Going Local to Go Global

Wharton's Marshall Meyer has written a new paper titled, "Going Out by Going In."   Meyer describes how Chinese firms such as Haier (an appliance manufacturer) "draw revenues from overseas by penetrating previously inaccessible domestic markets and then renting their distribution and service channels to foreign competitors.”   After all, foreign firms often find it very difficult to establish a route to market (distribution and sales channels) in the vast rural areas of emerging markets such as China or India.  If a domestic firm such as Haier has already established a route to market capability in those rural areas, they can generate significant revenue by providing services to foreign manufacturers who do not have the resources or the knowledge to replicate that rural presence quickly.  Meyer takes it one step further though.  He suggests that firms such as Haier develop experience and knowledge from building new routes to market in these rural areas in their home country, and that expertise may facilitate international expansion as well.  In other words, the knowledge and processes developed at home may be transferable as these firms from emerging markets try to establish a route to market in other countries, even those in the industrialized world.  Check out this video below, in which Meyer explains his research on this topic.