Enter emerging markets

After a long flight of more than 30 hours, across the vast Eurasian continent and the vast Pacific Ocean, He Weilan and his colleagues finally arrived in Rio. At this time, it was January, and it was still winter in Shunde, Guangdong, where their company Galanz headquarters is located, and Rio, the romantic capital of the world, was enjoying a pleasant temperature and a warm sea breeze. Sunshine, waves, sand, tall palm trees, and hot bikini girls all over the street form a peculiar and exotic landscape.

He Weilan had no time to appreciate these beautiful scenery. As soon as they got off the plane, they went to Sao Paulo non-stop to participate in the local home appliance exhibition, hoping to sell Galanz microwave ovens to the entire Latin American region.

It was 1998, and Galanz had occupied nearly half of the world microwave oven market, earning 100 million US dollars in foreign exchange from exports, and was known as the world's number one "singles champion". However, the traditional European and American markets, which have made important contributions to this report card, have become saturated. Galanz's local sales have been stagnant at around 10 million units, and it has become an urgent need to find new growth engines.

Although the clouds of bikini beauties on the streets of Rio quickly made He Weilan's eyes tired, Brazil's economy continued to be turbulent, and its high tariffs on imported home appliances also blunted Galanz, the "price butcher" of machetes. But that didn't make Galanz lose interest in the country.

As the largest market in Latin America, Brazil has a population of nearly 180 million. The local natural resources are rich and the people live a prosperous life. In 2003, it was ranked by Goldman Sachs economists alongside Russia, China, and India, and was called the "BRIC", attracting global companies to the Nuggets. The following year, Galanz, who had been coveting this huge cake for a long time, finally found a shortcut and entered the market in the form of SKD (part assembly), which soon occupied 40% of the Brazilian microwave oven market.

This is just a microcosm of Chinese companies exploring emerging markets. According to Yu Yaochang, Executive Vice President of Galanz, those "markets in developing countries with relatively backward economies" have unlimited potential for development because of the abundant labor force and high savings rate, and the economy has entered the stage of take-off. Often referred to as "emerging markets", Brazil is one of its representative countries.

Different people have different interpretations of the concept of "emerging markets". The first time Zhang Qi, CEO of Shenzhen Microelectronics Co., Ltd., heard about this term was four or five years ago. At that time, someone suggested that he buy stocks or bond funds in emerging markets. This is the most primitive meaning of emerging markets—developing countries. stock market. Now, he defines emerging markets as "emerging, fast-growing markets", relative to markets in developed countries such as Europe and the United States.

It doesn't matter when economists coined the term emerging markets and how it evolved to become synonymous with emerging economies. Importantly, emerging markets are represented by a growing number of countries, ranging from the BRICs to the VISTA 5 (Vietnam, Indonesia, South Africa, Turkey and Argentina) to the Golden Diamond 11 (Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam), a growing number of previously neglected countries are calling attention. No wonder George Soros, an international financier, says that the power of emerging markets is starting to matter more.

In the past few years, Chinese companies have gone global, and half of their products have been imported outside traditional markets such as Europe, America and Japan. Last year Galanz's growth rate in these regions was as high as 50%. Under the current economic depression in Europe and the United States and the reduction of consumer demand, many companies are looking for winter jackets in emerging markets like Galanz.

Dive deeply to learn more

He Weilan, who is now the general manager of Galanz Central and South America Branch, was a little bit laughing when he talked about his first time eating Western food abroad: he saw several knives and forks In front of him, he was a little dumbfounded, and he couldn't tell which one was used to cut meat and which one was used to cut bread. In the end, he had to slow down, observe others secretly, and dawdled to finish the meal. "No shame at all," he laughed at himself.

For Chinese companies that have been focusing on developed countries such as Europe and the United States for many years, emerging markets are like Western food placed in front of He Weilan. It seems very close, but in fact it is unfamiliar and far away. In order to study how to eat this feast, Galanz organizes an inspection team every year, led by President Liang Zhaoxian personally, to collect first-hand information on the front lines of emerging markets. Most of the delegation's energy was used to understand the distribution of local channels. Because this is more important than knowing the local customs. Only by figuring out the channels, can we open up the market and build a local sales network.

Liu Guizhong, general manager of the Overseas Development Department, participates in such inspections three or four times a year. In the process of deepening the market, he found that the distribution of channels in emerging markets is very different from that in developed countries. In mature markets in developed countries, home appliances are mostly sold in supermarkets, electrical appliance stores and other large stores, while home appliance sales points in emerging markets exist in the form of a large number of street shops. In Vietnam, there are as many as 1,000 such street-side stores, and there are countless home appliance streets in the Indian market, and home appliance products sold here account for 60% of the total local sales.

