Fast Forward To Growth

Fast Forward to Growth
Seizing opportunities in high-growth markets

Contents
Foreword 3
Executive summary 5
A wake-up call 9
Locating demand: The search for growth 13
New players, new rules: 26
The new shape of competition
Rethinking capabilities: The roadmap to success 33
Sizing the future: Assessing where and when to act 35
Shaping the future: Seeding tomorrow’s growth 43
Seizing the future: Operating at speed and scale 54

Conclusion: Windows to the future 65
Methodology: Income and consumption forecasting 67
References 69

1

Foreword
The search for growth opportunities in previous decades. Fundamental shifts in
emerging economies is no longer a matter income and demography are reshaping
of choice; it has become a necessity. the landscape of global consumption.
With short-term growth difficult to find Predicting where and when the
in developed markets, emerging markets related market opportunities will arise
must be considered as more than an is difficult enough; understanding
optional, longer-term bet. how to grasp them is even harder.

But making bets on the future, Second, I see a new constellation of
whether short-term or long-term, is an competition being formed out of the
especially difficult challenge amid the market turbulence of recent years. This
persistent uncertainty, complexity and is due partly to the new economic and
volatility in the global marketplace. In political relationships that are being
Mark Spelman my conversations with clients around forged, particularly between emerging
the world, I am struck by how today’s economies. But I also see transformation
Global Head of Strategy
business executives often find themselves in how businesses operate. The downturn
Accenture struggling to prioritize their investments has spurred improvements in the
across the diverse set of growth markets efficiency of global operations. New
in emerging economies. The questions technologies and reconfigured operating
I hear in boardrooms vary widely: Why models are allowing companies to create
aren’t we making profits in China yet? value more effectively and to build more
Is it too late to enter Brazil? How can direct and intimate connections with
we move faster to establish a foothold their customers. And these new business
in Africa? The questions highlight a key models, practices and capabilities draw
factor in strategic growth planning: the from a more diverse pool of global
importance of getting your timing right. players, characterized by important
differences in strategic priorities,
Planning an effective global growth governance and culture.
strategy across time horizons demands
significant investments of time, It is in the context of this dramatically
effort and resources to assess market altered landscape of opportunity
potential accurately and to build the and competition that this report, the
requisite capabilities for success. work of the Accenture Institute for
Putting off such investments, waiting High Performance, calls for an urgent
to see how markets evolve, is tempting reassessment of the strategies and
in today’s economic environment, capabilities that will be central to
and it may be the right decision. achieving high performance in tomorrow’s
global marketplace. Business leaders
But this presents executives with cannot allow change and uncertainty
a critical paradox: ongoing global to paralyze their decision making. We
economic change may lead businesses hope you find the report insightful and
to shy away from action in the very stimulating and its recommendations
markets that hold the key to faster both useful and actionable.
growth. The longer firms hesitate,
the greater the risk of missing out on
opportunities, and the more challenging
the competitive environment they will
face when they eventually take action.

I see two underlying factors at play. Mark Spelman
First, regardless of when and how
growth returns to developed markets,
the future map of global demand
will look very different from that of

3

Executive summary

In the current global economic is yet to come. For example, many low-cost capabilities and deep local
environment, executives fear that companies are pinning their hopes on knowledge, as well as an increased
prospects for growth in many markets China, the world’s most populous nation role of relationships and government
are patchy and vulnerable. With this fear and one of its largest and fastest- support. In this environment, with its
comes a renewed search for pockets growing economies. Currently, 27 other wide range of players and broad variety
of growth in the global economy. We economies—including Poland, Colombia of capabilities, many companies will
surveyed nearly 600 business leaders and Turkey—have a greater number face a challenge in pressing home
worldwide and found that 80 percent of households with an annual income their own competitive advantage.
are focused primarily on high-growth above US$30,000. But over the next
markets in emerging economies to chart decade, China will rapidly accelerate up
a more compelling path for the future. the ranks, leaving only three economies The opportunity paradox
And with good reason. Household with a greater number of households Our research uncovers a paradox: on
incomes in emerging economies will earning US$30,000 and above: the one hand, there is strong affirmation
jump by more than US$8.5 trillion United States, Japan and Germany. that firms see continued growth coming
between 2010 and 2020—nearly 60 This pace of change is not restricted from emerging economies. On the other
percent of the global increase over this to China: Mexican households in this hand, they feel that the windows of
period, in real terms.1 As these incomes income band are expected to boost opportunity to secure their company’s
grow, so will consumption and demand. their income by an additional US$340 share of these markets may be shrinking.
billion by 2020, an increase higher The point is underlined by our survey
But many executives are not confident than that expected in Germany. And in finding that 73 percent of respondents
that their organizations are up to the a richer income segment, households believe they need to accelerate their
task. Forty percent do not believe that with an annual income of more than efforts, or may already be too late,
their companies possess the strategic US$50,000, Turkey will see a total to build satisfactory market share
and operational capabilities to fully increase of US$380 billion, the highest in these high-growth markets.
grasp the opportunities in emerging of any emerging economy. As these
economies. The same proportion worry examples demonstrate, the varying Our research supports this imperative
that they do not fully understand the degree and speed of change across to accelerate action in seeking
competitive dynamics they will face. these markets make the size and timing opportunities in high-growth markets.
These doubts are not misplaced— of opportunities difficult to grasp. In an uncertain economic environment,
and may be exacerbated by the there is a strong temptation for
emergence of a rapidly intensifying companies to watch and wait, or even
competitive landscape, populated by Mapping the to retrench or withdraw from some
new players with new capabilities.
High-growth emerging markets are competitive terrain markets until the global economic
environment becomes clearer. In fact,
a fast-moving target. Companies Companies seeking their fortunes many organizations have significant
must build powerful new capabilities in high-growth markets face a reserves of cash that could be used
to address this new reality. challenging competitive landscape. As for expansion. But they continue
competitors jostle for position, firms to hesitate. A strategy of “wait and
Tracking the targeting these markets will confront
domestic players with strong local
see” may be effective, as long as it
is based on a realistic assessment
income surge knowledge and intimate customer
relationships; established multinationals
of the options, opportunities and
risks involved. More likely, however,
The pace of income growth in emerging with global scale that have improved hesitation in today’s global competitive
economies can be bewildering. Many their efficiency in response to the environment may be the most
companies have been impatiently downturn; and a further potent breed, dangerous choice of all. High-growth
awaiting the promise of profitability growing multinationals from emerging markets offer many opportunities, but
in emerging economies. But as our economies. The competitive landscape the explosion in demand is matched
detailed analysis of household incomes is characterized by a combination by ever-intensifying competition.
shows, the real growth in consumption of scale advantages, strong brands,

1 We analyzed household income data across 64 countries (see Methodology on page 67 for details) which together accounted for more than 90 percent
of global GDP in 2010. The income of the emerging-market households in our analysis will jump by more than US$8.5 trillion between 2010 and 2020.

5

Faced with the risk of squandering these newly-empowered female populations. • Use information and communications
opportunities, what can companies In this way, successful globalizers technology (ICT) such as mobile
do to accelerate their efforts and develop a more complete and realistic phones and social media to collect
avoid missing the boat? What are the understanding of the markets in which reliable and relevant data, improve
specific capabilities they need to build they intend to operate. demand forecasting, and overcome
in order to compete effectively and data scarcity. Coca-Cola has 22 million
claim their share of future growth? Second, in a rapidly-changing consumers following it through social
environment, these companies media, and the ensuing dialogue has
understand better than their competitors given Coca-Cola valuable ideas for
Opening windows the importance of planning over time new beverages and other products.
of opportunity horizons, allowing them to sequence and
prioritize their investments. Our research, • Leverage existing proprietary data
conducted in partnership with Oxford for further growth opportunities:
In our research we found that
Economics, illustrates the importance the Mexican retailer Grupo Elektra
successful companies in high-growth
of identifying where different markets built one of the country’s largest
markets think differently about the
will sit in terms of their consumption networks of banking branches based
capabilities critical for growth and
of specific products and services. How on data from a credit service it
prioritize their investments in different
close are they to reaching a point where launched for retail customers.
ways. Specifically, these “successful
globalizers”—companies with a track demand rapidly takes off? How close are • Choose local partners—whether
record of successful performance in they to market maturity? What are the through joint ventures, alliances or
emerging economies, that are confident opportunities of different markets over other arrangements—to gain a deep
and committed about their future different time horizons? understanding of local market dynamics,
prospects in these markets—excel in needs and preferences.
three areas. They are better able to size This deep understanding of their target
markets allows successful globalizers • Enhance competitor analysis
the future—they possess the ability
to become masters of strategic techniques to anticipate emerging
to accurately size, time and prioritize
positioning: to be not only where competitors across multiple time
demand opportunities around the
opportunities are today, but where horizons, from different geographies
world. They are better able to shape
they will be tomorrow. Through their and adjacent industries.
the future—they possess the insights
and capabilities to cultivate and protect superior ability to discern the size,
future demand opportunities around location and timing of opportunities, 2. Shaping the future:
these companies make more informed
the world. And they are better able
decisions and trade-offs around where Cultivating new markets
to seize the future—they display the
operational agility and flexibility to and when to invest, and remain several While some companies may feel they
adapt and reorient the company to moves ahead of the competition. are too late to secure their position
grasp opportunities across growth in high-growth markets, our research
To become masters of strategic shows that successful globalizers do
markets. Companies can take specific
positioning, companies can: not simply accept that windows of
actions today to improve their
capabilities in each of these areas: • Conduct cross-country forecasts opportunity are shrinking. Instead, they
of product and service consumption open new windows of opportunity by
discovering new demand and seeding
1. Sizing the future: Where across time horizons, beyond national
future opportunities.
and regional borders, and use these to
and when to invest evaluate trade-offs and guide decisions
about when, where and how to enter In an environment where attaining
Our research suggests that successful market share is challenging, successful
companies in high-growth markets adopt high-growth markets. Some markets
may offer immediate opportunities, companies have identified the
new approaches to assessing potential opportunity to grow the size of the
market opportunity. They take a more while others may be poised for more
significant growth in the longer term. overall opportunity, not just their share.
dynamic view that incorporates foresight They understand how to extend the
and flexibility into strategic planning. • Experiment with different customer frontiers of opportunity, often through
segmentation variables to uncover targeted partnerships and collaboration
They are more adept at examining global new geographic and demographic with local stakeholders.
opportunities through multiple lenses. groups. Discovering segments that cut
This allows them to aggregate seemingly across country borders may unearth Our research demonstrates the impact,
disparate markets and uncover business business cases beyond those that in real consumption opportunities,
cases that would otherwise have focus exclusively on country-level that can be achieved when businesses
remained untapped. Witness companies segmentation. Procter & Gamble invest in generating future demand. For
that have successfully targeted diaspora has designed razors, shampoos and example, our analysis examines how
communities scattered across the world, cleansing products specifically designed demand can be measurably increased
or specific high-potential customer for consumers in water-scarce areas. through improvements in infrastructure,
segments, such as those in water- education and health care.
scarce areas, rural communities or

6

To achieve a better understanding of companies to grasp the opportunities of International Development Program,
how they can push open new windows today, but will play a fundamental role giving future leaders experience in
of opportunity, companies can: in shaping the markets of tomorrow. foreign markets within the company’s
business units across the globe.
• Identify and map key stakeholders, For example, our analysis shows how
local and global, and build trusted the power of disruptive innovation No business decisions are simple in
relationships. can transform industry dynamics, today’s environment of prolonged global
improving the accessibility of consumer economic uncertainty. But a game of
• Assess the strength of relationships
products and creating markets. In the “wait and see” purely due to a lack of
with government agencies, industry
automotive sector, for example, process understanding or preparedness poses
regulators and local communities. These
redesign and low-cost materials have the risk of missing the boat. This report
relationships can help obtain a license
dramatically broadened the accessibility uncovers the key dynamics at play and
to operate, ease the policy environment,
of passenger cars to new customers. details specific actions that companies
and improve access to scarce resources.
New pockets of demand have opened can take to build the capabilities for
Executives may be surprised at the
up for those companies with the agility success in the high-growth markets of
extent of common interests held by
and efficiency to design low-price the future.
these stakeholders.
business models. Successful globalizers
• Innovate to fulfill unmet needs,
and involve local consumers in
are pushing the boundaries of what
is possible: they understand that
The research
innovation and design. Vodafone and business performance and the bottom Accenture’s Institute for High
Safaricom’s M-PESA money transfer line will only become more important Performance has conducted thorough
platform was designed to address a in geographic growth plans. They research to investigate the keys for
particular need in Kenyan society, to understand that operating at speed and success in today’s competitive high-
send money to family at home. The scale will play an ever greater role in growth markets. The main elements
service has grown quickly, achieving determining the winners and losers of of research include:
14 million registered users within the next phase of global competition.
four years, and has simultaneously • Household income analysis, in
brought an entirely new business collaboration with Oxford Economics.
To achieve operational agility and seize We created five standard bands of
model to markets across the world. new opportunities, companies can: annual household income and, for
• Evaluate local and global leadership’s each of 64 countries, estimated the
understanding of social and economic • Explore partnership and acquisition
number of households falling into each
factors that influence demand, and options to boost reach, capability and
band in 2010, 2015 and in 2020. All
promote the social and economic speed; and continually reassess and
forecasts are measured in real terms,
development of local communities. evolve ownership and governance
and at market exchange rates.
Companies successful in emerging structures as circumstances change.
markets engage national and local The flexibility of Starbucks in managing • Industry consumption curves, in
governments to help create the a range of business models and collaboration with Oxford Economics.
conditions needed for their businesses to partnerships has been instrumental to This research forecasts the evolution
prosper. GSK, a leading pharmaceutical its success in China, which the company of consumption for a select group of
and healthcare products company, now regards as its “second home industries across the world. It also
reduced the price of its patented market.” includes scenario-based sensitivity
medicines in the world’s poorest analysis to assess the impact of changes
• Develop systems to rapidly
countries, providing social benefits in the business and policy environment.
redeploy people, capital and ideas
and opening up new markets. around the global organization. In • A survey of 588 business leaders,
expanding its global footprint, Tata across 85 countries and 22 industries,
3. Seizing the future: The Communications designed a wholly conducted by the Economist Intelligence
operational agility to grasp new international operating model Unit. Business leaders were asked about
to incorporate local leadership their perceptions of the competitive
new opportunities expertise into its global operations. landscape, their company’s plans for
Successful companies infuse their growth and the capabilities important
• Encourage experimentation—
organizations with the strategic, for success in these markets.
incubate, fund and protect new ideas.
operational and cultural agility to The success of Indian pharmaceutical • Conversations with clients and
grasp new opportunities. Identifying companies demonstrates the importance experts across industries and extensive
opportunities is one thing, but rapidly of innovation, and the benefits of secondary research, including
mobilizing the organization to attain scaling new ideas across the global company case studies and analysis of
them is another. In order to achieve this, organization. greenfield and M&A investment data.
they prioritize and invest in distinctive
• Assess the leadership team and how
capabilities that boost operational
its skills and experience align with
agility and flexibility. These capabilities
growth plans. Nestlé is relaunching its
are not just instrumental in helping

7

A wake-up call

We analyzed household income data As emerging-market households spend
A world of opportunity across 64 countries that together this newfound income, fresh pockets
Faced with protracted economic accounted for more than 90 percent of demand will emerge. Our research
uncertainty, many companies are of global GDP in 2010. The income of examined the evolution of income
renewing their interest in emerging the emerging-market households in patterns globally, and how rising
economies as a springboard for their our analysis will jump by more than household incomes might influence
next phase of growth. Our survey US$8.5 trillion between 2010 and 2020. consumption. For example, a combination
of 588 business leaders reveals that That represents nearly 60 percent of of rising household income and a large
80 percent are looking primarily at the total global increase in household population will propel China to be one of
emerging economies for their next stage incomes over this period (see Figure the world’s most significant passenger
of growth. And they acknowledge that 1). In particular, China and India are car markets: our estimates show that
this is where future opportunities lie, projected to experience significant average annual car sales in China are
with 81 percent planning to increase increases in total household income, expected to exceed 15 million by 2020,
their investment in emerging economies with additional income of US$3.2 ahead of the United States. Already, in
over the coming three years. trillion and US$1.4 trillion, respectively. 2011, China has overtaken the US to
become Roll-Royce’s largest market.2

Figure 1: Household income growth 2010-2020 (US$ billion, 2010 constant prices)

60,000
Developed markets
• Share of global growth = 43%
• Compound annual growth rate 56,700
(CAGR) = 2.0%
55,000 Emerging markets
• Share of global growth = 57%
• CAGR = 5.4%

50,000

45,000

41,600

40,000

35,000

Global China India Russia Brazil Turkey Mexico Indonesia Other US Japan UK Germany Other Global
income emerging developed income
2010 2020

Emerging markets Developed markets

Source: Accenture, Oxford Economics
Note: The analysis covers 64 countries, which accounted for more than 90 percent of global GDP in 2010.

