At a time when economies in the U.S. and Europe are sputtering, the one bright spot for global business today is emerging markets, especially in China, according to Marcus Blosch, research vice president with Gartner. "Companies are looking east," he says. "The stellar growth rates of emerging markets are very attractive." The opportunity grows even more with the development of a middle class in those countries, he says.
Companies are predicting that 40 to 60 percent of their growth in revenues will come from emerging markets over the next decade, Blosch says. Some of that opportunity exists in the traditional form of low-cost manufacturing of product intended for developed nations. Increasingly, however, businesses are viewing these developing areas as places to sell finished consumer goods.
Coastal areas of China saw a 69-percent increase in labor rates between 2005 and 2010. "The real reason to be in China in the medium to long term is [the prospect of] reaching 1.2 billion people and an expanded middle class," Blosch says. "It's going to be the same in other emerging markets."
Companies looking to tap into that potential windfall need to have a direct presence that includes the hiring of local employees and possible joint ventures with existing entities. Such relationships make it easier to obtain operating licenses while generating crucial market knowledge. "You really have to have that presence to be successful," Blosch says.
China is the obvious first choice for companies in search of new and developing consumer markets. Many manufacturers already have a presence there. Rising fuel and labor costs are additional reasons for having production capacity close to the target market.
There are a number of obstacles to establishing a presence in new markets, including the challenge of attracting and retaining talent, and overcoming local bureaucracies. China in particular poses the dilemma of protecting one's intellectual property, but that situation is changing rapidly, according to Blosch.
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