Yield Growth Potential
November 15, 2008
BY MICHAEL KRAUSS
the stock market was plummeting, I was travelling for 18 days
The trip provided
clear-headed perspective on the importance of new markets, and
finding green fields and blue oceans where companies can achieve
at the start of the trip, I was on the treadmill at Beijing’s
New World Hotel watching a CNBC feature on McDonald’s success
founder of GolinHarris communications and the legendary PR man
who helped McDonald’s founder, Ray Kroc, build the global
chain, described Kroc’s and McDonald’s success.
I toured in China, McDonald’s was omnipresent. I called
Golin and asked about McDonald’s “secret sauce”
for entering new markets.
succeed in a new market, you have to get involved. You have to
engage in that local market,” Golin says. “That’s
what McDonald’s has always done. They purchase raw materials
locally. They hire from the local market. They get involved in
local market issues.”
It was odd
watching the Dow continue to drop while observing the scale of
the Chinese consumer economy and the breadth of Chinese industrial
investments in infrastructure.
scope of the Chinese market in its largest cities like Beijing
(17.4 million), Xi’an (8.1 million), Chongqing (31 million),
Wuhan (8.3 million), Guilin (1.4 million), Shanghai (17.8 million)
and Hong Kong (6.9 million), you see McDonald’s as well
as KFC and Starbucks. The Western fast food franchises—even
Burger King—are everywhere.
Taking a river
cruise down the Yangtze in China’s heartland, you see multiple
new suspension bridges and the massive Three Gorges Dam built
with Siemens and GE power generators and Caterpillar construction
a Westin Hotel in Guilin, you can buy Gillette shaving cream.
At the Western-style shopping center atop Victoria Peak in Hong
Kong, there is a Häagen-Dazs ice cream shop.
onto Hong Kong’s harbor from a Kowloon hotel, you can clearly
see the Wynn’s logo positioning the Las Vegas gaming giant
and the big stake it has in Macau.
stop on the tour, I drank Diet Coke. In a grocery store in Beijing’s
Chao Yang district, I even bought Wrigley coffee-flavored gum.
I was impressed
with the Great Wall of China at Mutianyu and the Beijing National
Stadium (Bird’s Nest) and the aquatic center on the Olympic
green. The limestone karsts and hills of southern China along
the Li river were picturesque and among the most beautiful scenery
home from Hong Kong (on United Airlines), I was equally impressed
with the power of the marketing efforts that I’d observed.
found green space for growth in China as a new market. Marketers
had followed Golin’s advice and customized their offerings
for the Chinese market. They’d partnered with local companies.
Each of these brands laddered its way from home to there, achieving
top-line and bottom-line growth in the process.
for me isn’t about globalization. That’s too 20th
century. We all know the world is flat. China is right next door,
a mere 14 hours by jet. Instead, it’s a story of new market
opportunity. It’s a process marketers should study and adopt
as a metaphor and model not only for entering China but for assessing
growth opportunities anywhere in the world.
To be successful
in fast food or fiber optics, marketers need to understand the
principles of seizing new market opportunities—especially
when the going gets rough.
economic hard times, if you want to achieve growth, you need to
master the art of tackling new markets, whether they are in Asia
or in the next county.
Here are five
tips for doing so:
Your Advantages – Identify where you have a sustainable,
asymmetric advantage. For Häagen-Dazs, it’s the product.
For Caterpillar, it’s the distributor network. For Coke,
it’s the product, branding and distribution. New market
success starts with knowing your source of advantage and making
sure it is relevant.
the Plan Profitable – Start your market entry
effort with the concept of profitability. Ask what the best
way is to make money. Confirm the profit potential is there.
Moves & Counter Moves – Anticipate how the
market will change after you enter. Your new market may be a
competitor’s core market. Anticipate the incumbent’s
moves and counter moves.
Execution Risk – Adopt a staged and gated process
for moving into a new space. Commit to investments in phases,
not all at once. Prove you really are as good as you think you
are before investing heavily.
Locally – Be sure to buy raw materials, hire
employees and get involved with the local market.
facing a global recession, now’s not the time to cut back.
It’s the time to look for nearby opportunities for top line
and bottom-line growth in places where competition is less fierce.
pressed by the economic downturn, travel to China. It will inspire
you to seek those new opportunities.
Krauss is president of Market Strategy Group, based in Chicago,
and can be reached at Michael.Krauss@Mkt-strat.com