Unlock emerging market growth via diversification
Emerging markets define the new elixir of growth for consumer product (CPG) companies. However, emerging markets do not lend themselves to a “cookie cutter” analogical approach where one unquestioningly works on a single market evolution model.
Overlay the emerging market complexity with inherent challenges in creating successful innovation for any market and we have the potential for many lost opportunities and spent millions.
An organization’s existing capabilities are rarely compatible with the “asks” of the newer opportunities.
A study published in Harvard Business Review* states that nearly 75% of all consumer goods and retail products fail and are withdrawn within a period of 12-24 months of launch. Indian consumer product companies, both home-grown and established multinationals, find themselves in a similar dilemma. With opportunities slowing in existing categories and increasing competitive pressures, companies are looking at entry into newer categories to drive growth.
Read the full article to understand why diversification success has been limited and find out the detail behind the three-phase approach to successful diversification which is outlined here.
A three-phase approach to successful diversification
EY works with a variety of consumer products companies around successful diversification, using a three pronged approach to devise entry into the new categories. The first step is all about focusing on the categories of interest. For the chosen categories, “where to play” and “how to win” choices are identified. The second step is to make the choices in such a way as to meet the twin objectives of creating a credible differentiation in the marketplace and executing a feasible plan given organizational capabilities. The last phase concentrates on creating detailed financial projections to seal the business case for the intended innovation.
Entry into a new product category is a critical decision for a company given the costs and risks of failure. There are multiple examples of companies failing to achieve the desired results after entering a new category. This is due to gaps in understanding and efforts to address distinct segments in a category with standardized product and service offerings.
In the words of Paul Polman, CEO of Unilever Plc, “In consumer goods, strategy is only 10%; 90% of success is down to execution.”** Clearly, a detailed execution plan is the best defense against the uncertainties of diversification.
* J. Schneider and J. Hall, “Why most product launches fail,” Harvard Business Review, April 2011, https://hbr.org/2011/04/why-most-product-launches-fail, accessed December 2014.
** “Fighting for the next billion shoppers,” The Economist, June 2012, www.economist.com/node/21557815, accessed December 2014.
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