keynote – going for gold in emerging markets
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Going for Gold in Emerging Markets:Winning the $30 trillion Decathlon
John Forsyth – McKinsey & CompanyFebruary 19, 2014
McKinsey & Company |
Going for gold
1
Massive opportunity
Crucial capabilities
Platform for success
trillion
xx
McKinsey & Company |
Three quarters of global growth in emerging markets
2SOURCE: McKinsey Global Institute
Share of GDP growth, 2010–25
74Emergingeconomies
Developedeconomies
26
McKinsey & Company |
And half of Global GDP
3
$, trillion
Total GDP
23
60
40Developed
Emerging
2025
113
53
2010
63
McKinsey & Company |
$30 trillion of consumption in emerging markets in 2025
4SOURCE: McKinsey Global Institute
10
Poland 1
Turkey 1
Indonesia
Other
1
Mexico 1
Russia 2
Brazil 3
India 3
China 8
Total 30
McKinsey & Company |
Speed and scale unprecedented
5
Years to double per capita GDP
India 16
China 12
South Korea 10
Japan 33
Germany 65
United States 53
United Kingdom 154
Country
Year
1700 20001800 1900
McKinsey & Company |
West’s leading companies not capturing growth
6SOURCE: McKinsey Global Institute, company financials
World wide
% ofGDP
36
64
Emerging markets
Developed markets
Company revenue
17
83
North America
% ofGDP
26%
% of company revenue
39%
McKinsey & Company |
Going for gold
7
Massive opportunity
Crucial capabilities
Platform for success
trillion
xx
McKinsey & Company |
Ten crucial capabilities
8
Target urban growth clusters
Innovate across the price spectrum
Organize today for tomorrow
Think local, act global
Manage in a multichannel world
Develop talent and capabilities
Secure support from key stakeholders
Anticipate moments of explosive growth
Build brands that resonate and inspire trust
Redeploy resources dynamically
Throwing accurately Jumping in Running the distance
1
2
3
4
5
6
7
8
9
10
McKinsey & Company | 9
Follow others into fast-growing markets
Sometimes miss the boat
What is average performance
What is Winning performance
Recognize discontinuities which drive rapid growth
1 Anticipate moments of explosive growth
McKinsey & Company |
Different drivers of growth
10
Needs
Demographics and income
Regulation
Infrastructure
Technology
SOURCE: McKinsey Emerging Markets team analysis
McKinsey & Company |
Rising incomes drive S-curves in consumption
11SOURCE: McKinsey Global Growth Compass
Sales value per capita Sales value per capita Sales value per capita
2,700 19,0000 2,700 19,0000 2,700 19,0000 Income per capita
Income per capita
Income per capita
“Warm-up zone” “Hot zone” “Chillout zone”
McKinsey & Company |
Adoption curves vary by product
12
50
40
30
20
10
0
Per capita income$ thousand, PPP
30252015
Penetration%
100
90
80
70
60
1050
SOURCE: Euromonitor; McKinsey Global Institute analysis
Household penetration by country, 2007
Take-off points
Saturation points
Washing machine
Refrigerator
McKinsey & Company | 13
Use countries and business units for strategic planning
What is average performance
What is Winning performance
Identify high growth opportunities at city cluster level
Target urban growth clusters
2
McKinsey & Company |
The “Emerging 440” cities will generate 47% of all global growth
14SOURCE: McKinsey Global Institute Cityscope 1.3
47
26
Global growth
100
Total developed
Other emerging regions
27
Emerging440 cities
GDP growth, 2007-2025
McKinsey & Company |
Urban growth in China alone is staggering
15
149
Beijing
239
184
Hangzhou
