Frugal Engineering & New Business Models

A recent issue of the Economist, brought out a detailed report on Globalization and its effect on developing and developed markets. The article analyzes the effect of the rise of corporations and businesses from developing economies and discusses how companies such as Lenovo, Airtel, Tata Steel, Embrarer are attaining global scale and acquiring well established brands and businesses from the developed world. At the same time, companies such as IBM, Cisco, GE are taking advantage of their presence in emerging markets and redefining their product, operational costs and business models. Key points from the article:

• Globalization now means business flows in both directions between developed and developing economies. Its now all about "competing with everyone from everywhere for everything"
• More than 62 companies from emerging markets are now part of the Fortune 500 list, expected to make up a third of the list in the next ten years
• Emerging markets demand a new genre of products, often in more basic forms or smaller sizes than developed countries. Firms in these countries are in a better position to understand these needs of a large consumer base.
• New business models are emerging - goods and services are being delivered in fundamentally different ways and at much lower costs
• Frugal Engineering - similar to the concept that I described in my earlier post Minimalist Products, where specialized skills of workers from emerging markets are helping define new, value driven products.
• Companies from emerging markets are more adept at making do with minimum resources and are able to make profits at low costs and while serving the "Bottom of The Pyramid"
• The incumbents are striking back too, by evolving new business models, buying out the cost advantage, building a large presence in countries like India & China and by tightening their belts.

Read more of the Globalization Report ...