9

“Emerging markets,” however, is a may be the most dangerous choice The growth prospects are clear. But
nebulous term that obscures the of all. The economic downturn has it is also clear that many companies
diversity and complexity across had a profound impact, dramatically will feel locked out of the opportunity
those markets. South Korea, India reshaping the global competitive to become serious players in the
and Vietnam are often cited as landscape. High-growth markets market, even before it has taken off.
high-potential “emerging markets” present many opportunities, but
to watch. Yet average household these opportunities are being rapidly This pattern is repeating itself in
income in these markets diverges snapped up by a new breed of players different industries and locations around
significantly; approximately US$35,400, from emerging economies, as well as the world. In some cases, the risk of
US$5,800 and US$3,300, respectively, multinationals that have entrenched being locked out of markets threatens
in 2010. The value of comparing themselves in these markets during deep and long-term consequences.
a “typical” consumer across these previous phases of globalization. The The CEO of a large Chinese railway
countries is questionable, even when longer they wait, the more challenging equipment manufacturer explained
factoring in cultural differences. competitive environment they will that the financial crisis weakened
face when eventually taking action. the ability of European and North
Headline numbers can also mislead. American banks to finance large railway
China, for example, is the world’s most contracts demanded in Asia’s emerging
populous country and home to one of The risk of missing economies. Chinese enterprises and
the world’s largest and fastest-growing
economies. Yet in 2010 it had fewer the boat banks partnered to fill the void. The CEO
is confident that his company’s products
households with annual incomes above Companies turning their attention to rival the quality of multinational
US$30,000 than many other smaller high-growth markets must act quickly competitors and will anchor rapid
“emerging” economies, including and definitively to carve out their sales expansion in Asia: exports for
Colombia, South Africa and Argentina. position. Firms entering and expanding the first half of 2009 increased by
While attention is focused on the BRIC in high-growth markets can expect 60 percent over the same period in
economies, we project that by 2020 to face a range of competitors with the previous year.3 The prospect of
Turkey will be home to an additional powerful strengths: from low-cost being locked out of such long-term
4.7 million households in this income players to global giants, from locally contracts around the world should be a
bracket, on a par with expected growth networked incumbents to masters sobering thought for many companies.
levels in Brazil. Mexico will also undergo of global scale and efficiency. In
rapid growth in its consumer-market this environment, hesitation risks The intensity of competition is not
potential: there will be an additional squandering opportunities. The longer all that has changed. The diversity of
3.3 million households in this segment the hesitation, the greater the odds competitors, and of their competitive
over the decade to 2020. With so that more nimble and prepared players advantages, brings new challenges.
much variation and rapid change, will position themselves for these In this report, we bring to light the
the size and timing of opportunities lucrative growth opportunities. fundamental shifts in the global
can be challenging to grasp. business landscape that the downturn
The mobile telecoms market in Latin has wrought. We make clear the
America, for example, is often predicted new challenges companies face in
The temptation to to be one of the world’s fastest-growing determining the optimal location
hesitate telecoms markets over the next five
years (See “América Móvil and Telefónica:
and timing of opportunities, and
the risk of delaying action in the
Businesses are understandably hesitant Seizing opportunities ahead of the pack,” face of aggressive competition.
to prioritize their investments in these page 12). The market for value-added
diverse, unfamiliar, but potentially
lucrative markets. Each brings unique
services such as mobile data is not yet
established in much of Latin America.
The opportunity
opportunities, challenges and operating
environments. The temptation to
Penetration rates remain very low in
many countries, and rapid increases in
paradox
hesitate is aggravated by continued demand may be far off. These facts have Our global business survey uncovered
global economic uncertainty, not stopped Mexico’s América Móvil and a paradox: on one hand, companies
sluggishness in developed markets Spain’s Telefónica from expanding rapidly see continued growth coming from
and increasingly tempered near-term across these smaller markets, acquiring emerging economies. On the other,
growth prospects in emerging markets. local providers and gaining access to they feel that their windows of
the infrastructure essential for growth opportunity may be shrinking. Our
The instinctive response of many when demand does take off. Companies survey findings underscored the point:
companies will be to watch and wait, or looking to enter these nascent markets 73 percent of respondents believe
even to retrench or withdraw from some will face not only domestic players, they need to accelerate their efforts
geographic locations. Yet our research but also two Fortune Global 500 to build satisfactory market share
demonstrates that in today’s global multinationals with established products, in these high-growth markets—or
competitive environment, hesitation infrastructure, relationships and brands. that it may already be too late.

10

With almost three-quarters of business
Wanted: Action and leaders believing that they need to
confidence accelerate their efforts in high-growth
markets, it is critical to understand the
Even while companies feel they dynamics that constrain their progress.
are missing out on opportunities,
uncertainty may lead them to hesitate Many companies may not appreciate
about investing in high-growth the degree of change in the business
markets. In fact, many companies have landscape since the downturn.
healthy cash reserves that could be
used for expansion. Cash holdings for On the demand side, companies
American nonfinancial companies in have not adjusted their methods to
June 2011 exceeded US$1.9 trillion, locate and measure demand and fully
the highest in half a century.4 evaluate potential opportunities:
their tools are often inappropriate,
The volatile economic environment or even outdated and irrelevant.
drives uncertainty and hesitation,
but our research uncovers deeper On the supply side, companies
concerns. We found that many underestimate the diversity of
business leaders are not confident players and capabilities they will
about their own company’s ability encounter in the competitive
to succeed in high-growth markets. landscape. Next, we explore these
demand and supply dynamics.
• 40 percent do not believe that
their company possesses the
strategic and operational capabilities 73% of companies feel
to fully grasp the opportunities
in emerging economies. they need to accelerate
• The same proportion acknowledge
that they do not fully understand the
efforts or may already
competitive dynamics they will face. be too late to build
• Nearly one-third do not even believe
that their company has a clear strategy
satisfactory market
for high-growth markets. share in high-growth
markets.

11

América Móvil and Telefónica:
Seizing opportunities ahead
of the pack

Latin America is projected to be the increasing its customer base. In recent
fastest-growing telecoms market over years, Telefónica has built on long-
the next five years. Demand is growing standing relationships in the region,
at unprecedented rates: penetration strengthening its presence through
reached a high of 89 percent this sizable acquisitions of established
year.5 As penetration rates rise, so do players such as Vivo.
opportunities for lucrative “value-
added” services. Almost one-third of all As other telecoms players look to
new phones in Latin America by 2014 high-growth markets in Latin America,
are expected to be smartphones. The they are faced not only with smaller
number of mobile data plan subscribers domestic incumbents but also with
is expected to more than double this two Fortune Global 500 multinationals
year, a sizable opportunity in a continent with global reach and scale, combined
of nearly 600 million people.6 with local presence and understanding
across the region. Breaking through this
The market is dominated by two global incumbency poses new and challenging
telecoms giants, each looking for growth questions to potential entrants.
to offset a decline in its traditional
revenue base: América Móvil, which is América Móvil and Telefónica are
looking for growth in mobile, broadband already jostling for position in new
and pay TV to offset declining revenue services, including mobile data,
in fixed-line services since the market broadband and pay TV. Telefónica
was liberalized and opened up to recently rebranded its operations across
competition, and Telefónica, which is Latin America, bringing together fixed
looking to broaden its footprint beyond line, mobile, broadband and TV under
Europe, an intensely saturated and the Movistar brand.
competitive market.7
When Latin America’s markets
These two companies are the dominant begin their inevitable acceleration—
players in most key Latin American broadband penetration rates are
markets. In Mexico, Telcel—América still hovering at around 15 percent
Móvil’s mobile arm—holds 72 percent in most of these countries—América
of the market, but Telefónica is closing Móvil and Telefónica will be at the
fast. In the last quarter of 2010, forefront of new opportunities.9
the two companies accounted for They are identifying and snapping up
90 percent of the one million new opportunities almost before they appear.
connections: Telcel took 30 percent,
but Telefónica took 61 percent. And in
Brazil, América Móvil’s Claro brand is
a key player in the market, along with
Vivo, acquired by Telefónica in 2007.8

The strategies América Móvil and
Telefónica use to build their presence
are revealing. América Móvil has for
many years been buying up smaller
operators around Latin America, taking
control of fixed-line infrastructure and

12

Locating demand: The
search for growth
Between 2011 and 2016, approximately profitability in China. But over the next for 56 percent of India’s economy,
60 percent of global economic growth decade, China will rapidly move up the compared with 34 percent in China),11
is forecast to come from emerging ranks, leaving only three economies China’s economy is largely built on
economies,10 despite an expected with a greater number of households investment and export growth, and
near-term slowdown in key high- earning US$30,000 and above: the Russia is heavily dependent on its
growth markets such as China and United States, Japan and Germany. In natural resources: oil, fuel and gas
India. The triad economies of the 2010, the number of Chinese households accounted for 69 percent of exports in
United States, Europe and Japan in this income bracket was almost 2010.12 These fundamental differences
continue to experience persistently twice that in Thailand—but by 2020, illustrate the dangers of relying upon
high unemployment and public debt there will be more than thirteen times such country groupings for detailed
levels. Many developed economies as many. Our analysis highlights the analysis and comparisons. Looking
have seen their economic growth dynamics shaping global demand outside the BRICs, Vietnam, Peru
forecasts downgraded in recent opportunities through 2020 (see “In and Angola are all forecast to grow
months and companies struggle to focus: Household buying power,” page more quickly than Russia. It becomes
locate the next sources of growth 18). Specifically, we illustrate how clear that even the accuracy of the
in these markets. In many emerging US$15 trillion of additional household terms “emerging markets” and “high-
economies, in contrast, unemployment income will be dispersed around the growth markets” is debatable.
is falling and governments hold world across distinct income segments.
significant reserves. Many companies The stories that emerge reveal where Economic groupings and macroeconomic
in these markets may not even have “high growth” may be found. terminology help describe important
felt the impact of the downturn. global trends. But when a company
plans its own global strategy, it needs
Levels of consumption and demand Attachment to a far more granular analysis—one
for goods and services in emerging
economies will increase as incomes outdated labels that looks beneath headline figures
and provides a more accurate picture
grow. But with enormous differences Income levels and the speed of change of the true size and pace of growth
in the size and growth rates of are difficult to keep up with and in demand around the world.
demand, along with a variety translate into investment decisions.
of customer preferences, it is
difficult to accurately assess and
Commentators are quick to embrace
labels such as BRIC (Brazil, Russia,
The dangers of
forecast growth opportunities. India and China), MINT (Mexico,
Indonesia, Nigeria and Turkey) and
generalization
Labeling groups of countries can also
A fast-moving target CIVETS (Colombia, Indonesia, Vietnam,
Egypt, Turkey and South Africa). But lead companies to overlook important
We have conducted an extensive the dramatic speed at which the differences among unfamiliar markets.
analysis, in collaboration with Oxford demand landscape is changing brings For decades, the African continent has
Economics, of household incomes and into question the value of these terms. borne the brunt of such generalizations.
their evolution over the coming decade. Over the next three years, in real In 2010, Nigeria had a per capita GDP
According to our analysis, China lags terms, India’s economy will grow at of US$1,300, lower than the sub-
behind 27 other economies, including a rate twice as fast as that of Russia. Saharan Africa average (see Figure
Poland, Turkey and Colombia, in the China will grow twice as fast as Brazil. 2).13 Nigeria’s total household income
number of households with an annual And there are significant structural was approximately US$200 billion—
income greater than US$30,000. This differences: while India’s growth has lower than South Africa’s, despite a
comes as no surprise to companies been fueled primarily by domestic population three times as large.14
eagerly and impatiently awaiting demand (private consumption accounts

13

Figure 2: GDP per capita, 2010 (US$ at 2010 prices and Figure 3: Change in total income for households with
market exchange rates) annual income of US$5,000 and above, 2010-2020
(US$ billion, constant 2010 prices)

8,000 140

7,000 120

6,000
100
5,000
80
4,000
60
3,000
Sub-Saharan 40
2,000 Africa average
20
1,000

0 0
South Egypt Ghana Nigeria Kenya Nigeria Thailand South Malaysia Egypt Ghana Kenya
Africa Africa

Source: Oxford Economics Source: Oxford Economics

However, Nigeria’s consumer-market “middle class” is a loosely defined the greatest opportunities lie. Some
potential will soon outstrip that of term and differs across markets. In might be surprised at what they find.
other African economies it lags behind some cases it is merely the middle of Significant opportunities exist in cities
today. By 2020, 7.8 million additional the income distribution. In others, it that many multinationals haven’t even
households are expected to have an refers to a specific level of income. heard of. Zhengzhou is a prime example.
income level of US$5,000 and above, Either way, a middle-class household The capital of Henan province in China,
with 12 percent of these earning more in India is unlikely to afford the deluxe Zhengzhou by 2020 will have a bigger
than US$30,000. This translates into refrigerator, high-end TV, smartphone economy than Sweden, Hong Kong or
US$130 billion of additional household and sport utility vehicle of a middle- Israel.16 And Surat, in the Indian state of
income and an increase far greater than class American family. These large Gujarat, is forecast to be home to nearly
other African economies (see Figure 3). discrepancies and ambiguities in the 8 million people by 2020, more than the
The income growth is also greater than definition of “middle class” matter whole of Paraguay or Norway.17
that in burgeoning Asian economies, for companies trying to find the most
such as Malaysia and Thailand. The attractive markets for their products One example of a company that has
key driver of Nigeria’s rapid economic and services. followed a city expansion approach
growth, and incomes, is the country’s is Xiang Piaopiao Food (XPP), which
expected fast population growth. entered the Chinese beverage market
Redrawing borders in 2005 with a milk tea product. The
market at the time was concentrated
The misleading Companies must take into account
the most appropriate geographic units in Tier 1 and Tier 2 cities, but XPP
“middle class” in strategic planning. For example, it
may make sense to plan in terms of
avoided the high entry costs associated
with these markets by focusing on 600
Hyperbole and imprecise terminology regions and cities rather than countries smaller cities, using traditional channels
hamper the sizing of high-growth and continents. In China, for example, of local distributors. The company has
market opportunities. Take the much there are significant variations across achieved compound annual growth of
vaunted “emerging middle class.” provinces in income, demographics, more than 100 percent, with total sales
This consumer segment is variously religion, language and geography. from smaller cities and towns typically
estimated to include anywhere between By delving more deeply into their accounting for 75 to 80 percent of total
500 million and 2 billion people. Some assessment of China and other large sales in each province.18
forecasts claim that it could double emerging markets, companies can
over the next two decades.15 However, create a more accurate picture of where

