Reporte de la consultora Accenture sobre la estrategia de crecimiento a seguir en los mercados emergentes

1. Gearing up for growth
Five imperatives for success in emerging
markets
Henry Egan and Armen Ovanessoff
Accenture Institute for High Performance
March 2011

2. With a patchy recovery and new investment
landscape, companies emerging from the downturn
face the dilemma of how to prioritise their
investments as they plan for the next phase of
growth.
What’s certain is that emerging markets will need to
take on even greater prominence in the growth plans
of multinational companies. Over the next five years,
it’s expected that emerging markets will account for
62 percent of global growth. As the locus of growth
lurches East and South, tomorrow’s global industry
leaders will increasingly be determined by their
success in emerging markets, not developed ones.
Those companies that are quick to re-evaluate the
size of the opportunity in emerging markets and
organise themselves to seize it will be best placed
to compete. Here we lay out five imperatives to
help build the insights and capabilities required for
success.
2

3. Contents
The new investment landscape 4
Five imperatives for success in 10
emerging markets
1 Look beneath the headline numbers 12
2 Understand your shifting S-curve 14
3 Uncover cross-country segments 16
4 Use data as a differentiator 18
5 Compete on risk 20
“Blue City” of Jodhpur, India
3

4. The new investment landscape
Companies emerging The wariness of businesses
from the downturn face to invest is all too apparent.
a difficult dilemma: how Companies are now holding
should they prioritise their more cash than at any time
investments as they plan for in the last 40 years.1 So, the
the next phase of growth? money is there to spend,
Having retrenched over the but the patchy recovery and
past few years, business changed landscape have
leaders in many parts of the created a climate of caution
world are now looking for and indecision.
investment opportunities
to position their companies
to profit in the upturn.
However, the landscape in
which they are investing
has changed, both in terms
of where the opportunities
and risks lie, and in terms of
the competitive threat they
face.
4

