Companies located in developing countries are currently serving billions of local consumers with innovative and inexpensive products. What happens when more of those companies make the leap into more developed markets?
Companies located in developing countries are currently serving billions of local consumers with innovative and inexpensive products. Author Constantinos C. Markides poses the question of what happens when more of those companies make the leap into more developed markets. Is it inevitable that these low-end companies will overtake the more developed companies? Markides examines and explores the “The Disruption Process” in the marketplace.
To begin with, to be disruptive, a product has to meet two conditions: it must start out as inferior in terms of the performance that existing customers expect, but superior in price. As a result, existing customers will initially ignore it, but other customers (usually non consumers of the incumbent products) will be attracted by its low price. Then, for a product to truly become disruptive, it must evolve to become “good enough” in performance (attracting mainstream customers from the earlier generation of incumbent products) while at the same time remaining superior in price. In other words, it must become “good enough” in performance and superior in price.
Using historical examples, Markides looks at how disruptors and incumbents manage competition in the marketplace. Whether low-cost innovations from emerging countries end up disrupting markets in developed countries depends not only on whether the disruptors succeed in putting in place an innovative business model that supports their cost advantage but also on how aggressively the incumbents respond. For incumbents, knowing that much of their fate rests in their hands is half the battle won.