14

Figure 4. South Africa income inequality scenarios: Number of households, 2020 (million)

7

6

5

4

3

2

1

0
US$0-US$5,000 US$5,000-US$15,000 US$15,000-US$30,000 US$30,000-US$50,000 US$50,000+

Baseline income inequality Reduced income inequality

Source: Accenture, Oxford Economics

it might mean that companies need
Understand the to accelerate entry plans as demand
“unknown-knowns” for their product picks up sooner
than they had expected. This example
A large number of external factors illustrates how changes in external
can cause consumer spending to factors may have an unexpected
diverge from expectations. One such but significant impact on market
factor is change in the distribution of opportunities and strategic planning.
income, something that is receiving
increased attention from opinion
formers and policymakers around
Spotting opportunity—
the world. China, for example, has
made reducing income inequality a
creating demand
priority in its 12th Five-Year Plan. A clear awareness of income trends is
a crucial first step toward developing
In South Africa, greater income an accurate map of current and future
equality is also an explicit policy goal. demand. Understanding the point at
We modelled what would happen if which consumption of a product will
South Africa’s Gini coefficient fell from pick up, accelerate and mature should
58 to 51, still a high co-efficient by be a central part of planning market
global standards (see Figure 4). The entry and expansion. Accurately
impact of this reduction in income assessing market maturity across
inequality would be to expand by 7 different locations can offer critical
million the number of households with insights into how those markets can
annual incomes of between US$5,000 best be aligned for strategic planning
and US$50,000. Understanding purposes. To illustrate, we have
shifts in the distribution of income estimated the global relationship
allows companies to measure market between household income levels
potential more accurately. This can and market penetration for select
mean the difference between making products and services (see “In focus:
a decision to enter a market or not. Or Consumption curves,” page 23).

15

In focus: Household
buying power

While high-growth markets offer attractive
consumer opportunities, diverse and rapidly
evolving income patterns often pose significant
strategic planning challenges. In collaboration
with Oxford Economics, we forecast the evolution
of household incomes across 64 economies.19
Our forecasts are measured in real terms at
constant 2010 prices to avoid the potential
distorting effect of inflation over time. We
compare income levels across countries
using market exchange rates, rather than
purchasing power parities (PPP). We believe
this avoids the upward bias of PPP measures
and corresponds more closely to the actual
size of revenue opportunity for businesses.
Even with our conservative methodology,
the stories that emerge are striking.
Between 2010 and 2020, the number of
households in the 64 countries we studied is
forecast to jump by 124 million—87 percent
will be in emerging economies—translating into
US$15 trillion of additional household income
by 2020. Emerging economies will account
for 57 percent of this increase in income.

18

The emerging consumers

As a household’s annual income surpasses US$5,000, spending
on personal goods and demand for high-impact items such
as televisions, mobile telephones and two-wheel vehicles
typically increases. In 2010, 40 percent of emerging-market
households earned less than US$5,000 a year, this share is
expected to fall below 20 percent in 2020. This low-income
segment would shed 225 million households, nearly a half
of them in China. During the same period, this segment
in Indonesia would shrink by 11 million households—20
percent of its current population. Meanwhile, the share
of India’s population earning more than US$5,000 a year
is expected to increase from 47 percent to 81 percent.

Figure 5: Additional households with annual income of US$5,000
and above, 2010-2020

More than 25 million 5 to 25 million 1 to 5 million 0 to 1 million

Less than 0 Not studied

NB: At market exchange rates and 2010 constant prices.

19

The great leap

The share of emerging-market households in our analysis
with an income exceeding US$15,000 is expected to increase
from 36 percent in 2010 to 54 percent in 2020. This jump
adds 240 million households to this income segment.
China alone would contribute half of this change, with
125 million households. Another hotspot is Russia, where
12 million additional households are expected to be in this
income segment by 2020—this shift represents 20 percent
of Russia’s current number of households. As households
pass this income threshold, we can expect them to begin
spending on cars, computers, and basic financial products.





20

Multiple consumer hubs

In 2010, developed-market households dominated the income
segment of US$30,000 and above. By 2020, it is expected
that there will be an additional 80 million emerging-market
households in this segment, boosting consumption for
healthcare services, basic leisure goods and home purchases.
After China, the shift in Brazil is expected to be one of the
largest in the world, with more than 5 million additional
households earning at least US$30,000. Turkey is also
expected to have an additional 4.7 million households
in this income segment by 2020, a greater change than
any developed economy apart from the United States.
This represents a 73 percent increase over Turkey’s
current number of households in this segment.





21

The new big spenders

The US$50,000-and-above income band represents
households with significant disposable income. Beyond this
income level, spending on such items as life insurance and
pension products, leisure and tourism services, and luxury
consumer goods would be expected to pick up. China would
contribute 5 million additional households to this segment, the
second-largest increase after the United States. South Korea,
a more advanced emerging economy, is expected to double
the proportion of its population in this income segment to
42 percent—one of the highest among emerging economies.
Kazakhstan also is expected to more than double the share of
its population in this income segment, from 7 to 15 percent. By
2020, Kazakhstan will have 770,000 households earning above
US$50,000; more than the combined number in Armenia,
Bangladesh, Bulgaria, Egypt, Ghana, Indonesia, Iran, Kenya,
Morocco, Pakistan, the Philippines, Ukraine and Vietnam.





22

In focus:
Consumption curves
Working with Oxford Economics, we Figure 9: Non-life insurance consumption curve, 2008
built global economic models to show
the relationship between a country’s 5,000
average annual household income 4,500 Netherlands
and expected sales or penetration in
4,000
a number of consumer industries. We
Premiums per capita (US$)

portray these relationships as global 3,500
Japan
“consumption curves” in Figures 9, 3,000
10, 11 and 25, where we explore the High-income economies
2,500
insurance, car and broadband markets.
2,000 US
Factors specific to each country 1,500
are also at play, as is shown by the Low-income economies
1,000
position of individual countries in these Russia
charts, sometimes at some distance 500
from the global curve. Understanding Turkey
0
these factors allows country-specific
consumption curves to be modelled: 0 20,000 40,000 60,000 80,000 100,000 120,000
we provide examples in Figures 24 and
Average household income (2008 US$)
26. Tomorrow’s successful globalizers
will display mastery of their global and Source: Oxford Economics, Swiss Re, Accenture
local consumption curves: this level
of analysis can provide the basis for Despite the attention given to fast- premia per capita) would be at US$680.
informed choices about market selection growing emerging economies, for In fact, it was around US$4,500. The
and timing, for appropriate geographic many of them the insurance market is difference is due to institutional factors.
aggregation or disaggregation of still at an early stage of development: The 2006 Health Insurance Act created
markets, and for strategies to grow their market penetration has yet to increase a universal health care system, in which
customers’ propensity to consume. significantly. This does not imply an all individuals were mandated to carry
absence of growth opportunities. On the basic health insurance in the private
Know your curve: contrary, being positioned in a market as
it is about to take off can give companies
sector, while the government subsidized
low-income households.20 The country’s
Non-life insurance first-mover advantages, such as a strong
customer base and brand. The timing,
historic maritime links have created a
strong tradition of insurance coverage,
The relationship between household however, is critical because insurance has and the Netherlands is one of the world’s
income and market penetration is very a long growth phase. Entering too early largest non-life insurance markets.
strong in non-life insurance. The steep can be as damaging as entering too late.
consumption curve in Figure 9 reveals
that insurance is a “luxury” good for Institutional factors could stimulate Driving up the curve:
low-income households. It becomes
attractive only at higher income levels,
demand ahead of expectations. In the
Netherlands, for example, the market Passenger cars
where households have more valuable penetration rate is substantially above A snapshot of the current passenger
possessions and can afford to protect what one would expect from the country’s car consumption curve (see Figure
them. Lower income countries therefore income levels. For an average household 10) illustrates how assessing market
appear around the base of the curve, income of US$51,000 (the country’s maturity in different countries can
while wealthier economies are clustered average income) in 2009, the curve reveal powerful country groupings
higher up the curve. suggests that consumption (measured by for strategic planning purposes. The

23

car markets in Mexico, Slovakia and and their major trading partners may prioritization of investments across
Turkey appear to be at similar growth promise lucrative opportunities for target markets. For example, in 2008, the
phases—rapidly growing markets the automotive sector, as well as for Thai market had not yet taken off. But
with car purchase penetration ancillary products and services. between 2008 and 2020, the car stock
increasing faster than income growth. is expected to nearly double to 103 cars
A “maturing” cluster of markets is In maturing car markets, the next wave per 1,000 people, and annual sales will
also apparent further up the curve: of growth may be in electric or hybrid average 560,000 cars (see Figure 11). By
in these countries, a change in vehicles. Although these vehicles still the same token, Turkey is further up the
income will induce a proportionally make up only a small proportion of consumption curve and expects a much
smaller change in demand. total car sales, by aggregating similar larger increase in consumption earlier
markets, companies may uncover in the decade. Penetration is expected
Companies can use these patterns and sufficient scale to build a profitable to increase by an additional 82 cars per
groupings to identify potential targets, cross-country business case. 1,000 people—equivalent to annual car
similarities and synergies. For example, sales of 1.12 million. These examples
many countries that are approaching the The greatest value in consumption curves illustrate the value of more granular
“rapid growth” phase are also significant is their ability to forecast over time. By analysis: some companies may need
automotive manufacturing hubs. Mexico, comparing market dynamics across time to prioritize today’s investment dollars
Slovakia and Turkey are fast becoming horizons and geographies, companies can between building a longer-term position
hotspots for auto parts production paint more accurate pictures of where in Thailand and betting on Turkey’s more
and assembly21 and are attracting and when opportunities will arise. These immediate window of opportunity.
considerable investment.22 These markets comparisons anchor a more effective

Figure 10: Passenger cars consumption curve, 2008

700 Maturing phase Illustrative consumption figures

600 Cars per
1,000 people
500 Rapid-growth phase China 27
Cars per 1,000 people

US Thailand 54
400
Turkey 92
300 Mexico 181
Slovakia 272
200 Russia Croatia 346
China United States 451
100

Emerging phase
0

0 20,000 40,000 60,000 80,000 100,000 120,000

Source: Oxford Economics, World Bank WDI, Accenture

Figure 11: Passenger cars: Expected change in car penetration, 2008-2020
600
2008
Illustrative consumption growth:
2020
change 2008-2020
500
Cars per Average
1,000 people sales, annual
Cars per 1,000 people

400 Croatia
Slovakia 99 160,000
Slovakia China 94 15,030,000
300
Turkey 82 1,120,000
Mexico 54 2,200,000
200
Mexico Thailand 45 560,000
Croatia 28 110,000
100 Thailand Turkey

0

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000



24

New players, new rules:
The new shape of
competition
This chapter looks at the important Many economies have actively courted
dynamics reshaping the global foreign investment, and governments
competitive landscape: the key players compete against one another to
and new competitive pressures that attract firms from around the world.
make it more difficult for companies The impact on local competitive
to access growth opportunities. dynamics has been dramatic.
We introduce the players in this
new phase of global competition Multiple layers of
and then look at how they are
changing the rules of the game. incumbency
First, companies must compete against
New players strong local knowledge and the
relationships that domestic players
Internationalization has never been a enjoy. Second, many can expect to
simple journey. The ability to become face Western multinationals that
relevant and respond to local needs have expended significant effort to
in new markets has always been a become locally entrenched. These
fundamental challenge. A major obstacle multinational players possess the scale
is the strength of incumbents, with and efficiency of global enterprises,
their deep local-level relationships, some possess strong brands, and
acute knowledge of local needs and most have become leaner and more
preferences, and enviable customer competitive in response to economic
loyalty. Business school case studies and troubles in their home countries. Finally,
media coverage are littered with praise companies entering new markets will
for companies that have managed to also face multinationals from emerging
effectively tailor their offerings to local economies that can leverage scale
markets. By the same token, companies advantages with low-cost capabilities
unable to recognize and adapt to and, in some cases, government
local circumstances are criticized. support and funding. Most companies
are rightly daunted by the prospect
But companies looking to enter high- of having to take share from these
growth markets today face a more incumbents. It is no wonder that some
complex incumbency challenge than firms feel they are already too late to
ever before. High-growth markets have enter these markets (For an example of
spurred growing levels of investment how to respond to these pressures, see
and corporate activity over recent years. “Cencosud: Retail relations,” page 30).

