As companies in mature markets compensate for modest growth at home by trying to boost their presence in emerging economies, they are encountering intense competition from increasingly confident local players. Aggressive and nimble enterprises in China, India and elsewhere may pose some threat, but the real challenge in these high-growth markets is more complex. And it is affecting companies from all markets, not just those in North America, Europe and other developed economies.
The important transformation in the global landscape is not so much the shift to emerging economies but the extraordinary growth in business activity among emerging market countries. When American companies target Brazil or India, for example, they should know that China has displaced the United States as the largest trading partner of both. We at Accenture predict that trade between emerging economies is about to overtake that between developed economies.
Thus, companies need to tackle the diversity of growth opportunities and the pace of change if they are to succeed. Clearly, emerging market companies have some advantages at home. They have established relationships and the ability to leverage scale advantages with low costs and, in some cases, government support. They have faced similar challenges in their home countries, such as dealing with infrastructure deficits and scarce or unreliable data. They are increasingly doing business with one another, growing across one another’s borders and gaining insights and experience on how to best serve one another’s markets. This gives them an inherent advantage over competitors from mature economies unfamiliar with operating in such conditions.
As these companies expand beyond their borders, the competitive picture becomes more balanced. The evidence suggests that business leaders – no matter whether they are from mature or emerging markets ‑ are not confident of achieving success. According to Accenture research on almost 600 senior executives from multinational companies around the world, 40 percent said they lack a strategy or the operational capabilities to grasp opportunities in these markets. More than half said they need to fundamentally rethink their strategies to compete in them.
What are the best ways to tackle emerging markets?
Rather than prioritizing traditional target markets, such as neighboring countries or countries with a common language, progressive companies identify consumer segments in particular cities or customer segments that may straddle national borders. For example, Procter & Gamble identified the needs of male consumers in areas with scarce water supplies and designed grooming products for this group in multiple markets. Within three months of launch, one shaving product became the best-selling product of its kind in India.