The 'Blade Runner' theory of market development
Market openings are a two-edged sword. They can bring great opportunities, and also great threats. The Myanmar economy's is the fifth market opening I have engaged in, having also worked in the Soviet Union when the Berlin Wall fell and the countries of Russia, East Germany, Hungary, Poland and Czechoslovakia were exposed to the West's products for the first time. I also worked in South Africa when sanctions were lifted, and in China and Vietnam when their economies were gradually exposed to outside capitalist influences.
I recently spoke in Bangkok at Dataconsult, a monthly gathering of experts run by long-time Bangkok resident Chris Bruton, and also spoke in Myanmar a few weeks ago at the Union of Myanmar Chamber of Commerce. In both events I gave a similar message. Market openings tend to follow the same pattern, and we can predict what will happen in Myanmar by studying other economies.
Closed market economies tend to have products and services that are not up to international standards. This is because there is a low availability of technology, certain raw materials, and expertise. When markets open, they are flooded with high quality international products. Local consumers, when they can afford it, prefer new international products to the "old fashioned" products they are used to buying.
Why is this? Consumers in the country whose market has just been opened flock to buy new international products. They say "My local product is inferior. I want the better, international, one."
Then there is a reaction against international products and a return to local ones. Consumers think, "Why spend so much? If it was good enough for my parents it is good enough for me."
Finally, there is a return to the middle ground as consumers now reason, "I will buy some international products if they offer good value for money and I will buy some local products also."
I call this the Pendulum Theory of New Market Openings. The pendulum swings one way, then the other, then settles in the middle.
What does a manufacturer, either a local Myanmar company or an International (perhaps Thai) company, wishing to enter Myanmar do when faced with this phenomenon?
To understand this, we must look at another theory, a theory I call the Blade Runner Theory of Market Development.
"Blade Runner" is a science fiction movie from the 1980s starring Harrison Ford. Although it takes place in the future, all of the scenery shows a blend of old and new, past and present. So there might be a street scene out of the 1950s, or modern-day New York City, with a flying car hovering about.
The point is that the future will not be just gleaming metal and hi-tech devices. It will be a mixture of things from the past as well as the present day.
Societies mature at uneven rates. We have all heard of the terms "frontier", "developed", "developing", and "emerging" in reference to markets. Yet the truth is that no market is ever one or the other. All markets are a blend. The US is considered the world's most developed market, yet there are parts of America that are more backward than downtown Bangkok. And parts of Bangkok are as sophisticated as any city in the West.
In fact, if we think of four stages of development: frontier, developing, emerging, and developed, we can say that virtually all societies exhibit at the same time elements of all stages. One could get into a car in Bangkok, a developed city, and drive to Isaan, a frontier region, and as one drove northeast, pass through all four stages in a single day.
Myanmar will follow this same pattern. Parts of the country, such as Yangon, will mature rapidly, and in a few years (these things always happen quicker than people imagine) Yangon will be as up to date as, for example, Ho Chi Minh City. Cities like Mandalay will quickly become more developed than parts of Isaan. Yet certain upcountry provinces in Myanmar, the far north for example, will develop more slowly and continue to be much more backward than the rest of the country.
So, consumers in Yangon will demand higher quality products, while consumers upcountry will not be able to afford them.
How should the businessperson respond, whether in Myanmar or selling products and services in Thailand?
For "Blade Runner marketing", you need to have products at:
l Different price points and;
l Different standards of performance.
Think Samsung, rather than Apple. Samsung has phones at many different price points, from the cheapest basic phone to the most sophisticated smart phones in the world. They offer them all to consumers and say "Pick the one that's right for you". Apple, on the other hand, makes one phone, at one price point, and says "Take it or leave it".
In a closed economy like Myanmar has been, it might have been possible to succeed with the take-it-or-leave-it strategy, but in an open economy, that is a recipe for disaster. Similarly, in Thailand, with multiple stages of development present, one needs to be selling an entire product range.
The Myanmar and Thai business, no matter what industry sector it is in, must begin to offer its customers a range of products, from high quality ones (at top price points) that rival the best of the West, to more basic products at affordable price points.
Let's learn from other multinationals. When companies like Procter & Gamble or Unilever enter a market, they always offer a range of products to suit different-sized pocketbooks. They will, for example, offer a laundry detergent that meets the best international standards of excellence, while at the same time (usually by buying a local company) also offer a more basic product that does a good (not great) job of getting laundry clean.
The international product is priced high for the ABC+ class and delivers a high margins but with low volume. The local product is lower quality but with a lower price for the CD class and offers low margins but high volume.
So the path is simple. The businessman must develop and offer a range of products and services, at a range of different price points and quality standards.
Understanding market dynamics and coming up with a clear path for growth is the only way to survive in a competitive environment.
Science fiction movies like "Blade Runner" can teach us marketing experts more than a thing or two.
Eric Rosenkranz is chairman and founder of e.three, a strategic advisory helping companies in Southeast Asia develop growth-oriented strategies. He can be reached at firstname.lastname@example.org.