26

Figure 12: Fortune Global 500

100%
47 60 70 78 91 95 117
90%
453 440
80% 430 422
409 405
70% 383

60%

50%

40%

30%

20%

10%
0%

2005 2006 2007 2008 2009 2010 2011

Developed Emerging

Source: Fortune Global 500, Accenture analysis

Emerging giants meet the demand there and from other (see page 31) details this important shift
South American countries. Embraer, the and how rapidly intra-emerging market
Already 117 companies from emerging Brazilian commercial plane manufacturer, (“E2E”) trade has grown in just the
economies are in the Fortune Global reports record profits through sales past ten years to transform the global
500, a six-fold increase since 2000. of mid-size jets suitable for regional competitive landscape. As emerging
This trend appears to be accelerating. travel between emerging economies. economies increasingly dominate global
Twenty-two emerging-market SABMiller, a leading global brewer trade and investment flows, it is only a
multinationals replaced their developed with roots in South Africa, recently matter of time before the world sees a
market peers on the list in 2011 (see built a brewery in South Sudan. The new global map of talent, innovation
Figure 12). The emerging-market company’s deep experience in emerging and industry standards.
companies are also quickly moving up economies—it operates in 17 African
the ranks. In 2011, 70 percent of the
Fortune Global 500 fastest-growing
countries—gave it the confidence to Seasoned global players
enter this unserved market, despite South
companies (by revenue) were from Sudan’s severe infrastructure barriers. Notwithstanding the importance of
emerging markets. competitors from emerging economies,
These examples of success in high- it would be wrong to assume that
Companies based in emerging economies growth markets by companies from they will dominate the next era
often have an advantage in entering emerging economies exemplify a broader of competition. Some of the best
and expanding in high-growth markets. transformation in the global business examples of success in high-growth
For example, they may be more familiar landscape: the sharp increase in business markets have been multinationals
with serving low-income customer activity between emerging economies based in developed markets. With a
groups or operating amid infrastructure since the beginning of the downturn. well-established presence in emerging
deficiencies. The size of the prize is China has displaced the United States economies, these companies are well
evident, and the success stories are only as Brazil’s largest trading partner. China positioned to combine their superior
increasing. China’s fast-growing Chery, has also become India’s biggest trading global scale and efficiency with their
an automotive company, launched its partner, and the two countries have local knowledge and responsiveness.
mini car, QQ, in nearly 80 countries, agreed to a US$100 billion bilateral Many solidified their position during
most of them emerging economies. trade target by 2015. But the story the downturn as their gains in emerging
Chery is particularly successful in isn’t just about China. India’s exports to economies made up for the pain felt at
Brazil. In the first half of 2011, Chery’s Brazil increased more than tenfold from home. For example, Figure 13 illustrates
exports to Brazil reached 18,000 units, 2000 to 2010 and exceed those of Latin how, through its presence in emerging
a quarter of its exports.23 The company American economies such as Mexico. economies, Unilever sustained growth
has recently built a plant in Brazil to “The journey to multidirectional trade” during the downturn despite shrinking

27

Figure 13: Unilever revenue growth breakdown (€ billion) Figure 14: Composition of Unilever’s revenue
(percentage share)

50
40% 42% 44% 47% 49% 53%
45
8.1 44.3
40 -2.2
38.4
35

30
60% 58%
25 56% 53%
51%
20 47%

15

10

5
0

Total revenue, 2005-2010 2005-2010 Total revenue, 2005 2006 2007 2008 2009 2010
2005 change in change in 2010
revenue from revenue from
developed emerging Developed markets Emerging markets
markets markets

Source: Unilever company reports Source: Unilever company reports

revenue from developed markets. In acquisition of Jaguar and Land Rover Capital, credit and corporate
2010, for the first time, the majority of created a company with a range of
Unilever’s revenue was from emerging high- and low-value offerings well governance: The freedom to
economies (see Figure 14). The company positioned to compete at the opposite invest for the long term
plans to increase this share to 75 ends of the same market. With these
percent by 2020.24 offerings, Tata Motors can also cater Constraints on capital investment
to markets around the world at and difficulties securing credit have
Companies such as Tesco in South Korea different stages of development. hampered growth efforts in the wake
or Coca-Cola in Brazil have shown that of the downturn. Firms backed by state
being a foreign or “Western” company Such ventures can leverage their capital and sovereign wealth funds,
is certainly no disadvantage. These complementary strengths to rapidly meanwhile, have benefited in this
companies possess strong competitive build market share in home markets and environment as they have been able
advantages. Their established brand form a springboard for global success. to access investment capital largely
presence positions them well to attract Some companies have used partnerships unconstrained by the pressures on
talent and customers. They can also to develop entirely new offerings: global capital markets.
draw upon their regional and global Vodafone and Safaricom’s M-PESA
networks and mechanisms to better money-transfer service acquired 14 Consider the example of sovereign
identify and rapidly act on local million registered customers within wealth funds in the Middle East, which
opportunities. What matters for high four years (see “M-PESA: Creating new have approximately US$1.7 trillion in
performance is not a company’s country markets through innovation,” page 44). assets under management.25 In 2010, as
of origin; it is the company’s strategic funds across the Middle East sought to
and operational capabilities for success.
New rules diversify and invest in new high-growth
markets, 49 percent of their investments
Combining forces As the key players in global markets were directed toward the Asia Pacific
change, so do the pressures that shape region—a significant leap compared
Companies also have a greater appetite the rules of competition. The location of with the 7 percent invested in the
for cross-border partnerships across a company’s headquarters matters less region from 2000 to 2008.26
emerging- and developed-market than its ability to grasp opportunities
economies, built through joint ventures, while others watch and wait. Many of the fast movers into high-
acquisitions and other models. These growth markets have been those
complementary capabilities, assets The following three trends are that have had the freedom to take a
and strengths can create a formidable increasingly shaping the competitive longer-term investment perspective.
competitive force. Tata Motors’ landscape. Ownership and governance structures

28

play a role here, as certain models difficult to steal. Africa, for example, high-capacity machines are equipped
are less beholden to short-term was emerging as a compelling growth to wash traditional gowns. And when
shareholder demands. This freedom opportunity for global banks just LG expanded into the Indian market
provides a distinct advantage in tasks as the financial crisis struck. Since with a television set featuring on-
such as product development or market then, companies less affected by screen display in the regional languages
planning. Of China’s 54 businesses in the downturn have taken advantage of Hindi, Tamil and Bengali, the
the Fortune Global 500, 41 are state- of Africa’s more open playing field “Sampoorna” sold more than 100,000
owned. While the total number of state- and snapped up the most lucrative sets in the first year of its launch.31
owned enterprises in China fell from partnerships and acquisitions. For
159,000 in 2003 to 114,500 in 2010, example, the Industrial and Commercial With opportunity and competition
the total assets of those under central Bank of China recently acquired 20 difficult to evaluate and predict,
government control rose from RMB percent of South Africa’s Standard Bank companies often hesitate to invest.
3 trillion (US$473 billion) to RMB 20 and formed a commercial partnership It is not surprising that the majority
trillion (US$3,150 billion).27 And though for corporate banking services.29 And of businesses believe they need to
many of Brazil’s large companies are Bank of China partnered with Togo- accelerate their efforts to build
publicly listed, most of them are family- based Ecobank, which operates widely market share—or that it may be
owned. The majority of India’s giant across Africa, to facilitate trade and already too late. As companies
conglomerates still hold family names, investments between Africa and Asia. wait, they fear that the windows of
and family members serve on boards. Snapping up the most promising opportunity are shrinking. They know
partners is a key advantage to moving the opportunities lie in high-growth
markets. They know they need to
Access and preferential fast in this sector.
accelerate their efforts. But what
treatment: The importance Global efficiency and exactly should they be doing? What
are the capabilities they need to build
of relationships local responsiveness: Dual in order to succeed in high-growth
More and more, relationships are markets? The following chapters
shaping access to new market
imperatives, not a trade-off seek to answer these questions.
opportunities: business-to-business, The most astute competitors in today’s
business-to-government, government- fast-evolving opportunities combine
to-government, as well as cross-sector global efficiency and scale with local
relationships with civil society and non- relevance and responsiveness. For
governmental organizations (NGOs). example, while Coca-Cola benefits
from its global scale and brand, its
The resources and extractives sector local market understanding allows the
is a case in point. Mining rights and company to offer 15 varieties of Fanta
access to natural resources are carefully in Mexico.30 Such success requires
controlled by host governments and a carefully designed international
are often granted to state-backed operating model: deep local market
companies on the basis of high-level insights, such as preferences around
governmental agreements. In exchange packaging and the local palate,
for rights to extract more than 11 combined with flexible sales and
million tons of copper and 620,000 distribution strategies that can respond
tons of cobalt in the Democratic to the local retail infrastructure.
Republic of Congo, China has agreed
to build hundreds of clinics, hospitals Many companies grounded in efficiency
and schools, two hydro-electric dams, advantages have built more targeted
3,300km of road and 3,000km of offerings to appeal to specific
railway there.28 As long-term investment consumer groups. Players such as
deals brokered by governments seeking China’s Haier, Taiwan’s HTC and South
foreign expertise erect barriers to later Korea’s Samsung and LG have moved
entrants, the path to new opportunities beyond their initial low-cost offerings
for many companies may be blocked. to design products and services for a
variety of income levels, cultural tastes
In other industries, access to and preferences. Haier has driven
opportunities may depend on cultivating international expansion by tailoring its
relationships with the right partners. products to local markets: in China’s
In the banking sector, acquisitions and rural Sichuan province, Haier sells
joint ventures are a common route to washing machines specifically designed
entry. Banking has traditionally been and labeled to wash “clothes, sweet
an industry where market share is potatoes and peanuts.” In Africa, its

29

Cencosud: Retail relations

Cencosud in Latin America established, looked to acquire well-entrenched
through a focus on strong relationships, players in high-growth markets,
a regional foothold that is daunting such as the Wong Group in Peru,
to potential competitors. For thereby gaining access to established
supermarkets, chances of success are infrastructure and relationships. These
strongly influenced by access to the acquisitions—13 in just 10 years—have
infrastructure and ecosystems that enabled the company to expand rapidly
support their business. Appropriate across the region, driving year-on-
real estate, and effective supplier year growth of more than 25 percent.
and distribution networks, can make Cencosud is now the leading or No. 2
or break a venture. The right local- supermarket retailer in three of the
level relationships are critical because four countries in which it operates.32
control over real estate and supply
chains can sit in a small number of Cencosud’s competitive position is
hands in high-growth markets. In an raising the stakes for other retailers
industry where market share really attempting to gain a foothold in these
counts, relationships can provide the high-growth markets. New entrants,
access needed to unlock opportunity whether regional or global retailers, will
and to establish a leading presence. be pitted against Cencosud’s mastery
of local knowledge and relationships.
Cencosud has long been one of the
key players in its home market of
Chile, and the company is building
on its domestic position to expand
across Latin America. In stepping up
its regional expansion, the company

30

The journey to multidirectional trade

A new map of global Phase 1 Phase 3
trade and investment is Before 2002, the majority of global The third phase, heralded by the
emerging. The dominance trade took place between developed global downturn, is still under way. It
economies. For example, just ten is characterized by the resilience of
of developed economies years ago, 47 percent of world exports between emerging economies.
is being challenged, exports excluded emerging economies E2E exports have grown from the
completely. Exports between emerging smallest component of global trade
and the last ten years economies accounted for just 15 to the second-largest contributor
alone have seen a sharp percent of total exports in 2000. to international exports, just behind
Emerging economies were largely D2D (developed market to developed
transformation in the perceived as sources of raw materials. market) exports. Our estimates suggest
dynamics of global trade. The triad economies of the United that if E2E exports continue to grow
States, Japan and the European Union at the average annual rate they
The implications are far determined the norms and rules of experienced from 2000 to 2010, they
reaching, not least in giving business. However, China’s accession could overtake D2D exports by 2013.
to the World Trade Organization in
a clue as to where the 2001 marked a turning point, opening
future hubs of opportunity up China’s vast potential as an
exporter, particularly of manufactured
and competition will lie. goods, to the rest of the world.

The journey to Phase 2
multidirectional trade From 2002 to 2006, E2E exports
over the past decade averaged 25 percent annual growth.
By 2003, they overtook exports from
has three distinct phases developed to emerging economies, and
(see Figure 15). by 2006 E2E exports overtook those
from emerging to developed economies.
Exports between developed economies
remained the dominant component of
global trade. But their relative share
declined during this period, from 53
percent in 2002 to
38 percent by 2006.

31

Emerging economies This transformed
are becoming the key landscape of competition
shapers of global trade is characterized by a more
and investment, both as diverse set of competitors
sources and destinations. and a more varied range
of strategic motives and
From being the smallest organizational behaviors.
component of global
exports only a decade ago, The implications are
E2E exports have grown fundamental; from a new
dramatically to become the global map of talent and
second-largest contributor innovation, to new industry
to international exports. standards and norms.

Our estimates show that if
E2E exports continue to grow
at the average annual rate
they experienced in 2000-
2010, they could overtake
D2D exports by 2013.

Figure 15: Journey to multidirectional trade (LHS: Export value, US$ billion; RHS: Indexed export value, 2000 = 100)

18,000 Phase 2 Phase 3 440
Phase 1
420
16,000 400
380
14,000 360
340

Indexed export value, 2000 = 100
12,000 320
Export value, US$ billion

300
10,000 280
260
8,000 240
220
6,000 200
180
4,000 160
140
2,000 120
100
0 80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Developed to Developed (D2D) Emerging to Developed (E2D) Developed to Emerging (D2E) Emerging to Emerging (E2E)

Source: IMF Direction of Trade Statistics

32

Rethinking capabilities:
The roadmap to success
Business leaders realize that they need In our research, we were keen to Disappointed globalizers
to step up their search for growth—and understand the perceptions and the
that old approaches will not be suitable actions of two particular sample groups: We also looked at companies that
for the new competitive landscape. Some are committed to growing in high-
57 percent of respondents to our survey Successful globalizers growth markets but that have been
acknowledge that they need to “reassess” disappointed by their performance to
We looked at companies that have had a date. They are defined by the following
or “fundamentally rethink” their
track record of successful performance characteristics:
approaches and capabilities to compete
during recent years and are also
and win in high-growth markets. • They are primarily looking at emerging
confident and committed about their
future growth in high-growth markets. economies for their next stage of
Moreover, our research unearthed key growth.
differences between successful and Specifically, they are defined by the
unsuccessful companies in high-growth following characteristics, based on their • In the past three years, their company
markets. Successful companies think responses to our survey: revenue and profits in high-growth
differently about the capabilities critical • They are primarily looking at emerging markets have developed slower than
for growth and prioritize investments in economies for their next stage of they expected.
different ways. growth.
• They are planning to increase Keys to high
57% of respondents investment in their target high-growth
markets over the next three years.
performance
to our survey • They believe they have an accurate
Our research uncovers three
capability areas that successful
acknowledge that they understanding of the size of
opportunities in emerging economies.
globalizers excel at relative to their
peers, particularly in comparison
need to “reassess” or • They believe they fully understand the with disappointed globalizers:
“fundamentally rethink” competitive dynamics that they face in
these markets.
1. Sizing the future: The ability to
accurately size, time and prioritize
their approaches and • They believe they possess the strategic demand opportunities around the world.
and operational capabilities to fully
capabilities to compete grasp those opportunities.
2. Shaping the future: The insights and
capabilities to cultivate and protect
and win in high- • In the past three years, their company future demand in high-growth markets.
revenue and profits in high-growth
growth markets. markets have developed in line with,
3. Seizing the future: The
operational agility and flexibility
or faster than, their expectations. to adapt and reorient the
company to grasp opportunities
In 2010, 61 percent of these successful
across high-growth markets.
globalizers experienced global revenue
growth of 5 percent or more. The following chapters look at each
of these capability areas in depth.

33

Accenture conducted an
extensive research program
to investigate the keys to
success in today’s hyper-
competitive high-growth
markets.
The main elements of research include:
• Household income analysis, in
collaboration with Oxford Economics.
We created five standard bands of
annual household income and, for each
of 64 countries, estimated the number
of households falling into each band in
2010, 2015 and in 2020. All forecasts
are measured in real terms, and at
market exchange rates.
• Industry consumption curves, in
collaboration with Oxford Economics.
This unique research maps the evolution
of a select group of industries across the
world. It also includes scenario-based
sensitivity analysis that assesses the
impact of changes in the business and
policy environment.
• A survey of 588 business leaders,
across 85 countries and 22 industries,
conducted by the Economist Intelligence
Unit. Business leaders were asked about
their perceptions of the competitive
landscape, their company’s plans for
growth and the capabilities important
for success in these markets.
• Conversations with clients and
experts across industries and extensive
secondary research, including company
case studies and analysis of greenfield
and M&A investment data.

