Value-for-Money for

Recessionary Times
Williamson and Zeng
Harvard Business Review (2009)
Introduction
Before 2000 After 2000
Companies from emerging markets
arise to challenge Western firms.
Smart companies win
Changes in the world:

Incumbents = survivors due to Deregulation

economic of scale and customer
relationships (mainly Western firms) Lower trade barriers
To escape recession, companies
main objectives are to survive or to Rapid technological
maintain market share
advances
Demographic shifts
Greater
urbanization
Value-for-money Strategies
Strategies conducted by the winners
Delivering products and services that
enabled hard-hit consumers to do more
with the same resources and become more
effective
To do the same with fewer resources
improving efficiency
To do less with far less resources
economize
Strategy Shift

Recession
Cost conscious
consumer
Premiu More value
m for less
Offerin money
g
Cost-innovation capabilities
Defined
Capabilities to reengineer the cost structure in a novel way
so that company can offers customers dramatically more
for less
smart emerging-market companies use the strategy to
unlock mass market

Result products and services that look inferior in

some ways to the existing ones but are more affordable
and easier to use than incumbents offering

Most US, European, and Japan dealt with low-cost

competitors with going upmarket and creating premium
segments both at home and broad no longer viable
Cost-innovation Strategies by
Emerging Giants
Sell high-tech products at mass market
prices
Chinas BYD Lithium-ion cell enters the
market in 1995 against 4 Japanese giants.
Japanese companies strategy
offer expensive battery for high end market
BYD strategy
Replace the expensive materials with the cheaper
ones
Develop less sophisticated method of production
(decrease the cost of production from $40 to $12)
Target broad segment
Cost-innovation Strategies by
Emerging Giants
Offering choices and customization to value customer
Develop products in emerging markets-then sell them everywhere
Ex. Goodbaby offer 1600 types which sells customers 1,600 kinds
of children's strollers, car seats, bassinets, baby walkers, playpens,
high chairs, tricycles, and bicycles-four times more than its rivals
offer but at comparable prices (strollers from $30 to $600).

Turning premium niches into mass market

Grow mass markets in developing countries
In 2002, Shinco, the largest manufacturer of DVD players in China,
wished to enter the global market. It didn't want to challenge Sony,
Panasonic, and Samsung head-on, so it chose to focus on the
portable DVD player segment first.
According to one estimate, the market grew tenfold in the first year
after its entry, and Shinco became the industry leader, with a 30%
share.
Cost-innovation Strategies by
Emerging Giants
Offering choices and customization to
value customer
Develop products in emerging markets-then
sell them everywhere
Ex. Goodbaby offer 1600 types which sells
customers 1,600 kinds of children's strollers,
car seats, bassinets, baby walkers, playpens,
high chairs, tricycles, and bicycles-four times
more than its rivals offer but at comparable
prices (strollers from $30 to $600).
Cost-innovation Strategies by
Emerging Giants
Turning premium niches into mass
market
In 2002, Shinco, the largest manufacturer of DVD
players in China, wished to enter the global market.
It didnt want to challenge Sony, Panasonic, and
Samsung head-on, so it chose to focus on the
portable DVD player segment first.
According to oneestimate, the market grew tenfold
in the firstyear after its entry, and Shinco became
the industry leader, with a 30% share.
Counterstrategies for Multinationals
Go beyond low-cost sourcing in emerging
markets
relocating as many stages of the value chain as
possible, from R&D to customer service.
shifted the base of globalization initiatives overseas
nurture demand in other emerging markets, as well
as in segments of the developed world that need
advanced technology at inexpensive prices.
Develop products in emerging markets and bring
them home
Unilever has long used lndia as a source of
innovation, developing products there that it can sell
globally.
Counterstrategies for Multinationals
Invest in brands as you would in emerging markets
For more than a decade, Acer has put its name on the heavy-
luggage trolleys and small carts used inside Asia's airports.
Business fliers and vacationers who can afford to travel by air
are both potential laptop buyers.

Invest in growing mass markets in developing countries

Nokia launches two or three new models every month in
China.
To consolidate its position, Nokia has since appointed 100
distributors in cities across China, established 300 franchised
sales outlets, and recruited more than 5,000 salespeople to
promote its products in every corner of the country- not just
on the eastern seaboard, where many of its Western
competitors remain.
Counterstrategies for Multinationals
Combine multinationals capabilities with those of
emerging giants
When 3Com and Huawei joined forces in 2003, they
hoped to win share from Cisco all over the world.
For its part, 3Com brought its brand, a global
distribution network, detailed knowledge of customers
in the United States and Europe, and a set product add-
ons that completed the Chinese offerings.
Huawei brought its product line, sizable market shares
in developing countries, cost-competitive service
hours. capabilities, and design and engineering
resources.
The alliance enabled 3Com to compete effectively with
Cisco by revitalizing its product range.