Geo Expansion Strategies – Why is almost every MNC getting it wrong?

There has been a marked increase in the revenue contribution from class B ,C,D & E towns in India, Apparently the quick way of addressing the growing demand is to start a office , appoint sales and support staff and in some cases appoint distributors , stockists in such locations and wait for the magic sales figures to appear.

In reality many vendors end up shutting these office locations within months, retrenching the staff, leaving the customers and partners in the lurch thereby losing credibility.

So what went wrong in the popular term “Geo expansion strategy” of most MNC brands?

The answers are not always very in the face, but some are evident in the points as below.

  1. Overestimating the market – Accepted that the emerging geographies have an increased per capita income over the last decade and therefore they should be buying more stuff. Correct? Well the answer is Yes and No , the customers in such locations have very distinct priorities and cannot be assumed to have similar spending patterns as in case of developed markets. For such customers the increase in per capita translates into fulfilling basic necessities rather than aspirational goals.
  2. Deliberate Brand Ignorance – The availability of substitutes and complementary products and services ensure that customers don’t always fall into the brand trap, for example in such locations for most customers buying a cell phone is a priority and not buying a popular A brand or B brand. There is less of a style statement compulsion and more of a need fulfilment in these markets.
  3. Selling is not easy – The fundamentals of sales including face to face customer interaction , feature selling , strong distribution channel, schemes and promotions etc fail to make their mark in such markets primarily because selling is not easy , it takes time and lots of patience . The desperation to get quick results often leads to a de motivated team which coupled with apprehension and doubt amongst the target customers it is a recipe for failure.

The best way to expand your footprint in emerging geographies is to spend quality time in conducting market research and arriving at tactical and strategic measures to both grow the market and as well as serve the latent demand.

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