As global mobile-phone makers Nokia, Motorola, and Samsung have
learned, 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 working
simply with a limited set of national distributors. Colin Giles, Nokia’s senior
vice president for customer and market operations in the region, says: “China
is so big and diverse that it’s not possible to classify it as a single market. That
17
Before 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 expenses
exceeding manufacturers’ annual profits. Source: AMR Research and National Highway Traffic
Safety Administration (NHTSA). See Kevin Mixer, Joe Souza, and Fenella Scott, “Early warn-
ing solutions: A transformation roadmap,” AMR Research, June 21, 2004). Narishiko Shirouzu
and Sebastian Moffet, “As Toyota closes in on GM, quality concerns also grow,”
Wall Street
Journal
, August 4, 2004.
54
BUILDING SUPPLY CHAIN EXCELLENCE IN EMERGING ECONOMIES
is what we did three years ago. Today, we look at every market as different and
we look for the best distribution or business model to suit that market.”
18
To capture these markets profitably, companies will find that planning, per-
sistence, and flexibility are key. From our research, however, it is clear that few
companies effectively build and leverage their global network when entering
new markets. Not surprisingly, for most the major challenge to supply chain
flexibility 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, global
companies can rapidly lose the edge to smaller, national or regional competi-
tors.
Carlsberg, one of the world’s largest beer producers, acquired Poland’s
Okocim to gain access to a valuable brand and expand into new markets in
Central 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, and
sales and marketing operations, the new network design includes a reduction
in production sites from four to three, packaging sites from 12 to seven, and
warehouses from 12 to six. Overall, the network optimization is expected to
reduce total supply chain costs 15 percent while positioning the company for
sales growth.
Supply Chain: The Global Pursuit of Lower Manufacturing and Supply
Costs.
Sourcing from low-cost countries is the obsession of the day at
multinationals around the world. Pushed by maturing markets and price com-
petition from competitors sourcing in those low-cost locations, companies in