Differences in channel distribution make Galanz's experience in cooperating with hypermarkets and big brands in developed countries almost useless. "We gradually discovered that every major importer and wholesaler has more than 200 customer resources of street stores, and they are our real customers." Galanz quickly identified emerging markets The entrance, through the intermediary of importers and wholesalers, occupied countless local street shops.

In management, Jack Welch advocates "deep dive": a tough guy who gets to the bottom and works with the lowest-level employees. In emerging markets, Galanz is also "dive deep": every time the delegation goes, they will visit the sales point, count the types of microwave ovens on the shelves, their brands and prices, and even talk to consumers. Welch believes that there seems to be a natural connection between "deep diving" and success, and Galanz proves that this kind of "deep diving" is extremely effective with the achievement of double-digit growth in emerging markets.

Zhang Qi, CEO of Microlabs, will also do such deep dives. A few years ago, he visited the border trade market in Kazakhstan. At the end of the trip, he got at least two extremely important information: the size of the Kazakhstan market is huge, and the products are available, which means that this market has great potential; almost all products are available. Produced in China, which shows that Chinese products are very popular. As a result, Microlab increased its efforts to develop the local market. Now, Microlab's speakers account for 60-70% of the market share in Kazakhstan, and local consumers even equate Microlab's English name microlab with speaker (speaker).

As the producer of the first 2.1 speaker in China, "Subwoofer", Microlab has been sparing no effort to promote its own brand in emerging markets in recent years, which is very popular among local speaker enthusiasts.

Like many Chinese exporters, Microlabs and Galanz use agents to open up emerging markets, but this still requires deep diving, rather than sitting in the office and waiting for agents to come to the door. Deep diving also allows Galanz to see the uniqueness of emerging markets more clearly, rather than copying what others say.

For example, many people believe that consumers in emerging markets are more sensitive to prices due to their relatively underdeveloped economies, and they deduce the conclusion that "cheap is marketable". Liu Guizhong believed this at first. However, as he got closer to local consumers each time, he began to realize that when it comes to microwave ovens, this seemingly correct conclusion does not hold water at all.

In emerging markets, microwave ovens are far less common than TVs and washing machines, and many people regard them as a novelty. In addition to being practical, it also assumes the function of showing off and psychological comfort. Only those microwave ovens with gorgeous appearance and full functions are popular with consumers. In developed markets, the cheapest and most common microwave ovens tend to sell the most. Because for consumers in these markets, buying a microwave is as simple as buying an electric fan for the Chinese. Therefore, in the developed country market, Galanz put the most simple microwave oven, 17 inches, mechanical type, single function. In the United States, the fool-like "push-to-talk" is the most favored. In emerging markets, the most popular ones are 23-inch, computer-based microwave ovens, and some even have a barbecue function. The appearance of the products is also entrusted to the local designers who understand consumers' preferences best.

In addition to researching consumer psychology, Galanz also researches consumer tastes and improves products accordingly. For example, people in the Middle East like to eat charred food, so Galanz makes some appropriate adjustments to the power and firepower. Indians love curry, so Galanz embedded the program to make curry rice in the menu.

“We don’t go to the mall to take a quick look at the flowers, take a few photos and copy a few prices, but to find some commonalities and know which ones are acceptable to consumers.” In He Weilan’s view, Understanding consumers is a must-do when entering an unfamiliar market, and in an emerging market, this is an unbreakable truth.

Localization, Shortcut to Improve Efficiency

Ten years ago when He Weilan participated in the exhibition in Brazil, few local people could speak English. For many years, he also wanted to learn another foreign language, but due to his busy business, the plan had to be shelved again and again. In his view, speaking a local language when expanding overseas markets is not without help in promoting customer relationships.

However, there are many people who are proficient in English in China, but it is extremely rare to have talents with small languages. Compared with traditional markets, this is the difficulty of developing emerging markets. Huawei, which has been working overseas for many years, has also encountered such problems: after 8 years of expanding the Russian market, Liang Guoshi, Huawei's first foreign representative, was surprised to find that the market meeting attended by more than 10 Russian employees in the Moscow Region Department also Using Chinese as the working language, although there is a Russian translation, the progress is slow, and the Russian employees soon become drowsy. There were no questions or discussions in the middle of the meeting, which was even more inefficient. Liang later exclaimed: With such a team, it may be difficult for such a team to achieve a certain market scale.

Huawei has sent a large number of marketers to emerging markets, however, they did not know where customers were for a long time, and even if they did, it was difficult to meet customers. Galanz, on the other hand, has brought the principle of "localization of talents", which has been used in mature markets, to emerging markets. Everywhere, in addition to the financial management controlled by the company's expatriates, the market construction and network maintenance personnel are recruited from the local. Compared with Huawei's "airborne troops", Galanz's local "indigenous" employees can save a lot of time to adapt to the market and work quickly.

