New Markets Yield Growth Potential

November 15, 2008

BY MICHAEL KRAUSS

While the stock market was plummeting, I was travelling for 18 days through China.

The trip provided clear-headed perspective on the importance of new markets, and finding green fields and blue oceans where companies can achieve profitable growth.

Jet-lagged 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 in Asia.

Al Golin, 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.

Everywhere I toured in China, McDonald’s was omnipresent. I called Golin and asked about McDonald’s “secret sauce” for entering new markets.

“To 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.

Viewing the 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 equipment.

Staying at 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.

Looking out 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.

During every 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 on Earth.

But flying home from Hong Kong (on United Airlines), I was equally impressed with the power of the marketing efforts that I’d observed.

Each brand 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.

The insight 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.

With today’s 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:

• Know 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.
• Keep 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.
• Plan 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.
• Manage 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.
• Engage Locally – Be sure to buy raw materials, hire employees and get involved with the local market.

With marketers 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.

If you’re pressed by the economic downturn, travel to China. It will inspire you to seek those new opportunities.

Michael Krauss is president of Market Strategy Group, based in Chicago, and can be reached at Michael.Krauss@Mkt-strat.com or news@ama.org.