5. Sugarloaf Mountain in Rio de Janeiro, Brazil
5

6. A shifting set of expansion of the global economy
than developed markets. China will
Along with a new set of opportunities,
companies making investment
opportunities and be a bigger source of growth than the
United States, and India will contribute
decisions must also factor in a
markedly different risk landscape.
risks more growth than Germany, Japan, the
United Kingdom, France or Canada.
Some countries that once appeared
a safe haven for investment now
look dicey. Whereas, others that have
What does the new landscape look Alongside this acceleration in traditionally been seen as risky, now
like? The stronger performance of emerging markets, we are also look a much safer bet. For example,
emerging markets during the seeing a broadening of the base of in terms of macroeconomic stability,
downturn – coupled with a stronger growth. Beyond the BRICs, a range Indonesia and Uruguay currently have
rebound – has widened the of indicators point to rapid and lower risk ratings than Greece or
performance gap between emerging sustained levels of growth across Ireland, a very different picture from
and developed markets. This has a range of other economies. For before the crisis (see figure 2).
served to accelerate and accentuate example, Argentina, Chile, Indonesia,
the opportunities in emerging markets. the Philippines, Qatar and Vietnam are
Between 2010 and 2015, global all expected to grow at over 5 percent
economic output is forecast to rise by in 2011.2 And Africa – often seen as
US$8.5 trillion. Emerging markets are the final frontier for companies – is
expected to account for US$5.3 trillion finally generating business interest,
of this growth, some 62 percent (see due to greater stability and faster
figure 1). This means that emerging growth. The broadening base of
markets aren’t just growing faster growth in emerging markets will create
than developed markets; it means that opportunities for business far beyond
emerging markets will contribute a the large BRIC economies that have
greater share to the absolute dominated the emerging market story
thus far.
Emerging markets are forecast to contribute 62% of global growth between 2010 and 2015
Figure 1: Breakdown of global GDP growth, 2010-2015
(US$ billions at 2005 prices and market exchange rates)
651 59,498
178 152
206 Developed markets
302 273
1,458 • Share of global
growth = 38%
• CAGR = 1.8%
1,903
203 174 Emerging markets
272 220
• Share of global
617
growth = 62%
1,906
• CAGR = 5.7%
50,983
Global China India Brazil South Russia Mexico Other US Germany Japan UK France Canada Other Global
GDP Korea emerging developed GDP
2010 2015
Share of global growth, 2010-2015
22% 7% 3% 3% 2% 2% 22% 17% 4% 3% 2% 2% 2% 8%
Source: Economist Intelligence Unit; Accenture analysis
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7. A new era of The downturn has shaken up the global risk landscape
competition Figure 2: Macroeconomic risk
(risk rating, 0 = low risk, 100 = high risk)
Together with the shifting 70 Ireland
opportunities and risks, companies 65 Greece
seeking new growth markets also
face a very different competitive 60
environment. During the downturn, as 55
growth disappeared in most developed 50
markets and sources of capital dried
up, many Western multinationals 45
retreated to focus on their home 40 Indonesia
markets. AIG put a number of its 35
Asian assets up for sale, including
AIA, its Asian life-insurance business; 30 Uruguay
General Motors sold off Saab, its 25
Swedish brand; and Royal Bank of
20
Scotland, the UK bank, divested
operations in Hong Kong, Indonesia, 0
2006 2007 2008 2009 2010
the Philippines, Singapore, Taiwan
and Vietnam. However, it wasn’t just
troubled financial services providers Source: Economist Intelligence Unit; Accenture analysis
and automotive companies that
halted their international expansion.
BHP Billiton was forced to walk away
from a multi-billion dollar deal to
buy Rio Tinto, and the downturn also
forced companies such as Carrefour
and Vodafone to re-examine their
international portfolio and divest less
attractive parts of their business to M&A originating in emerging markets overtook developed markets for the
free up capital. first time in 2009
Contrast this with many emerging- Figure 3: Value of outbound M&A deals by country of origin
market multinationals who took (US$ billions)
advantage of the downturn to 212
strengthen their position. Drawing on
the resilience of their home markets 178
170
during the downturn, the number of 167
158
companies from emerging markets in
140
the Fortune Global 500 reached 95 133
in 2010, up from 70 in 2007. These
companies aren’t just winning at 108
97
home. They are using their strong
domestic base as a springboard 80
for global expansion. The value of
52
mergers and acquisitions originating in
37
emerging markets surpassed developed
markets for the first time in 2009
(see figure 3). Recent deals include
Indian telecoms operator Bharti 2004 2005 2006 2007 2008 2009
Airtel’s US$10.7 billion purchase of
the sub-Saharan assets of Kuwait- Developed Emerging
based Zain telecom, and the US$1.5
Sources: Dealogic
billion takeover of Volvo by Geely, the
Chinese automaker.
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8. New industry Emerging markets will be the main drivers of global growth in the consumption
of TVs, PCs and mobile phones over the next five years
centres of gravity Figure 4: Source of growth of consumer electronics products, 2010-2015
(number of units, %)
Taken together, these trends are
dramatically reshaping industries at
the forefront of globalisation. Take TVs 34% 66%
electronics and high-tech (E&HT),
for example. With slower growth
and more saturated markets in many PCs 17% 83%
Western economies, consumers in
emerging markets will account for
Mobile phones 12% 88%
the lion’s share of the industry’s
expansion. For example, emerging
markets will account for 88 percent Developed economies Emerging economies
of the growth in mobile phone
sales, 83 percent of the expansion Source: Economist Intelligence Unit; Accenture analysis
in PCs purchased, and 66 percent of
additional TV sets sold over the next
five years (see figure 4).
The shifting centre of growth in the
industry is leading to the emergence
Ignore the shifts at Of course, the opportunity in
emerging markets and the competitive
of new global market leaders – witness your peril threat posed by players from these
countries won’t evolve as quickly
the increasing dominance of Samsung
and LG, or the more recent ascent of across all industries. However, even in
The E&HT industry provides important industries that are somewhat sheltered
Acer, HTC, Huawei or Lenovo. China’s lessons for other industries at earlier
Huawei, a telecoms-equipment from these trends, the relative
stages of internationalisation. attractiveness of emerging markets
manufacturer, is a perfect example The first is that tomorrow’s high-
of this new breed of competitor. By is likely to have grown. The retail
performing companies will increasingly industry is a good example. For some
serving China Mobile, China Telecom be determined by their success in
and China Unicom, Huawei has built time, retailers were considered to be
emerging markets, not developed ones. the laggards of internationalisation.
a strong domestic base in the world’s Moreover, in some industries, it will be
largest telecoms market. Huawei However, saturated markets at home
possible to become the global leader coupled with accelerating demand
has also invested heavily in research just by winning in large emerging
and development to accelerate its in emerging markets are forcing
markets. Take Alipay, the online large retailers to rapidly expand their
shift towards higher-value products payment subsidiary of Alibaba, the
and services. As its competitors footprint in the emerging world. Many
online marketplace based in China. The US giants that were once satisfied
retrenched during the downturn, company recently overtook PayPal in
Huawei expanded aggressively into with their sizeable home market are
terms of its number of registered users now looking to emerging markets
international markets, overtaking and transaction volume – this despite
Nokia Siemens and Alcatel-Lucent to for growth. Best Buy, the consumer
a limited overseas business. electronics retailer, is a good example.
become the industry’s second-largest
player, with 20 percent of the global It first entered emerging markets in
The second lesson is that even
market. We saw evidence of Huawei’s 2007 but has rapidly grown, opening
domestic players who think they’re
dramatic rise in November 2009 when stores in China, Mexico and Turkey.
insulated from what’s going on in
it won a landmark contract to build emerging markets may find their
Norway’s fourth generation (4G) For companies across industries the
position at home under threat from message is clear: the new investment
mobile network – this in the backyard these emerging global players. This
of its major competitors. landscape necessitates a rethink.
means that companies that aren’t Those companies that are quick to re-
proactive in pursuing the opportunities evaluate the opportunity in emerging
in emerging markets aren’t just passing markets and organise themselves to
up a valuable source of growth, they’re seize it will be best placed to capture
potentially jeopardising their long- new sources of growth in the upturn.
term position.
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9. Petronas Towers in Kuala Lumpur, Malaysia
9

