Developing New Business Models

To better understand the opportunities posed by emerging markets and potential approaches - PF3 researched examples of companies across a diverse range of sectors – including regulated industries such as water and finance – to highlight how others are profitably and sustainably reaching middle and low-income consumers. Early movers in this field have recognised that by playing an active role in compensating for infrastructural, logistical or market deficits, they not only can develop new markets, but also can address pressing societal needs.

Three specific elements of successful emerging markets business models are relevant to the pharmaceutical industry as it considers how to meet the needs of both affluent and lower-income patients in emerging markets: (1) they are human centred; (2) they take a new approach to understanding affordability; and (3) they actively seek new means of achieving market penetration.

Human-Centred
Companies need to continuously ensure that their products/services meet customer needs. Pharmaceutical companies expanding into emerging markets must critically examine their product offerings for individual markets.

Affordable
Cost-cutting, volume-based business models, customer aggregation and other financing mechanisms will all help to improve affordability. Companies will have to implement innovative pricing schemes for emerging markets, without negatively impacting their Western markets.

Accessible
Beyond greater affordability, expanding access to low-income populations depends on improved distribution. Upfront investment by companies, governments and non-governmental actors to support the development of equitable health systems is vital. And, partnerships, between a variety of players who can help develop and deliver solutions, will be a key determinant of success.

In addition to such approaches, success in new markets requires a healthy dose of patience, willingness to experiment and determination.

The PF3 report presents five cases, including Nokia, as an example of a Western multinational which is evolving its business model to reach beyond the urban centres to rural populations in India. It highlights how two global firms based in emerging markets, Cemex and Manila Water, are proving adept at innovation solutions to better align societal needs with shareholder value. And finally its study of the Aravind Eye Hospital and Fabio Rosa illustrates the potential for social
enterprise models to leverage the market to offer health and energy solutions.

Two additional cases available for download here – Novo Nordisk (Download Case Study) and GE (Download Case Study) – also serve as illustrations of innovative approaches in emerging markets.