How Big Companies Thrive In The Third World

By Greg McFarlane | August 31, 2012 AAA

In the developed world, major corporations build and sustain by fighting for market share, squelching competitors and using economies of scale to provide more and more product at correspondingly lower prices.

That's what happens in markets where consumers have plenty of disposable income and leisure time. What about in poorer countries? It would seem that sophisticated marketing and brand strategizing have little meaning in places where literacy is low and subsistence agriculture is still a dominant industry.

To thrive in what's commonly referred to as the Third World (or in more politically correct terms, lesser-developed countries), big corporations have to abide by the same overriding principle that every successful producer does in every market: know your customers. Nike doesn't sell its Zoom Kaiju snowboarding boots in Costa Rica, nor its surfing boardshorts in Mongolia. A proud population with its own distinct culture will be more receptive to a seller that understands local tastes than to one that doesn't.

The Soda Wars
There's a commonly held belief, possibly apocryphal but hard to dispute, that the most recognized brand names in the world are Marlboro and Coca-Cola (Nasdaq:COKE). Focusing on the less blatantly unhealthy of the two, Coca-Cola doesn't offer a uniform product line around the world; the company makes a huge investment in catering to regional differences.

In the United States, Coca-Cola's two best-selling beverages are no surprise to anyone - its namesake flagship beverage and Diet Coke. Pressed to name other variants, your typical North American consumer would say something like "Coke Zero, Sprite, Cherry Coke. Do they still have the vanilla one? Vanilla Coke. Oh, and doesn't Coke make Barq's?"

Coke also makes Dasani and Mr. Pibb too, but that's beside the point. Throughout the world, where different consumers have tastes unfamiliar to the refined First World palate, The Coca-Cola Company sells thousands of varieties. That's not hyperbole, either, literally thousands - 3,500 at last count. For instance, Comorans and Botswanans enjoy Coke's Sparletta, a soda that's been sold in Africa since 1955. It comes in flavors not common in the United States - coconut pineapple, raspberry, cherry plum and strawberry vanilla cream, among others. A commercially produced coconut pineapple soda might exist in the United States - it is a big country - but any such soda would obviously be a modest seller.

Sparletta's just one example. Coca-Cola also makes: Hit, a soda available in apple, grape and pineapple and found nowhere else but Venezuela; Limca, a lemon-lime concoction sold only in India, Nigeria, Zambia and the United Arab Emirates; and Cheers, exclusive to the Philippines. All of this is from a company founded in Atlanta, that some critics allege foists American culture into places that didn't ask for it.

The Competition
Coca-Cola's venerable competitor operates much the same way. PepsiCo (NYSE:PEP) tailors its portfolio and business model for emerging markets, operating research and development centers in every major country in the Asia-Pacific region and Africa. Those centers exist to create new, locally relevant flavors. PepsiCo isn't handicapped by its size, either. Like many other big multinationals, it uses local partners that know the local environment and laws better than any American could.

The company's stalwart brands (Pepsi, Lay's and Gatorade) are available everywhere the compnay does business, but even then it customizes. For example, Pepsi in Indonesia is blue and Lay's flavors in China include seaweed and blueberry & cream. In India, PepsiCo subsidiary Quaker Oats sells Upma, a savory breakfast dish made out of semolina.

PepsiCo's also has additional brands created especially for diverse markets. The company's biggest seller in India is Kurkure, which is essentially curry-flavored Cheetos. In Saudi Arabia the company sells Barrio, a malt-flavored cola and the closest thing you'll find to beer anywhere in the kingdom.

PepsiCo recently franchised out its Chinese beverage business to Tingyi, the nation's largest beverage maker. Not only does that help with catering to local tastes, it gives PepsiCo a scale advantage. Tingyi invests ahead of demand, an aggressive posture that the green eyeshades at PepsiCo would never sign off on. Tingyi can build 30 aseptic plants in a year, on spec. Pepsi once took a year and a half to approve a single Quaker Oats facility.

It should go without saying, but to succeed in foreign cultures, you need to speak the language. Literally. You can't expect to do business in the less-developed parts of the world when you can't communicate with the people who live there.

Beyond Fizzy Water
Outside the realm of Coke and Pepsi, you have other markets where companies have learned to adapt accordingly. Take the fundamental issue of computer language support. Apple (Nasdaq:AAPL) is not only the largest company in the world by book value, but one with fanatical devotion among its customers. Part of what makes Apple so iconic is that its products are generally more expensive than their competitors', but another competitive advantage for Apple is that it translates into almost any tongue.

If you happen to own a Mac, go to System Preferences and look at the polyglot under language preferences. Keep in mind that only a few years ago, your typical Anglophone technology company thought it was being progressive if it offered support in French, Spanish, Italian, German and perhaps a few other Indo-European languages.

Today, Cherokee speakers can have an iPhone configured specifically for them. As of the year 2000, less than 17,000 Cherokee speakers inhabited the United States, bringing the language close to the brink of extinction. In an effort to preserve the language, Apple and the Cherokee nation have collaborated, making the option available on their mobile OS. App developers have also extended the language database to obscure tongues such as Tongan, Haitian Creole, Guarani, Rwandan, Uzbek, Kazan Tatar and even Oromo (a Kenyan dialect) and Bislama (one of the official languages of Vanuatu.)

The Bottom Line
The surest guarantee that a company will come crawling home is ignorance of its new market. But for a company that takes the time to respond to regional and national differences, understanding that there's no such thing as a "typical" consumer onto which it can project its sales strategy, the world is its oyster.

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