Photos: David Levene/eyevine/Intertopics, Joao Marcos Rosa/Nitro
High Growth Markets_August 2012
be a quicker and more cost-effective way for a Western multinational to distribute its goods in a country compared to the hard work of building up its own network from scratch. This was the logic behind US home-appliance maker Whirlpool’s decision earlier this year to form a sales and distribution alliance with Chinese retailer Suning Appliance. The deal, aimed at boosting Whirlpool’s small share of China’s burgeoning white-goods market, will see the world’s largest maker of washers and refrigerators get “preferential access” to 1,700 Suning stores in nearly 300 cities across China. In return, Suning will get exclusive rights to Whirlpool products, according to Ian Lee, vice president of North Asia at Whirlpool. “China is not the easiest market to work in,” says Lee. “It is one of the most competitive markets in the whole world. It is also a very big country. Every province is like a single country. For us to build a presence across China, we would have to do it one city at a time, and this would have involved building customer services, infrastructure, logistics, all of which are very costly and labor-intensive. Suning has a presence in every province and offers a cost-effective way to expand and accelerate our reach in the country.” Similarly, when US clothing retailer The Gap decided to step up its overseas presence in places such as Panama, South Africa, Lebanon, Georgia, and Azerbaijan, it did so through franchise partnerships. “Gap’s entry into these smaller countries is low risk and high return because they are not going in there and building bricks-and-mortar stores themselves,” says Richard Jaffe of financial services company Stifel Nicolaus. “Rather, they are doing it through a franchise agreement with a local partner. In return, Gap can leverage its brand name and promote its e-commerce presence. It’s lucrative and costs Gap nothing.” In other sectors, partnerships and joint ventures are also becoming more focused on addressing a specific need, such as gaining access to new technology, collaborating on research and development, or tapping into a pool of highly skilled workers for less money.
ufacture, and sell generic drugs in China and on the global market. “It’s a way to access our partner’s portfolio and tap into local manufacturing and distribution capacity,” says Petra Danielsohn-Weil, head of strategy for Pfizer’s emerging-markets business.
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or local companies in emerging markets, alliances can be an attractive means to learn from their bigger and more established foreign peers. In some cases, it might also be the only way – short of selling the company outright – to survive once the home market has
For companies in emerging markets, alliances are a way to learn from their more established foreign peers. >
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he looming expiration of US patent protection on top-selling drugs such as Plavix, a blood-thinner, has sent companies in the pharmaceuticals industry scrambling to diversify their income streams. Earlier this February, Merck announced a partnership with two Brazilian drugmakers, Supera Farma Laboratórios and Eurofarma, to sell and distribute its drugs in Brazil. The same month, Pfizer announced that it had entered into a framework agreement with China’s Zhejiang Hisun Pharmaceutical, a leading producer of active pharmaceutical ingredients, to establish a joint venture to develop, man-
Shelf life in Belo Horizonte: Merck has partnerships with two Brazilian drugmakers. 27
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