Eyeing Emerging Markets? Think Micro, Not Macro
About 440 cities are on track to deliver almost half of global GDP growth. Now’s the time to get more granular with your emerging marketing strategy.
For many companies, emerging markets are full of opportunity. You have growing groups of people with increasing disposable income they’re looking to spend. At the same time, because the markets haven’t been robust in the past, many businesses have ignored them. The result? Pent-up demand and insufficient supply.
Sounds great, right? But according to a study from McKinsey, many companies are approaching emerging markets from too high a level, missing the urbanization dynamic:
This urbanization wave is shifting the world’s economic balance toward the east and south at unprecedented speed and scale. It will create an over-four-billion-strong global “consumer class” by 2025, up from around one billion in 1990. And nearly two billion will be in emerging-market cities. These cities will inject nearly $25 trillion into the global economy through a combination of consumption and investment in physical capital.
Think More Micro
According to McKinsey’s analysis, 440 emerging market cities will deliver almost half of global GDP growth. That is a stunning number. It effectively says that an enormous portion of the economic expansion that the world is likely to see will be concentrated in a relatively small number of urban areas. You could call these the new economic city-states, because they are the most likely places to offer opportunity. If you want to give your business a shot in the arm, these are the places to do it.
But according to McKinsey, most companies are blowing their chances. Fewer than 20 percent of surveyed executives looked beyond the country level when deciding where and how to target new markets. Most executives expected their strategic approach to remain fixed for the next five years and 60 percent thought that cities were an “irrelevant unit of strategic planning.”
It’s hardly irrelevant if you have heavy concentration of where business takes place. As Willie Sutton famously replied when asked by a reporter why he robbed banks, “that’s where the money is.” Why would you go where the market isn’t?