10. Five imperatives for success
in emerging markets
How should companies and business trends under that executives should
respond to the changed our multi-polar world consider when reassessing
landscape? Executives research programme, as well the emerging-market
thinking through their as our research programmes opportunity. We believe
response to these trends and far-reaching client that these imperatives are
can be excused for feeling experience on international valid for companies across
a little lost. Much of the operating models across industries and stages of
published literature and industries and around the internationalisation:
research on emerging world.
markets is either too high 1. Look beneath the
level to be practical or too Our advice: while the headline numbers
detailed to be applicable decisions that companies 2. Understand your shifting
from one company to the make and their international S-curve
next. The imperatives in this growth journeys will vary,
the underlying questions 3. Uncover cross-country
report are designed to be segments
strategic but actionable. In that companies are trying
formulating them we have to answer – such as where, 4. Use data as a
drawn on years of extensive when, and how to compete differentiator
analysis of macroeconomic – remain the same. We’ve 5. Compete on risk
identified five imperatives
10

11. Bosphorus Bridge in Istanbul, Turkey
11

12. 1 Know where to compete
The vast potential of the emerging
markets is clear. However, knowing
Go granular
Our advice in sizing the opportunity
in emerging markets: look deeper
Look beneath the exactly where to compete and how in deciding where to compete.
to prioritise opportunities is perhaps The aggregate figures that many
headline numbers the most difficult question facing companies use to evaluate market
companies seeking growth in emerging opportunities – such as GDP or
markets. Such choices take on even GDP per capita – can be deceptive,
The indicators that greater importance in a period when concealing a wealth of important
many companies use to investment decisions around where to
allocate capital and talent continue to
detail. For example, while China is by
far the biggest emerging economy
evaluate opportunities be characterised by caution. (more than three times bigger than
second-placed India), when looking
are often aggregate
The misleading middle class at the high-income segment, the
measures, such as GDP The task of sizing the opportunity
picture looks very different. In 2010,
it’s estimated that there were 167,000
or average income in emerging markets is clouded by households in China with annual
hyperbole and misleading statistics.
levels. But these figures Take the much vaunted “emerging
incomes greater than US$75,000.3
This is less than Mexico, Hong Kong,
conceal a wealth of middle class”, for example. This South Korea, Brazil, Singapore and
segment of consumers is variously Russia (see figure 5). So if you sell
detail. Companies that estimated at anywhere between 500 luxury goods, the best opportunities
go granular in their million and 2 billion people, and some
forecasts suggest it could double
might currently exist outside China.
While it’s highly likely that China will
analysis can outperform in size over the next two decades. overtake all of these countries, this
However, “middle class” is a loosely
the competition through defined term and differs across
example highlights the dangers of
relying on headline figures in market-
a deeper understanding markets. In some cases it’s merely sizing exercises. It also helps to explain
the middle of the income distribution, why some companies that have rushed
of where the greatest while in others it refers to a level of into certain markets are surprised at
opportunities lie. income. In either case, it’s unlikely
that a middle-class household in
how long it takes to break even, or
indeed, why some markets surprise
India will be able to afford the deluxe on the upside. By digging beneath the
refrigerator, high-end TV, smart-phone headline numbers, such as examining
and sports utility vehicle of a middle- specific income bands, companies can
class family in the United States. The get a much more accurate picture of
large discrepancies in the numbers and the true size and pace of growth of
the ambiguity around the definition opportunities in emerging markets.
of “middle class” matter, especially
for companies trying to figure out
the most attractive markets for their
products and services.
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13. Think regions and cities, not Despite the overall size of China’s economy, several other emerging markets
have a greater number of high-income households
countries and continents
In assessing opportunities and Figure 5: Number of households with annual income greater than US$75,000*,
designing strategies for larger 2010
emerging markets, companies should (thousands)
think in terms of regions and cities,
not countries and continents. In China, 708
for example, there are significant 632
variations across provinces, in terms 582
of income, demographics, religion,
language and geography. There is
no such thing as a national market, x4.2
making China more like the European
Union than the United States. This 301
translates into a markedly different 272
business environment in China’s cities. 228
The market for PCs is a good example. 167
In 2009, there were 109 PCs per 100
people in Shanghai, compared with
39 in Ningxia, a northern region.4
With the market close to saturation, Mexico Hong Kong South Korea Brazil Singapore Russia China
companies targeting growth in
Shanghai are likely to face fiercer *US$ at 2005 prices and market exchange rates
competition and slimmer profit Source: Economist Intelligence Unit; Accenture analysis
margins. The tastes, preferences and
attitudes of consumers are also likely
to be very different, with Shanghai
shoppers demanding the very latest
technology and models.
By going granular in their assessment
of China and other large emerging
markets, companies can get a more
accurate picture of where the greatest
opportunities lie. And some might
be surprised about what they find.
Significant opportunities exist in cities
that many multinationals won’t have
even heard of. Take Zhengzhou, the
capital of Henan province in China, for
example. The Economist Intelligence
Unit forecasts that, by 2020, the
city will have a bigger economy that
Sweden, Hong Kong or Israel.5
13

