Want to Succeed in Emerging Economies? Market-Focused Innovation is Critical

This content relates to : EMERGING ECONOMY – INDIA

HIGHLIGHTS

Emerging economies can be an important source of sustainable competitive advantage.

Innovation is an important prerequisite for success in emerging economies.

Innovations developed in emerging economies can be successfully diffused to developed economies.

Gerard Athaide, Loyola University Maryland   

S.P. Raj, Syracuse University

Emerging economies have become fertile markets for innovation and can be an important source of sustainable competitive advantage. Such economies are characterized by rapid economic growth and the emergence of a large middle class that has significant purchasing power. As a case in point, thanks to significant growth in its GDP, India has 300 – 350 million middle-class consumers who have tremendous purchasing power and rising aspirations. However, emerging economies differ from developed markets on several fundamental dimensions such as infrastructure, income distribution, and culture; therefore, succeeding in such markets can be challenging.  For example, although India has a large population of about 1.4 billion, there are wide disparities in income distribution. Also, it is a country characterized by significant cultural and language variations. 

The opportunities and challenges of emerging economies make innovation an important determinant of success as the “one size fits all” approach generally does not work well. There is considerable evidence that product innovations, in particular, are crucial to success in emerging markets. Because the populations of emerging economies are often skewed toward “bottom of the pyramid” consumers, “frugal” innovations, i.e., innovations that are affordable, increase the odds of success. In addition, there is evidence that successfully targeting such consumers requires marketing innovations in areas such as branding and packaging. Additional marketing innovations in channel management and last mile delivery are necessitated by the poor infrastructure in emerging economies.  

Furthermore, innovations developed in emerging economies can be subsequently offered in developed economies. As sustainability initiatives gain traction, indigenous innovations developed in resource poor environments may find global market opportunities. There is evidence of such “reverse innovation” occurring in several industries like automotive and health care.  Collectively, these perspectives suggest that emerging economy innovation offers a rich and fertile area for scholarly inquiry. 

Authors: 

Gerard Athaide, ’95 Ph.D.

Professor of Marketing, Sellinger School of Business, Loyola University Maryland 

https://www.loyola.edu/sellinger-business/academics/departments/marketing/faculty/athlaide

S.P. Raj 

Distinguished Professor of Marketing, Whitman School of Management, Syracuse University 

https://whitman.syr.edu/directory/showInfo.aspx?nid=spraj