However according to Canadian CEOs, the US remains their primary focus
TORONTO, Feb. 14, 2012 /CNW/ - Globally, businesses are now looking at the 'Next 4 Billion' nations for growth, they include India, China, Indonesia and parts of Africa and Latin America, where over 4 billion of the world's 7 billion people live. Businesses in these markets have traditionally focused on the middle and upper middle income segments but according to a new report from PwC, the next big opportunity will come from the Global Emerging Middle (GEM) - just below the middle income segment.
The GEM market already accounts for 2.3 billion people globally and is growing fast as large numbers of consumers are making their way up from the bottom of the economic pyramid to form an Emerging Middle class. By 2021, this market is expected to represent annual spending power in excess of US$6 trillion.
Though they still earn modest sums - US$1.70 to $5 per capita per day in India, for example - these consumers collectively have large purchasing power. In India about 470 million people were in the Emerging Middle class in 2010. PwC estimates that this will grow to 570 million by 2021. At that time, the segment, sandwiched between the lowest-income group and the middle class, will constitute about 42% of India's total population. India's Emerging Middle spending power is expected to be over US$1 trillion by 2021 alone.
The US remains focus for Canadian business
However when it comes to international growth prospects, the US is still the primary focus for Canadian businesses. According to PwC's 15th Annual Global CEO Survey, 52% percent of Canadian CEOs said the US was one of the three most important countries to their business, while 22% said China, 8% said Brazil, and 8% said India.
Globally, China was selected by the most CEOs (30%), while 22% said the US, 15% said Brazil, 14% said India and just 3% said Canada.
"Canadian companies seeking growth can't afford to ignore the opportunity and potential benefits offered by the Emerging Middle segment," says Tracey Riley, PwC's National Consulting & Deals Leader. "Many companies will have to enter this increasingly important sector during the coming decade but will need to innovate to meet customer requirements and serve them profitably."
Riley continues, "Once a company has established itself in the Emerging Middle, customer loyalty will remain with them as the consumer continues to increase their income. Companies can use the capabilities they have built in the Emerging Middle in one country to compete in other markets with similar segments. The innovations developed in these emerging countries can also be exported to more developed economies to help spur growth."
According to the report, companies seeking to succeed in this challenging environment should consider three important factors:
|1.||Value propositions: Companies must develop a nuanced understanding of the aspirations and tradeoffs of customers in the GEM segment and develop solutions based on these needs. While low-cost is important, solutions must be positioned beyond low cost and be designed as "platform" products which can be customized to cater to the wide diversity of the GEM.|
|2.||Innovative Business models: Companies need innovative business models and processes to address this segment profitably, to overcome institutional weaknesses and gaps - from everything from credit systems to supply chains. PwC's report argues that while smart technology-based reach is essential to penetrate this market, businesses must still focus on offline interventions and achieving scale from the beginning..|
|3.||Shift in mindset: Companies need to adjust both their external approach to the market, and internally. This requires a strong leadership presence, a bold approach that embraces disruptive solutions, and a willingness to adopt new values and metrics to drive growth and measure success.|
For more information, please contact Kiran Chauhan at 416-947-8983 or [email protected]. A copy of the report is also available from the media contacts.
Notes to editor:
- For the report, 'Profitable growth strategies for the Global Emerging Middle - Learning from the 'Next 4 Billion' markets, PwC conducted in-depth interviews with a number of CEOs and leaders of major corporations, as well as grass-roots organizations and innovation experts. PwC also conducted a consumer study with individuals and families from the Emerging Middle class to develop a deep understanding of their needs and demands.
- The Next 4 Billion nations are defined as having average per capita income of between US $1,000 and US $4,000 per year and are home to 4 Billion people or more than half of the world's total population of 7 billion.
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