Shanghai
Guangzhou 146
154
Suzhou
91
Shenzhen
81
127Tianjin
Wuhan
75
Dongguan 52
Xiamen 55
Fuzhou 58
Foshan 62
Chongqing 66
Nanjing 71
Chengdu
Absolute GDP growth,2011-2016, billion USD at PPPCity
Growth over $1.6 trillion
Another South Korea
Population more than
Russia
McKinsey & Company |
Absolute GDP growth,2011-2016, billion USD at PPPCity
The top 20 developing cities outside China
16
Kolkata 36Abu Dhabi 38Chennai 38Bogota 38Bangalore 41Kuala Lumpur 42Hyderabad 48Lima 48Bangkok 49Riyadh 55Istanbul 56Mexico City 58Doha 66Taipei-Keelung 77Buenos Aires 77Sao Paulo 77Jakarta 84Moscow 100Mumbai 108Delhi 109
Growth over $1.2 trillion
Another Indonesia
Population 6th biggest
country
McKinsey & Company |
City-cluster approach can be very powerful
17SOURCE: Insights China; McKinsey analysis
合肥合肥合肥合肥Hefei南昌南昌南昌南昌
Nanchang
太原太原太原太原Taiyuan
南宁南宁南宁南宁Nanning
昆明昆明昆明昆明Kunming
`
西安西安西安西安Xian
北京北京北京北京Beijing
济南济南济南济南Jinan 上海上海上海上海
Shanghai
福州福州福州福州Fuzhou
长沙长沙长沙长沙Changsha 深圳深圳深圳深圳
Shenzhen
武汉武汉武汉武汉Wuhan
郑州郑州郑州郑州Zhengzhou成都成都成都成都
Chengdu 重庆重庆重庆重庆Chongqing
南京南京南京南京Nanjing杭州杭州杭州杭州Hangzhou
大连大连大连大连Dalian
沈阳沈阳沈阳沈阳Shenyang天津天津天津天津
Tianjin 青岛青岛青岛青岛Qingdao
厦门厦门厦门厦门Xiamen
广州广州广州广州Guangzhou
长春长春长春长春Changchun
哈尔滨哈尔滨哈尔滨哈尔滨Haerbin
石家庄石家庄石家庄石家庄Shijiazhu
ang
呼和浩特呼和浩特呼和浩特呼和浩特Huhehaote
McKinsey & Company |
Cluster approach can be simpler and cheaper
Packaged goods manufacturer
▪ Fewer key cities, organized into 15 priority clusters
▪ Much sharper differences in targets
▪ 2-3% reduction in cost-to-serve
▪ Accelerated growth to over 20%
▪ Looking at 40 cities spread out across China for expansion
▪ Similar targets across all regions
From… To…
18
McKinsey & Company |
Extend developed market strategy to emerging markets
What is average performance
What is Winningperformance
Refine product offering to appeal to local needs, while leveraging cross-market scale
Think local,act global3
19
McKinsey & Company |SOURCE: ACIC
Five grocery segments are in evidence across Africa
Importance of brand
Importance of fresh/quality
Importance of price
Experi-mental Index
Low price hunter
▪ Most price conscious▪ Will make sacrifices
for lower price
High Low Low Low
Local, quality shopper
▪ Believe price indicates quality
▪ Shop locally
Low Medium Medium Medium
▪ Prefer brands▪ Will pay more for
them
Brand loyalist
Low High Low Low
▪ Like to try new things▪ Enjoy shoppingExperimental
shopper
Low Low Low High
Fresh lover
▪ Look for fresh Low Medium High Low
20
McKinsey & Company |
Segment distribution by country
% of country market potential that is in the specific segment, countries in order of GDP in PPP terms, 2011
Although their relative importance varies from market to market
27
19
19
2034
29
18 12
30
24
1021
10
23
11
11
17 2323
1214 14
918 18
27
11 9 116
Freshlover
Experimentalshopper
Brand loyalist
Local, qualityshopper
Low pricehunter
Senegal
50
8
Kenya
19
17
Ghana
42
15
Ethiopa
19
35
Angola
9
25
Morocco
26
12
Algeria
17
23
Nigeria
52
10
Egypt
19
27
SA
26
23
SOURCE: ACIC 21
McKinsey & Company |
Addressing consumer needs and local market tastes
SOURCE: Press clippings, company website
Adding a local twist Meeting primary needs
Flexing for taste No sacred cows
22
McKinsey & Company |
Extensive ethnography to identify ways to re-design and innovate
Guard launched at 34 cents quickly gained market share and today represents two out of every three razors sold in India, increasing market share from 37% to 49% in 5 years.
