Everyone knows that the world has significantly changed. Whether the cause of this was 911, the fall of the Berlin Wall, the GFC, or simply the opening up of large, populated countries that have been closed to outsiders or unstable for decades, there can be no arguing that global economic, political and social power is shifting towards the emerging world of the “BRIC”s (Brazil, Russia, India and China) and other big rapidly emerging countries (eg Mexico, Indonesia, South Korea and Turkey) and regions (eg Asia, Continental Africa, Latin America and Eastern Europe).
Everyone is asking the same questions? Can the USA recover? Will the BRICs be able to fill the consumption gap? Is this an opportunity or a threat? Where are the low hanging opportunities? How do you get started?
To answer these questions, bold forward-thinking entrepreneurs and business leaders need to be considering the impact of five irreversible trends which are setting a new direction for business, investment and thought leadership. These are as follows:
The developed world already knows the significant economic benefits that have been derived from the process of urbanisation. In the two centuries following 1800, the world's average per capita income increased over tenfold as a result of the ‘Industrial Revolution’ in Britain. China and India, which had previously been two of the largest economies in the world due to their large populations and land mass are now catching up and experiencing their own ‘Industrial Revolution’ on steroids! In only 30 years, China is already half way through its own urbanisation process but still has a long way to move another 300 million people or so from rural to urban centres in the next 30 years.
Urbanisation is a driving force for economic growth and expansion (urban growth alone produces an increase of 20% GDP per capita). It increases rural productivity, boosts demand for resources, commodities and energy and drives domestic consumption (urban residents spend 3.6 times more than rural dwellers). Forward thinking business leaders need to consider the potential of the world’s new “mega-cities”: Sao Paulo, Moscow, Mumbai, Shanghai etc.
With rising incomes, minimal debt and rapidly increasing wealth, the emergence of a new middle class from emerging countries is perhaps the most exciting opportunity of all, and a good reason to be positive about the future.
In Asia alone, the middle class consists of 525 million people, accounting for 28% of the global middle class, and this number will triple to 1.74bn by 2020. Over 70% of the growth in global demand until 2020 will come from Asia, with private consumption reaching $8.6 billion by 2020. There are already 3.5 billion consumers in developing Asia. By 2030, two-thirds of the world’s middle class will be in Asia and will account for 54% of total consumer spending.
As evidence of the exciting potential, car sales in China will grow at an annual rate of 5.3% and is anticipated to reach 30 million units in 2020. Healthcare expenditure in Asia is expected to double by 2020. Food consumption of the ASEAN-5 is expected to reach US$180bn by 2020. Bank lending has been expanding in Vietnam at 33% per year for the past ten years.
We live in the “Asian Century” but the consumption story is equally exciting in Eastern Europe and Latin America. What are you doing to tap into the growth of the emerging consumer?
Its no longer true to say that, whilst the emerging world is good at copying things and applying cheap labour to create wealth for well known western brands, they will never be able to become true inventors, creators and innovators themselves. In fact, they are already leading the world in many areas of scientific development, including the bio-sciences, IT and in the development of new forms of sustainable energy. Brazil is already well known for its green credentials (45% of Brazil's total energy needs is already drawn from renewable sources) and China is transforming many industries with its massive investment in new renewable energy (hydro, nuclear, solar, wind, biomass and more efficient use of coal and existing energy sources).
“Moving up the value chain” is the mantra that you hear as you travel around the emerging world. This creates a window of opportunity for innovative western leaders to export their capabilities, experience, know-how and technology to the emerging world and participate in the growth of these new creative industries.
Apart from an abundance of land, people and capital, the emerging world benefits from a dynamism and entrepreneurial spirit derived from a combination of ambition, energy and aspiration. In many countries (eg Brazil, India and Continental Africa) this aspiration comes with an exceptionally young demographic profile which will propel their economic growth long beyond the next century. Don’t forget that only 30 years ago, most emerging countries were suffering from extreme poverty (for a wide range of largely uncorrelated reasons) and since opening up and attracting foreign investment, they have now had a taste of success and wealth which has energised the whole nation.
Don’t take too long to decide whether you believe this or not. By the time you do decide, it may already be too late to jump on board!
Despite a great deal of talk, words and catchy titles (eg “the world is flat”) the process of globalisation has only just begun. In fact, some argue that it hasn’t even started yet. The truth is that, despite the well known advances in technology, high speed broadband and inter-connectivity, the opportunity to connect and collaborate with other global business leaders and entrepreneurs in China, Brazil or Russia, or to outsource low level tasks to India, Indonesia or Vietnam, is as opportune now as its always been. The emerging world is literally your oyster if you are brave enough to take the plunge. Don’t mess around on the small waves. Surf where the big waves are!