The Explainer: Creating New Products for Emerging Markets

There’s really no way to
take a product created for say, the American mass
market, make a few changes, and make it work for
the Indian mass market. But that hasn’t stopped
multinationals from trying. That’s the model global
companies have followed for decades, to appeal to
customers in emerging markets, they water down products
designed for developed markets. However, a better way
is for global companies to develop brand new
cost effective products inside the countries where
they’ll actually be used. For example, General
Electric developed several medical devices
in emerging markets that were a little simpler
and a lot less expensive. In China, they developed a
compact portable ultrasound machine from scratch. It cost just $15,000
compared with over $100,000 for their high end model. Although it didn’t have
all the bells and whistles, it was a hit in
China’s rural clinics. That’s when G.E. realized that
American doctors could use it too. Not to compete with the
more expensive product, but for new uses. In situations where
portability was important or space was tight. This is what Vijay
Govindarajan and Chris Trimble call reverse innovation. Not only does it
result in products that address market needs
in emerging economies, it also creates new
sales opportunities in developed ones. Reverse innovation can
be tough to pull off but there are two
reasons to try. First, because emerging
markets have larger populations and lower per
capita GDP’s they’re especially sensitive to
many of the forces affecting competition in
global markets today. Products built for
emerging markets are more likely
to be well suited to issues that ultimately
affect every market. Second, as emerging
market companies grow, they’ll be looking to export
their own products often at much lower prices,
which incumbent firms will find tough to beat. Practicing reverse
innovation today will help protect
incumbent firms from being disrupted by low
cost competitors tomorrow.

5 Replies to “The Explainer: Creating New Products for Emerging Markets”

  1. In another words, you will make 2nd quality of products and charge more for them. In the long run, your products will get bad name and reputation.

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