34

Sizing the future: Assessing
where and when to act
Our research suggests that successful This deep understanding of their target One way to build this understanding
globalizers in high-growth markets markets allows successful globalizers to is through in-depth analysis of
adopt new approaches to assessing become masters of strategic positioning: consumption curves for companies’
potential market opportunity. The to be not only where opportunities are products and services. By analyzing
distinction becomes clearer when today, but where they will be tomorrow. consumption curves, companies can
we compare them with firms that Through their superior ability to identify the optimal entry point for a
have been disappointed by their discern the size, location and timing of particular target market. For example,
performance in high-growth markets. opportunities, these companies make more in our analysis “In focus: Consumption
informed decisions and trade-offs around curves” (see page 23), we see that the
Traditionally, companies looking to where and when to invest, and remain non-life insurance market has a long
enter new markets might construct several moves ahead of the competition. growth phase. Entering too early can
country-by-country business cases, be as damaging as entering too late.
or segment opportunities by common This type of analysis also offers clues to
language, for example. Successful Getting the “where” appropriate routes of entry. For example,
globalizers take a more dynamic
view that incorporates flexibility and and the “when” right in a country where demand is still in its
infancy, companies have more time to
foresight into strategic planning. Sizing and timing opportunities across build partnerships with local players and
high-growth markets is complex. The gradually cultivate their customer base.
First, they are more adept at examining evolution of household income over the In a more mature market, entry through
global opportunities through multiple next decade—an indicator of potential acquisition might be more attractive.
lenses, to find where and when demand consumer buying power—underscores
will arise. Witness companies that its importance. For example, from 2010 Cross-country consumption forecasts
have successfully targeted diaspora to 2020, Turkey’s share of households can also identify countries at similar
communities scattered across the world, with an annual income above US$50,000 stages of market development. Such
or specific high-potential customer is estimated to nearly double, from 18 insights open opportunities to share
segments, such as those in water- percent to 34 percent. This translates into lessons across markets and to build scale
scarce areas, rural communities or an additional 3.6 million households in and synergy into market entry plans. For
newly-empowered female populations. that income segment, representing total example, our analysis shows that Mexico,
In this way, successful globalizers household income of US$380 billion. Slovakia and Turkey are on the cusp of
develop a more complete and realistic rapid demand growth for passenger cars.
understanding of the markets in But the accurate assessment of
which they intend to operate. addressable opportunities is only a Successful globalizers recognize that
first step. Planning over time horizons superior market assessment capabilities,
Second, in a rapidly-changing business is becoming a critical capability, as such as analysis of household incomes
environment, these companies consumption levels evolve at a variety and product consumption curves, give
understand better than their competitors of speeds around the world. In this them an edge. For example, 75 percent
the importance of planning over time complex and volatile environment, of successful globalizers said that
horizons, allowing them to sequence and understanding these dynamics, and using looking at the size of potential consumer
prioritize their investments. Our research, this understanding to evaluate trade-offs purchasing power is critical for growth.
conducted in partnership with Oxford and guide decisions about when, where Among disappointed companies, only
Economics, illustrates the importance and how to enter high-growth markets, 42 percent had similar feelings.
of identifying where different markets will be critical to success. Some markets
will sit in terms of their consumption may offer immediate opportunities, while We now look at some of the specific
of specific products and services. How others may be poised for more significant ways in which successful globalizers
close are they to reaching a point growth in the longer term. differentiate themselves and build an
where demand rapidly takes off? How in-depth understanding of their target
close are they to market maturity? high-growth markets.
What are the opportunities of different
markets over different time horizons?

35

Procter & Gamble: Designing
for the $2-a-day consumer
As it pursues an ambitious goal of This approach has already provided
adding 800 million new consumers critical market insights. Last year, P&G 75% of successful
between 2010 and 2015, Procter &
Gamble (P&G) is actively targeting
targeted the notoriously challenging
male grooming market in India. Through globalizers said that
the underserved—those it calls the
“$2-a-day” consumers. In a significant
field research, product developers
discovered that previous international
looking at the size of
shift in strategy, P&G is moving brands of men’s razors had failed potential customer
beyond its traditional focus on high- because of poor access to running water
end beauty and personal care to build in India’s rural communities. In response, purchasing power is
new markets at the “bottom of the the company launched an affordable
pyramid,” seeking to reach consumer razor that uses less water. Within three critical for growth,
segments across high-growth markets
through a deep understanding of
months of launch, Gillette Guard became
the best-selling razor in India and today compared with 42%
their needs and preferences. represents more than half of the razors
sold in the country. Building on its rural
of disappointed
Realizing that future opportunities lie
predominantly in emerging economies,
customer insights, P&G is developing globalizers.
new cleansing and hair-care products
P&G has invested significant time, specifically designed to be effective in
money and management attention to water-scarce conditions across China,
aggressive expansion in these markets. India, Africa and Latin America.
CEO Robert McDonald speaks of
“shifting the center of gravity” of the Following the success of the Beijing
company’s innovation away from top- Innovation Center, P&G plans to
end products and toward innovation invest US$250 million in a new
that reaches underserved consumers. innovation center in Singapore as a
“connect and develop” hub. The hub
To achieve this goal, P&G has established will meld insights from customers
the Beijing Innovation Center. While and local stakeholders to co-create
the company has 25 innovation centers appropriate products that help P&G
across the world, the US$70 million ensure that it has the right products
investment in the Beijing center in the right place at the right time.
provides a base for P&G researchers to
collect insights from across the world.
These insights will drive cross-country
groupings of consumers and products
designed to serve their specific needs
and living conditions. The unit is focused
on discovering cross-country insights:
product researchers frequently travel
across multiple countries and regions to
test potential products in the field.

36

Segment to seek new customer groupings

Successful companies stand out through
their focus on segmentation techniques
Identifying cross- France Telecom’s Orange brand is
another example. As the firm analyzed
that create customer groupings that
are relevant both within and across
country segments strategic segments across its African
and Middle Eastern markets, it
high-potential markets. According to Today’s tech-savvy young adults found that, regardless of nationality,
our survey, 82 percent of successful in Mumbai have more in common consumers share a need for very low-
globalizers believe that this is critical with their peers in New York than cost, easy-to-use telephone services. In
for growth, compared with 64 percent with youngsters in rural India. response, Orange launched innovative
of disappointed globalizers (see Figure Affluent consumers in Shanghai are services such as Bonus Zone, which
16). Successful globalizers are also more more likely to buy the same luxury offers special prices when network
likely to devote adequate time, money products as high-income consumers traffic is low. For the illiterate, Orange
and attention to building this capability, in Paris. Alongside their geographic launched Voice SMS, a service for short
with 78 percent saying they do so, strategies, companies should identify voice messages offered at the same
compared with only 45 percent segments that cut across national price as an SMS. Orange discovered
of disappointed globalizers. borders. Emerging-market strategies a specific consumer segment for this
have traditionally focused on service that spans Botswana, Cameroon,
tailoring products to specific local Côte d’Ivoire, Egypt and Madagascar.35
Approaching needs. While understanding local
tastes and preferences is essential,
segmentation in companies should also find cross-
Procter & Gamble (see “Procter &
Gamble: Designing for the $2-a-day
distinctive ways country opportunities to enable
greater operational scale. Restricting
consumer,” page 36) has identified new
market segments through similarities
Successful companies use advanced segmentation to a country-by- in living conditions. The company has
techniques to analyze demand. Seventy- country approach may hide lucrative focused on products that address
five percent highlight the critical opportunities that could be uncovered consumer challenges in water-scarce
role of understanding the size of by a cross-country business case. areas: razors that require less rinsing,
potential customer purchasing power, for example, or detergents that are
compared with only 42 percent of The world’s diaspora populations, for effective with minimal water. As water
disappointed companies (see Figure 17). example, provide a vast pool of well- scarcity becomes an ever-greater
Successful companies are also more networked consumers with similar tastes global challenge, this segment may
likely to identify synergies through and preferences that companies can tap offer further opportunities to scale
an understanding of similar business to develop cross-border segments. There the business around the world.
environments before making country are more Chinese people living outside
groupings—41 percent of successful China than there are French people
globalizers achieve this understanding, living in France.33 Dabur, the Indian
nearly double the amount of consumer goods company, has adopted
disappointed companies (22 percent). an international growth strategy that
On the contrary, successful globalizers leverages the expansive Indian diaspora.
do not make strategic growth plans Dabur created a cross-country customer
based on easy and conventional segment that spans South Asia and the
criteria, such as targeting locations Middle East, based upon similarities
with a common language. Disappointed in hair-care preferences: it launched
globalizers are twice as likely to do so. Dabur Amla, a hair oil, in Bangladesh,
Pakistan and the United Arab Emirates.
Dabur plans to use its success among
the Indian diaspora as a springboard
for broader growth in new segments
of global consumer markets.34

37

Figure 16: Segmentation techniques that create customer groupings that are relevant within and across high-potential
markets (percentage of respondents)

Successful 82%
globalizers
78%

Global 71%
average
59% 12%

Disappointed 64%
globalizers
45%

0% 20% 40% 60% 80% 100%

Critical for growth Receiving adequate attention

Source: Accenture Fast Forward to Growth survey

Figure 17: Criteria used to group target high-growth markets when conducting strategic planning
(percentage of respondents)

75%
Potential
consumer 54%
purchasing
power
42%

41%
Similarity of
business/policy 35%
environment
22%

18%
Groupings used
by economic
analysts 9%
(e.g. BRIC)
7%

17%
Common
language 28%

35%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Successful globalizers Global average Disappointed globalizers


38

Compensate for data scarcity

Despite the expansion of the digital Figure 18: Importance for growth: Sophisticated statistical and analytical
universe and its wealth of information, techniques to make up for scarce and unreliable data
companies still rely on sparse or (percentage of respondents)
weak data when conducting strategic
planning in high-growth emerging
markets. The lack of centralized
statistical agencies combined with Successful 70%
local conditions can make it difficult globalizers
or excessively expensive to collect
data. When it comes to estimating
and forecasting, the results will be
only as good as the underlying data. Global average 63%
Successful companies recognize the
value of insights and the challenge of
scarce, reliable data. Seventy percent
of successful globalizers consider this Disappointed
43%
critical for growth, compared with 43 globalizers
percent of disappointed globalizers (see
Figure 18). At the same time, successful
globalizers use innovative means to 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
collect and mine data using analytics.

Finding new roads to
customers: Leveraging participants.37 Followers give their
reactions to new products—such as Fueling growth through
technology Kuat, a drink based on the guarana
proprietary data
berry, a local favorite. Favorable
Successful companies use technology consumer response has led to increased Successful companies do not just
to address data shortages. In India, crop investment in anticipation of innovate in how to capture data but
“e-Choupal” kiosks, set up by the growing demand.38 Consumers also also understand the premium value of
conglomerate ITC, give farmers access propose new juice flavors, such as the reliable data in high-growth markets.
to crop prices, weather and other new cashew-flavored Minute Maid. Grupo Elektra, a Mexican retailer,
information in local languages.36 This strong and loyal following has also leveraged existing data to build a
More than 4 million Indian farmers stimulated growth in other divisions of new business. The retailer collected a
access these kiosks—a striking number the company. For example, the Coca- wealth of financial information about
given the infrastructure constraints Cola clothing brand has become so its customers when it launched a credit
of rural India. ITC uses advanced popular that Brazilians are willing to service for those without bank accounts.
analytics and mobile technologies pay up to US$200 for a pair of jeans. Based on this new data, Grupo Elektra
to track data from individual farms built one of the country’s largest branch
and then offers farmers tailored Companies can combine the power of banking networks to complement its
supplies, such as fertilizer and seeds. technology with the insights of their popular retail chain.40
local partners by equipping them with
The proliferation of social media in simple, easy-to-use mobile devices.
emerging markets offers another source Hindustan Unilever gives its rural
of insights into customer needs and distributors a user-friendly mobile
preferences. Coca-Cola’s social media application so they can transmit
marketing strategy in Latin America, stock level and pricing information.
particularly in Brazil, generates a Unilever then uses the information to
constant stream of information on manage inventory and predict demand.
consumer preferences. Coca-Cola Improved demand forecasting has
has nearly 22 million followers, and helped Hindustan Unilever to increase
Brazilians are among the most active rural store sales by nearly a third.39

39

Anticipate emerging competitors

Accurately measuring fast-evolving between emerging economies, such as Likewise, some competitors are
windows of opportunity requires an trade and investment agreements, are structured around their presence
assessment of current demand, future also reshaping the business landscape. in multiple industries. The growth
demand and the component within For example, Mexico and some model of Indian conglomerates, such
each of these that is accessible. An South American countries—Uruguay, as the Tata Group or the Aditya Birla
accurate analysis of the accessible Paraguay and Peru—want to establish Group, is based on expansion into new
demand cannot be carried out without mutually beneficial trade pacts with industries—their success in one market
understanding the dynamics of both India, particularly around information can be a buffer for cycles in other
demand and competition. technology.42 Keeping track of future industries, or provide a steppingstone
competition can boost strategic to entering new markets.
Successful companies emphasize planning efforts and reveal new options
competitor analysis techniques to for partnerships or acquisitions.
anticipate and evaluate emerging Preparing for your
competitive threats, both from adjacent
industries and from new geographic Looking beyond your next victory
locations. Eighty-one percent of
business executives from successful industry’s traditional Companies cannot expect their
competitive advantage to last as long
companies agreed that this capability
is critical to their company’s success in
boundaries as they may have been accustomed
to. In fact, research shows that the
high-growth markets (see Figure 19). Successful companies keep an eye on average lifespan of a Standard &
emerging competitors from adjacent Poor’s 500 company is shortening.46
industries, or industries further afield.
Locating the As technology and business model
To remain relevant, companies must
move beyond anticipating the influx
future hotspots of innovation continue to blur the
boundaries between industries, a keen
of new competitors. They must
continually plan their next venture
competition knowledge of competitive threats from
multiple sources is crucial. The decline
and build capabilities for its success.
Enterprises must have a foot in the
At the macro level, mapping the volume of DVD rental stores, bookshops and opportunities of today and tomorrow.
and shape of trade and investment flows music retailers is a cautionary tale of Apple is an example of a company
can help to locate future hotspots of companies that failed to identify and using product innovation to stay ahead
competition. Companies can also look adapt to this shift. Companies that are of competitors. While redesigning
for opportunities and challenges that alert to such trends have a sharper lens new versions of its iPhone, Apple was
emerge from government strategies, to spot new competitors and business developing its iPad tablet. It beat
such as “going out” initiatives (where options. Nestlé, for example, used its competitors to the market and forced
governments encourage local companies broad, loyal customer base to enter them to scramble to offer alternatives.
to invest abroad), nurturing of national the pharmaceuticals sector. In 2010 it
champions or strategic plans to created a health science business to
build advantage in specific sectors. develop products that tackle obesity
For example, Malaysia’s Economic and chronic ailments such as heart
Transformation Programme, launched disease.43 Similarly, Google is no longer
in October 2010, is the country’s just a search engine. For example, the
roadmap toward its aim of becoming company operates in the smartphone
a high-income country. The roadmap market, through its stake in the Android
includes a target of 6 percent annual software and its plans to acquire
growth and a focus on 12 strategic Motorola Mobility,44 and also in the
sectors, including tourism, financial renewable energy market, through its
services, palm oil and electronics.41 investments in wind energy projects.45
New economic cooperation plans

41

On tomorrow’s agenda
• Conduct cross-country forecasts
of product and service consumption
across time horizons, beyond national
and regional borders, and use these to
evaluate trade-offs and guide decisions
about when, where and how to enter
high-growth markets.
• Experiment with different customer
segmentation variables to discover new
geographic and customer grouping
options.
• Use information and communications
technology, such as mobile phones
and social media, to collect reliable
and relevant data to improve demand
forecasting.
• Assess the value of existing proprietary
data and seek potential to leverage it for
further growth opportunities.
• Choose local partners, whether
through joint ventures, alliances or
other arrangements, to build a deep
understanding of local market dynamics,
needs and preferences.
• Enhance competitor analysis techniques
to anticipate emerging competitors across
multiple time horizons, geographies and
adjacent industries.