14. 2 Know when to enter
emerging markets
Timing is critical in emerging markets.
Exploit the finite window of
opportunity
To complicate matters further,
Understand your Knowing when to enter, when to S-curves in many industries appear
industry’s shifting accelerate growth, and when to look
for the next opportunity will go a long
to be shifting. Commoditisation and
innovation continue to bring down
S-curve way to determining success. Going
in too early can prove disastrous,
the cost of products and services. The
Tata Nano is a prime example. With
and there are countless examples of a price of less than US$2,500, the
Lifecycles of products companies that have had their fingers
burnt. But, equally, there is a huge
Nano will increase the affordability
of cars, meaning that companies will
and services generally opportunity cost associated with see demand at lower levels of income,
arriving too late in emerging markets. shifting the S-curve. Expected take-
follow an S-curve from By allowing competitors a head start, off and saturation points may need to
adoption to maturity. they can amass the scale, relationships be adjusted, as automakers are likely
and brand loyalty needed to build an to find that demand takes off and
However, accelerating unassailable lead. accelerates sooner than expected (see
incomes combined So when’s the best time to enter a
figure 7).
with falling prices in particular emerging market? This With a finite and shrinking window
is a complex question with a huge of opportunity, companies who adopt
many categories mean number of country, industry and a wait-and-see approach may miss
that demand will take company-specific factors that
need to be considered. However,
out. The optimal entry point is often
just before the take-off point, which
off more quickly and understanding the maturity of demand allows companies to establish a
for your product or service is vital to foothold in the market before growth
markets may become determining the current attractiveness accelerates. However, in industries
saturated sooner. With of the market and the headroom for with a longer growth phase, attractive
growth. opportunities may still exist for
a narrower window of companies arriving late. Companies
opportunity in emerging Understand your S-curve already operating in emerging markets
must also understand the maturity
markets, companies that Demand for most categories of goods of their S-curve, to ensure that they
and services follow a similar path – are ready to jump to the next growth
employ a wait-and-see what is commonly described as an opportunity, even while reaping the
strategy may miss the S-curve. Many factors influence the
path of this curve for each category,
revenues from their mature product or
service.
boat. everything from tastes and preferences
to religion and regulation. However, As well as helping companies to
the primary determinant of demand decide when to enter emerging
is normally income, particularly markets, industry S-curves can also
in emerging markets where many inform decisions about how to enter
consumers are purchasing products emerging markets. For example, when
or services for the first time. Demand considering a product or service in
growth can be separated into three its Emerging phase, it may make
distinct phases: Emerging, Accelerating sense for multinationals to establish
and Maturing (see figure 6). partnerships with local players,
benefiting from their local knowledge
Of course, different products and and relationships to gain a foothold
services have different S-curves. For in the nascent market. In a country
example, consumption of affordable where a product or service is in the
consumer goods, such as soft-drinks, Maturing phase, companies will be
will take off at much lower levels of faced with slower growth, fiercer
income and reach maturity much competition, and better established
quicker. On the other hand, demand competitors. With less headroom
for luxury products, like designer for growth, market share becomes
handbags, doesn’t begin to accelerate more important, making market entry
until average incomes are significantly through acquisition increasingly
higher. attractive.
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15. Understanding the maturity of target markets can help companies decide when and how to enter
Figure 6: S-curve for passenger cars
550
1. Emerging 2. Accelerating 3. Maturing
500 UK
450 Spain Germany
Greece
400
Passenger cars per capita, 2010 (stock per 1,000 people)
350 South
Korea
300
Taiwan
250 Saudi
Russia Arabia
200 South Argentina
Africa
150
Mexico
100
Thailand
50 Indonesia
0
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
GDP per capita, 2010 (US$ dollars at market exchange rates)
1. Emerging 2. Accelerating 3. Maturing
Demand is still in its infancy because most At a certain threshold (around US$6,000), greater Beyond this point, increases in GDP per capita
consumers can’t afford to buy a car – e.g. Thailand affordability sees demand growth outstrip increases in don’t translate into significant demand growth –
and Indonesia. GDP per capita – e.g. Argentina and Mexico. e.g. Germany and Spain.
Source: Economist Intelligence Unit; Accenture analysis
Falling prices of products and services mean that take-off and saturation points are shifting
Figure 7: Shifting S-curves
Per capita
consumption
2. Saturation Point
...and that markets can
accelerate to maturity
more quickly
1. Take-Off Point
Falling prices mean that
take-off points for products
and services arrive at lower
levels of income...
Per capita
income
15

