New trends to reshape emerging markets

24 May 2010

SINGAPORE: Changing consumer behaviour in emerging markets will have a "great impact" on brand owners in the next five years, a study from McKinsey has predicted.

The consultancy surveyed 1,416 senior executives to gain an insight into their strategies in key developing economies, many of which have young, growing populations that are attractive to marketers.

Overall, 64% of the panel argued the rising number of consumers and changing preferences in areas like Asia Pacific and the Middle East will have an impact on their profitability in the next five years.

A further 63% forecast that new technology, such as online tools that "empower consumers and communities", would play an equally important role.

The shift towards a global labour market posted a score of 50%, while 32% of contributors thought popular interest in corporate social responsibility would soon be a prominent characteristic of the trading climate around the world.

"Clearly, the financial crisis and economic downturn have not shaken these key trends," McKinsey said.

"Continued faith in the positive effects of globalisation combined with a move away from short-term planning likely reflects rebounding optimism about global economic prospects."

Widespread approaches among firms at present include building up a local presence on 54%, forming joint ventures and partnerships on 50% and recruiting staff with on-the-ground experience on 47%.

More than 40% of organisations were pioneering new business models and redeploying current employees, while 33% were adapting their price and value propositions to suit the unique needs of customers in different countries.

However, only 20% had chosen to manufacture brands that were specifically tailored to reflect the tastes of shoppers in emerging nations.

Respondents in North America and Europe agreed the greatest challenge lay in uncovering sufficient talent for their research and development units, on 19% and 20% respectively, with hiring the right management on 18%.

For 28% participants in China the major shortfall was said to be in identifying executives to lead up their operations in other countries, an assertion shared by 25% of those polled in India.

In terms of assessing the likely impact of the increasingly global flow of information over the period to 2015, 40% of the sample believed this process would lead to improved innovation.

This figure fell to 39% for heightened popular awareness about goods and services, and to 33% for enabling the greater customisation of products.

Elsewhere, 28% expected this would ultimately give consumers more choice, compared with 25% who took the view it would encourage the formation of more "technology-enabled communities".

Some 24% of executives also believed there would be more opportunities for highly targeted marketing as a consequence of this development.

A fifth also cited the prospect of consumers becoming more involved in the generation of new products as one off-shoot of this trend.

"The free global flow of information has already resulted in radical pricing transparency and new networks of engaged consumers, and this probably is only the beginning," McKinsey suggested.

"Disruptive changes in consumer behavior could have great impact on business over the next five years."

Despite this, just 40% of the 1,100 respondents based in advanced economies expected that over 25% their revenues would be drawn from emerging markets in five years time.

Data sourced from McKinsey; additional content by Warc staff