Western technology companies be warned: emerging economies are on course to change the dynamics of global competition. Good quality, low-cost technological products will become a key battlefield between global companies and local companies in India and China. The upshot being that technology brands and manufacturers will need to rethink their strategy for developing high-quality technology for low-cost emerging markets.
Siemens are developing more than 80 ‘base level’ products for financially constrained mass markets, with an investment of €3bn in India, China, Russia and Brazil over the next three years. From this, Siemens expects to raise its order book ten-fold in India to €1bn a year during the next decade. It also foresees double-digit profitability from the low-cost, high-quality strategy – what in India is called ‘frugal engineering’ and has created the $2,000 Tata car.
Chinese companies may not yet understand ‘innovation’ beyond manufacturing at the moment, with the idea of a ‘customer’ still pretty foreign to Chinese companies. But as they become more attuned to the end user, they will open vast new opportunities for consumer-centric innovation. Even though they’re ten years behind, the trend is unstoppable and when they do catch up, western companies will have a challenge on their hands.