Nearly 400 mid-size cities in the worlds emerging market will account for 40 percent of the global economic growth over the next 15 years, says the quarterly business journal by McKinsey Global Institute. This spectacular avowal about the countries lingering at nascent economic stages would shape the future business decisions of the investors, shunning away the investors attention from the established economies.
According to MGI, the annual consumption in the emerging markets will surpass $30 trillion by 2025 up from $10 trillion in 2010; thus seizing the locus of economic activity from the developed pool. The underlying reason behind the sudden wave of progress in the emerging world is the brisk rise of urbanisation which in-turn is propelled by long-term trends such as the incorporation of peripheral nations into the global economy, the exclusion of trade barriers and the spread of market-oriented economic policies.
Another striking revelation made by MGI is that by 2025, over 50 percent of the worlds top 50 countries in terms of GDP will be located in Asia while many of the Europes mega cities will be kicked out of the roll. In this new-fangled economic backdrop, Shanghai and Beijing will outperform Los Angeles and London, while Mumbai and Doha will beat Munich and Denver.
Talking about the fruits of investing in the emerging market--companies grew 2 to 3 times as much as the companies based in developed geographies. Emerging market companies not only benefit from low costs but also have to pay dividends at a rate lower than that of developed-market companies.
According to MGI research, companies in emerging economies distribute only 39 percent of their earnings to the shareholders, whereas, developed-market companies return nearly 80 percent. Thus, increasingly the companies based in emerging economies deploy their earnings in new business opportunities domestically instead of repatriating their earnings abroad.
Whats more expanding populations, an increasing middle class and a few domestic competitors also pose vivid opportunities for success in emerging economies.
That said, besides too many carrots egging on the investors to step into the emerging market, the stick still hangs on in the form of lack of underprivileged infrastructure, delayed or inadequate support from local policymakers and also poor political and security backdrop in some countries. Thus, investors are vexed by the complexity of seizing the hidden opportunity.
Moreover, creating a powerful emerging-market strategy has also climbed the apex of the growth agendas of many multinational companies. To catalyse growth in emerging markets, it isn enough to develop a country-wide strategy. A recent analysis of China revealed 22 distinct urban clusters. Thus, companies, in order to succeed in these markets, need to understand the cross-city variations.
As rightly said by a researcher that thriving in the emerging market is more like participating in a Decathlon whereby there is no single route to success, rather a series of challenges weighing up the contenders versatility and aptitude to win the laurels.
==========================================
Countries entering and exiting top
50 economy-list by 2025
==========================================
Newcomers by 2025 Dropouts by 2025
==========================================
Bangkok Athens
Beijing Barcelona
Chengdu Denver
Chongqing Detroit
Delhi Hamburg
Doha Lille
Foshan Melbourne
Guangzhou Minneapolis
Hangzhou Munich
Mumbai Nagoya
Nanjing Oslo
Shenyang Rhein-Main
Tianjin Rio de Janeiro
Wuhan Stuttgart
Xian Taipei
Shenzhen Vienna
==========================================
Source: McKinsey Global Institute
Comments
Comments are closed.