The End of Corporate Imperialism

8 Nov, 2005 | by
Topics: Global, Strategy

The Harvard Business Review classic article called “The End of Corporate Imperialism”, written by C.K. Prahalad and Kaenneth Lieberthal was passed along to me sometime ago and figured I’d comment on this nice piece of work.  Below is a summary and personal assessment… 

Article Summary:
This pointed article discusses the realization that growth inspired multinational corporations will have to compete in the emerging markets of China , India , Indonesia and Brazil . As these developing countries grow rapidly the necessity to penetrate these markets are apparent as MNC’s clamor for new market share. The article presents the concept of an imperialist mind-set which in their meaning depicts MNC’s of the 80s looking to explode onto the emerging market scene with old products.  Not to mention and old mindset such as “we can still squeeze some profits out of these sunset technologies”.

Now the times have changed and MNC’s see the opportunity in these emerging markets but it will require more then a greater cultural sensitivity to penetrate them. It will require a completely new way of thinking, a reconfiguration of all existing business elements and an unyielding dedication to this newly coveted segment. The article neatly integrates the imperial mind-set concept throughout and points out that MNC success in these emerging markets will ultimately bring corporate imperialism to its end.

The author believes there are five basic questions that MNC’s must answer to compete in these emerging markets:

1. Who is the emerging middle-class market in these countries, and what kind of business model will effectively serve their needs?
2. What are the key characteristics of the distribution networks in these markets, and how are the networks evolving?
3. What type of local and global leadership is required to foster business opportunities?
4. Should the MNC adopt a consistent strategy for all its business units within one country?
5. Will local partners accelerate the multinational’s ability to learn about the market?
These five questions are touched on different ways throughout the article and I felt it warranted its inclusion in the summary.

Assessment:
Overall I felt this was a well written case that kept me engaged throughout. It presented clear points in a manner that was very easy to follow. It also provided two powerful complimentary charts that really drove home the author’s pointed commentary. I’m at a lose to offer up criticism on this case, which I typically look forward to presenting, but if I had to comment I’d say I wish there were updated statistics as this case is roughly 10 years old.

There were several sections in the case that I enjoyed a great deal. I figured I would comment on them specifically in this assessment as opposed to providing an overarching comment.

The first section I’d like to comment on is early discussion on business models for the emerging middle class. Under this section, the author presents his thesis, which is logical and rooted in well constructed thought. Essentially it discusses the enormity of custom tailoring required in order to break into these emerging markets I mentioned above. Small cultural adaptations or cost reductions will not be sufficient enough for entry. It requires a fundamental change to every element of their business model. In this section the point was driven home with several examples on these emerging markets and how differentiation is apparent in their cultural activities. For instance, Indians will buy any product once, but brand switching is common practice. One survey found that Indian consumers tried an average 6.2 brands of the same packaged product in one year, compared with two for the American consumer (Lieberthal, Prahalad, p194). This consumer reaction provides invaluable data that MNC’s must take into consideration when reengineering their business models. It’s items such as these that cannot go overlooked by MNC’s as these emerging markets will not be fooled or swayed unless their specific needs are met.

Another compelling piece of data presented by the author was the market pyramid chart that illustrated the purchasing power parity across China , India and Brazil . The author explains how many MNC’s did not take this purchasing power chart into consideration when trying to enter these emerging markets. India for example, has its largest population within the two lower tiers. Without understanding the target segment a MNC can very well come in with existing product lines that throw them into the unprofitable top tier segment where there is only small room for growth. An example of that mistake was Revlon in 1976 and 1994 when they tried to introduce their beauty products to both China and India respectively. Other sections in the article also presented a strong case to drive home the author’s thesis but I felt this very first category presented the most compelling argument.

The case was extremely applicable to the global business environment. I felt its points spoke the essence of what is required in order to compete on a global scale. Most of these emerging markets today have red hot economies, especially China and India, which further prove the validity of this case. It essentially predicted that these markets were growing at a rapid pace and MNC’s would need to remold themselves in order to reap the rewards. I think many MNC’s today have reaped the rewards and it’s research material such as this that helped them get there.

3 Responses so far | Have Your Say!

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    April 16th, 2014 at 1:14 am #

    The article Summary is really wonderful I like such type of article is is include the growthing country !! Thanks !!

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