BRIC Characteristics

Sumit Mitra
IIMK
2013-14
 Political & Social Systems
• US
– Democracy, rule of law, enforcement of legal contract
– NGOs, media as pressure groups on social/env issues
– Open to FDI, monopoly restrictions
• Brazil
– Democracy with bureaucracy, corruption across
– Media as watchdog, NGOs weak
– Open to FDI except monopolies
 Political & Social Systems
• India
– Democracy, high bureaucracy, corruption high
– Media and NGOs as check on politics and cos./pressure groups
– Restricted investment thru JV, no FDI in some sectors
• Russia
– Centralized, regional fiefdoms, dysfunctional bureaucracy,
corruption/mafia, Narodnaya Marka
– Media is govt. controlled, NGOs under-developed
– FDI difficult, take help of local firms to access gov.
• China
– Single party, local govt make economic policy, abuse of power for
personal gains
– Media govt. controlled, civil society exists but weak
– FDI allowed but in JV with local cos., locals get govt. help
 Other Systems
• Product/Market: Nature of product tech, IPR,
R&D scope, outsourcing options, markets
mature or not, presence of local brands,
infrastructure available.
• Labour Market: availability of wide pool of
skilled manpower, unionization of workforce
• Capital Market: Ease of getting loans, raising
capital, bond market, VCs, transparency of
accounting, bankruptcy procedures.
 The Globalization of
Markets and Brands

• Important to determine when product

standardization is appropriate in an international
market
• Firms may need to vary marketing mix in each
different country
• Globalization may be the exception rather than the
rule in many consumer goods markets and industrial
markets
 Market Segmentation
• Two main issues relating to segmentation:
– Extent of differences between countries in the
structure of market segments
– Existence of segments that transcend national
borders
 Product Attributes

• Cultural differences
• Economic development
• Product and technical standards
 Cultural Differences

• Differ along dimensions such as social structure,

language, religion, and education
• Impact of tradition
• Some tastes and preferences becoming cosmopolitan
 Economic Development
• Consumer behavior is influenced by economic
development
– Consumers in highly developed countries tend to
demand extra performance attributes in their products
• Price not a factor due to high income level
– Consumers in less developed countries value basic
features as more important
• Price a factor due to lower income level
– Cars: no air-conditioning, power steering, power windows,
radios, and cassette players
• Product reliability is more important
 Retail Concentration

• Concentrated system
– Common in developed countries
– Contributing factors: increase in car ownership,
number of households with refrigerators and freezers,
and two-income households
• Fragmented system
– Common in developing countries
– Contributing factors: great population density with
large number of urban centers, e.g. Japan
– Uneven or mountainous terrain, e.g. Nepal
 Channel Length
• Long distribution channel
– Fragmented retail system promotes growth of
wholesalers and retailers
– Firms go through intermediaries such as wholesalers
to cut selling costs
• Short distribution channel
– Concentrated retail system
– Firms deal directly with retailers
Typical Distribution System
 Push Versus Pull Strategy
• Push strategy emphasizes personal selling
– Requires intense use of a sales force
– Relatively costly
• Pull strategy depends on mass media advertising
– Can be cheaper for a large market segment
• Determining factors of type of strategy
– Product type and consumer sophistication
– Channel length
– Media availability
 Strategic Pricing
• Experience curve pricing
– Firms price low worldwide to build market share
– Incurred losses are made up as company moves
down experience curve, making substantial profits
– Cost advantage over its less-aggressive competitors
Can be accumulated from BRIC country experience
 Regulatory Influences on Prices
• Antidumping regulations
– Selling a product for a price that is less than the
cost of producing it
– Antidumping rules vague, but place a floor under
export prices and limit a firm’s ability to pursue
strategic pricing
• Article 6 of GATT allows action against an importer if the product is sold at
‘less than fair value’ and causes ‘material injury to a domestic industry’
• Competition policy
– Regulations designed to promote competition and
restrict monopoly practices
Local manufacturing in BRIC helps compete on
low cost local mfg.-no fears of dumping
 Staffing Policy
• Staffing policy
– Selecting individuals with requisite skills to do a
particular job
– Tool for developing and promoting corporate culture
• Types of Staffing Policy
– Ethnocentric
– Polycentric: Developed in BRIC
– Geocentric: Can be achieved by moving best
managers to developed markets in time.
 LG
• We need to understand to what extent all
these apply to LG and
• How LG can transfer its knowledge on these
aspects from BRIC to its business and
competition in Developed Markets

THANKS