Context: in rural India, >400m+ men using double-edge blades without lighting and running water
Solution
Single blade razor with protectivehousing
Handle texture for easy gripping
Ruthless focus on cost
23
McKinsey & Company | 24
Take existing brands but customize communication and media
What is average performance
What is Winningperformance
Develop and anchor brand positioning through local insights
4 Build brands that resonate and inspire trust
McKinsey & Company |
Able to influence with word-of-mouth
25
29
40
44
46
49
71
92
% receiving recommendations from family/friends
McKinsey & Company |
And in-store advice
26
“In-store experience”
Strongly disagree to somewhat disagree
55
Strongly agreeto somewhat agree
45
76
24
"I find myself leaving the store with
a different brand/product than I
planned because of the suggestion
of the in-store salesman"
"I find myself leaving the store with
a different brand/product than I
planned because of the suggestion
of the in-store salesman"
McKinsey & Company |
Prefer foreign brand Prefer Chinese brand
Consumer preference for foreign brands varies by category
27
24
3138
5356
Food & Beverages
Household care products
Personal care products
Household electrical appliance
Personal digital gadgets
Brand preference by category
Percent of respondents prefer foreign brands over Chinese brands
McKinsey & Company |
New Mainstream consumers have a higher preference for foreign brands
28
Prefer foreign brand Prefer Chinese brand
22
29
36
5255
34
45
52
6365
Household electrical appliance
Personal digital gadgets
Food & Beverages
Household care products
Personal care products
New Mainstream
Mass
Percent of respondents preferring foreign brands over Chinese brands
McKinsey & Company |
Ten crucial capabilities
29
Target urban growth clusters
Innovate across the price spectrum
Organize today for tomorrow
Think local, act global
Manage in a multichannel world
Develop talent and capabilities
Secure support from key stakeholders
Anticipate moments of explosive growth
Build brands that resonate and inspire trust
Redeploy resources dynamically
Throwing accurately Jumping in Running the distance
1
2
3
4
5
6
7
8
9
10
McKinsey & Company |
Going for gold
30
Massive opportunity
Crucial capabilities
Platform for success
trillion
xx
McKinsey & Company |
Important choices for management
31
Speed
Values/ Culture
Fast
Refresh
Gradual
Owner-ship
Locally-driven HQ-driven
Scope of change
No sacred cows Constraints defined
Maintain
McKinsey & Company |
Are you ready for this journey?
32
Do you understand product S-curves and anticipate explosive growth and other market discontinuities?
Do you know your market growth prospects at granular, urban market level?
Do you understand the needs of your consumers – in both globally converging and locally differentiated segments?
Do you have trusted brands that signal quality among emerging market customers?
Can you deliver value at multiple price points and cater to the premium and entry level segments?
McKinsey & Company |
Are you ready for this journey?
33
Are your channels able to reach the full spectrum of emerging consumers?
Are you being sufficiently aggressive in reallocating resources to future growth areas?
Is your organization ready for effective execution across the diverging global market place?
Are you winning the war for local talent?
Are you effectively managing the full range of stakeholders in emerging markets?
McKinsey & Company | 34
John Forsyth
Expert Principal,
Stamford
John_Forsyth@mckinsey.com
www.youtube.com/McKinseyCMSOForum
@McK_MktgSales@McKinsey_CSI
McKinseyonMarketingandSales.com
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