Finding the 'developed' segment in 'developing' markets

MULTINATIONAL companies have been echoing the cliché that developing markets are their primary focus for growth. Many report share of business in these markets and the progress made from year to year. Companies say that they have been rejigging product portfolios, pricing models, distribution strategies and sales promotion activities to tap into consumers whom they are getting to know for the first time. These consumers do not always resemble the typical consumer of developed markets and therefore, it is a trendy thought that a paradigm shift in solutions is necessary to conquer these markets.

The more striking insight is the fact that in many emerging markets, there are meaty "developed" segments. These segments do resemble that of established markets and are often the low-hanging opportunity for multinationals. We can cite examples of luxury cars in China; beauty and cosmetics products in Brazil; luxury homes in Indonesia and Thailand; high-end retail in Russia; Internet-based retail in South Korea; and health care in Turkey. These businesses are singled out because these countries are otherwise classified as "developing" or meet the standards of a developed nation on only a few criteria.

The fundamental reasons for the rapid start and maturity of some but not all sectors arise from globally comparable affluence in the top percentile population (these markets boast of an increasing number of millionaires); exposure to western civilisation; ease of targeted marketing; ramped-up investment in enablers such as WiFi etc. Consumer aspiration for western goods and services is only a partial explanation. The trade-off psyche is an interesting phenomenon. The Chinese for instance, will pay for a Mercedes or BMW or Porsche but not necessarily a six-star holiday or even premium higher education. Similarly, elite Russian women spend hours shopping at TsUM departmental store in Moscow yet may not show the same infatuation for renovating their houses. (Real wages in Russia have declined in the past year or so, hence there is justification to "avoid" some expenses but not all.) Thus, headway in the wish list is selective. The Brazilian woman's per capita spending on cosmetics, beauty products and fragrances is next only to the US and Japan. By contrast, only 11 per cent of Brazilian adults have a university degree.