wipro was present in the domestic technology market in India since the ‘80s growth was greatly accelerated when its focus broadened to include the US and Europe. Today Wipro has sales offices in over 50 countries and has a delivery center in Brazil.
It is hard to get a foot-hold in a new country, and if you can identify people familiar with your offering or company and market to them initially, you can build a good reference base. For example, when the Indian IT firms were unknown in the US, they started contacting Indians who worked there, as they would be more familiar with these firms which were well known in India.
The Indian firms also worked together to change the perception of India in international forums like the World Economic Forum, Davos. Consumers do associate country brands with services and products made there and it is important that the country have a reputation that enhances the brand value.

Think Narrow: Sharply define the brand value proposition – why should someone choose your offering and not buy from the competition
It is very tempting to position an offering as serving many needs, but it is hard to communicate so many benefits on a limited budget. Look for the reason why 80% of your clients choose you, and publicize that. Being focused here will simplify your communications and enhance word-of-mouth, referenceability and memorability – all big money and time savers. For example, when they first approached the international market, the Indian IT firms all entered with a single service line. Once they had built a base, they expanded their service offerings and became more broad-based.

Think Collaboration: Communicate to all elements of the eco-system, not just your key buyers.
Buyers can hear about your offering from different parts of their industry, and some elements (for example media) may have a higher level of influence in their decision-making process. Often, there is no cost to contacting the members of an industry eco-system, though you will have to put in the effort to identify them and create relevant, custom communication. But you can save a lot of money by avoiding the mass media required for a direct contact with the buyer.
Once you have built critical mass in that chosen space, you can expand the circle of potential buyers and eventually when you have sufficient money go mass market.
When we enter a market or launch a new offering, we draw a map of all the elements which could influence the buyer and develop a communication plan to address each. For IT services, a sample diagram of an eco-system is:

Think Frugal
Constraints can force you to be clever. We always look for new ways to reach out to customers. Usually when you do something creative it can also be cheaper. For example, we wanted to reach our clients, many of whom travel often. Instead of doing a mass advertising campaign, we placed our messages in airlines, business lounges and airports.

Be interesting: There are many things that we do as part of our business – hiring, training, signing up suppliers, going green, selling, producing, customer service. Make each of these things interesting; seek opportunities to do them differently or uniquely. This will get you lots of media interest which will help you gain awareness.

Be insightful: Thanks to the Internet, information is easily available. What customers and prospects value today is insight. A good way to stand out amongst the clutter is to have a good point of view, and provide insights into the industry. This will generate word-of-mouth buzz and free publicity, in addition to creating a loyal base of customers.

In the years to come I hope that the BRIC countries produce not just global companies, but many more global brands. Today, the Interbrand listing of the top 100 global consumer brands does not have any entries from Brazil or India, as most of the successful multi-national firms from these countries are in the B2B (business-to-business) space. As we become economically more powerful, and have greater consumer clout, I am sure that we will harness our marketing talent to achieve this.


Anonymous said...

Must admit, good post. The collaborative theory seems interesting though I personally believe it take lot of time to align the external members to join the focus especially the most governments scale best in corruption & malpractice. Practically v.slow to execute.
Some real comments, while BRIC has made great strides over the past 2 decades, we could also see the value, attitude slack, excess volume and artificial demand entering in the developed markets be it the US, Europe.Most companies in the BRIC have been able to reduce the fat(includes hyped salaries, excess volume, less innovation). It could be safely said that for almost next 2 decade the BRIC countries might make it big but the fact still remains that once the bulk gets reduced, both these giants would be on the walk fast and what happens to all these BRIC region?

Is the present situation an early indicator of such a fact? I believe it is so,
The present status at least in Brazil, India is left to gods' will. Things are moving on their own, the govt. involvement is low, & slow.

Jessie Paul said...

Good points, all, and yes, each of the BRICs has its own, special, political issues to sort out. But I am a strong believer that economics often drives politics and that as they get richer, the people will demand more accountability, and get it. Technology is also a key enabler of this transparency, and many governments are embarking on e-governance initiatives.

Ridwan said...

By that I mean latching on to this or that latest, most innovative idea that some self styled money making guru has put out in the hope it’ll go viral and make them a lot of money off the backs of all the headless chickens who will follow them blindly down a blind alley. Its a shame but a truism nonetheless that people will follow where someone they see as an expert leads. Even if they lead them to certain disaster, which is what most of the gurus tend to do to their flocks.
The trick is to recognize a shadow when you see it!