Thursday, July 12, 2007

Designing for Global Markets

GE Chairman and CEO Jeffrey Immelt offered up this week’s nugget at a gathering of Indian Institutes of Technology (IIT) graduates in California’s Santa Clara Convention Center. During a wide-ranging address, Immelt characterized three generations of technology business: the past, in which developed-world companies designed for mature markets; the present, with developed-world companies tapping emerging-market manufacturing and personnel resources to deliver products and services to mature markets; and the future, when developing-world companies design and sell products and services to mature markets.

Vital Wave Consulting wondered why Immelt’s three generations each ended with mature-market (rather than global) buyers, when GE’s revenues from emerging markets are projected to grow from $10 billion to $50 billion between 2000 and 2010. Last year, nearly 20% of the company’s $163 billion in revenues came from emerging markets, and revenue in these markets rose 14% in the first quarter of 2007. Emerging markets already represent the fastest growing markets for global technology companies, and overall revenue potential in these regions will soon overtake that of mature technology markets. For GE and other technology companies, a more accurate description of the third generation of technology business is global companies designing for global markets, not just the developed world.

Immelt’s audience of primarily Indian-born engineers, eager to compete in the world’s most advanced markets, was receptive to his suggestions. Successfully designing for the developing world, however, presents a worthy challenge and, in the long-run, larger rewards. Business trends suggest that companies based in developing countries will not only be selling into mature markets, they will also be designing for emerging markets around the world. With lower cost structures, technical expertise, and a broader understanding of global problems, emerging-market entrepreneurs may bring a richer set of solutions to local challenges. Multinational corporations, however, retain the advantage of global scale. To lead in developing countries, they must develop effective strategies to design for the world’s growing mass markets. First, however, they must acknowledge that the market opportunity is global and that, if they don’t act fast, their counterparts in developing countries will.

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