Unsurprisingly, we are seeing more and more consumer-orientated firms coming out of emerging markets that have huge brand power and global presence. For example, Mexico’s Grupo Bimbo, the world’s largest baking company, South Africa’s Aspen Pharmacare and Chinese e-commerce, Alibaba Group are advancing into foreign markets yet they remain largely unknown in the UK. It’s estimated that together the emerging market countries generate sales of over $1 billion.
The opportunities in emerging markets are immense: according to analysts’ forecasts China’s economy could surpass the US’ within just two decades. The Chinese economy is a hot topic in economic circles with analysts fiercely debating whether China is going to experience a crash or continue its unprecedented growth.
It was interesting to see in a recent survey from McKinsey that less than 20 per cent of decision makers are targeting China at city rather than country level1. The report suggested that marketing strategies should focus on city-specific targeting in China and other emerging markets, due to the sheer scale of each city and growing consumer demand. This is certainly a strategy we have adopted as we work with increasing numbers of Chinese companies – there is much more value in targeting specific areas and understanding them well, than trying a blanket approach in such a vast geography.
|Source: McKinsey & Company
Demand on commodities
There is little doubt that we are experiencing the biggest growth opportunity in the history of capitalism. In the past decade, worldwide consumption of coal, palm oil and iron ore has grown by up to 10% per year, and there has been a similarly substantial rise in the consumption of oil, copper and wheat.
According to Bernice Lee, Research Director of Energy, Environment and Resource Governance (EERG) of Chatham House, “demand from emerging economies has driven up commodity prices and made them more volatile”2. This poses new challenges for risk management in public policy and business strategy between sectors, communities and nations. BRIC countries have started to put their foot on the break in fear of limited future supplies. For example, China has used export controls to support its industry’s raw materials, and Brazil and India are considering similar measures for iron ore2.
In an attempt to resolve supply disruptions, the International Energy Agency’s (IEA) and its 28 member countries have agreed to store oil 90 days. In practice this should ensure that there is always a supply available. Last year, the IEA called on its members to release emergency oil stockpiles to balance market disruptions tied to the civil unrest in Libya.
Industrial and political disruptions were played out last year in front of the international community, when the Marikana massacre in South Africa and similar wildcat strikes spread across the country and left the sector in turmoil. Shares in companies such as Coal of Africa were hit hard and Anglo American Platinum has reported an annual loss.
This week companies and industry leaders gathered in Cape Town for the annual Investing in Africa Mining Indaba, the largest mining conference on the continent. In keeping with tradition, companies threw dinners and cocktail parties, and as usual, meetings were held by the Cullinan pool. Conversation centred on the state and business, the revival of the country and its mining firms, and how it can still benefit from China’s growth.
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1Recent survey conducted by Mckinsey Global Institute
2Bernice Lee, Research Director of energy, environment and resource governance of Chatham House in Financial Times Guest post: let’s start an R30 Group to manage global resources.