Are Traditional Multinationals Ready for Emerging Markets?
Emerging markets may be subject to political uncertainty and volatile commodity prices, but they also happen to be among the fastest-growing economies in the world. An explosion in consumer spending will soon offer massive opportunities to companies that can learn to navigate this uniquely challenging business environment.
WASHINGTON, DC – Since 2010, economic growth in low- and middle-income countries has been two to three times faster than in high-income countries. The ten economies with the highest projected growth rates for the next four years are all in Africa or Southeast Asia. In the coming years, emerging markets in Africa, Asia, and Latin America will also account for the lion’s shareof global population growth, as well as an unprecedented expansion of the middle class.
Because of their younger, increasingly prosperous populations, emerging markets will drive an explosion in consumer spending. Real (inflation-adjusted) expenditure will grow at triple the rate in developed countries, owing to the continued expansion of Internet and mobile connectivity. Companies that ignore these opportunities risk missing out on decades of future returns.
Yet emerging markets pose significant structural challenges to developed-economy multinational companies. Four issues stand out: a lack of physical infrastructure; a data deficit and reliance on interpersonal networks; policy uncertainty; and informality.