Sales Growth by McKinsey & Company Inc

Author:McKinsey & Company Inc.
Language: eng
Format: epub
ISBN: 9781119281061
Publisher: Wiley
Published: 2016-04-06T00:00:00+00:00

Interview: Mikhail Gerchuk, VimpelCom

CEO, Eurasia

What do you see as the biggest differences between developed and emerging markets?

We serve more than 200 million customers in 19 countries. These include very established markets like Italy and Russia, but also a range of developing markets such as Ukraine, Kazakhstan, Bangladesh, Pakistan, and Zimbabwe. Our strategies vary a lot from one emerging country to another, but a few general distinctions between emerging and developed markets are clear. Distribution channels in emerging markets are hugely fragmented. In telecommunications, this is true for devices but even more for top-ups, when customers buy more credits for their prepaid phones. Customer access is critical in the early stages, so distribution needs to be fast. In mature markets, you need to focus much more on an appealing experience and good service that allow you to re-sell and upsell to existing customers. In Rome, our Wind brand has a cutting-edge flagship store on the famous Piazza di Spagna. In Armenia and Kazakhstan, the picture is totally different—dealers have vans that drive from village to village. In Bangladesh and Pakistan, a dealer might be someone who tops up his own phone and then transfers these credits to customers “phone-to-phone” for a small commission.

Given the special challenges of emerging markets, what do companies need to do to be successful there?

Emerging markets pose challenges in three areas: logistics, control, and education. In terms of logistics, you need to be present everywhere. This requires different skills from those needed to build sophisticated distribution for mature markets. You also need to be able to allocate budgets, set the right targets, and choose the right KPIs [key performance indicators] to track country performance. Finally, you have to educate dealers more about your products and how to sell them. Why are your mobile services better than those of competitors? In many emerging markets, user education—in terms of things like new phone capabilities, topping up, or data options—relies heavily on dealers, as Internet penetration is low.

I’ve seen companies entering emerging markets make two mistakes. The first is trying to transfer the approach they use in mature markets to these new situations. They overinvest and underdistribute, spending too much on too few outlets. The second is trying to control too much. Often, headquarters will intervene in local operations. But the people in these countries know best how to run a business in their local culture. Furthermore, excessive involvement from headquarters undermines local management’s sense of responsibility for performance in their market.

What is VimpelCom’s approach to the many emerging markets where it does business?

I strongly believe in empowering local operations. VimpelCom today is the result of a recent merger of the original VimpelCom, which was headquartered in Russia; Orascom, from Egypt; and Wind, from Italy. Our company is therefore quite new, while many of our local brands—Beeline, Kyivstar, djuice, Infostrada, Djezzy, and others—have a long history. Headquarters is there to support the countries and is purposefully kept lean and mean. We don’t do any central brand management, for example. Instead, we work with the countries in three areas.

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