Published: January 24, 2012
Accenture Study: Majority of Companies Say They Must Rethink Their Capabilities To Secure Growth in Emerging Markets
DAVOS, Switzerland - (BUSINESS WIRE) - 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 (NYSE: ACN) study finds. According to a survey
of 588 business leaders in 85 countries, 80 percent say their company's
primary focus for growth is on emerging economies, but 73 percent
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, published in an Accenture report: Fast
Forward to Growth: Seizing opportunities in high-growth markets,
found that 40 percent of executives say they lack a strategy or the
operational capabilities to take advantage of opportunities in their
target high-growth markets and 57 percent 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.
"There is a tendency for companies to hesitate in prioritizing
investments in new markets and even a preference to retrench or withdraw
from some locations until the global economic environment becomes
clearer," said Mark
Spelman, managing director, Strategy,
Accenture. "Many companies are holding healthy cash reserves that could
be used to expand, and our research identifies countries with high
growth consumer markets that could represent significant opportunities.
Yet companies continue to hesitate, which could be one of the greatest
risks in today's competitive environment. The first step is getting to
know new markets better."
A video report from Mark Spelman discussing the global report is
available via Accenture's YouTube channel and may be accessed by
clicking this link.
Diversity of household income levels points to the need for better
prioritization
The report's analysis of future household income in 64 leading economies
was conducted in collaboration with Oxford Economics. It suggests that
87 percent 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 US$50,000 in
2010.
-
China was ranked 28th among countries with household
incomes of at least US$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 US$50,000 by
2020, a rise of almost 150 percent to US$635bn.
-
Other less familiar countries will offer significant opportunities. By
2020, for example, the number of households in Kazakhstan with incomes
of at least US $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.
Downturn Has Accelerated Shift in Trade to Emerging Markets
In addition to the results of the business leaders survey, Fast
Forward to Growth contains research which indicates that,
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.
"As trading volume shifts to high growth markets, businesses must either
place themselves in these economies or miss out on the increasing trade
that will flow between them," said Spelman.
"But the landscape of high growth consumer markets is changing fast and
companies must look beyond labels like the BRICs (Brazil, Russia, India,
China) when formulating their growth plans. The diversity of growth
rates means that companies must consider a broader range of
opportunities by becoming granular in their identification of niche
market segments."
Getting Granular
The Accenture
report illustrates how companies will need to look beyond
conventional market segments to new, innovative customer groupings and
propositions. One method is to develop cross-country segments of
customers with common needs and preferences. For example, one
multinational company found success by identifying the needs of male
consumers in areas with scarce water supplies and designed male grooming
products specifically for this customer group in multiple markets.
According to Accenture, another method is to develop business cases
based on the potential that can be found in cities or regions rather
than countries. For example, a Chinese beverage company secured an early
market advantage by targeting 600 smaller cities rather than entering
more competitive larger cities. By using local traditional distribution
channels in these smaller cities, the company has enjoyed compound
annual growth rates of more than 100 percent since 2005.
Sizing and segmenting new markets
In addition to advocating the use of different segmentation variables to
uncover new customer groupings and target markets, the Accenture report
identifies recommendations to accelerate the selection of target markets:
-
Conduct multi-market forecasts of consumption to help decide how and
when to enter select markets;
-
Maximize the value of existing proprietary customer data in
environments where market data is scarce;
-
Gather reliable local-level data through new techniques such as mobile
and social media, helping to create new relationships with consumers.
"Accenture's research makes it clear that multinationals cannot afford
to take a business-as-usual approach to growth, especially when it comes
to gaining and sustaining a foothold in the emerging world," said Spelman.
"Companies that are able to size, time and prioritize demand
opportunities; cultivate and protect future demand in high-growth
geographies and build agile and flexible operational capabilities, will
have the best chance for long-term success."
About Accenture
Accenture is a global management consulting, technology services and
outsourcing company, with more than 244,000 people serving clients in
more than 120 countries. Combining unparalleled experience,
comprehensive capabilities across all industries and business functions,
and extensive research on the world's most successful companies,
Accenture collaborates with clients to help them become high-performance
businesses and governments. The company generated net revenues of
US$25.5 billion for the fiscal year ended Aug. 31, 2011. Its home page
is www.accenture.com.
Accenture
Chris Allieri, +1 646-245-8937
chris.allieri@accenture.com
or
Accenture
Alex
Pachetti, +1 917-452-5519
alex.pachetti@accenture.com
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