Figure 19: Anticipating and evaluating new competitors from other industries and markets (percentage of respondents)

Successful 81%
globalizers
70%

Global 79%
average
60% 12%

Disappointed 74%
globalizers
58%

0% 20% 40% 60% 80% 100%



42

Shaping the future:
Seeding tomorrow’s growth
While some companies may feel they Our analysis, in collaboration with
are too late to secure their position Oxford Economics, demonstrates
in high-growth markets, our research the impact, in real consumption
shows that successful globalizers do opportunities, that can be achieved
not simply accept that windows of when businesses invest in generating
opportunity are shrinking. Instead, they future demand. For example, our
open new windows of opportunity by analysis examines how demand can
shaping and seeding future demand. be measurably increased through
improvements in infrastructure,
Most businesses today accept the education and health care.
need to engage with local stakeholders
in order to gain a licence to operate The analysis presented in “Shape your
and increase their penetration and consumption curve: Building digital
market share. Many companies have pathways” (see page 49) details how
gone further, appreciating the need businesses can increase and bring
to collaborate with governments forward demand by engaging in policy
and other actors, and to invest in development and infrastructure building.
the communities in which they The scenarios outlined in “Shifting
operate, in order to drive economic consumption curves: The value of
development and higher incomes. disruptive innovation” (see page 51)
illustrate the potential rewards for
But our research finds that successful companies with a deep commitment
globalizers go further still: they to consumer-focused innovation.
are not content to simply push for Companies should not underestimate
increased sales that will come about the potential to influence consumer
as incomes rise. They aspire to “shift trends and shape their next opportunity.
their consumption curve,” rather
than just move along it. They are not Successful globalizers place significantly
just looking to scramble for market greater emphasis on specific capabilities
share; rather, they want to increase that seed future growth. They invest
the overall size of the market, as well in relationships with local stakeholders
as their share of it. And critically, and design flexible business models
they understand the strategies and that can adapt to local circumstances.
capabilities required to extend the They share and scale successful
frontiers of opportunity in this way. innovations that can uncover and
generate new demand. Finally, they
create strategies and processes that
encourage sustainable growth.

43

M-PESA: Creating new markets
through innovation
The sudden explosion of M-PESA in The success of M-PESA illustrates
Kenya shows how companies can how companies can create and grasp
actively shape future opportunities opportunities to build an entirely new
through innovation that targets the market so quickly that competitors
fulfillment of unmet needs. Vodafone’s barely have a chance to catch up.
M-PESA platform, which now generates Vodafone and Safaricom laid the
16 percent of local partner Safaricom’s foundations for success by taking an
revenue, was launched in March 2007 innovative approach to the nascent
to provide a system of electronic peer- market for financial services, designing
to-peer payment for consumers in a product from the bottom up to
Kenya. In a country where 40 percent meet specific local needs, quickly
of the people had no access to financial establishing market incumbency
services, but a similar share owned a and rapidly rolling out M-PESA
mobile phone, M-PESA offered a new across the country. In the Kenyan
platform to meet the needs of those market, the incumbency advantages
without bank accounts.47 enjoyed by M-PESA have created a
challenging environment for would-
The platform addresses a particular be competitors: only one in five of
need in Kenyan society, to send money alternative branchless banking services
to family at home: 17 percent of Kenyan have passed the one million user mark,
households depend on remittances compared with M-PESA’s 14 million.51
from relatives working away from home
as their primary source of income.48 M-PESA’s success is not limited to its
M-PESA aims to reduce the high cost initial products. The partnership has
of sending money across the country extended its initial product offering
and to remove the risks of doing so. The to launch M-KESHO accounts, which
solution is a simple-to-use mobile phone offer micro-savings, micro-credit and
application, supported by a network of micro-insurance to M-PESA customers.
branded retail outlets across Kenya that And success is not limited to Kenya:
tap into the strong consumer trust in Vodafone is combining its Kenyan
the Safaricom brand. experience with its global reach to
enter into new ventures in Tanzania,
By serving the unmet needs of South Africa and Afghanistan, and the
Kenyan consumers, M-PESA has company has identified India as the next
grown quickly, achieving 14 million big opportunity for growth.
registered customers within four
years. This corresponds to 81 percent
of Safaricom’s customer base, two-
thirds of Kenyan adults, and 35
percent of the entire population.49
M-PESA has achieved US$320 million
per month in person‐to‐person
transfers, equal to approximately
10 percent of Kenyan GDP.50

44

Engaging with local stakeholders

It is easy to underestimate the is a key weapon in the arsenal against consumers, from door-to-door sales
importance of local relationships in competitors—and perhaps the greatest to urban “high-street” settings. In
high-growth markets. Relationships challenge of all in high-growth markets. 2010, L’Oréal’s sales in Brazil rose 20
with governments, regulators and percent,53 to €740 million,54 and the
local communities play a crucial role Cosmetics giant L’Oréal has made company expects to add 50 million new
in obtaining a license to operate. expansion in Brazil a top priority, customers there over the next decade.55
Opportunities may go to companies aiming to double sales by 2015.52
that can effectively negotiate with In the Brazilian cosmetics market, Successful companies in high-growth
governments and local authorities, the third largest in the world, the markets understand the importance
often benefiting local incumbents. dominant domestic incumbent Natura of forging relationships and engaging
Governments and policymakers can Cosméticos has built unmatched local stakeholders. Ninety percent of
keep the windows of opportunity open market reach with a strategy of successful globalizers view relationships
by easing the policy environment or direct sales through a network of with local stakeholders as critical for
providing access to scarce resources. over one million sales consultants. To success, far in excess of the 69 percent
challenge Natura’s dominance, L’Oréal among companies disappointed by their
Similarly, establishing strong is adopting a differentiated strategy. performance in emerging markets. This
relationships with suppliers, It is establishing partnerships with belief is reflected in practice: 79 percent
distributors and consumers can open retailers, such as Lojas Americanas, of successful globalizers report that
up opportunities in unfamiliar but to forge new consumer relationships they devote sufficient time, money and
lucrative segments and geographies. For through high-end displays and personal management attention to stakeholder
consumer goods companies, building beauty advisers. By establishing strong relationships. Only 54 percent of those
networks for the efficient distribution relationships with high-street retailers, with disappointing performance report
of products in new markets is critical L’Oréal will be in prime position to the same commitment (see Figure 20).
to success. Forging a strong identity take advantage of the shifts in buying
and brand relationship with consumers behaviors they expect from Brazilian

Figure 20: Management of relationships with local stakeholders (percentage of respondents)

Successful 90%
globalizers
79%

Global 81%
average
66%

69%
Disappointed
globalizers
54%

0% 20% 40% 60% 80% 100%



45

Companies are already seeing the
benefits of this strategic focus and
investment: 83 percent of successful
globalizers believe that they have
already established strong relationships
with local stakeholders (see Figure 21).

83% of successful
globalizers believe
they have established
strong relationships
with local stakeholders,
compared with 47%
of disappointed
globalizers.

Figure 21: “My company has established strong relationships with local
stakeholders” (percentage of respondents)

Successful 83%
globalizers

Global average 61%

Disappointed
47%
globalizers

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


46

Uncovering latent demand

Searching for latent demand also Successful companies understand the The means to discover latent demand
opens windows of opportunity: that is, importance of innovation in reaching need not reside in-house. BP Energy
uncovering sections of the population untapped consumers: nearly two-thirds India (now First Energy) bought patented
that have previously been excluded from believe in the importance of new sales technology from the Indian Institute
access to consumer products or services. and marketing techniques to reach of Science (IISc) that uses fuel pellets
underserved consumers (see Figure 22). made from agri-waste to run smokeless
Successful companies build strategies to Banco Bradesco, operator of Brazil’s stoves: it has now successfully sold
meet the needs of potential consumers largest retail banking network, found an its “Oorja” stoves to nearly a quarter
underserved by traditional products and innovative solution to meet the banking of a million homeowners and hopes
business models. Providing innovative needs of rural consumers. In 2009, to bring this energy-efficient solution
solutions for unmet needs, such as those pursuing a goal of “banking inclusion” to 3.6 billion potential customers.60
in rural areas, can spur new demand in a country with more than 50 million
and uncover powerful engines for wider “unbanked” consumers, Bradesco
economic growth. In India, for example, opened the country’s first floating bank
rural incomes have been growing at branch on the Amazon River network.
more than 7 percent annually over the Targeting 250,000 people along the
past few years. The income growth banks of the river, who are used to
accounts for almost 40 percent of traveling more than twelve hours to
India’s total consumption of goods and collect salaries, pensions and their Bolsa
services.56 More than 50 percent of new Família grant, the floating branch has
subscribers for some leading telecoms uncovered pockets of demand previously
providers are rural customers, and the unserved by traditional banking.59
share of rural subscribers in the Indian
market has hit 34 percent, up from less
than 5 percent just five years ago.57

In Peru, soft-drinks manufacturer
AJE took on multinational players by
targeting its Kola Real soda at lower
income brackets. AJE has replicated its
success in other emerging economies.
The manufacturer’s success is grounded
in a business model that targets latent Figure 22: Importance for growth: New sales channels to reach previously
demand. First, the low-cost business excluded customer groups (percentage of respondents)
model allows the company to offer its
products at lower prices. That makes
its drinks affordable to the majority of
the population. Second, an innovative Successful 63%
distribution system, involving micro- globalizers
entrepreneurs using their own transport,
allows it to reach untapped consumers
in remote areas. In 2006, AJE set up
in Asia. It now boasts annual sales of Global average 50%
US$1.5 billion across 16 countries. Our
household income analysis shows that
significant growth in household income
is expected in many of the countries in Disappointed
47%
which Kola Real operates, such as India, globalizers
Indonesia and Brazil. India alone is on
course to gain 21 million households
earning up to US$30,000 per year 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
by 2020, equivalent to additional
household income of US$1.1 trillion.58

47

Seeding future demand

Many of the multinationals that have Companies with an effective presence
achieved success in high-growth markets in high-growth markets are also On tomorrow’s agenda
over recent decades were quick to realize investing in the health and education
the important connection between of local communities. Doing so builds • Identify and map key stakeholders,
business success and socioeconomic the demand and consumer base of the local and global, and build trusted
development. An “enlightened self- future. GSK, one of the world’s leading relationships.
interest” drove many companies to providers of medicines and health • Assess the strength of relationships
invest in these markets and develop a care products, founded its strategy with government agencies, industry
proactive stance toward collaborating in emerging economies on its Access regulators and local communities.
with stakeholders for mutual advantage. to Medicine program. The program is
• Innovate to fulfill unmet needs, and
designed to increase the company’s
Successful companies engage with involve local consumers in innovation
positive societal impact while delivering
national and local governments to and design.
business benefits. GSK has reduced
shape the conditions needed for their the price of its patented medicines • Evaluate local and global leadership’s
businesses to prosper. In May 2010, in the world’s poorest countries. The understanding of social and economic
for example, the Brazilian government price reductions build new markets factors that influence demand, and
launched the US$8.5 billion National while increasing access to previously promote the social and economic
Broadband Plan (PNBL). The plan unattainable medicines and safeguarding development of local communities.
aims to provide Internet coverage to the future health of local communities.
11.9 million households by the end of
2014. State-owned Telecomunicações Significant benefits can be attained
Brasileiras (Telebrás) holds overall through initiatives that uncover and seed
responsibility for the plan. Four future demand. These are highlighted
additional companies, Telcos Claro, TIM, in “Shape your consumption curve:
Sky and GVT, have agreed to invest Building digital pathways”, page 49, and
and offer Internet packages under “Shifting consumption curves: The value
the plan. This commitment to capital of disruptive innovation,” page 51.
investment to boost the telecoms
infrastructure exemplifies the willingness
of companies to invest upfront in
support of government initiatives,
in the expectation of significant
long-term returns.61 Our analysis Figure 23: Importance for growth: Strategy and process design that ensures
in “Shape your consumption curve: environmentally and socially sustainable growth (percentage of respondents)
Building digital pathways” (see page
49) makes clear the disproportionate
consumption benefits that these
infrastructure investments can achieve. Successful 82%
globalizers
While investment in “hard” infrastructure
may help companies open new windows
of opportunity, successful players realize
that deeper engagement is necessary Global average 69%
to keep them open. Eighty-two percent
of successful globalizers stated that
“strategy and process design that ensures
environmentally and socially sustainable Disappointed
68%
growth” will be critical to success in globalizers
high-growth markets, compared with
68 percent of those disappointed in
their performance (see Figure 23). 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


48

Shape your consumption
curve: Building digital
pathways
As part of our research with Oxford Figure 24: Chile’s broadband consumption curve, 2020
Economics, we conducted scenario-
based sensitivity analysis to understand 70
the impact of business and policy
60 Potential curve
changes on market penetration. The
Broadband subscribers per 100 people

Average household
scenario presented in Figure 24 shows income in 2020
the potential impact in Chile of policies 50
designed to increase broadband
coverage and Internet accessibility. 40
Baseline curve
In our baseline scenario, we assume 30
that rising household incomes increase
19
broadband demand from eight 20
subscribers per 100 people in 2008 to
15 per 100 in 2020. Effective policy 10 15
interventions can boost this even
further. In many ways Chile’s digital 0
economy is ahead of its peers. It has 5,000 25,000 45,000 65,000 85,000 105,000
a focus on government e-services and
high social media penetration—but Average household income (2008 US$)
significant limitations still exist. For
instance, the government’s broadband Source: Oxford Economics, Accenture
review found that 20 percent of NB: The potential curve diverges from the baseline at higher average income levels because the model
Chilean households, particularly in assumes that higher average incomes translate into increased computer ownership and therefore
rural areas, are not covered by any increased demand for broadband.
fixed broadband network.62 We then
posed the question: what would
happen if broadband coverage were
brought to all Chilean households?

