The 86 Percent Solution

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The 86 Percent Solution

by Vijay Mahajan and Kamini Banga

Wharton School Publishing © 2006, 224 pages, $26.99 (ISBN 0-13-148907-0).

The Biggest Market Opportunity of the 21st Century

So many international companies focus on the most affluent part of the world’s population — the top 14 percent — that many of these markets have become oversaturated and overcompetitive. In The 86 Percent Solution, marketing experts Vijay Mahajan and Kamini Banga describe how global companies can make a profit and grow by serving the other 86 percent of the world’s people. By presenting many examples of companies that have successfully reached out to the emerging markets of the world, the authors demonstrate how potential markets have been turned into profit by innovative companies that have grown larger by thinking smaller.

The authors have organized The 86 Percent Solution into a new set of “rules of engagement” that can help companies reach underserved markets with more appropriate products. These rules include, “Don’t build a car when you need a bullock cart,” “Think young,” and “Bring your own infrastructure.” By expanding on these rules with numerous case studies and statistics from around the world, the authors provide a blueprint for understanding the key drivers of today’s and tomorrow’s global economy.

Develop With the Market

To help companies keep up with change by recognizing and taking advantage of shifts in developing markets, the authors provide these eight strategies:

1. Look for patterns of change. Opportunities can be found in markets that are moving from $1,000 per capita GNP to $5,000 and $10,000 per capita GNP. By looking at the histories of current developed nations, companies can pinpoint key transition points in a country of interest. The rise in prepared foods as women enter the work force is one example of a recognizable shift.

2. Develop solutions with governments, NGOs and other players. The authors write that public-private partnerships are critical in addressing social and economic challenges. They explain, “As emerging markets develop, governments, foundations and nongovernmental organizations (NGOs) play a central role in the development.”

3. Export successes. When a solution in one developing market works, it can often be successfully exported to other similar developing markets. Fiat’s Palio model was initially successful in the Brazilian market in 1996. Four years later, more than 1.5 million Palio models were sold to customers in 41 markets, including Germany, Italy, France, Spain, South Africa, Morocco, Russia, Vietnam and India.

4. Look for opportunities for “reverse colonization.” The authors write that “the remnants of earlier colonial periods can sometimes help in this process of global exporting.” This strategy was employed in India when the high concentration of English speakers there — a remnant of the country’s past as a British colony — helped to make it a hub of back-office service and call centers for U.S. companies.

Growing Pains

5. Address the “growing pains.” Development often brings with it political and economic trouble, strains on an already fragile infrastructure, and environmental challenges. New roads, airports, railroads and seaports must be rebuilt to keep up with the growing needs of a developing country.

6. Export products to the developed world. The authors write, “Developed-market segments that need rugged, low-maintenance or low-cost products might also turn to the solutions of the developing world.” For example, Mexico’s Cemex is now one of the world’s top cement companies.

7. Import customers from the developed world. The authors point out that digital technologies and inexpensive travel allow developing countries to import customers from the developed world. For example, the “medical tourists” who are flocking to Thailand, Malaysia, Jordan, Singapore and India come from both developed and developing nations.

8. Utilizing old skills in new ways. There are many ways for companies in developing markets to utilize traditional skills in new ways. Global Digital Creations Holdings, a Chinese company, uses its low-cost advantages and skilled workers — who have been involved in film animation since the 1920s — to challenge Pixar and Disney in global animation. ~

Why We Like ThIs Book

The 86 Percent Solution presents fascinating lists of strategies such as these in each of its 10 chapters on making headway in developing markets. Through colorful and timely examples from around the globe, the authors illustrate the opportunities that are available in the developing world while highlighting how many companies have grown while improving life in underserved markets. ~

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