"To cultivate a qualified international market talent, it is necessary to send him to work overseas for 5 years, which is very expensive. Even if the talent is qualified after 5 years, it may be time to change jobs. If you rely solely on agents Managing overseas markets is also very risky, because many of the information provided to us by agents is filtered, which will hinder our decision-making in the local market.” Yu Yaochang believes that only localized talents can better take root in the local area , understand local culture and social customs. This is equivalent to arranging sales staff directly to the front line of the market to feel the pulse of the market.

A more interesting approach of Galanz is to turn local agents into its own employees. At present, the two sales executives of Galanz in the Russian market were "instigated" by the former agents. At the Shunde headquarters, there are specially Russian-speaking employees to connect with them.

“When he is just our agent, he is an independent entity and has an interest relationship with us. When the profit is good, it may be more reliable. Once the profit is thin, their loyalty will be problematic. When he became our employee, he completely served the company, instead of arbitrarily lowering prices or selling products at random as before."

Although Liu Guizhong believes that this approach is extremely beneficial. big, but there are also difficulties. First of all, there must be extremely favorable conditions to attract them, so as not to make them feel that they have given up their good work to take risks in Galanz. For this reason, in addition to the higher salary than the original level, Galanz also gave these dealers considerable incentives: the more products they sell, the higher the promotion, sometimes even so high that the basic salary can be ignored. The bigger difficulty is how to manage these employees. Although emerging markets are relatively backward, they are also deeply influenced by Western culture and like to separate work and life. Some employees are absolutely reluctant to stay in the office for an extra minute after get off work, which is unbelievable for Galanz people, who are known for their "ascetic" culture.

"We need to guide them to adapt to our corporate culture and identify with our values." Liu Guizhong jokingly calls this process "brainwashing." Whenever foreign employees in emerging markets return to the headquarters to report their work, Galanz will seize the opportunity to "take a political lesson" on them. Sometimes even the time spent entertaining with them is put to good use. Through these subtle ways, make their way of thinking as close to the headquarters as possible.

Although this is a common method for Galanz to manage foreign employees in the international market, Liu Guizhong still believes that the participation of foreign employees in emerging markets will help improve Galanz's management level: "With the development of Galanz, our entry into There will be more and more markets, and more and more multinational talents will be managed. If you still follow the previous operating methods, you will soon be unable to keep up with the speed of the company's development."

Respect is the only way to be rewarded

If You want to get an order from a certain customer, but for three consecutive months, this customer only invites you to a bar for drinks and never talks about business. You may feel disappointed and suspect that this customer has an intention. But in some emerging markets, real business relationships are often built this way. The European and American markets are relatively mature and standardized. Everyone acts according to the rules and is straightforward. Few people bring personal feelings into the business field. In emerging markets, whether a deal can be concluded depends to a large extent on the other party's impression of you. If you can make friends with them patiently, after three months, things may turn around, and customers are very likely to come to the door to ask for a contract. Don't care about price.

This is a true story that He Weilan encountered in the Latin American market. "This long-established business habit can be disturbing, but we have to respect it, or we can't do work," he said.

Locally, there is another "not very welcoming" Business habits: Most customers do not use international letters of credit for settlement, but require money lending, and sometimes the term of money lending is even as long as 180 days, that is, 180

days after the product is delivered to receive payment. This is completely different from the way developed countries open letters of credit and guarantee them by banks. The formation of this habit is not unrelated to the local national conditions. Both Brazil and Argentina implement the double-high policy of "high exchange rate and high interest rate". The interest rate on bank loans is very high, and 75% of local enterprises are small and medium-sized enterprises. Most of them are reluctant to spend high bank fees and use letters of credit to communicate with foreign countries. Enterprise conducts business. Even if you use L/C for settlement, you can only open L/C from domestic banks, and it is difficult to open L/C from international multinational banks. In the entire business chain, wholesalers will lend money to retailers, and local residents will often buy things on credit when they go to the store.

Galanz did not give up trade in Latin America out of consideration for the risk of foreign exchange receipts like many Chinese companies did. Rather, it respects this habit and strives to maintain a harmonious relationship with customers, while also strengthening risk management. While making friends with local customers, they will also pay attention to customers' credit problems, and will also conduct risk assessments through some insurance agencies. At present, Galanz has not had any bad debts in these markets.

