Using CSR to Enter New Markets

Authors

• Mark Little

  Former Director, Healthcare, Advisory Services, BSR

• Adam Lane

  Former Manager, BSR

---

When leaders at Novo Nordisk, the world’s largest company focused solely on diabetes, decided to enter the diabetes market in China, they opted to leverage not just products but a long-term CSR strategy focused on health, economic development, and the environment.

First, working closely with government officials, physicians, and local community representatives, company leaders launched new diabetes clinics and prevention programs to build systemic capacity to address diabetes in China. Next, to support the local economy, they moved a significant portion of the company’s R&D and production capabilities to Tianjin, with an aim to use local manufacturers to supply the entire Chinese market by 2015. And to mitigate environmental impacts in a country recognized as the world’s biggest carbon emitter, Novo Nordisk’s new Tianjin facility was designed to produce 20 percent fewer emissions than the company’s best-in-class factory in Brazil.

Novo Nordisk is just one leading company that has successfully used CSR strategies to support growth in new markets. BSR’s research has identified three key tactics to do this effectively:

1. Focus on core business objectives.
2. Invest in local infrastructure to overcome barriers to market adoption.
3. Use information gathered in the field to adapt business strategy.

Focusing on Business Objectives

Rather than pursuing a range of activities, companies that have narrowed their CSR programming to one or two areas that are critical to their business objectives have been more successful in using CSR to enter new markets.

Merck’s US$30 million public-private partnership focusing on HIV/AIDS prevention and treatment in southwest China serves as a useful example: A market leader in the research and development of HIV drugs, Merck began this partnership to work with 1,600 organizations to promote awareness of the disease and establish support networks and surveillance systems that gathered detailed information about the disease from health care workers and patient-monitoring systems. Company representatives also conducted extensive ethnographic research to learn more about local health needs, which helped them establish relationships with more than 11,800 government and policy makers and 8,261 health care workers. As a result of this work, the company has contributed solutions to a significant societal need, and company leaders are building relationships that will also help business.

The Novo Nordisk example described above also highlights the value created by CSR practices. In February, the company released “Blueprint for Change,” a quantitative analysis of the sustainable value created through the company’s triple-bottom-line business approach in China. According to that publication, senior leaders will approve CSR programs only if they demonstrate impact and support business objectives. “Our job is to convince top management and internal skeptics that sustainability can make a difference and can grow the business,” said Novo Nordisk’s Business Integration Program Director Ole Kjerkegaard Nielsen.

Building Local Infrastructure

In new markets—particularly in emerging economies—technical equipment and trained staff are often in short supply. Cultural belief systems can create additional challenges, especially if they run counter to scientific knowledge. While these issues can significantly hinder commercial success, a company’s CSR initiatives can directly address these barriers.

Consider AstraZeneca’s new pilot projects to prevent, detect, and treat breast cancer in Ethiopia and Ghana. To improve the countries’ overall health care system, the company is developing breast cancer treatment guidelines, strengthening the referral system, training physicians, and expanding diagnostics—steps that also align with AstraZeneca’s focus on breast cancer in these underserved markets.

Novartis took a similar approach to building local infrastructure when it partnered with the World Health Organization to create an e-learning program to teach health care workers in remote locations about integrated management of childhood illnesses. The program can be rolled out quickly, adapted easily, and allows program directors to follow up with individuals who have been trained. It also has been a critical part of Novartis’ strategy to build relationships—and business—in non-urban markets.

Gathering Local Intelligence

Companies often find great value in gathering insight directly from the field via their own company-led programs, and CSR initiatives can be used to do just that.

Pfizer used its Global Health Fellows program to gain insight about local markets and channel it back to headquarters. Through this program, Pfizer sends 200 staff on six-month assignments to 38 countries to train and support NGO partners. Upon their return, Pfizer fellows share important information they learned in the field that can improve the company’s approach to local markets.

Bayer used its new rural development program examining how to improve livelihoods for the very poor in China’s Chongqing in a similar way: While working in western China, company representatives develop a greater understanding of health needs and relevant socioeconomic factors that must be considered as Bayer expands its already sizable market share in that country. According to William Valentino, Bayer’s vice president of corporate social responsibility, the company invested in Chongqing, an area the size of Denmark with 30 to 40 million people, because it is one of the most dynamic growth regions in China. “We will be able to use our strengths in agriculture and health care to find solutions that align with the needs of the population,” he said. “This will allow us to look at something beyond the narrow scope of marketing and sales and make a real social impact.”

While these approaches carry challenges of their own—not the least of which is tailoring them to the unique circumstances of local markets—there are great opportunities to be realized in designing a CSR strategy that enables new market entry. For more information on how to do this, contact Mark Little (New York) or Adam Lane (Beijing).