16. 3 Understand cross-country
consumer preferences
As a result of globalisation and the
Look for cross-country
segments
Cutting across their geographic
Uncover cross- rapid proliferation of the Internet, strategies, companies should seek
country segments goods, services, ideas and people flow
more freely than ever between the
to identify segments – groups of
consumers with similar tastes and
world’s countries and regions. These preferences – across countries.
flows lead to the spread and greater Conventional thinking on emerging
In an era of increased convergence of attitudes, tastes and markets often emphasises their
cross-border flows of preferences across borders. Today, diversity, and the need to design
high-income consumers in Mumbai individual strategies and offerings to
goods, services, ideas have more in common with affluent successfully compete in each market.
and people, there are consumers in Shanghai, Tokyo and However, while companies should
New York than with consumers in rural be careful not to underestimate the
often greater similarities India, whose needs and purchasing differences across emerging markets,
power are likely to be more akin to they equally shouldn’t overlook
among consumers across rural consumers in China or many opportunities to build greater scale
countries than within Africa countries. This creates a into their operations. Procter &
dilemma for companies who have Gamble is an example of a company
them. By focusing on traditionally designed their emerging- that looks at segments of customers
similar segments across market strategies on a country- on a global scale. For example, P&G
by-country basis. The diversity of found that taboos over feminine
different countries, larger emerging markets means that hygiene products in rural India were
successfully serving multiple consumer similar to those in parts of Africa. To
companies can share segments requires a host of different counter these issues, P&G worked
leading practices across approaches; a one-size-fits-all with schools and local communities
strategy simply won’t cut it. However, to raise awareness of the importance
borders and create the multiple strategies across many of female hygiene issues. Though a
scale needed to serve markets increase cost and complexity. continent apart, the similar attitudes
How can this dilemma be addressed? and needs of consumers in rural India
previously unprofitable meant that P&G was able to use its
experience in Africa to quickly roll out
customer segments. and scale a pilot outreach programme
in Rajasthan, India.
Similarly, Dabur, the Indian consumer
goods company, has adopted an
international expansion strategy
based on segments. Dabur found
that hair-care preferences in other
parts of South Asia and the Middle
East were similar to those in India,
and capitalised on this by launching
Dabur Amla, its hair oil, in Bangladesh,
Pakistan and the United Arab Emirates.
Given the huge Indian diaspora across
the world, the company has ambitious
plans to capitalise upon this segment
to further expand its international
footprint.
16

