Playing to Win in Emerging Markets - Local Competitors Pose the Biggest Threat to Success

A new study by the Boston Consulting Group (BCG) has concluded that emerging markets are more important than ever, and they make up a large share of many multinational companies’ revenues and growth.

However, BCG suggests that, despite the importance of emerging markets, multinationals have not mastered key markets such as China, India and Brazil. The reason? Multinationals are “not playing to win”.

The survey covered 156 top executives in multinationals. Over half (57%) of these executives identified China as the most important emerging market. In total, 83% of the executives said that China was either a “top priority” or “major priority”. Brazil, India and Southeast Asia were next in line in terms of priority markets.

It is clear that these multinationals see emerging markets as a key source of future revenue and profit growth and that they believe they can grab an increasing share of demand in those markets.

78% of those surveyed expected to gain market share in their target emerging markets. However, only 13% said that they currently have an advantage against local competitors.

73% of multinationals identified local competitors as the key competitive threat rather than other multinationals trying to compete in the same market.

The survey has also looked at the relative importance of various business capabilities in achieving success in emerging markets. Each executive was then asked to measure their own multinational’s performance against these key capabilities to identify potential gaps that need closing if growth objectives are to be achieved.

A key finding is that employing strong local talent (e.g. having senior leaders based in emerging markets and employing the best local employees) is a critical success factor. Also, detailed market knowledge and tailored business models are essential.

Tellingly, the BCG survey suggests that it is in these critical aspects that multinationals are falling short the most!

For example, fewer than half of multinationals have more than 5% of their top executives based in emerging markets. How can these businesses really understand their target markets if their top leaders remain largely based in developed economies?

Attracting and retaining local employees is also seen as a major challenge. Local competitors seem to have many advantages, particularly as they become more successful and can match the packages being offered by multinationals. BCG suggests that there is a critical need for strategic workforce planning by multinationals in emerging markets.