Companies Willing But Not Able To Tap Emerging Markets, Says Accenture

[Techtaffy Newsdesk]

A majority of global business leaders say their companies are looking to high growth emerging economies to fuel their next stage of growth, but do not believe they have the necessary capabilities to compete in these markets, a new Accenture report finds.  The report’s analysis of future household income in 64 leading economies was conducted in collaboration with Oxford Economics.

According to a survey of 588 business leaders in 85 countries, 80 per cent say their company’s primary focus for growth is on emerging economies, but 73 per cent believe they must accelerate their efforts to build sufficient market share in these high-growth markets, or may, in fact, be too late to do so.

The survey found that 40 per cent of executives say they lack a strategy or the operational capabilities to take advantage of opportunities in their target high-growth markets and 57 per cent believe their company will have to “reassess” or “fundamentally rethink” the approaches and capabilities they need to compete in these markets.  The data reveals no significant difference between companies from mature and emerging markets when it comes to preparedness for building market share in these geographies.

The report analyses the diversity of growth rates of household incomes in a number of economies and suggests that significant opportunities exist in markets that are often poorly understood by multinational businesses. In order to take advantage of these opportunities, the report recommends that as a first key step, companies should invest in advanced techniques to track and forecast rapid changes in purchasing power and consumption trends in these markets, as well as the nature of the competition they will face there.

The Accenture study suggests that 87 per cent of the additional 124 million households that become part of the world economy in the 10 years to 2020 will be in emerging economies, representing at least US $8.5 trillion of additional household income. Among the examples of the pace and diversity of growth revealed by the analysis:

Despite China’s size and growth rate, 21 other emerging economies – including Poland, Colombia, Malaysia, Nigeria and Kazakhstan – had a greater number of households with an annual income above $50,000 in 2010. China was ranked 28th among countries with household incomes of at least $30,000 in 2010.  However, by 2020, it is expected to overtake all but the US, Japan and Germany.

Among emerging markets, Turkey will see the greatest absolute increase in household income from households earning at least $50,000 by 2020, a rise of almost 150 per cent to $635bn. Other less familiar countries will offer significant opportunities. By 2020, for example, the number of households in Kazakhstan with incomes of at least $50,000 is expected to more than double to 770,000, more than the combined number of households with incomes of that level in Indonesia, the Philippines, Vietnam, Pakistan and Egypt.

If current trends continue, the value of exports between emerging economies (E2E) will surpass that between developed markets (D2D) for the first time by the end of 2013.  Until recently, D2D trade has dominated global trade volume and as recently as 2000, E2E was the smallest component of global trade flows. According to Accenture, the shift has been accelerated by the economic downturn.


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