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As global mobile-phone makers Nokia, Motorola, and Samsung havelearned, in order to drive growth and market share in emerging markets, dis-tribution must be extended to ever smaller markets. For example, in China,Nokia is developing relationships with specialty retailers, consumer electron-ics chains, and small, regional or city-level distributors rather than workingsimply with a limited set of national distributors. Colin Giles, Nokia’s seniorvice president for customer and market operations in the region, says: “Chinais so big and diverse that it’s not possible to classify it as a single market. That17Before the end of the second quarter of 2004, automakers will have recalled more than 14 mil-lion units in North America, exceeding the total of 2003 by 2.5 million, with warranty expensesexceeding manufacturers’ annual profits. Source: AMR Research and National Highway TrafficSafety Administration (NHTSA). See Kevin Mixer, Joe Souza, and Fenella Scott, “Early warn-ing solutions: A transformation roadmap,” AMR Research, June 21, 2004). Narishiko Shirouzuand Sebastian Moffet, “As Toyota closes in on GM, quality concerns also grow,”Wall StreetJournal, August 4, 2004.
54BUILDING SUPPLY CHAIN EXCELLENCE IN EMERGING ECONOMIESis what we did three years ago. Today, we look at every market as different andwe look for the best distribution or business model to suit that market.”18To capture these markets profitably, companies will find that planning, per-sistence, and flexibility are key. From our research, however, it is clear that fewcompanies effectively build and leverage their global network when enteringnew markets. Not surprisingly, for most the major challenge to supply chainflexibility is forecast error, followed by long lead times, product proliferation,and supply chain visibility. These are all fundamental issues in building a prof-itable, sustainable business; without strong capabilities in these areas, globalcompanies can rapidly lose the edge to smaller, national or regional competi-tors.Carlsberg, one of the world’s largest beer producers, acquired Poland’sOkocim to gain access to a valuable brand and expand into new markets inCentral and Eastern Europe. To guarantee the future viability of the expan-sion, Carlsberg quickly realized that it had to restructure Okocim’s operations.Through an extensive assessment of production, packaging, distribution, andsales and marketing operations, the new network design includes a reductionin production sites from four to three, packaging sites from 12 to seven, andwarehouses from 12 to six. Overall, the network optimization is expected toreduce total supply chain costs 15 percent while positioning the company forsales growth.Supply Chain: The Global Pursuit of Lower Manufacturing and SupplyCosts.Sourcing from low-cost countries is the obsession of the day atmultinationals around the world. Pushed by maturing markets and price com-petition from competitors sourcing in those low-cost locations, companies in