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The transformation of emerging markets in recent decades has generated a new, growing, and very large middle class market, also known as the middle of the pyramid. This market segment, which is middle by the standards of emerging markets yet low by the standards of advanced economies, is extremely attractive for firms, but still understood and underserved. This volume presents detailed analyses of exemplary firms that have innovated products, services, and business models to fulfil the needs and desires of these new middle classes. It provides useful insights for managers, consultants, researchers, and students interested in emerging economies, and actionable lessons on how to innovate for a new and expanding market segment.
In this chapter, we integrated data obtained from the interviews conducted with business leaders from seventy-two companies across twelve emerging markets in five continents to better understand which capabilities leaders of emerging market multinationals identify as being strategic. In doing so, we examined which capabilities appear to be commonly assessed as being strategic across our study contexts, and which ones varied by industry, company multinationality, and country of origin. In particular, we examined emerging market companies headquartered in Eastern Europe (Russia and Poland), Asia (China, India, and Kazakhstan), Latin America (Argentina, Brazil, Chile, Colombia, Mexico, and Peru) and Africa (South Africa). Looking across the various capabilities identified by the senior managers in our study, our results suggest that the strategic capabilities needed by emerging market firms to be successful outside their home markets occur at multiple levels, including management level, firm level, industry level, and national level. These capabilities influence both a firm’s ability to internationalize and its ability to be successful, abilities that often have reinforcing influences on each other.
This chapter introduces the background and key research question of the project for this book, which is an output of a multi-country study on a highly important subject in emerging markets: what types of capabilities do emerging market firms need, and how do they acquire and upgrade these capabilities in order to achieve competitiveness in the global market? The chapter highlights two unique aspects of emerging markets: weak institutions and lack of endowment. The main theme of the book thus becomes how emerging market companies develop competitive capabilities to international levels facing these two critical constraints. The chapter also discusses the organization of the book, which comprises twelve different country studies, and presents the methodology used to select and evaluate the firms studied.
We analyze how firms from emerging markets upgrade their capabilities to improve their international competitiveness. We argue that firms use a combination methods, the four-I mechanisms, to upgrade their capabilities – imitation, integration, incorporation, and internal development – and that the underdevelopment of emerging markets affects this catching-up process. We propose that initially, as laggards in global competition, firms are more inclined to imitate products and services from more sophisticated firms, leveraging the relatively weak intellectual property protection of their home countries and aiming to serve low-income consumers. As they catch up, firms are more likely to integrate best practices through alliances to obtain technologies, or to learn by serving as suppliers of more sophisticated firms. Firms then incorporate best practices by acquiring technologies or firms that own sophisticated knowledge. Finally, as they catch up to leaders, firms focus more on internal development of capabilities. We highlight how the four-I mechanisms evolve with the development stages of firms and emerging economies.
Firms in emerging markets are becoming leading global players despite operating in challenging home country environments, but little is known about how they build their capabilities. By analyzing multiple companies operating across over a dozen emerging markets in Asia, Latin America, Africa and Europe, the authors identify the specific challenges faced by emerging market firms to become internationally competitive. Furthermore, they provide actionable solutions to upgrading capabilities, sustaining competitive advantage, and achieving multinational status, all whilst operating in emerging economies. Featuring contributions from eminent business scholars from across the globe, this timely volume provides a valuable tool for academics and practitioners, managers and consultants, especially those involved with emerging market firms working to grow and succeed globally.