49

Figure 25: Fixed-line broadband consumption curve, 2008

45

40 Sweden
Broadband subscribers per 100 people

35
South Korea
30

25

20

15

10 Chile

5

0

0 20,000 40,000 60,000 80,000 100,000 120,000



Our results suggest that improving the business landscape. A significant Sweden’s success in deploying a fast
access to the Internet could number of small businesses would and wide network was supported by tax
boost broadband subscriber rates gain access to new technologies, breaks for infrastructure investments
by around 25 percent, from 15 such as cloud computing— this would and directly subsidized rural deployment
per 100 people to nearly 19 (see provide a boost to innovation and to the tune of US$800 million.65 The
Figure 24). This is equivalent to an entrepreneurship. It would also open up country’s new broadband strategy—with
additional 650,000 subscribers. new channels to customers, including a target of 90 percent coverage at 100
overseas markets. Mbps average speed by 2020—reflects
In practical terms, this change could the collaborative nature of the plan: a
be brought about through public and South Korea has developed one of the joint challenge with different roles for
private collaborative investment that world’s most advanced broadband different players.66
enables more households to connect to networks through the government’s
the Internet. Recognizing the massive long-term commitment to and Figure 25 illustrates how progressive
potential that Internet access holds for collaboration with the private sector. broadband policies in both Sweden and
the economy, the Chilean government South Korea’s Information Infrastructure South Korea have allowed subscription
recently commissioned a strategic (KII) Plan was initiated in 1994 and rates to shift measurably away from
review of broadband policy. The goal designed to connect 84 percent of the global curve, effectively boosting
is to identify potential measures that households to broadband services with consumption. Businesses across
eliminate the country’s coverage speeds of up to 1 Mbps by 2005. The industries have been able to benefit
differentials and strengthen broadband plan combined government support and from these initiatives.
takeup.63 Companies in Chile have private-sector investment. Specifically,
the opportunity to work with local the “KII-Private” phase of building the Proactive engagement in policy
governments and other businesses to network for households and business development and infrastructure building
shape the institutions, infrastructure included private-sector investment can have a very real impact on business
and standards that will govern future of US$14.5 billion. That investment opportunities by increasing and bringing
industry dynamics. was supplemented by US$1.76 billion forward demand.
of government loans between 2000
The benefits of collaborative investment and 2005.64 The near-ubiquity of
extend far beyond the creation of a new internet access has enabled South
customer base for service providers. Korea to become a world leader in
Improved internet access can transform market sectors such as online games.

50

Shifting consumption
curves: The value of
disruptive innovation

Renault, the French automotive As part of our sectoral consumption impact of any price change can be
company, used its acquisition of analysis, in collaboration with Oxford broken down into two elements: the
Romanian car manufacturer Dacia Economics, we examined the potential “substitution effect” and the “income
to produce the Logan, a five-seater impact of disruptive innovation on effect.” The substitution effect occurs
sedan. The Logan was introduced in the automotive sector. We selected when a price drop makes cars more
Romania in 2004. Prices started at India’s passenger car sector as an affordable and consumers can trade
US$6,500, approximately 40 percent example. It is a market about to take up from their current transport mode.
lower than rival sedans.67 The car was a off and promises significant rewards. This means that the consumption curve
success in Romania and other emerging would shift to the left, so that there is
economies and now accounts for one In the baseline case, as household higher demand at every income level
in five of Renault’s global sales.68 Tata incomes in India rise, the ratio of (move from A to B in Figure 26). But
Motors launched its no-frills small car, passenger cars to people is expected to the dramatic price drop also increases
the Tata Nano, in 2008. It retails for rise to 28 per 1,000 by 2020, compared the purchasing power that households
US$2,500,69 70 percent lower than the with 10 cars per 1,000 people in 2008. can dedicate to buying a car—it has
average car price in India in 2008.70 This growth would translate into 3 a similar effect to that of an increase
million cars sold per annum in the period in income. This is the income effect
These cars are not stripped-down to 2020. We then posed the question: and is demonstrated in Figure 26 as
versions of the models sold in developed what would happen if price innovation a move along the consumption curve
economies. In fact, the innovations reduced average retail prices across (move from B to C). Of course, this
extend beyond the actual product, the Indian car market? (see Figure 26). isn’t a stage-by-stage process. The
including a full-scale process redesign breakdown presented depicts the
from materials sourcing to marketing. In our alternative scenario, innovation potential shifts as the market moves
For example, the locally sourced, drives down prices significantly to a new equilibrium. The combined
low-cost steel that Renault uses for and current industry dynamics are impact of these two effects could be a
the Logan is more difficult to shape transformed. Households lower in 25 percent increase in car sales over and
than the steel used for high-end the income spectrum would be able above the baseline—equivalent to an
cars. To work with this steel, the car’s to afford new cars. Consumption additional 750,000 cars per annum (this
design had to be simple enough to patterns would change as households is toward the upper end of the range
be manufactured by humans instead re-prioritize their demand between of car sales’ responsiveness to price:
of robots. Working with human labor goods and services. To illustrate, take see Methodology, page 67, for further
allowed Renault to take advantage a scenario in which car prices in India details on the modeling assumptions
of Romania’s low labor costs.71 drop by 50 percent. Typically, the used to generate this estimate).

51

Figure 26: India passenger cars consumption curve: Disruptive innovation scenario

45
A 50% price reduction
40 could potentially
Passenger Cars per 1,000 people

35
C translate into 25%
2020 Curve - 50%
reduction in real price
B
higher car sales.
2020 Curve -
30 constant car price
A
25

20
7,500 8,000 8,500 9,000 9,500 10,000 10,500 11,000


Source: Oxford Economics, Accenture

Investment in disruptive innovation is Lessons from the small-car segment
a big commitment. But the rewards extend beyond emerging economies,
are tantalizing. Some automotive and so will the benefits. Many
players have already started to open consumers in markets that have
this window of opportunity. The traditionally favored larger cars, such
Renault-Nissan alliance is launching as the United States, are downsizing
a low-cost car project in India, led to cheaper cars that combine fuel
by Gérard Detourbet, the head of economy with the features of
the global Logan program.72 South larger cars. Ford’s small cars, the
Korea’s Hyundai Motor Company Fiesta and Fusion, set sales records
is investing in India, including a in 2011.74 Companies in mature
research and development center, markets also have an incentive to
to make India its global hub of support the sale of low-cost, small
low-cost, small-car production.73 cars that meet new fuel-efficiency
standards. For example, in the United
Tapping into India’s demand is more States, automotive companies have
complicated than it might appear. committed to doubling the average
Finding the right mix of price and fuel economy of their fleets by 2025.75
product features that would induce
Indian consumers to trade up
requires technological investment
and a deep understanding of
local needs. Success also relies on
building a robust business case that
incorporates the additional costs of
research and product development
into a low-margin, high-volume
sales plan. This is a high-risk, high-
reward opportunity. But for some
companies, the risk of missing the
opportunity altogether may be higher.

52

Seizing the future:
Operating at speed
and scale
Successful companies infuse their Innovation plays an important role
organizations with the strategic, in this. Our analysis shows how the 83% of successful
operational and cultural agility to
grasp new opportunities. In order
power of disruptive innovation can
transform industry dynamics, improving globalizers believe
to achieve this, they prioritize and
invest in distinctive capabilities
the accessibility of consumer products
and creating new markets. In the
they can keep up with
that boost operational agility and automotive sector, for example, process the pace of change in
flexibility. These capabilities are not redesign and low-cost materials
just instrumental in helping companies have dramatically broadened the high-growth markets,
to grasp the opportunities of today, accessibility of passenger cars to new
but will play a fundamental role in consumers. New pockets of demand compared with 47%
shaping the markets of tomorrow. have opened up for those companies
with the agility and efficiency to of disappointed
For many companies, a focus on
efficiency and profitability may have
design low-price business models. globalizers.
been secondary to the desire to grow Successful globalizers are pushing the
quickly and establish a foothold boundaries of what is possible: they
in high-growth markets. But the understand that business performance
competitive pressures of tomorrow’s and the bottom line will only become
markets will demand renewed attention more important in geographic
on efficiency. Agility and flexibility growth plans. They understand that
will be essential to enable companies operating at speed and scale will play
to serve new consumers faster and an ever greater role in determining
more effectively than their rivals. the winners and losers of the next
phase of global competition.
Our research demonstrates that
successful globalizers prioritize
specific capabilities that boost
operational agility and flexibility.
This in turn allows them to adapt
and reorient to the opportunities of
today and tomorrow. The results of
this commitment are clear: 83 percent
of successful globalizers believe that
their company is able to keep pace
with change in high-growth markets,
a figure significantly ahead of the
global average of 62 percent.

54

Starbucks: Flexibility, the recipe
for success
With nearly 500 stores across mainland At the same time, Starbucks added
China, Starbucks has undergone strong direct responsibility for China to the
growth in China over the past five portfolio of Asia Pacific President John
years. Starbucks now regards China Culver, bringing executive responsibility
as its “second home market” and for the market into the top management
plans to triple the number of stores team. Culver’s remit includes growing
there by 2015.76 But the company’s and developing Starbucks operations
success has not been simple: it had in Indonesia, Japan, Malaysia, New
to be flexible enough to incorporate Zealand, the Philippines and South
a range of ownership models, from Korea. Starbucks continues to explore
joint ventures to wholly-owned new high-growth markets through
operations, and develop them over joint ventures and licensing models.
time. Starbucks understands the The flexibility of its approach, driven
importance of agility in order to take largely by the maturity of the company’s
advantage of new opportunities. presence in each market, is central to
achieving the agility that Starbucks has
Joint ventures with local operators such displayed. The operational changes that
as Hong Kong-based Maxim’s powered Starbucks has been able to make are a
the coffee giant’s initial venture into testament to its culture and ability to
China. With Starbucks’ need to gain navigate complexity and change.
local market experience and build the
necessary networks, these partnerships Starbucks may have only scratched
provided access to new consumers the surface of the coffee opportunity
and allowed Starbucks to “dip a toe in in China: single-store sales in Chinese
the water” of the potentially lucrative outlets are on average 40 percent
Chinese market. less than in the United States, and
the average consumer purchases
The company’s confidence in China has just five cups of coffee per year,
grown with its success, and Starbucks compared with 400 in North America.
is deepening its roots in the market. It As tastes change—driven in part by
has partnered with Ai Ni Group, one the company’s own efforts—China is
of China’s most established coffee poised to become the world’s second-
operators and agricultural companies, biggest coffee market. Starbucks is
to open a coffee farm and processing well positioned to take advantage
facilities in the southwestern province of of this new wave of growth.79
Yunnan. Expansion plans target ten new
Chinese cities each year to reach a total
of 1,500 stores in 90 cities by 2015.77

Restructured operations and the
move from a partnership model to a
wholly-owned venture reflects the
importance of China in the company’s
growth plans. In June 2011, Starbucks
took full ownership of the stores it
ran in partnership with Maxim’s. This
agreement gave Starbucks 250 wholly-
owned stores in the provinces of
Guangdong, Hainan, Sichuan, Shaanxi
and Hubei and afforded the company
greater control of its brand, outlets and
product offering.78

56

Designing agile and flexible operations

The rapid evolution of markets demands Attitudes toward the movement of
speed in identifying and responding ideas around the organization are
to opportunities. Entering a new particularly illuminating. Innovation
market, designing a new product will become increasingly important.
or making an acquisition requires Players in higher-end markets will
organizational agility and flexibility face heightened pressures to innovate
to move ideas, people and capital as firms from emerging economies
around the organization as required. continue their move up the value
chain. Players at the lower end will
Our survey highlights some significant face continued pressure as competitors
differences between successful find innovative ways to develop the
globalizers and other companies. same offerings at a lower cost: think
Although companies across the Tata’s Nano car, Asus’ notebook
board consider the rapid mobilization computers or the new generation
of people to be critical for success of lower-cost pharmaceuticals (see
in high-growth markets, behavior “Indian pharmaceuticals: Turning
differs substantially when it comes agility to advantage,” page 60).
to committing sufficient time, money
and attention (see Figure 27). Successful globalizers place great
importance on generating new ideas
The ability to mobilize people is and innovations. Seventy percent use
particularly important for large incentives to encourage local innovation
domestic players expanding onto the and experimentation among employees
international stage. In seeking to extend in potential high-demand locations, and
its footprint beyond India’s borders, 76 percent underline the importance
Tata Communications designed a wholly of structures and incentives that
new operating model to incorporate generate and capture demand. Once
local leadership expertise into its global new ideas and innovations are created,
operations. By establishing corporate successful globalizers also focus on
offices in Singapore, Sri Lanka, the sharing and scaling successful ideas
United States and the UK, the company across the organization (see Figure 30).
has extended the reach of its corporate
center. By instituting a rotation model, Investment in innovation can lead to
employees can be redeployed according significant demand and consumption
to business need, while simultaneously gains, as illustrated in “Shifting
building their cross-cultural skills.80 consumption curves: The value of
disruptive innovation,” page 51.
Successful globalizers also place greater
emphasis than other companies on the
ease of redeploying capital around the
world. They are more confident that
they pay sufficient attention to this
capability (see Figure 28). Successful
globalizers are also far more likely to
feel that they have sufficient access
to investment capital (see Figure 29).

57

Figure 27: Rapid mobilization of people around the global organization (percentage of respondents)

Successful 78%
globalizers
73%

Global 73%
average
57%

75%
Disappointed
globalizers
43%

0% 20% 40% 60% 80% 100%



Figure 28: Rapid mobilization of capital to different parts of the world (percentage of respondents)

Successful 72%
globalizers
71%

Global 62%
average
56%

56%
Disappointed
globalizers
43%

0% 20% 40% 60% 80% 100%



58

Figure 29: “My company has sufficient access to investment capital”

Successful 77%
globalizers

Global average 55%

Disappointed
36%
globalizers

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


Figure 30: Structures and processes to share and scale successful innovations across high-potential markets

Successful 82%
globalizers
72%

Global 75%
average
59%

64%
Disappointed
globalizers
49%

0% 20% 40% 60% 80% 100%



59

Indian pharmaceuticals:
Turning agility to advantage
The rising global presence of Indian recently launched a joint venture with
pharmaceutical companies in recent Cadila, one of India’s largest privately
years demonstrates the importance of held pharmaceutical companies. But
organizational agility and flexibility, these ventures are also designed to
as companies build on their domestic establish a new base for expansion into
success by sharing and scaling other emerging markets. In 2009, GSK,
innovation across new markets. the world’s third-largest pharmaceutical
company, signed an agreement with
Growth in India’s pharmaceutical sector India’s Dr. Reddy’s to develop and
has been strong in recent years, driven by market selected products across
rising domestic consumption and strong emerging markets.
export demand. The pharmaceuticals
industry has traditionally been dominated Building on the strength of their
by companies in developed markets. domestic position and the advantages
But deregulation and new production of joint ventures with multinational
processes have allowed new players to players, Indian companies are expected
gain leadership in the generics market. to grow exports nearly 20 percent
this fiscal year, to US$12 billion. They
India’s leading pharmaceutical will supply nearly 50 percent of the
players have taken advantage of the world’s bulk drug requirement. The
opportunities presented by deregulation United States remains the largest
and patent expiration through export destination, followed by the UK,
innovative approaches to process Germany, South Africa and Russia. In
design. Traditionally, pharmaceutical coming years, however, Indian firms
industry R&D has been a slow anticipate significant growth in exports
process, but in India the adoption of to emerging economies. A recent study
reverse pharmacology has provided forecasts that by 2020, seven emerging
production efficiency gains and helped markets—Brazil, China, India, Indonesia,
manufacturers to test generic drugs more Mexico, Russia and Turkey—will
quickly and increase the speed to market. account for one-fifth of international
pharmaceutical sales.83
The ability to bring relevant products
quickly to market at low price points As new markets develop in emerging
has been instrumental for domestic economies, Indian players and
players in shaping the Indian market their joint-venture partners may
on their terms. Organizational agility, hold an advantage. They can apply
combined with a focus on lean, low-cost their domestic experience to new
manufacturing operations, has enabled geographies and innovate at home
domestic players to secure the largest before scaling across global markets.
share of the Indian market: while 15 Success in these markets will play a
of the world’s top 20 pharmaceutical critical role in determining the future
companies have an active presence growth prospects of even the largest
in India,81 domestic players supply companies. Pfizer estimates that
90 percent of bulk drugs in the 75 percent of pharmaceutical sales
country.82 Domestic companies are also growth over the next five years will
rapidly expanding sales in advanced come from emerging markets.84 In
formulations and specialty medicines. seizing these opportunities, operational
agility and flexibility will be critical.
In response, foreign multinationals are
aggressively pursuing joint ventures
with Indian players. These ventures are
designed to gain access to the Indian
market. Bayer HealthCare, for example,

60

Building leadership teams for tomorrow’s reality

Ninety-one percent of successful Figure 31: “My company’s top leadership is committed to market entry and
globalizers report that their leadership expansion” (percentage of respondents)
team is fully committed to entry and
expansion in high-growth markets,
compared with just 60 percent among
those companies disappointed by their Successful 91%
globalizers
performance (see Figure 31).

