What are the challenges associated with emerging markets? Give an example, and how Procter & Gamble, Siemens,
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What are the challenges associated with emerging markets? Give an example, and how Procter & Gamble, Siemens, Nestle, and Unilever overcome those challenges.
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One of the most basic issues at the bottom of the pyramid is access to basic infrastructure. Historically, government- owned powergeneration facilities, including massive solar projects and wind farms, have been the norm in emerging markets such as India. However, it is often not cost-effective to extend the power grid into rural areas. In fact, according to the International Energy Agency, less than two-thirds of the rural residents in the world's developing nations have access to electricity. One problem with the new renewable energy systems is the lack of scale. Rural markets are dispersed, and distribution is not well established. As a result, many investors consider rural renewable energy initiatives to be too risky. The situation may be changing in Africa, where nearly 600 million people are included in the "off-grid segment." That is, they live without access to reliable sources of electricity. For years, small-scale organizations such as Solar Sisters have worked at the individual level to help provide renewable energy sources. Now large global companies such as Philips Electronics, DuPont, and Siemens are testing solar-powered systems at the village level. The companies hope that government officials will purchase the systems and bring power to rural areas. The systems include solar panels for charging batteries and overhead home lighting and lanterns that use efficient LEDs. As Philips has discovered in its pilot program in South Africa, the money that villagers save by not buying kerosene can be spent on necessities such as bread. If the pilot programs are successful and win government funding, enough power will be available to enable village households to have refrigerators and radios. Lack of scale and a shortage of capital are just two of the problems associated with reaching the world's poor. For consumer products, Professor Aneel Karnani of the Ross School of Business has identified another stumbling block to market success. "The biggest problem is that prices are too high. Companies overestimate the size of the market and end up selling to the middle class, not the poor," he says. But there is a potential upside: Even as shoppers in mature markets cut back on discretionary spending, consumer spending on basic items such as food and soap remains stable and relatively unaffected by trends in the broader global economy. However, after companies have created the right product at the right price, another potential problem presents itself: communicating product benefits and persuading low-income consumers to change long-entrenched behaviors by paying for new products and integrating them into their lifestyles. In short, it is not enough to simply launch a low-cost product; markets for that product must be created. One of the most basic issues at the bottom of the pyramid is access to basic infrastructure. Historically, government- owned powergeneration facilities, including massive solar projects and wind farms, have been the norm in emerging markets such as India. However, it is often not cost-effective to extend the power grid into rural areas. In fact, according to the International Energy Agency, less than two-thirds of the rural residents in the world's developing nations have access to electricity. One problem with the new renewable energy systems is the lack of scale. Rural markets are dispersed, and distribution is not well established. As a result, many investors consider rural renewable energy initiatives to be too risky. The situation may be changing in Africa, where nearly 600 million people are included in the "off-grid segment." That is, they live without access to reliable sources of electricity. For years, small-scale organizations such as Solar Sisters have worked at the individual level to help provide renewable energy sources. Now large global companies such as Philips Electronics, DuPont, and Siemens are testing solar-powered systems at the village level. The companies hope that government officials will purchase the systems and bring power to rural areas. The systems include solar panels for charging batteries and overhead home lighting and lanterns that use efficient LEDs. As Philips has discovered in its pilot program in South Africa, the money that villagers save by not buying kerosene can be spent on necessities such as bread. If the pilot programs are successful and win government funding, enough power will be available to enable village households to have refrigerators and radios. Lack of scale and a shortage of capital are just two of the problems associated with reaching the world's poor. For consumer products, Professor Aneel Karnani of the Ross School of Business has identified another stumbling block to market success. "The biggest problem is that prices are too high. Companies overestimate the size of the market and end up selling to the middle class, not the poor," he says. But there is a potential upside: Even as shoppers in mature markets cut back on discretionary spending, consumer spending on basic items such as food and soap remains stable and relatively unaffected by trends in the broader global economy. However, after companies have created the right product at the right price, another potential problem presents itself: communicating product benefits and persuading low-income consumers to change long-entrenched behaviors by paying for new products and integrating them into their lifestyles. In short, it is not enough to simply launch a low-cost product; markets for that product must be created.
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ANSWER The emerging market is a global economy or a country transitioning to a developed nation This transition helps bring out the maximum potential ... View the full answer
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Valuation Measuring and managing the values of companies
ISBN: ?978-0470424704
5th edition
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
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