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
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Large ASEAN Cities and Growth Rates
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Growing ASEAN Middle Class
(>$10,000 annually)
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Smartphone Users
9
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Smartphone Affordability
10
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The New World – Here at Home!
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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
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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
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Wealth Inequality
Skill Premium:
The Talent Acquisition Problem
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Infrastructure Investment Needs
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The Business Challenges
in ASEAN
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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