Can dinosaurs dance?
Oct 11th 2007 | From The Economist print edition
Responding to the Asian challenge
ARE consumers in India and China too poor to afford high-quality Western goods? That used to be the old idea of doing business in these countries as firms offered watered-down versions of their products at reduced prices. Mr van Houten, of chipmaker NXP, says Indian and Chinese consumers are forcing multinationals to design sophisticated products that more closely meet their needs, and this is making firms operating in Asia better innovators.
By recruiting ingenious local engineers and designers in places like Bangalore and Beijing, and paying close attention to trends and practices in the market, firms are coming up with products and services that can be sold in other parts of the world too. Nokia’s engineers are finding that many Chinese and Indians access the internet mainly through their mobile handsets. Such customers’ requirements of their handsets may therefore be quite different to those of Western users, many of whom have computers at home and at work.
GE’s research lab in China has come up with a simplified magnetic-resonance imaging machine that costs a fraction of the one it sells in rich countries. The firm now plans to sell it worldwide. Wenda, a question-and-answer “knowledge community” product developed by Google in China to help overcome a lack of local content, was launched in Russia in June.
Unilever has long had a strong distribution network in India, but it has expanded its efforts with a division called Shakti, which provides Indian women’s self-help groups with business education and the chance to earn a living selling cheap sachets of Unilever products. The effort has proved so successful that Unilever introduced a high-tech element: the Shakti entrepreneurs now run kiosks with personal computers which villagers can rent to send e-mails and browse the web for things that can make a big difference to their lives, like market prices.
Alan Lafley, who ran some of Procter & Gamble’s Asian businesses before getting the top job at the American company, says many Asian firms began imitating what foreign ones did but are now “very innovative, especially with business models”.
Mr Lafley sees Indian firms shaking up the way foreign companies operate, and not only with back-office services where many began. Hours after he uttered those words, Wipro, an Indian pioneer of software services said it would open a new development centre in Atlanta, Georgia, that will report to its headquarters in Bangalore.
This is forcing P&G to innovate in other ways too. Mr Lafley uses the example of detergents in China, where the company is using a low-cost manufacturing method which he likens to Coca-Cola’s “syrup” model, which supplies a concentrate to local bottlers. P&G provides secret, high-value “performance chemicals” to Chinese partners, who add basic ingredients and packaging before distributing the products.