Many times, people's impression of a country also affects the transaction process. In emerging markets, due to relatively backward information, some people even think that China is still in the period of the Cultural Revolution. This bad impression makes them doubtful about the quality of Chinese-made products, and this psychological barrier is unlikely to be broken in a short period of time. "At this time, we can only do business if we communicate with customers for a long time and let them understand our products and the company's situation." What, how to help its development, can be regarded as truly respected." This is He Weilan's true understanding of respect.

It has also been proven that mutually beneficial parties in business are always happy to hold hands again, while those who are blindly thinking about satisfying their own needs will not be trusted. Microlab has been established for ten years and has made more than 200 types of speakers as a single product. Over the years, Zhang Qi's biggest wish is to make products less and more refined, but he has not been able to do so.

This is because "In some emerging markets, such as Russia, customers like large and comprehensive, often asking for dozens of samples, but when you finally place an order, you will find that the quantity of each model varies. Big". This is very different from developed countries such as Europe and the United States, which have always advocated simple and single habits. Many companies are not willing to do such thankless things, while Microlab always tries to meet the needs of customers. Zhang Qi believes that business habits in different regions are "thresholds set by the market itself". "We may have to work harder, but if you respect this habit, you can open up a situation locally, which will also allow you to set a high bar in this market and resist the attack of competitors."

In addition to such a threshold, In order to protect local industries, some emerging market countries often set up more trade barriers. In Argentina, Galanz was once subject to an anti-dumping investigation jointly conducted by local microwave oven manufacturers, and the import tax rate of microwave ovens was once increased to 200%, which directly caused Galanz to lose Argentina's annual order of 180,000 units. At that time, Galanz's own brand accounted for 70% of the local market. Afterwards, Galanz quickly changed its direction, no longer focusing on promoting the company's own brand, but cooperating with large manufacturers to produce products locally. This will not generate tariffs, but also provide local employment opportunities, which is naturally welcomed by the local government.

In order to reduce operating costs, Galanz has established a number of assembly plants in Russia, India, Vietnam and other places, specializing in assembling microwave oven spare parts exported from China, and then selling them all over the world. In these emerging markets, Galanz's costs have dropped by at least 30% due to the advantages of cheap labor and various tax incentives. While benefiting, Galanz also actively participated in the activities to improve the local environment. For example, in India, due to the large gap between the rich and the poor and the large number of out-of-school children, Galanz spends part of its sales revenue every year to support poor children in school. Through these efforts, Galanz not only showed respect for the local people, but also established a good corporate image for itself.

Training staff, every effort is made to every detail

Those staff who will be stationed abroad must go through very strict selection and training. In Galanz, a training course for multinational managers is held every six months for one week, and those excellent employees who are willing to participate are selected by each system. Teachers include professors from well-known universities, experts from authoritative consulting institutions, and seniors who have developed foreign markets within the company.

The training content is all-encompassing, in addition to the essential international etiquette, it also includes financial knowledge and business negotiation skills. For those who will be sent to emerging markets, there is more to learn. For example, in those emerging countries, for various reasons, it is impossible to establish a fixed institution. Employees also often hold short-term visas, work there for a month or two, then return home, then go out to work for another month or two, and so on. At this time, the guidance given by the company will be detailed on how to find a suitable office and accommodation place.

In some countries with poor security, personal safety has become an important part of training. Galanz also does not advocate that employees live in poor places in order to save costs. In Galanz, the standard of accommodation for expatriate employees is US$1,500 per month, plus a daily allowance of US$55. In those emerging countries where consumption levels are not high, this is enough to allow employees to find a better place to live in a safe area.

Part of the training is military training, requiring students to get up at six o'clock, line up on the playground, run, and shout slogans. Liu Guizhong believes: "This is mainly to exercise the self-control of employees." In emerging markets, due to relatively difficult conditions, everyone must be prepared to endure hardships, and such training is particularly necessary.

Only employees who rank high on the post-training exam are eligible for assignment. Attendance, English proficiency, business ability, and comprehensive skills such as negotiation skills and the ability to deal with emergencies during military training are all included in the scope of the test.

Although emerging markets are becoming very popular for Chinese companies, some experts are not too impressed. Ba Wenwu, director of the business affairs department of the Guangdong Household Appliances Chamber of Commerce, believes that emerging markets are relatively poor. Not as good as a province in the country.” Zhang Qi also said frankly that Microlabs did not grow in emerging markets this year, because the economic crisis made it impossible to conduct transactions according to conventional procedures. And he himself is also waiting for the good times of winter to spring.

In Yu Yaochang's eyes, emerging markets are by no means a perfect gold nugget. However, rather than crowding into the cramped spaces of traditional markets, it’s better to take the initiative to find a new oasis. Those companies that can endure loneliness and are willing to cultivate deeply in emerging markets will surely get rich rewards.