Commitment from the top is a hallmark
of success. But senior-level commitment
tells only part of the story. Successful Global average 72%
globalizers’ leadership teams are
configured differently and work in
different ways. These teams are also
more likely to invest the resources Disappointed
60%
and devote the attention required to globalizers
ensure that the team composition
reflects a diversity of perspectives
and experience (see Figure 32). 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

The efforts of successful companies Source: Accenture Fast Forward to Growth survey
to broaden the backgrounds and
geographic distribution of their teams
exemplify the importance of diversity.
HSBC announced in 2009 that the office through a deep understanding of cross-functional committees on issues
of the CEO would move from London Chinese tastes and preferences. Today, such as leadership development and
to Hong Kong;85 and in 2011, Unilever Yum! Brands, KFC’s parent company, product innovation. These committees
appointed Bharti Airtel Chairman cites the focus on local leadership connect business units and move
Sunil Mittal to its global board as a as a key element in the success of beyond siloed lines of command toward
non-executive director.86 Looking to a business that generated US$4.1 a model that puts the right people in
the demands of tomorrow, leading billion in revenue in China in 2011.88 the room with the right information
companies have adopted structured to make decisions. Whatever model
approaches to ensure that their Successful companies also recognize is used, it must provide the flexibility
future leadership has the appropriate that operating across diverse and to adapt to and keep an eye on the
diversity of experience. Nestlé, for fast-growing markets demands a future shape of the organization.
example, is relaunching its International variety of decision-making styles.
Development Program in Marketing and They acknowledge this more readily
Sales. The 36-month program aims to than other companies. They are also
give future leaders an introduction to far more likely to invest in building
the company’s headquarters and their leadership teams that can easily
product category prior to a 30-month reconfigure their composition to meet
assignment to a foreign market.87 complex demands (see Figure 33).
Global companies see the benefits of Some leaders have chosen a
developing local leadership in new “networked” approach rather than
markets. When PepsiCo stepped up its one that is “process-driven.” In order
efforts to establish the KFC brand in to address high-priority concerns, for
China, for example, it recruited local example, international hotel chain Four
managers who could build the company Seasons has established new global

61

Figure 32: Leadership teams that possess a diversity of perspectives and experience (percentage of respondents)

Successful 91%
globalizers
82%

Global 88%
average
69%

89%
Disappointed
globalizers
72%

0% 20% 40% 60% 80% 100%



Figure 33: Leadership teams that easily reconfigure their composition and decision-making style to meet growth-market
needs (percentage of respondents)

Successful 89%
globalizers
81%

Global 77%
average
59%

73%
Disappointed
globalizers
43%

0% 20% 40% 60% 80% 100%



62

Embedding a culture to manage complexity
and change
Successful companies, in any market, difficulties in transforming the way
are committed to building the skills a company thinks, feels and works. On tomorrow’s agenda
and capabilities required for success Samsung has been drawing select • Explore partnership and acquisition
and shaping the corporate culture to Western business practices into its options to boost reach, capability and
support them. Today’s fast-evolving traditional South Korean corporate speed, and continually reassess and
business environment demands a culture culture. For example, it launched evolve ownership and governance
that is comfortable with uncertainty, meritocratic promotion and pay into a structures as circumstances change.
complexity and change. Across the board, culture based on seniority and reverence
our survey respondents acknowledge for elders. It also combines a focus on • Develop systems to rapidly redeploy
the importance of this critical capability. innovation with expertise in process people, capital and ideas around the
But there is a significant gap between improvement. The company is engaged global organization.
successful companies and others in terms in an ongoing process that preserves • Encourage experimentation—incubate,
of committing sufficient time, money and the best aspects of its long-held culture fund and protect new ideas.
management attention to building these while incorporating new traits into
corporate cultures (see Figure 34). its organization. Samsung’s drive to • Assess the leadership team and how
reorient its culture has allowed the its skills and experience align with
One of the most successful globalizers company to embrace the demands of growth plans.
of recent decades, Samsung, grasped new markets while maintaining the
early on the importance of molding the foundations of its success.89
company’s culture to its new business
reality. The company also realized the

Figure 34: A corporate culture that embraces uncertainty and change (percentage of respondents)

Successful 85%
globalizers
70%

Global 77%
average
57%

73%
Disappointed
globalizers
47%

0% 20% 40% 60% 80% 100%



63

Conclusion:
Windows to the Future
Who will be the high performers in the Beginning today, firms can make efforts
next phase of global competition? It will to push the boundaries of opportunity
be those organizations that are able to beyond the status quo. They can
make the most of the transformations in build the relationships and make the
today’s business environment to position investments to generate new demand,
themselves for growth tomorrow. to build new customer groups and to
It will be those that have revised shape the possibilities of consumption.
their approach to global growth in For example, innovating new business
recognition of the fundamental changes models can shift price points and bring
in the global landscape of opportunity new customer groups within reach. And
and competition. Success will not entirely new markets can be seeded
come to those that rely on outmoded through improvements in infrastructure,
templates and attitudes. Rather, it will healthcare and education.
come to those that engage in new
strategic and operational approaches Tomorrow’s high performers are already
that bring a superior ability to track building agility and flexibility into their
and act upon the diversity of global international operating models. They
opportunities, wherever they are found. are leveraging advances in technology
These opportunities will, in many cases, and analytics; they are reconfiguring
lie in emerging economies. processes and organizational structures;
and they are investing in building
Beginning today, business executives skills and leaders that have a superior
can focus on understand the unfolding capacity to identify and rapidly act
changes in the map of global trade and upon emerging opportunities. Their
investment flows, especially between culture embraces market change and
emerging economies. They can build uncertainty, rather than allowing change
their understanding of where new to paralyze decision-making.
competitors and partners will come
from and where emerging players are The future looks bright for companies
placing their big bets for growth. that are acting today to position
themselves for the next era of global
Beginning today, companies can view opportunity and competition. Business
global growth opportunity through leaders who invest in building the
multiple lenses. They can look across capabilities to succeed in this new
time horizons in order to better environment will not talk of shrinking
sequence their investments and windows of opportunity—they will throw
more effectively evaluate trade-offs open the windows to the future.
between competing opportunities.
They can also look across national
borders, for example, by aggregating
across disparate markets to find new
opportunities and by exploring new
pockets of demand.

65

Methodology: Income and
consumption forecasting
The projected distribution for 2020 paved in each country was included.
Household income was obtained by inputting the 2020 For broadband penetration, the average
analysis forecasts of average income into the
function, keeping the standard deviation
broadband speed was included.
• Identifying market phases: The
Accenture, in collaboration with Oxford constant.
takeoff, rapid growth and maturity points
Economics, constructed household • Inflation adjustment: All forecasts were identified for each consumption
income band estimates and forecasts are adjusted to constant 2010 US$. curve. The takeoff point was located
for 64 countries.90 These countries as the point where market penetration
accounted for more than 90 percent
of global GDP in 2010. The research Baseline global begins to significantly increase at the
bottom of the consumption curve. The
involved the following stages:
consumption curves rapid-growth point was calculated by
• Data collection: The data for total net using the point where the slope of the
Accenture, in collaboration with Oxford
disposable household income (i.e., total consumption curve is steepest. The
Economics, estimated the consumption
household income once all taxes have market maturity point is where market
curves for a select number of products
been paid) were collected from national penetration does not rise significantly
and services.
statistics agencies and broken down by despite an increase in income.
key sources (wage earnings, government The main steps for all sectors
transfers, other income sources). This covered were: Scenarios
was done for each of the 64 countries.
• Defining the shape of the Scenarios were developed to test
• Data adjustments: For some emerging consumption curve: Different ideas were how consumption curves might
markets, total household incomes were explored for the general functional form change and how they might be
rescaled using the household savings of each sector’s consumption curve. The shifted by targeted business and/
rate to match the consumption total in logistic functional form was chosen as or policy action. Output from two
the national accounts. In some cases, no the most appropriate fit, based on the scenarios, passenger car market and
breakdown was available for the source academic literature and the nature of broadband penetration, was presented
of income, so a proxy country, with a the selected industries. in the main body of the report.
similar economic structure, was used.
• Estimating the consumption curve:
• Total household income forecasts: The first step was to estimate a cross- Passenger car market
The Oxford Economics baseline country relationship between market The approach was to estimate a baseline
macroeconomic forecasts from penetration and household income. consumption curve for 2020 for a
June 2011 were used as a basis for The base year for analysis was sector- particular case-study country (India)
calculating estimates and forecasts of specific, and we used household income and then vary the parameters of interest
total household income in 2010, 2015 data for the base year. The estimated to test different scenarios. The baseline
and 2020. curve implicitly assumes that the curve for 2020 already includes the
• Income distribution estimates relationship between household income increase in market penetration due to the
across income bands: We used a log- and market penetration takes the expected rise in household income. The
normal distribution, which is defined same shape across all countries. The household income data were based on
by two parameters: the mean (median second step was to incorporate relevant our own research in this area.
household income, in this case), and the country-specific structural factors.
standard deviation (which captures the For example, for passenger car market
degree of dispersion around the mean). penetration, the percentage of roads

67

In the alternative scenario presented in Broadband penetration
the report, we test the impact of a 50
percent price reduction. Consumption Using Chile as a case study, our
analysis explores the relationship of a baseline consumption curve for 2020
given good versus others in the consumer incorporates the impact of rising
basket. Typically, the impact of a price household incomes and improvements
change on demand can be decomposed in the average speed of fixed-line
into the substitution and income effects. broadband from around 2 Mbps to
around 15 Mbps. This is based on
The substitution effect arises because recent market trends that suggest
of the relative price change, since a a brisk pace in broadband speed
price drop makes cars more affordable improvements around the world.
relative to other goods and consumers
are encouraged to trade up from their Although improvements in speed
current transport mode. According to the increase penetration rates, access (as
academic literature, the price elasticity indicated by maximum coverage) is
of the car stock to price changes is also important. In Chile broadband
around 0.11 (for example, Johansson & penetration is limited by access
Schipper, 1997).91 However, it is likely restrictions—20 percent of households
that a large price drop would trigger a are not covered by any fixed broadband
more significant response in demand. network. The Chilean government
This is particularly true in emerging has announced its intention to work
economies, where the passenger car with business to widen broadband
stock per capita is still very low. To access to all households. To capture
account for this impact, we increased this, in our alternative scenario, the
the price elasticity in our scenario to maximum penetration rate in the
0.3. Studies that look at price elasticity broadband consumption curve is
in the context of large price drops increased from 45 subscribers per
are rare, so our assumed elasticity of 100 people to 65 subscribers.
0.3 lies just above the upper estimate
suggested by most academic studies.

The income effect means that household
purchasing power has increased as a
result of the price drop. For example,
a 50 percent price fall in a good that
represents 20 percent of the average
household’s consumer spending implies
a rise in real income of 10 percent.
So although the household’s average
nominal income hasn’t actually
changed, the price drop simulates the
same effect as an income increase.
We might usually assume that the
share of vehicle purchases stays in
line with the household’s share in the
consumer price index (CPI) bundle.
But our scenario assumes a disruptive
innovation whose impact is to bring
about a significant shift in household
spending patterns, increasing the share
of household spending on cars at the
expense of other items in the consumer
bundle. To account for this change,
we assume that vehicle purchases rise
to 10 percent of household income.

68

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70

Acknowledgments About the Accenture
Core research team Institute for High
Rob Hayward, Armen Ovanessoff,
Athena Peppes, Kuangyi Wei
Performance
The Accenture Institute for High
Senior executive steering Performance creates strategic insights
into key management issues and
committee
macroeconomic and political trends
Paul Nunes, Mark Purdy, Matthew through original research and analysis.
Robinson, Mark Spelman Its management researchers combine
world-class reputations with Accenture’s
External economic advisor extensive consulting, technology and
Vanessa Rossi outsourcing experience to conduct
innovative research and analysis into
We would like to thank the many how organizations become and remain
Accenture client account executives high-performance businesses.
who provided input.

We would also like to thank the About Accenture
following individuals for their Accenture is a global management
contributions to the study consulting, technology services and
Claire Allen, Allan Alter, Joshua Bellin, outsourcing company, with more than
Sarah Bird, Shawn Collinson, Tim Cooper, 244,000 people serving clients in
Steve Culp, Ladan Davarzani, Philip Davis, more than 120 countries. Combining
Henry Egan, Alex Foster, Stephane Girod, unparalleled experience, comprehensive
Anish Gupta, Nancy Hamill, Jeanne Harris, capabilities across all industries and
Francis Hintermann, Sarah Hunter, Sanjay business functions, and extensive research
Jain, Mamta Kapur, Marcia Kramer, Hans on the world’s most successful companies,
von Lewinski, Gong Li, David Light, Scott Accenture collaborates with clients to
Livermore, Luisa Lombardo, David Mann, help them become high-performance
Susan Mann, Matthew McGuinness, businesses and governments. The company
Joanne McMorrow, Raghav Narsalay, generated net revenues of US$25.5 billion
Andrew Newby, Alex Pachetti, Yali for the fiscal year ended Aug. 31, 2011.
Peng, Anton Pichler, Bérenger Playford, Its home page is www.accenture.com.
Lawrence Ryz, Carron Sass, Stefano
Scuratti, Abhik Sen, Tina Senior, Andrew
Sleigh, Marcelo Gil Souza, Roxanne Taylor,
Meng Yen Ti, Jens Tholstrup, Robert
Thomas, David Thomlinson, Oscar Vasco,
Alex Walker.

Copyright © 2012 Accenture
All rights reserved.
11-2358 / 11-4446
Accenture, its logo, and
High Performance Delivered
are trademarks of Accenture.

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