17. Unlock new sources of Companies need to look beyond simple demographics and consumer value when
defining customer segments
demand
Uncovering segments can also Figure 8: Multidimensional customer segmentation
help companies unlock demand in
previously unprofitable consumer
segments. Significant untapped Attitudes & Needs Behaviour
demand exists in emerging markets, • Attitudes (lifestyle, interests, risk • Usage (average time using product
particularly in remote rural areas tolerance) or service)
where margins are razor thin or in • Needs (buyer needs) • Relationship (tenure, loyalty)
small emerging markets where volumes • Perceptions (brand awareness, • Constraints (cultural, regulatory)
are insufficient to generate adequate beliefs)
returns on their own. Uncovering
segments can allow companies to Multidimensional
serve these markets profitably, by Customer
creating the combined scale needed to Segmentation
bring down operational costs, such as
production, marketing and distribution.
Re-examine your customer Value Demographics
• Revenue of customer • Gender, age
segmentation techniques • Profitability of customer • Education
• Cost to serve or acquire • Occupation
A granular approach to growth – one
• Income
that dissects the opportunities within
markets – will be needed to uncover
cross-country segments. Companies
may also need to re-examine their Source: “New Faces, Places and Spaces: Customer-centric principles for acquiring customers in today’s multi-polar
customer segmentation techniques. world”, Accenture 2009.
Many companies continue to divide
their customer base into groups based
on simple demographics, such as age
or income, or into categories based
on how profitable they are. These are
important, but to help identify similar
clusters of consumers across borders,
companies need to supplement this
data with often-neglected behavioural
and needs-based attributes, such as
time spent online or brand loyalty,
to create a truly multidimensional
customer segmentation (see figure 8).
17

18. 4 Good data; good decisions option. Instead, companies must find
innovative ways to capture data about
Good data is the key to good decisions, target customers, taking advantage of
and making good decisions is even low-cost technologies.
Use data as a more important as companies retrain
their sights on growth, particularly in Hindustan Unilever (HUL), India’s largest
differentiator a cost-conscious recovery period. In fast-moving consumer-goods company,
putting together the business case for is an example of a company that is
entering a new market, targeting a making use of mobile technologies to
Good data is the key to new customer segment, or launching a get information on demand patterns
new product or service, few executives
good decisions, but data still rely on gut instinct alone to guide
and consumer trends in remote areas.
As part of a trial, HUL is providing some
is notoriously difficult their decisions. This is particularly of its rural distributors – including
true in less familiar emerging markets. traditional mom-and-pop stores –
to get hold of and often Executive teams will scour economic, with mobile devices to capture and
unreliable in emerging financial, demographic, social and relay information about its products
risk indicators to paint a detailed – including stock levels and pricing.
markets. Companies picture of the business landscape in This creates a real-time stream of
specific countries and the tastes and
that can find ways preferences of their target customers.
information that can be used to better
predict demand and manage inventory,
to overcome this can But what happens when good data develop new products and services, and
simply doesn’t exist? You can have craft targeted marketing messages. AC
steal a march on their the most powerful and sophisticated Nielsen, a research firm, estimates that
competitors by more analytical tools available, but they’re better demand forecasting has allowed
of little use if the underlying data HUL to increase sales in rural stores by
accurately targeting being analysed is unreliable. This is around one-third.7
the challenge facing many companies
customers and better looking to build a better understanding As the HUL example shows, companies
identifying opportunities of customers in emerging markets. looking to build a better understanding
of consumers beyond the big cities
to improve efficiency. Dodgy data will increasingly turn to mobile
technologies to capture and track
Getting hold of reliable data is a data. However, some of the most
constant headache for companies innovative companies will be able
looking to enter or expand in to reach even further. For example,
emerging markets. Data might exist in Brazil, Banco Bradesco is able to
for the major urban areas in emerging access 200,000 potential customers
markets, such as Cairo, Delhi, Hanoi or via a bank branch on a boat that
Rio, but it gets a lot patchier outside travels up and down a section of the
the big cities and can be non-existent Amazon River. This allows them to
in remote, rural areas. Take the case serve customers who don’t even own
of Experian, the credit ratings agency, a mobile, and to capture valuable
that is attempting to put together information about their evolving needs
“credit CVs” for rural Indians to assess and preferences.
their credit worthiness. They are
trying to collect data on customers,
many of whom live in dwellings that
Turn data into dollars
don’t have house numbers or street Collecting proprietary data about
names.6 Consumer goods companies customers can be incredibly valuable,
face similar difficulties. Given the even providing the basis for entirely
traditional small-scale mom-and-pop new businesses. Grupo Elektra, for
retail outlets that reach beyond the example, a Mexican retailer, started
big cities, reliable information about offering credit to consumers who
the tastes, preferences and buying did not have a bank account. In the
behaviours of customers rarely exists. process, it ended up collecting a
wealth of financial information about
Use data as a differentiator its customers. To utilise this data,
it decided to move into financial
So how should companies go about services, and now has one of the
getting the data they need? Given the country’s biggest networks of bank
razor-thin margins that companies branches to complement its popular
face beyond the big cities, expansive retail chain.
market research efforts aren’t an
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19. Burj Khalifa Skyscraper in Dubai, United Arab Emirates
19

