Global Growth: New Players, New Opportunities
By Mona Pearl
You know you should make a move, and you think your product or service could perform well in international markets, but how do you decide where you should target your efforts and what efforts are necessary?
The search is ongoing for markets that promise growth and new opportunities for businesses around the globe. Activity spans the globe:
*The G-7 (Canada, France, Germany, Italy, Japan, the UK and the United States)
*The BRIC (Brazil, Russia, India and China)
*The N-11 (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam)
* The CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa)
*The MIST (Mexico, Indonesia, South Korea and Turkey)
*And the Global Growth Generators (3G) (Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam)
Because new opportunities are constantly emerging, analysts, the World Bank, IMF and others, have conducted extensive analyses of market conditions in countries far off the traditional radar screen. However, what companies need to pay close attention to when selecting a new target market isn’t just one country’s market performance over another. Rather, the right target market has everything to do with aligning your company’s unique product/services, goals, vision, and global strategy with the most suitable region, country and target market.
What factors are important when choosing a target market? Income, urbanization, language, culture, purchasing power, regional/local trends, and many more considerations. As such, this process involves taking the abundance of available data from a growing number of market possibilities and filtering that information to identify the best possible target market for your particular business.
The term “emerging markets” is now more than 25 years old and has come to define the new global economy and rapid changes. Dozens of countries fall under the label even though they are evolving at their own pace and with their own twists on economic development. The term is often reduced to the concept that emerging markets are “emerging” because they have not “emerged.” But what is the benchmark?
When referring to emerging markets, it sounds like we are talking about countries with great promise and great potential. They are growing, but they are still not there. One could argue that the BRIC countries are no longer emerging markets. They have emerged, got to a certain maturity and can be re-classified and called growth markets, certainly when compared with growth potential against the United States or even the European Union. Companies may want to look at other regions and countries of the world, find a better match with their vision and actions, and assess best growth opportunities.
It is almost impossible to find a business leader in the global marketplace who does not operate, or at the very least, is not exploring opportunities with or within emerging market countries. Even those entrepreneurs who prefer domestic markets experience competition from companies based in these regions.
Regardless of the loose definitions and characterizations, the question to be asked by companies remains: which are the countries with the biggest growth potential for my company?
Emerging Players To Watch
Vietnam’s shift from a centrally planned to a market economy has transformed the country from one of the poorest in the world into a lower middle-income country. Vietnam now is one of the most dynamic emerging countries in East Asia region.
*Power generation, transmission and distribution
*Telecommunications equipment and services
*Oil and gas machinery and services
*IT hardware and software
*Airport and ground support equipment
*Air traffic management systems
*Environmental and pollution control equipment and services
*Education and training
*Safety and security
*Architecture, construction, and engineering services
*Plastics equipment and machinery
The Philippines, with opportunities in information technology, telecommunications, medical equipment, water resources equipment and services, and electric power systems is an attractive market. It is an underdeveloped market, with vast growth opportunities for companies that are looking to branch into markets that have a great potential.
Goldman Sachs introduced the concept of N-11 in 2005. The goal was to identify emerging markets with the potential of the BRIC countries. These N-11 economies represent the next big growth stories or the markets “worth keeping an eye on.”
While these markets are culturally, geographically and economically diverse, each one is positioned for success by population size, resource wealth and sub-regional dominance. For example, each N-11 country has a large population coupled with high population growth rates that far exceed those of more developed economies.
Is a growing population an important market trait for every business? Of course not. Population growth is critical for businesses looking to establish that market as a consumer base, but then GDP and buying power come into play. Alternatively, many businesses expand globally to access skilled labor, more economical manufacturing, proximity to other (future) markets, improved distribution channels or myriad other reasons. Not to mention that the recent unrest in the Middle East may change the balance, time frame, and the way we should plan for doing business with these countries.
A closer look at MIST (Mexico, Indonesia, South Korea and Turkey) finds a common number of factors: a large population and market, a big economy at about 1 percent of global GDP each, and all are members of the G20.
