Innovation as a Strategic Approach to the D&E Markets

1. Innovation as a Strategic Approach to the D&E Markets Led by Eleanor Eaton Eaton & Company

2. AGENDA In this seminar, we’ll discuss how to create innovative process of evaluating, prioritizing, entering, and winning in the D&E markets: • Creation of information sources and data base. • Market prioritization based on collected data, cultural, legal, and political issues. • Evaluation of alternative entry strategies.

3. “The real growth will only come from developing and emerging markets. The developed markets in the U.S. and Western Europe are saturated and may grow only through an upgrade of existing market offerings. In terms of volume growth, one has to look to China, India, Russia, Brazil, Vietnam, Central Asia, and points beyond.” A. G. Lafley Chairman The Procter & Gamble Company

4. The Emergence of New Markets U.S.Western Europe – Stable Market – No longer a major supplier U.S.Western Europe - Supply Competition from Asia • U.S./Western Europe: • Major Suppliers • The Biggest Market China: - Major Supplier - Major Market • China: • Demand Grows Exponentially • Global Involvement RussiaEastern Europe: - Growing Markets • Mexico/Brazil: • Oil Supply • Growing Demand • Middle East: • Oil Supplier • Strong Market • RussiaEastern Europe: • Pent-up Demand • Vietnam: • Supplier • Pent-up Demand • China: • Becomes a Supplier • Vietnam: • Supplier • India: • Supplier • Growing Market • Central Asia: • Consumption 1980 1990 2000 2008

5. The Appeal and Challenges for the D&E Markets • Challenges • Cultural Issues • No Market Data • Language Barrier • Different Habits Require Different Products • New Political Climate • Possibility for Corruption • No Means of Validation/Vetting Partners • Appeal • Size • Growth • Unmet Demand • Low-Cost Outsourcing • Innovation Capabilities • Sourcing Where does your company stand?

6. Questions & Issues for the New Markets • Where do I start? • Where do I get the data? • How do I enter? • Is the government a help or impediment? • What are cultural and legal issues? • How can I be flexible and still adhere to main business requirements?

7. Define Your Needs/Goals Success Model Identify Targets of Opportunity Develop Entry Strategy Develop Screening Criteria Develop Alternative Scenario Collect Data Evaluate and Prioritize Markets Process of Evaluating the New Market

8. Defining Your Needs A. Lower Production Costs Outsourcing Own Manufacturing Facility B. Search for Innovations Licensing Technologies Joint Venture Supply Source C. Volume Growth In the Specific Market Use One Market As a Hub to Enter the Region

9. To prioritize the new market opportunities, develop screening criteria based on the market attractiveness and ease of entry…

11. Information gathering when published data is not available… Developing your own data base in the new market requires creativity, persistence, and legwork.

12. Rules of Data Collection Rule #1 – Reliance on face-to-face interviews Rule #2 – Visual observation plays a big role in the market assessment Rule #3 – Check all data, at least 3 times Rule #4 – Create market data as a mosaic pattern Rule #5 – Throw the net wide – talk to everybody Rule #6 – Talk to local competitors – they may become partners

13. Cultural differences can determine the products you may offer…

14. Even within the same ethnic group people may have different usage for products based on country culture…

15. All countries differ in their relations toward foreign entrants…

16. Market Attractiveness Ease of Entry Results -- Market prioritization. (Example) We have applied this screen to major countries/geographic areas…

17. Development of alternative entry strategies… • Joint Ventures • Sub-Contracting • Partnerships • Creation of Own Network • “Greenfield” vs. “Brownfield” approach

18. The process has to be flexible and creative in each of its steps – based on actual local conditions… Example #1 – A Major Knitwear Company SOLUTION Needs - Identified a small textile factory - Created a sub-contracting arrangement - Used their modest distribution for slow but sure growth - Achieved large cost saving by selling sub-contracted items in the West Entry into the Russian market Reality Major textile plants are structured in old soviet style with poor maintenance, low level of skills, and huge overhead. Planned Strategy A purchase of a major textile plant

19. Example #2 – A Baby Formula Manufacturer SOLUTION Needs Entry into China - Determine the government interest in accelerated development of babies - Create baby development centers in partnership with maternity wards - Offer baby formula as a part of educational and health products - long-term, create a local manufacturing base Reality - China just outlawed door-to-door distribution - Government tightens control over food items Planned Strategy Development of a door-to-door distribution system through local communities

20. Key Learnings • Key Learning's 1 – D&E markets are lucrative but highly challenging. To win in these markets requires strong commitment, out-of-the box thinking, creativity and flexibility • Key Learning's 2 – In conducting market assessment in the markets/countries where no statistical data is available, the key is to throw the net wide and reach out to sources from all elements of the country: government, business, consumers, academia, competitors and companies with similar experience • Key Learning's 3 -- In searching for alliances in the new market environment, do not rush to create permanent arrangements

21. Contact Details Company: Eaton & Co Phone: 1-817-946-2302 Email: eleanor@eleanoreaton.com Web-site: www.eleanoreaton.com