The Global Stage BY KEVIN MOE Aftershocks across the globe in the aftermath of the 2008 recession are still being felt. Companies have found themselves with new markets to target, and new multinationals are taking root in emerging economies. Each new development brings with it a host of opportunities and challenges. Emerging markets in developing economies are often of interest to companies operating on a global scale, but during a recession, they can be of even greater interest, says Professor Michael Houston, associate dean of Global Initiatives and the Ecolab-Pierson M. Grieve Chair in International Marketing. “Some developing economies did not show the effects of the recession as measured by GDP growth. Examples include the key economies in sub-Saharan Africa,” he says. “These economies often reflect more rapid post-recessionary growth as well. A key impact of the recession was therefore the markets companies were looking at to realize growth in global sales. And the emerging markets were clear choices in terms of market selection.” As new markets enter the field, multinationals have some adjusting to do. “Brand portability is a key issue in international markets,” says Professor Akshay Rao, the General Mills Chair in Marketing. “We see significant country-of-origin effects. In India and China, for example, Korean and Japanese auto manufacturers are highly visible in the middle market, while upscale European luxury car makers are beginning to make their presence felt as well. While “country of origin” influences consumers’ perceptions about the quality of products, there are other persuaders at work. “Consumer behavior among various cultures is coming in for increasing scrutiny,” Rao says. “For example, in most Eastern societies, group decision-making is the norm, and most purchases have a ‘collectivist’ flavor, in 14 UNIVERSITY OF MINNESOTA contrast to the ‘individualistic’ nature of decision-making in the West.” But there is also some blending going on, as the increased knowledge about foreign cultures among consumers is causing a form of biculturalism among otherwise monocultural individuals, says Associate Professor of Marketing Carlos Torelli. “As a result, these people exhibit some culture-switching effects similar to those exhibited by biculturals,” he says. “This marketplace multiculturalism is leading to the emergence of a global mindset among people around the world.” In another turn of events, firms from developing countries are making significant inroads into Western markets, both in terms of market share and in terms of ownership, Rao says. And established multinationals are finding countries with emerging economies attractive for relocation. Supply Chain and Operations Associate Professor Enno Siemsen says companies had been motivated to move to China in the past because of the cheap labor pool, but that is now on the verge of drying up. “The labor cost argument is really gone by now,” he says. “To move to China now wouldn’t be because of labor costs but because of markets. The products that will be manufactured there will be geared to the Asian market.” So where are companies looking at setting up shop? “I think Mexico will be used more,” Siemsen says. “There’s the trade agreement with the U.S. and a shorter distance to move merchandise—just a few days by truck.” Other areas where he expects to see company relocation include low-cost countries in Asia such as Thailand, Vietnam, Indonesia, and Malaysia. Visit carlsonschoolmagazine.com for video.
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