When companies first go global, they tend to select the richest foreign markets. After all, if you want to make money abroad, you follow the money abroad. Yet this strategy overlooks the bulk of the world’s population. And it also pits all these multinationals against one another (why not try markets where you have less competition)?
There are a few good souls out there struggling to show companies how to make money in poorer countries AND serve the greater good, as shown in this recent Fortune article.
It’s an uphill fight to convince companies to invest in emerging markets. Most American companies have yet to even consider the Arab Middle East as a potential market. Yet there are 200 million people here. So I ask: when will American companies (besides the oil companies) care about this market? Those companies that invest today will gain a competitive advantage tomorrow. It does take long-term thinking and it does take a large measure of risk, but globalization is inevitable; succeeding globally is not.
Anyway, here are some interesting stats from the article:
“The World Bank figures that people in low-income nations account for less than 4% of global private consumption; triple that figure, and it still doesn’t offer much bounce to corporate earnings. Coke has been operating in Africa for almost 60 years, and the entire continent still brings in only 3% to 4% of its profits. Look at China. In the last 20-plus years, companies have piled into that country in the belief that its one billion people–consumer heaven!–would sustain growth for generations. Instead, it’s been a money pit–and China is in much better shape than many other countries whose citizens cluster at the bottom of the pyramid. What about India? The arithmetic is sobering: India’s economy needs to about double in size to add $500 billion to GNP; by contrast, America can add the same amount in just two years of slightly below-average growth.”