Is your emerging-market strategy local enough? McKinsey

Main exam idea (“not country-level but”)

Emerging markets are too diverse for a country-level strategy. A company should not say “our China strategy” or “our India strategy” as if the whole country is one homogeneous market. It must use a granular strategy: targeting regions, cities, clusters, or submarkets.

Small example:
Selling the same product in Shanghai, rural China, and inland China with the same price, promotion, and distribution is weak strategy. These areas may have different incomes, media habits, channels, and product needs.

Exam logic:
Do not answer: “Emerging-market strategy = enter China/India/Brazil.”
Correct: “Choose specific submarkets inside those countries.”

[to read] Why country averages are dangerous

The reading says large emerging markets contain huge internal differences. For example, Mumbai may become economically bigger than Malaysia, but it would still represent only 5% of India’s economy by 2030. India’s 14 largest cities would represent only 24%. So focusing only on top cities misses most of the market.

Small example:
A company entering India only through Mumbai and Delhi may look “present in India,” but it is missing many other growth areas.

Exam trap:
Do not confuse “big city” with “full market coverage.”

[to read] Growth is not always where competition already is

The Brazil example is important. Many multinationals focused on São Paulo because it is large and rich, but competition there is intense and prices are lower. Brazil’s northeast was poorer but growing faster, with lighter competition and higher prices. Companies without granular insight arrived late.

Small example:
A shampoo brand may fight many competitors in São Paulo, while a northeastern region has faster demand growth and fewer strong rivals.

Exam logic:
Attractive market ≠ largest market.
A smaller or poorer region can be better if growth is faster and competition is lower.

City-cluster strategy

The key tool in the reading is the city cluster approach. A city cluster is a group of cities that are similar enough to be managed as one strategic market. In China, McKinsey identified 22 urban clusters. These clusters are based on factors such as industry structure, demographics, scale, geographic proximity, and consumer characteristics.

Small example:
Instead of targeting 100 random cities across China, a company targets 50–100 similar cities inside 4–5 clusters. This makes distribution, sales force, supply chain, and media planning easier.

Exam logic:
City clustering is a way to balance local adaptation with manageable scale.

Focus on cluster size, not city size (clusters vs. big cities)

The reading warns that companies often focus too much on famous large cities. But the better question is whether the whole cluster is attractive. Example: Chengdu, Xi’an, and Wuhan are huge cities, but they are far apart. Shandong may be more attractive because it has many large cities close enough to form a strong cluster.

Small example:
One big isolated city may be less efficient than a group of medium cities close together because distribution and marketing can be shared.

Exam trap:
Do not rank markets only by the size of individual cities. Look at the cluster economics.

Scale and word-of-mouth matter inside clusters

The article says that in China, because many brands are still relatively new, word of mouth is especially important. If a brand reaches around 10–15% market share in a cluster, reputation can grow faster and help the brand gain more share without always increasing marketing spending.

Small example:
A phone brand may become popular in one cluster because enough users recommend it. That reputation then spreads locally and lowers the need for heavy advertising.

Exam logic:
Better to become strong in selected clusters than weakly present everywhere.

Do not extrapolate from past growth

Historical growth can mislead because consumer behavior changes quickly when income rises. One cluster may still be buying first low-end cars, while another is already moving to imports or luxury cars. SUV sales may grow 20% nationally, 50% in some cities, and decline in others.

Small example:
A national average says “SUV demand is growing,” but in one rich city the market may already be saturated, while in another city it is just starting.

Exam trap:
National average growth is not enough. You need category growth by submarket.

[to read] Consumer behavior differs even between nearby cities

The reading gives Guangzhou and Shenzhen as a strong example. They are both tier-one cities in the same province and only two hours apart, but their consumers differ strongly. Guangzhou is more local, Cantonese-speaking, and family/home-oriented. Shenzhen has many young migrants, mostly Mandarin-speaking, who spend more time away from home.

Small example:
A family-oriented TV campaign may work better in Guangzhou, while a mobile/out-of-home campaign may work better in Shenzhen.

Exam logic:
Geographic closeness does not automatically mean similar consumers.

Media & channels are local

China has over 3,000 TV channels, but only a few are truly national. In some areas, only around 5% of consumers watch national television. Newspapers, radio, and billboards are also local. This means marketing communication must often be localized by cluster.

Small example:
A national TV campaign may fail if your target customers mostly watch local channels.

Exam trap:
“Global brand” does not mean “one national campaign is enough.”

Clusters must be flexible

Clusters are not fixed forever. Companies can merge nearby clusters if supply chain logic supports it, or split a cluster if media habits or consumer behavior are too different. The reading says most companies should probably manage around 20–40 submarkets: fewer may be too broad, more may be too complex.

Small example:
A company may manage Chengdu and Chongqing together if logistics work well, but split Shanghai into subclusters if media behavior differs inside the area.

Exam logic:
Granular strategy must still be manageable.

India: wheel tecnique

India is harder to cover than China because it is less urbanized and more dispersed. To pursue opportunities in the 10 states that will account for most future GDP, companies may need to reach 3,500 towns and 334,000 villages. The article suggests focusing on clusters around major cities and using a hub-and-spoke approach.

Small example:
A company uses one major city as a hub, then serves surrounding smaller towns and villages through spokes.

Exam logic:
In India, the problem is not only market attractiveness. It is cost-effective reach.

[to read] Granular focus can reduce cost-to-serve

The technology company example is important. It moved from operating in 120 cities to focusing on 8 clusters with 67 cities. It still reached 70% of its potential market, but customer service costs fell from 9–10% of sales to 5%.

Small example:
Instead of serving too many scattered cities badly and expensively, a company focuses on fewer connected clusters and serves them efficiently.

Exam trap:
Granularity is not just about selling more. It can also lower cost and improve execution.

[to read] Brazil: regional differences affect product, channel, and pack size

Brazil shows why national strategy can fail. Many companies use São Paulo for consumer research, but São Paulo may be culturally closer to New York than to other Brazilian regions. In the northeast, modern retail is weaker, small outlets are more important, and consumer preferences differ. For detergent, northeastern consumers prefer different pack sizes and care more about strong perfume and foam than whitening power.

Small example:
A detergent company using only São Paulo research may design the wrong product for northeastern Brazil.

Exam logic:
Regional variation affects the full marketing mix: product, price, distribution, promotion, and packaging.

[to read] Final

The reading’s core message is that emerging-market strategy must be granular. China, India, and Brazil should not be treated as single homogeneous national markets. Companies must identify the most attractive submarkets, especially city clusters or regional clusters, and adapt distribution, media, channels, product features, and investment priorities accordingly. The strongest exam idea is: country-level averages hide the real opportunities and risks. Winning companies focus resources on selected clusters where they can build scale, reduce cost-to-serve, use local media and channels effectively, and adapt to regional consumer behavior.