The Race to the Developing World Heats Up
As the economic struggles of the western world continue, some multinational brands have been forced to reassess their strategies. One such company is Procter & Gamble (P&G) whose dwindling profits and market share have made its management acknowledge the difficulties the company is facing.
Although the world’s largest maker of household and personal-care products, P&G’s strategy was to concentrate upon the developed economies while its European rival Unilever gained a vital foothold within developing countries such as Brazil and India. The greater potential for long-term growth is now being realised in the developing world and competition between the rivals is set to get fierce in the coming years.
Household and personal-care products are used the world over but significant cultural and purchasing power differences mean that companies have to localise their business models to be successful in developing markets. In India, for instance, shampoo sold in bottles is outside of the budget of most low-income shoppers. Unilever solved this issue by selling its Sunsilk and Lux shampoo in sachets for a few rupees each. This may not seem to offer much opportunity for a multinational’s revenue growth but when you consider that India has a population of 1.2 billion people, the numbers soon start to add up. By entering the market when it’s small, Unilever can claim market share cheaply as well as establish brand recognition to strongly position itself in the long-term as disposable incomes grow.
Ambitious goals by both P&G and Unilever have been set for this decade, P&G wants to add 1 billion more customers while Unilever wants to double its revenue by 2020. The only way to achieve this growth is by making greater in-roads within countries like China where both companies are competing for market leader status. While P&G is stronger in China, Unilever has dominated the South Asian countries through direct partnerships with small family-owned shops that are prevalent in the region.
The added dimension of digital marketing is also proving to be another part of the front-line in the competition war. The growing web population connecting through mobile devices in emerging markets makes it easier for brands to target consumers. All the latest product information is communicated to local consumers who are a lot more responsive to this type of advertisement of local products.
The increasingly localized product offerings like Unilever’s Comfort One Rinse for the Asian markets are a result of on-going innovation. The product is designed to reduce the amount of water used when washing clothes and this is very useful for water-scarce countries in Asia. P&G followed by launching Downy Single Rinse which is a similar product to retain its grip on its existing customers.
Competition always brings out the best in everything and the focus of these consumer goods giants on the emerging economies is bringing choice to consumers where historically there was none. With multinationals like P&G now joining the race to win market share in these important markets for the future, consumer choice looks set to undergo rapid transformation.