Asia powerhouse rising, but challenges remain
Business conference brings international leaders, success strategies together to meet opportunities presented by Asia's growing consumer force By Romi Herron
4/29/2006 - When Sam Pitroda left his native India in 1964, he held a master's degree in electronics, yet he had never seen an actual television or made a single telephone call. At the time, that technology was simply not widely accessible in his homeland.
That year, he arrived in Chicago where he was able to embrace these communications advances; since then, he has contributed to achievements such as the development of digital switching systems in the United States, key to integrating voice and data in global networks.
Pitroda, founder and CEO of WorldTel Ltd., shared his story at Asia Rising, the Kellogg School of Management's Asian Business Conference, held April 29 at the James L. Allen Center. His insights and those of other internationally acclaimed experts enlightened an audience of more than 300 Kellogg faculty and students through a closer look at branding strategies, as well as investment and access to capital, in Asia .
Highlighting the evolution of telecom in India , Pitroda, who now holds more than 75 worldwide patents, said that in 1981 a single telecom company provided only 2 million phones for 750 million people. Two years later, telecom was liberalized and a free market economy, along with talented entrepreneurs, created an environment where software and computer enterprises now thrive today.
Despite the progress, the keynote speaker affirmed India is indeed challenged to meet its population's basic human needs of literacy, water and sanitation.
“Food packaging is an issue; food is not reaching people in famine. Housing is an issue. We need 10 million new homes. India doesn't have enough power to light its villages,” said Pitroda, who oversaw the country's National Technology Missions related to drinking water, literacy, immunization, oil seeds and dairy and has helped shape India's developmental policies and philosophy.
Currently, he said, only 7 percent of India 's children are university educated, and that number needs to quadruple if India hopes to become a first-rate global economic power. Without increased educational opportunities, India 's population will not be able to take advantage of the technology now available there. His hope is that India will accomplish with education what it has in telecom over the last 25 years, opening doors to vocational training and scientific and industrial training centers, in addition to university education. To that end, the country's citizens must embrace new ways of thinking, he said, including an approach to nongovernment-funded education, which will link students to technology that brings nations together.
“Technology is leading to the flattening of the world, but while technology has no borders, people still have borders [rooted in beliefs that inhibit development],” he concluded.
Understanding cultural views was also discussed in Developing Brands in Asia , moderated by Kimihiko Konda, professor of marketing at the Otaru University of Commerce's Graduate School of Business in Hokkaido , Japan .
In this forum, Alice Tybout, the Harold T. Martin Professor of Marketing at Kellogg, compared Asian and American consumers' responses to marketing strategies.
When Kraft launched Oreo in Asia , Tybout said, the company had to consider possible consumer interpretations of its successful American advertising campaign, which depicted a father teaching his son to split and then dunk the Oreo cookie in a glass of milk. Asian consumers might react less positively to the indulgence conveyed in that message, Tybout explained, adding that a one-size-fits-all approach to brand development in Asia would not be useful.
“The differences between countries in Asia may be as great as differences between the U.S. and Asia ,” noted Tybout, who is chair of the Kellogg Marketing Department and co-edited Kellogg on Branding .
In another example of cross-cultural marketing strategies, Warren Guthrie, executive vice president and managing director of Leo Burnett Co., said a successful marketing campaign for a Western brand of shampoo focused on building a values-based connection between Chinese consumers and the product's image. In the endeavor, consumers selected stories of personal dreams and aspirations that were submitted by other Chinese consumers. The stories were to be featured in the advertising.
“One requirement is to be very global, cosmopolitan, connected with the world. The other is to be connected to your own culture,” Guthrie said. “Most important for success is establishing the culture of the corporation, its values and what it represents.”
Consideration of physical constraints is also imperative, he said, because retail locations in Japan , for instance, do not have shelf space for a multitude of products from a supplier. In addition, consumers' home size affects what they buy.
While corporations face challenges introducing products into Asia , the region poses unique circumstances for entrepreneurs too. Some of those factors were considered in Investing and Accessing Capital in Asia, a panel discussion moderated by Ben Jones, Kellogg assistant professor of management and strategy.
An advantage noted by Ken Tsang, managing director of Hine Group, is that companies don't require “a lot of capital to succeed in China because the companies are so capital efficient.”
Similarly, Asia tends to be asset based while the United States tends to be cash flow-based, according to Sajal Kohil `95, who is a partner at McKinsey & Co., a gold sponsor of the conference. Cash flow in the United States is frequently reinvested, while in Asia, businesses strive to obtain more assets and resources to offer consumers, noted Kohil, who also advised potential entrepreneurs to network with locally raised talent in their Asian business endeavors.
But despite the strategic impact of geographic difference articulated by many conference participants, marketing strategists can also expect some universal preferences. In the food industry, for instance, flavor is often valued most with consumers, according to keynote speaker James Lawrence, executive vice president and chief financial officer for General Mills Inc.
Lawrence said General Mills' global brands with a specialty niche, such as Haagen Dasz, Green Giant and El Paso, have been most successful in Asia, with Japan's recent Nikkei Consumer Survey ranking Haagen Dazs in the top 3 products for overall quality, behind Canon and Seiko.
Key growth drivers for both national and international endeavors are product innovations, with platforms including health, convenience, and taste/variety; brand building, with promotions such as “Box Tops for Education,” channel expansion (convenience stores, dollar stores, natural/organic retailers, and drug and discount chains); and international expansion and margin expansion, Lawrence said.
Two General Mills innovations are its Azuki red bean ice cream, and Wanchai Ferry frozen dumpling kits, which the corporation will soon debut in France.
“What's fascinating is we are an American company taking a Chinese product, employing El Paso (Mexican food) marketing analog to market in France,” Lawrence said. Sixty-two percent of the corporation's sales are generated in the United States, with 14 percent international and 10 percent joint ventures.
The Asian Business Conference also offered perspectives from John Tomaszewski '98, vice president of NaviAsia Consulting Group, as well as Asia's Growing Consumer Power, an executive forum moderated by Kellogg Adjunct Professor Phil Corse, vice president of Herbst LaZar Bell. Featured panelists included: Guy Bouchet `93, lead partner at Colehower & Co.; David Hartman, practice director and CEO China, Blue Canyon Partners; David Lum, director of Asia/Pacific product and operations at Motorola; and Tawfik Sharkasi, vice president of research and development at Wrigley. Weiying Zhang, professor of economics and executive dean of the Guanghua School of Management at Peking University, delivered the day's final keynote address.