And Don’t Forget
Rise up, stretch and rub the green dollar signs from your eyes. A new day is dawning in China and a radical transformation is underway. China’s new economic mission has shifted from sourcing and manufacturing to outbound and domestic investment, indigenous innovation and domestic consumption. While beneficial for some U.S. businesses already in China, this shift may present
challenges for others. Certainly, any first time businesses looking strategically at China will need to understand this new China and how it will impact future success.
Going forward, one of China’s main ambitions is domestic investment. As China invests in infrastructure, education, and social welfare, it will no longer be the best source of cheap labor. However, this shift might result in a heightened commitment to quality, thus providing previously unavailable opportunities
for U.S. businesses. On the other hand, China will always strive to protect its own brands, leaving no guarantee of benefit for foreign companies.
An OECD-ECLAC report predicts Latin America’s economy will grow by 4 percent in 2012. The IMF is predicting Latin American growth forecast to 4 percent in 2012.
For those companies considering investment in the region, there are solid prospects, thanks to shifting market dynamics and demographics. Throughout Latin America, two significant changes look promising and are likely to produce increasing opportunities for international business. One relates to sheer numbers. The portion of the population referred to as ‘bottom-of-the-pyramid consumers’ represents more than 400 million citizens. Increasing consumer purchasing power and infrastructure development will create investment opportunities. Secondly, technology infrastructure projects are under way. The increased collaboration in building a modern network of telecommunications, power grids and undersea fiber optic cables will set the stage for more efficient and effective communications in the large geographical area.
Growth industries in that region include health care; packaging; wireless and mobile; food and drinks (organic), and many more.
The Middle East sits strategically where Africa, Asia, and Europe meet and includes 20 distinct countries and several world-class cities. Fortunately for U.S. businesses, much of this region is highly dependent on outside expertise and foreign imports to meet the growing demand for products and services. European and Chinese companies have already forged closer ties to this region and are reaping a disproportionate share of opportunities while U.S businesses struggle to sort out political and business concerns.
The latest uprising in the region came as a total surprise to most observers, but so was the fall of the Berlin wall and the transformation from communism in Russia and Eastern Europe. Both created amazing business and other opportunities.
From the well-established, high-tech giant of Israel to the future “green cities” of Saudi Arabia, the Middle East is open for business. And success is attainable for any U.S. company with the ability to identify a well-matched opportunity, assess the risks and plan accordingly.
What’s Next? Future Prospects
Since the initial report by Goldman Sachs, the Philippines and Indonesia have performed better than most of the N-11 economies. Bangladesh, Egypt, South Korea, Turkey, Nigeria and Vietnam have performed in line with original projections. Meanwhile, Iran, Pakistan and Mexico have largely disappointed the analysts. The differing levels of performance have everything to do with country-specific factors. For example, Mexico’s struggles are indicative of their dependency on the U.S. economy which experienced decelerating growth. By contrast, Vietnam’s growth was fueled by an increase in tourism and a diverse export market.
Nevertheless, these countries face extraordinary challenges and a difficult economic environment that could prevent them from following the BRIC growth path.
To understand the challenges these countries face, it is also helpful to consult the World Bank’s “Ease of Doing Business Index.” This index provides a quantitative measure of the regulations for: starting a business; dealing with permits; employing workers; registering property; getting credit; protecting investors; paying taxes; trading across borders; enforcing contracts and closing a business. A low score, like the United States at 4, demonstrates a solid foundation for conducting business. In the N-11 community, five countries score well over 100 with the highest score of 136 (Philippines).
Global success requires today’s expansion to be based on future opportunities, not yesterday’s reality. Forward- thinking businesses will explore the Middle East for new markets and pave the way for future growth.
Although today may not be the day for all companies to begin conducting business with Nigeria, Vietnam, Bangladesh or any other N-11, today is the day to put these countries on the strategic radar screen. Investigate the strengths and weaknesses and how they might synchronize with your long-term strategic goals. Start building relationships now. Alternatively, ask how you might modify long-term goals to take advantage of these opportunities.
Mona Pearl is the founder and COO of BeyondAStrategy Inc. and is a global business expansion strategist and the author of the book Grow Globally. Learn more at www.monapearl.com.
This article includes excerpts from Grow Globally: Opportunities for Your Middle-Market Company Around the World. Copyright 2011 by Mona Pearl. Reprinted with permission of John Wiley & Sons Inc.