Private companies being lured to emerging markets for its growing consumer base: PwC report

TORONTO, June 15, 2011 /CNW/ - A PwC global report shows that private companies are less interested in making goods in emerging markets than they are in selling them there.

The report, "Building a presence in today's growth markets," says this shift in focus reflects how rising wages in emerging and fast-growing markets (EFGMs) are not only making new consumers, but also making those individuals more costly for foreign manufacturers to employ. According to the report, some top reasons for investment include:

  • 82% market growth
  • 51% economic slowdown
  • 49% increased competitive pressure
  • 45% lower cost base
  • 42% access to nearby major markets

"Another big motivator has been the introducing of policy reforms that are aimed at creating a friendlier business environment.  We have seen this, for example, in places such as Brazil and Mexico," says PwC Canada's Private Company Services leader Tahir Ayub. "As well, private companies are growing more adept at dealing with the challenges in emerging markets as their exposure to these markets increases."

Private businesses operating abroad consistently project higher revenue growth than their domestic-only peers, as well as report higher gross-margin increases. Eighty percent of respondents report average annual revenue growth of more than 5% in EFGMs in the past three years, while 40% enjoyed annual growth of more than 15%. Performance is expected to improve further over the next three years: 84% of survey-takers expect average annual revenue growth to exceed 5% in EFGMs where they have already invested; 57% expect revenues to grow more than 15% per year.

The most sought after destinations are the BRICs: Brazil, Russian, India and China.  But private companies have also begun to seek business opportunities in a second set of rapidly ascending markets in Mexico, South Korea, Turkey, Poland, Indonesia, and South America.

The report explores risk factors involved with entering fast growing emerging markets. It notes that the risk of doing business in these countries is declining—in such areas as inadequate infrastructure to legal and bureaucratic hurdles, economic and political instability.

Some of the report's suggested best practices for entry into these EFMG countries are:

  • Build strong networks. Developing networks of advisors, partners and government contacts help to ensure you go into markets well informed of operating realities as well as identifying opportunities and risks.
  • Tailor your strategy. One strategy won't work in different countries and sometimes different regions and submarkets. Customize to local customer tastes and operating conditions.
  • Cultivate local talent and partners. Local management and partners can help tailor your approach to specific to fast growing emerging markets and help navigate obstacles.
  • Build a strong due diligence process. Conduct preliminary investigations to learn how the local culture and business environment might affect operations.
  • Plan careful but be flexible. Good planning entails constantly refining strategies to meet local needs, to keep pace with competition and changing government policies.

The survey was conducted by the Economist Intelligence Unit on behalf of PwC and was designed to discover why and how non-financial private companies are investing abroad. A total of 158 corporate chiefs, directors, and senior executives of non-financial private companies from around the world participated in the survey. The report contains the survey findings as well as commentary from PwC Partners from around the globe and with a special focus on Brazil, China, India, Indonesia, and Mexico. The survey is available at www.pwc.com/ca/emergingmarkets

BACKGROUND
About Private Company Services (PCS)
More than 65% of PwC Canada's clients are private companies, ranging from high net worth individuals to owner-managed family businesses and large, professionally-managed businesses. PwC's Private Company Services (PCS) group is a dedicated team of business advisors who help private company owners resolve day-to-day business issues and achieve long-term success. PCS offers the perspective of a third party with professional industry knowledge, business consulting, tax and accounting expertise.For more information about PwC's Private Company Services, please visit www.pwc.com/ca/private

About PwC's Deal Team
PwC's Deal Team (www.pwc.com/ca/deals) helps clients to achieve deal success—from concept to close and beyond. As part of the world's largest Transaction Advisory practice, and with our global Corporate Finance group being 2010 Upper Mid Market M&A Advisor of the Year, the PwC Canada Deals Team is your gateway to an exciting new world of emerging M&A opportunities.

Follow PwC on Twitter @PwC_Canada_LLP and on Facebook at http://www.facebook.com/pwccanada.

Note to Editors: PwC has changed its name from PricewaterhouseCoopers to PwC in the fall of 2010. 'PwC' is written in text with a capital 'P' and capital 'C'. Only when you use the PwC logo is the name represented in lower case.

Firm Description
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See www.pwc.com for more information. In Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 5,700 partners and staff in offices across the country.

"PwC" is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these firms form the PwC network. Each firm in the network is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way.

__________________
"PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

SOURCE PwC

For further information:

David Rowney, PwC
Tel: 416 365 8858
email: david.rowney@ca.pwc.com
OR:
Kiran Chauhan, PwC
Tel: 416 947 8983
email: kiran.chauhan@ca.pwc.com

Profil de l'entreprise

PwC

Renseignements sur cet organisme


FORFAITS PERSONNALISÉS

Jetez un coup d’œil sur nos forfaits personnalisés ou créez le vôtre selon vos besoins de communication particuliers.

Commencez dès aujourd'hui .

ADHÉSION À CNW

Remplissez un formulaire d'adhésion à CNW ou communiquez avec nous au 1-877-269-7890.

RENSEIGNEZ-VOUS SUR LES SERVICES DE CNW

Demandez plus d'informations sur les produits et services de CNW ou communiquez avec nous au 1‑877-269-7890.