Building capabilities for Growth Markets’ success
Thursday, 10 April 2014
PwC’s recent megatrends report has re-confirmed that the shift of economic power from the G7 countries to the E7 countries is continuing at a fast pace. Admittedly the US has picked up the pace of its GDP growth over the past year, but the long term prospects of emerging markets remains robust. This shift has been led by the so called BRICS, but other nations in Africa, Latin America and South East Asia are also accelerating. Together these growth markets account for a significant proportion of global GDP and by 2020 these economies are expected to contribute to over half of the world’s GDP.
A number of companies have already responded to this shift, although in different manner. Those companies who have not yet experienced Growth Markets are making attempts to enter these markets. There are companies in these Growth Markets who are experiencing difficulties in generating profits and who need to build extra capabilities in these markets or shift capabilities from the developed world to the emerging markets. Finally, and in recent years there are a number of companies who are emerging from the Growth Markets who are looking to expand into other Growth Markets given their business models are attuned to these markets.
The common factor in the growth market journey of companies is the requirement to build capabilities to address these markets. These capabilities are broadly in four categories. Creating and launching value propositions which are relevant for a Growth Market, developing an operating model that will be profitable for these Growth markets, managing financial and human capital that is relevant, as well as an ability to deal with a business environment which is ambiguous and often works in fits and starts. Above all these is the need for a change in mindset to address Growth Markets and the constant expectation setting that takes place between the boards of companies and their local managers. The former asking for greater return, while the latter asking for more time for getting those returns!
Together Growth Market countries are home to almost 4 billion of the 7 billion people on our planet, and represent significant potential for growth as entire societies tool up. There are very specific innovations that are taking place in these markets, which our clients and society at large is applauding. The resulting shift of balance is therefore not just in terms of GDP or per capita income, it is in the form of shifting mindsets that can recognize this change, and help prepare their companies to build appropriate capabilities.
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