If there’s one word that sums up the mood at the World Economic Forum this week, it’s uncertainty. Will the Eurozone crisis be resolved? Will there be new leaders in the White House, the Elysée or the Kremlin? Will the Chinese economy avoid a hard landing? Current high levels of corporate cash reserves suggest that uncertainty is holding back investment decisions. But this is, in fact, a time of great opportunity. If decision makers can agree on one thing to lift the mood in Davos, it would be that the world is not just uncertain, it’s also remarkably resilient.
While mature markets struggle for growth, emerging economies continue to enjoy buoyant conditions. Opportunities abound. And yet, although the vast majority of business leaders are looking to emerging markets for growth, it’s clear many don’t think they have what it takes to succeed there. In a study that we have published this week involving the opinions of almost 600 executives from both emerging and mature economies, 57 percent say they will have to fundamentally rethink the capabilities they need to compete in these high-growth markets. It may be understandable that this weakness might lead some businesses to wait until the global economic picture becomes clearer, but hesitation is likely to be the most dangerous option of all.
We forecast that emerging markets will generate an additional US$8.5 trillion of disposable household income between 2010 and 2020. To take a slice of this pie, however, businesses will have to be far more proactive and precise in identifying and targeting opportunities. That’s partly because there are nimbler competitors succeeding already. But it’s also because the diversity of opportunity is greater than they might imagine. Consider the sizeable markets growing beyond the BRICs, for instance. Turkey will see the greatest absolute increase in households earning at least US$50,000 of any emerging market in the decade to 2020. And Kazakhstan will have more households at this income level by 2020 than Indonesia, Vietnam, Pakistan and Egypt put together.
Targeting whole countries and other traditional markets will not be enough to achieve success, though. Companies will increasingly have to identify unconventional niches, like particular cities or segments of consumers with specific needs that straddle national borders.
In short, companies must get granular if they are to find new markets and win in them. This proactive approach is the surest way to fight uncertainty, build sustainable growth and demonstrate the true resilience of the world economy.