Business Case Studies, Executive Interviews, Marshall Van Alstyne on Emerging Markets

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Executive Interviews: Interview with Marshall Van Alstyne on Emerging Markets
February 2008 - By Dr. Nagendra V Chowdary


Marshall Van Alstyne
Associate Professor at Boston University and research scholar at MIT.


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    At the beginning of the 20th century, three separate platform technologies competed to become the automobile standard: steam, electric, and gasoline. Before the invention of the electric starter, the internal combustion engine was actually less popular among many consumers because it not only required specialized fuels, but improper hand cranking to start the engine that could cause a kick back capable of breaking the driver's arm. These markets are two-sided because the fuel supplies are essentially incompatible. Who wants to supply one type of fuel until consumers have committed to a particular engine type and who wants to commit to a particular engine type until there's a ready supply of fuel?

    It's fascinating to me that a century later, a transition back toward electric vehicles confronts this problem in reverse. Technology immaturity is clearly a problembut so is chicken-and-egg adoption. Electric fuel cells aren't readily available because there aren't enough cars that use them in part because they aren't readily available.

  • How do you describe the slow but confident burst of growth in emerging markets? Is this growth here to stay or do you see this as an irrational exuberance?
    I don't think this is just an irrational exuberance. With increasing connectivity across global markets, sources of inexpensive but skilled labor stand to gain. In fact, I've put a healthy fraction ofmy own retirement investments into markets like Brazil, India, and China so I do believe these markets will continue to grow.

  • ManyMNCs are already present in one or more emerging markets. However, not every company from the same emerging economy reports a success story. Why is it that some companies are able to be successful while many others aren't?
    You could ask this question of any economy, not just emerging markets! The four year survival rate of new businesses (not just MNCs) in the US ranges from a low of 10% to a high of 40% depending on the industry sector and who's doing the estimating! For distinct challenges faced in emerging markets, let me reemphasize on being nimble, culturally aware, and fair.

  • Do you think First Mover Advantage would give foreign companies a wider wedge in emergingmarkets?
    Yes I believe it helps, but this is not definitive in terms of establishing market dominance. Companies with established two-sided networks already have a working business model, working technology, and cash streams that they can use to subsidize the launch of such networks in virgin markets. Yahoo launched online auctions in Japan ahead of eBay and still dominates that market. Their continuing strength nicely illustrates how hard it can be to dislodge an incumbent protected by strong network effects.

    But a better example is Baidu, the largest search engine company in China. It competes directly with Google and went public only in 2005. Baidu benefits from a cultural preference to support Chinese companies but they also exhibit an indigenous cultural sensitivity that helps build their market share. I've heard if you search for the word "tiger" on Google that, in addition to the animal, you're more likely to get "Tiger Woods" and a version of the Apple Macintosh operating system. In China, you're more likely to be interested in the zodiac Year-of-the- Tiger or other cultural references to the animal.

1. Emerging Markets Case Study
2. ICMR Case Collection
3. Case Study Volumes


The Interview was conducted by Dr. Nagendra V Chowdary, Consulting Editor, Effective Executive and Dean, IBSCDC, Hyderabad.

This Interview was originally published in Effective Executive, IUP, February 2008.

Copyright © February 2008, IBSCDC No part of this publication may be copied, reproduced or distributed, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or medium electronic, mechanical, photocopying, recording, or otherwise without the permission of IBSCDC.

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