Women in Power Series: Four Competitive Advantages Local Companies Have Over Multinationals

achievement
Phuong Uyen Tran, author and Deputy CEO of the THP shares her thoughts on family-owned business in the age of globalization.

Women in Power Series

Imagine being a family-owned business in an emerging market and turning an offer to be acquired by Coca-Cola. That’s what we did.

By Phuong Uyen Tran

Globalization can seem like an indomitable force as it propels multinationals into every corner of the earth. In many emerging and frontier markets like Vietnam, where I’m from, independent local companies get swallowed up in their path, unsure of whether they can fend off or compete with the global giants who have suddenly become interested in their country.

Phuong Uyen Tran
Phuong Uyen Tran

But this does not have to be the case. It is entirely possible to build a thriving local company and turn it into a national champion that not only resists, but also competes heartily with, multinational giants. In their home markets and regions, local champions even have the potential to outperform these giants — and often do.

As deputy CEO of Vietnam’s largest privately-owned fast movingconsumer goods company, THP, I have experienced this first hand. THP has beensuccessfully competing against giants for almost 20 years. Havingbecome Vietnam’s largest fast-moving consumer goods business selling to all ofVietnam’s provinces and 16 countries internationally, we were offered a $2.5billion buyout deal from Coca Cola in 2012.

Ultimately, we turned the offer down, choosing instead toleverage our unique strengths to continue building our own vision. Becauselocal companies do have advantagesover the multinationals that move into their markets — some of which they maynot be fully aware of. In many cases, they can easily stand their groundagainst the multinationals.

As I discuss in my book, Competing With Giants, here arethe 4 biggest advantages local companies have in their own territories overmultinationals:

A Deep Understanding of LocalConsumers

Local companies’ leaders know and understand the culturalnuances of their markets in a way that big global corporations cannot. Thisenables them to develop and products that will resonate strongly with consumersand design marketing campaigns whose messages really stick.  THP’s bottled Zero Degree Green Teaskyrocketed to success even though green tea drinks are often served  for free in Vietnam. We understood the valueof marketing it for its stress reduction, health benefits and  convenience exactly at a time when Vietnamesepeople were craving these three factors. Similarly, Dr. Thanh Herbal Tea becamean instant hit for its ability to rebalance and detoxify the body afterexcessive eating. Designed with this benefit in mind, we launched it in the runup to Tết — the most important celebration in Vietnameseculture, when people tend to over-indulge.

The Ability to Leverage MutuallyBeneficial Local Partnerships

Local companies are much better positioned than multinationalsto build mutually beneficial relationships with local providers. Doing so makessense on many levels. First, from a purely P&L perspective, transportationcosts are lower and local sourcing of raw materials is nearly always cheaperthan international sourcing. The logistics are also far simpler and moredirect. When supply-chain management takes place at a distance, regional orglobal headquarters often end up grappling with extremely long internationalchains, which have multiple branches and sub branches. This increasesbureaucracy and detaches one end of the chain from the other. Finally, localcompanies are in a much better position than multinationals to give theirsuppliers and other partners the support and respect theydeserve. Ultimately, this helps maximize the relationships and enhance thequality of the services received.

Speed and Flexibility

Because localcompanies are smaller and are not dependent on a broader regional or globalstructure, they can make and execute businessdecisions far more swiftly than large, geographically disparatemultinationals.  They also can be quickerto adapt to changing circumstances and capture new opportunities. In the caseof THP, we have been able to move rapidly to invest in new technology, becominga pioneer in its use.  For example, wewere the first company in Southeast Asia to invest in aseptic bottlingtechniques.  All of this adds up togreater efficiency and growth potential.

SharpFocus on Core Mission

Ultimately, a company’score mission is to serve its customers. Spending time on processes such asgenerating reports to global headquarters as multinationals must do can get inthe way of producing the highest possible quality products and services andmeeting customers’ needs. Local companies have the distinct advantage of beingable to focus sharply on serving their customers without these distractions.

There are other benefitsto being local too, such as the ability to really get to know, understand andforge connections with your employees, which boosts productivity. Local companiesare also in a better position than multinationals to know how, when and whereto give back to local communities, thus deepening ties to the market.

So next time your localbrand trembles in the face of a global giant, consider how you can leveragethese advantages to survive independently, and thrive. There is room for bothof you.

Aboutthe author

Phuong Uyen Tran is Deputy CEO of Tan Hiep Phat (THP) group, Vietnam’s leading independent beverage company. In addition to running Number 1 Chu Lai Plant, she is responsible for THP’s procurement, domestic and international marketing, public relations, and corporate social responsibility programs. Phuong is an executive of the Beverage Association of Vietnam and also sits on the executive committee of the Young Presidents’ Organization (YPO) Vietnam chapter.

After being asked by Harvard Business Review to write a case study on how her family owned business walked away from a $2.5 billion offer from Coca-Cola, Tran authored Competing With Giants: How One Family-Owned Company Took on the Multinationals and Won.

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