Emerging Markets - Opportunities

& Challenges

November, 2017

Professor V. “Paddy” Padmanabhan

Unilever Professor of Marketing,

Academic Director, Emerging Markets Institute

Distribution of World Output (PPP)

Shifting Powers

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1975 1980 1990 2000 2010 2015

Other emerging

India

China

Other Advanced

European Union

United States

© Prof. V. Padmanabhan

World Economic Center of Gravity:

Going East! Source: D. Quah

© Prof. V. Padmanabhan

GDP Growth

Growth Forecast – IMF,

October 2017

Urbanization

© Prof. V. Padmanabhan

Large ASEAN Cities and Growth Rates

© Prof. V. Padmanabhan

Growing ASEAN Middle Class

(>$10,000 annually)

© Prof. V. Padmanabhan

Smartphone Users

9

© Prof. V. Padmanabhan

Smartphone Affordability

10

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The New World – Here at Home!

© Prof. V. Padmanabhan

Points to Ponder

• There is no monolithic Emerging Markets. There are lots of

opportunities

• Variations across countries

• For instance, within ASEAN

• Singapore – vs – Indonesia – vs – Myanmar

• Status of Economic Development

• Regions within a Country

• Across Sectors within a Region

• Exposure to China versus rest of the world

• Tapping into Investments or Consumption

© Prof. V. Padmanabhan

There is a lot of Variance – Equity

Markets

© Prof. V. Padmanabhan

Commodity Prices

What has changed in EM?

• The real competition is the Local Firms

• Significant cost advantages

• COGS, Overheads, Wages, R&D, Distribution

• More agile, nimble, aggressive and entrepreneurial

• More new products

• Flexible business models

• Managerial depth and capabilities

• Economic nationalism plays to their strengths

© Prof. V. Padmanabhan

© Prof. V. Padmanabhan

Emerging Markets –

National Challenges

© Prof. V. Padmanabhan

The ASEAN Agenda

• Economic fundamentals are a lot stronger than they were 20

years back

• Aspirational generations

• Job growth

• Income growth

• Economic nationalism is less pronounced

• Pushing on with TPP despite Trump

• Focus on innovation, productivity and a domestic

consumption driven economy

• Intra-ASEAN trade as well as extra-ASEAN trade

The EM Government Worries

• The de-facto model for growth “factory led export oriented”

is no longer a valid option

• Share of manufacturing for most EM countries have peaked

prior to 2000

• At levels far below the peak for advanced economies!

• How to create jobs for the graduating millions?

• How to build a domestic consumption driven market

• How to leverage the demographic dividend promise?

• How to improve productivity of the SME sector?

© Prof. V. Padmanabhan

Growth and Inequality –

Does US have a problem? Think again

© Prof. V. Padmanabhan

Wealth Inequality

Skill Premium:

The Talent Acquisition Problem

© Prof. V. Padmanabhan

Infrastructure Investment Needs

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The Business Challenges

in ASEAN

© Prof. V. Padmanabhan

How do you play and win in EM?

• What the EM country/government wants to know?

• Why are you here?

• Can’t be a extractive business model

• The key EM business challenges

• Growing the top-line and the bottom-line

• More sophisticated and demanding customers

• Building a national presence

• Go-to-market excellence

• Learning how to partner

• Growing the talent pipeline

© Prof. V. Padmanabhan

Leadership in ASEAN

• Probably, the biggest challenge for companies in ASEAN is the state of

development of the talent pool

• Starts at the top

• In developed markets

• 75% on leadership, 25% on cultural awareness/sensibilities

• In developing markets

• 75% on cultural awareness/sensibility, 25% on leadership

• You are being constantly watched and studied

• How do you want to be perceived?

• Head-farming is more important than head-hunting

© Prof. V. Padmanabhan

Some observations

• People look/rely on their managers to identify & present

them with growth opportunities

• Not the other way around

• Individualize the interaction

• People do not speak up in talent engagement opportunities

• More comfortable doing that one-on-one

• Leaders need to build the next gen leaders

• It is key part of the day job

• Inspiring them to Aspire for greater things

• Take more risks with them

• Rotate within the region

© Prof. V. Padmanabhan

Cultural Due Diligence

• Diverse teams can pay off, but it takes a lot of time to make it work

• Give them the time to create the team culture

• Show them you are genuine and you care

• Self-deprecate your style, culture, attribution, stereotype

• Show long term commitment to their region and interests

• Talk about failure and not just success

• Don’t get angry, be patient

• Celebrate success

• What is important is to understand what is happening under the

SURFACE

© Prof. V. Padmanabhan

Sustainability

Challenge – can you reconcile

Less Waste

Less Risk

Less Damage, with,

Bigger and Better Business

© Prof. V. Padmanabhan

Issues to Consider

• Changing Mind-sets

• Government

• Sustainability is not a luxury for emerging markets

• Consumers

• The watermelon analogy

• Partners

• Collective action works better

© Prof. V. Padmanabhan