20. 5 The revival of risk
The political turmoil witnessed in parts
of North Africa and the Middle East in
Risk practices are honed for their
home markets or similar developed
countries, and the significant cost
cutting and organizational reshuffling
Compete on risk early 2011 provided a timely reminder in response to the downturn have left
that risk matters when it comes to the operations of many companies
doing business in emerging markets. vulnerable.
Expanding into emerging Take Egypt as an example. Before the
markets can be a risky dramatic events in January 2011, the
country’s strong economic growth,
The rapid internationalisation of many
companies has also left them exposed.
business, especially relatively well-educated population, In configuring their global expansion
large domestic market, and pro- plans, many companies have focused
for companies that are business reforms made it an attractive on the opportunity at the expense of
more accustomed to proposition for multinational the potential risk. For example, in an
companies. Between 2005 and 2009, effort to quickly scale their businesses
the safer surrounds of foreign direct investment into Egypt across borders, a number of companies
the United States and doubled, making it North Africa’s
most popular investment destination.
have reduced the importance of
their country managers in favour of
Western Europe. High However, the impact, speed and product-led business units that span
unpredictability of events served to geographies. As recent events have
performers are not only highlight the significant risks that shown, while the macroeconomics
better at identifying still accompany investments in many of business may be increasingly
emerging markets. borderless, politics and other
and managing risks, components of risk certainly aren’t.
they increasingly see Expect the unexpected
Compete on risk
risk as a competitive Emerging markets are, by and large,
inherently riskier than the developed Emerging markets far beyond the
differentiator. markets in which most multinational BRICs now receive greater attention
companies have traditionally operated. from all angles, whether from
The political instability that companies analysts, investors or the media. New
were faced with in North Africa is technologies and market liberalisation
just one type of risk companies have increasingly allow companies of any
to deal with. When doing business size to access opportunities in these
in emerging markets, companies are markets. You no longer need to be
also often faced with underdeveloped a Coca-Cola, Procter & Gamble or
infrastructure, weak protection General Electric to have expansive
of intellectual property rights, ambitions in the emerging world. As
unpredictable regulation, and greater the opportunities become increasingly
financial volatility, to name just a few accessible, risk can become an
of the risks (see figure 9). A number important differentiator, allowing
of companies have found themselves companies to significantly increase
faced with unexpected challenges over their degrees of freedom in emerging
recent years. High-profile examples markets.
include Vodafone’s tax dispute in
India, the breakdown of Danone’s Walmart is a company that gains
joint-venture with Chinese food and competitive advantage through its
beverage company Wahaha, or the strong risk-management capabilities.
cyber security threat that Google has The US retailer has historically gained
faced in China. market share in the wake of natural
disasters, such as hurricanes, or other
Balancing opportunity and serious events. This is the result of
Walmart’s meticulous contingency
risk planning, allowing it to recover quickly
Emerging markets are riskier, but few from temporary supply chain shocks
companies can afford to ignore the and reopen its stores rapidly, by relying
growth opportunities they present. on back-up measures such as mobile
Managing this balance is a growing electricity generators. By responding
concern in boardrooms. Most Western faster than its competitors, alongside
multinationals without a long history increased sales, Walmart generates
in the emerging world are ill-prepared significant goodwill by assisting the
to deal with the broader range and communities in which it operates at a
heightened levels of risk they face. time of significant upheaval.8
20

