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9.7 Conclusion

In this chapter, we discussed methodologies for the planning and execution of marketing strategies, and examined case studies targeting China and India. Global aggregation strategies are often not effective for companies in advanced countries, including those in Japan, which attempt to expand their home country business into global markets. Business environments and customer needs are often markedly different in target countries, thereby requiring companies to deepen their understanding of these markets. Large countries such as China and India have great income disparities, wherein wealthy classes have lifestyles on par with those in advanced countries, while poor classes make less than USD 1,000 per year. Because of the various customer classes due to differences in regional characteristics and lifestyle, market segmentation and targeting of specific customers become important. Therefore, companies can choose marketing plans according to the 4Ps: developing a product according to local circumstances; setting a price; arranging distribution channels for products and services (i.e., place); and implementing promotions that provide product information to potential customers.

In this chapter's case studies, we examined the high-growth trends in the middle class—the volume zone—in terms of the hierarchical distribution of disposable income. Households with disposable income greater than USD 10,000 have been increasing rapidly in both China and India since 2000, and as of 2011 they have accounted for 36 and 15 %, respectively, of their overall national markets. However, a large gap still exists between these countries and Japan, where most households have above USD 45,000 in disposable income. Thus, acquiring customers from the middle classes of both countries requires a low price strategy.

However, companies in advanced countries effectively target wealthy classes that are similar to markets in their home country; therefore, they must carefully consider whether to pursue a low price strategy for a good enough market. In this chapter, we introduced a matrix to analyze customer needs and competitive environments with local companies, as a framework to determine strategic options. There are few incentives to purchase high-priced, high function products even for the wealthy, when the ascending curve of customer needs for product functionality and performance is somewhat satisfied. In such a case, companies must select a low price strategy for good enough markets. However, if companies possess technology superior to that of their local competitors, they can partner with local companies using their technology as leverage. Should companies find it difficult to differentiate products because of technological catch up by local competitors, their only hope of success is to beat their competitors in terms of prices. Accordingly, companies may also have the option of continuing operations without major changes by acquiring a local company. On the other hand, in case of an increase in the demand for product functionality and performance, it is possible to pursue the premium market using a high price/high function strategy if the company has superior technology. To avoid the quick catch up of local competitors in terms of technology, a company can invest in R&D or build a business model that makes catch up difficult.

We conclude this chapter by discussing the BOP business that targets the bottommost classes of the world's population. Companies taking this path must operate their business with a proper balance of for-profit and non-profit activities, combining the business with social contribution objectives such as solving poverty issues or improving nutrition and hygiene. There are few success stories in the BOP market; however, the value of providing services required by the poverty-stricken is large because companies partner with a broad range of stakeholders such as public organizations that provide developmental aid, NGOs, and local communities. Companies conducting business globally will find it worthwhile to consider this business model in some form.

References

Diamond Inc. (2002). MBA management book. Tokyo: Diamond Inc.

Gadiesh, O., Leung, P., & Vestring, T. (2007). The battle for China's good-enough market. Harvard Business Review, 85, 80–89.

Karamchandani, A., Kubzansky, M., & Lalwani, N. (2011). Is the bottom of the pyramid really for you? Harvard Business Review, 89, 107–111.

Moore, J. (2002, January). Chasm (trans: Kawamata Seiji). Tokyo: Shoeisha.

Ogawa, K. (2009, July). Management text marketing Nyuumon. Tokyo: Nikkei Sangyo Shinbunsha. Prahalad, C. K. (2005, December). Next market “Hinkonsou” wo “Koukyaku” ni Kaeru Jisedai Business Senryaku (Wharton Keiei Senryaku Series) (trans: Skylight Consulting). Tokyo:

Nikkei BP.

Rogers, E. M. (2007). Innovation Fukyuugaku (trans: Aoike Shin'ichi & Uno Yoshiyasu). Tokyo: Sanno Daigaku Shuppanbu.

 
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