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
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
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
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.
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Tel: 416 365 8858
Kiran Chauhan, PwC
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