21. To compete on risk, companies need Emerging markets are riskier across the board
to strengthen their risk-management
capabilities. They need to build their Figure 9: Risk ratings
capacity to identify risks, assess (risk rating: 0 = low risk, 100 = high risk)
their potential impact across the
90
entire organisation, and monitor and
85
mitigate the effects (see figure 10).
80
The prioritisation of risks will differ
75
depending on a number of factors,
70
such as a company’s industry, its 65
geographic footprint and its strategic 60
priorities. Nissan, the Japanese 55
automaker, provides a useful example. 50
The company manufactures a large 45
proportion of its cars in Japan, but 40
increasingly sells them in the United 35
States and other parts of Asia. Nissan 30
identified that this mismatch between 25
supply and demand left the company 20
exposed to exchange-rate volatility. 15
To respond, Nissan plans to migrate a 10
significant portion of its operations to 5
the United States and Asian countries 0
with dollar-linked currencies.9 Security Political Legal & Financial Tax Policy Labour Infrastructure
Stability Regulatory Market
Emerging China Brazil India Russia
Developed US Japan Germany UK
Source: Economist Intelligence Unit
Companies can use a risk-response framework to identify potentially high-impact risks and develop
contingency plans to mitigate them
Figure 10: Risk-Response Framework
1. Identify 2. Assess 3. Monitor 4. Mitigate
Scan horizon to identify risks Assess each risk based on its Design risk dashboard to Develop contingency plans to
across different categories likelihood and impact monitor changing nature of mitigate high-impact risks
Map risks across risks
organisation to identify
pressure points
Risk Assessment Matrix Risk Categories Risk Exposure
High Security Business Units
1
12 7 4 Political Risk A B C D
1
8 Economic
6 4
Financial
6
Impact
2 3 Legal & Regulatory
13 14 5
Tax 7
9 11 10 8
Labour
Infrastructure 12
Low Likelihood High
21

22. The coming phase of global competition promises to
be eventful. Growth is on the minds of executives all
around the world; but with persistent uncertainties
and questions around the nature of the recovery,
companies need a clear strategy that looks beyond
the current fog and prioritises investments to
achieve sustainable, long-term growth.
Emerging markets will take on even greater
prominence in the post-recession era. For
multinationals in many industries, emerging markets
will be where the greatest opportunities lie, but also
the greatest threats. A thriving business in mature
markets will no longer be sufficient to ensure
sustained high performance. To be tomorrow’s
global industry leaders, companies will need to build
successful businesses in emerging markets.
Getting beneath the headline figures, understanding
your shifting S-curve, uncovering cross-country
segments, using data as a differentiator, and
competing on risk will help companies develop
the insights and capabilities that are essential to
success. It’s time to prepare.
22

23. References
1 Accenture Outlook, “It’s all about
balance”, June 2010
2 Economist Intelligence Unit
3 US$ at 2005 prices and market
exchange rates
4 National Bureau of Statistics of
China, “China Statistical Yearbook
2009”
5 Economist Intelligence Unit,
“CHAMPS: China’s fastest-growing
cities”, 2010
6 FinancialTimes, “Experian: creating
credit CVs for India”, December 13,
2010
7 ForbesIndia, “Hindustan Unilever’s
Bharat Darshan”, 22 September 2010
8 Accenture Outlook, “It’s all about
balance”, 2010
9 Financial Times, “Nissan to shift
output to dollar economies”,
November 21, 2010
Puerto Madero Bridge in Buenos Aires, Argentina
23

24. About the authors About the Accenture About Accenture
Henry Egan (henry.egan@accenture. Institute for High Accenture is a global management
com) is a manager in the Geographic Performance consulting, technology services
Strategy team within Accenture’s and outsourcing company, with
Growth & Strategy function. The team The Accenture Institute for High approximately 211,000 people serving
advises Accenture’s leadership on Performance creates strategic clients in more than 120 countries.
the company’s geographic footprint, insights into key management issues Combining unparalleled experience,
with a focus on emerging markets. He and macroeconomic and political comprehensive capabilities across all
previously worked for the Accenture trends through original research and industries and business functions,
Institute for High Performance. analysis. Its management researchers and extensive research on the world’s
combine world-class reputations with most successful companies, Accenture
Armen Ovanessoff (armen.ovanessoff@ Accenture’s extensive consulting, collaborates with clients to help them
accenture.com) leads the Emerging technology and outsourcing experience become high-performance businesses
Markets programme at the Accenture to conduct innovative research and and governments. The company
Institute for High Performance. His analysis into how organizations generated net revenues of US$21.6
focus is on macroeconomic, geopolitical become and remain high-performance billion for the fiscal year ended
and business trends that affect businesses. Aug. 31, 2010. Its home page is
multinationals active in emerging www.accenture.com.
economies; publishing and speaking on
the business realities of globalisation.
He also manages Accenture’s strategic
partnership with the World Economic
Forum.
We would like to thank Paul Nunes
and Ivy Lee for their insights and
contributions to this report.
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