“Hilsa fish can be a global brand like salmon & tuna,” tweeted Dr Nirmalya Kumar.
Though a vegetarian by choice, yet coming from a Bengali family, it is unlikely for me to escape the mention of hilsa, albeit a branded one.
The concept hasn’t worked out so far or may even sound alien, but when Dr Nirmalya Kumar, who is an authority on marketing and branding, and features in the lists of Thinkers 50, says so, like most others I do listen.
The author of seven books on marketing and business-related topics, Dr Kumar talks about how brands from Emerging Markets will go global in his latest book Brand Breakout: How Emerging Market Brands Will Go Global.
As I am focusing on brand stories and brand matters in this blog, I enlist here a few interesting observations shared by Dr Nirmalya Kumar on different forums.
The Top brands are among the most innovative companies with a considerable portion of their revenues spend on R&D.
Among the 10 biggest R&D spenders worldwide, Volkswagen, Samsung, Intel, Microsoft, Toyota, Johnson & Johnson and Google figure in the list of Top 100 Global Brands (both ranked by Interbrand and Millward Brown.)
In one of his sessions Dr Kumar points out an interesting and contrasting fact. Out of the 500 richest people in the world published by Forbes, a quarter of them are from Emerging markets. However, no Emerging market brand has made way to the list of Top 500 Global brands.
How very true! While we Indians easily relate with Global brands such as Apple, Coca Cola, Unilever brands or LÓreal, very few people living outside India and who are not of Indian origin, would relate with Dabur, Amul, Limca or Lakme.
Most markets, today, are free and open; local brands face competition from global brands, who sell in the domestic market, says Dr Kumar.
The local players competing on a small playground cannot be as efficient in terms of innovation, marketing expenses and production as compared to a global players playing on the global market. Local brands need to go global to survive in the long run against the global players.
— Nirmalya Kumar (@ProfKumar) May 4, 2015
The path for local brands to go global is strewn with many challenges due to:
Perception – Western market consumers have a perception that brands from Emerging markets are cheaper and of poor quality. Due to this perception, Indian brands that go global initially need to sell products cheaper than the western brands, which means that their cost of production has to be much lower than the western brands.
Promotion & Distribution – When selling a consumer brand, the companies need have to get retail distribution. This requires mass advertising budget which is often difficult for Indian companies to justify.
Investment in R&D – Indian companies don’t invest into R&D in the same way as the Chinese companies do. China is today the biggest patent filers in the world after US. Huawei is the 2nd largest patent filer in the world. Haier and Zedge are huge patent filers too.
While US spends 3% of its GDP, China spends 1.2% and the R&D spending of India is limited to 0.6% of GDP.
Chinese goods have flooded the markets, but the faith in the ‘Made in China’ products still remains low. Dr Kumar, says that this is likely to change sooner than expected as global brands emerge from China.
He reasons out that as the Chinese are already making products for Apple, Walmart or Ericsson, the day is not very far off when they start putting their own labels on their products.
To produce goods that cater to the world markets, the Chinese companies like Lenovo, Haier, Huawei are setting up global R&D centers, and attracting global talent for their R&D facilities to get the consumer insights from different markets.
Chinese brands are now increasing their global outreach in a manner similar to which companies like Honda and Toyota had set up their subsidiaries, production facilities and R&D in US, Europe and other parts of Asia.
The home market in China is four to five times as big as the Indian market. Using the profits generated in the local markets, the Chinese are likely to finance their global ambitions.
The change in Indian consumers psyche in addition to competition from global players, mandates creation of global brands in India.
Indian consumer, says Dr Kumar, are now impatient about quality – increasingly demanding good experiences and good products. They are aspirational and have become more value conscious instead of being instead of being obsessed with price only.
Thirdly, India with more than a billion population, has a highly fragmented market, wherein each segment requires a different value proposition.
All these factors put together are forcing Indian companies to deliver products that live up to global standards.
To build global brands, advertising is important, but what is more important is to have the right and unique products. for which R&D is needed. Indian companies too would need to massively increase their investment in R&D to come up with global brands.
“Markets change faster than Marketing“, sums up Dr Kumar.
It seems that global is the way to go for Indian brands!!!
When that happens some of us will surely be asking for branded hilsa to be served on a platter.
Read my post ‘From Made in China to Chinese Brands Made in India‘.