Updated on 5 November 2013
As homegrown products climb the value chain, international companies are set to face a product-pricing crisis
Industry forecasts by market analysts state that 80 percent of the multinational companies expect to gain a good share in emerging markets in the next few years. However, a recent survey conducted by the Boston Consulting Group (BCG) revealed that very few MNCs feel that they have cracked the code to succeed against local competitors. The Globalization Readiness Survey report titled ‘Playing to win in emerging markets: Multinational executive survey' clearly reveals the gap between ambition and execution.
"Emerging markets are now responsible for nearly 40 percent of the global GDP and an even larger share of GDP growth. Many of these markets are dominated by able and ambitious local competitors that often have superior local knowledge, stronger government relationships, and lower cost structures, hence multinationals have their work cut out for them," states Mr Bernd Waltermann, a BCG senior partner and co-author of the report.
The report also pointed out that the largest performance gap is in attracting and retaining local talent. Experts advise MNCs operating in Asia to improve their capabilities to develop strong local leaders, create localized business models, and establish growth targets and execution plans. These are all capabilities where the performance gap exceeds 20 percent.
In 2013, China retained the position of the most important emerging market for multinational companies. Brazil and India were next in line, followed by South East Asia and Russia, which were rated as the most important emerging markets.
"The current business environment is really going to force business leaders and political leaders to rethink the way we are innovating and the way we are developing talent in the region. From an innovation standpoint, I think we're going to have to think more in terms of collaboration and co-creation, whereby people with various areas of expertise will come together in order to solve the very complex problems that we will face in the future," says Deborah Henretta, group president, Asia and global specialty channel, Procter & Gamble (P&G).