Sources of New Growth – Marketing Management Column #3

Marketers should be aware of converting economies, growth industries and demographic segments.

Written with Charles J. Skuba

This column elaborates on the final three of nine major issues, identified by our study, which will shape the future of marketing management in the changing global business environment. The three issues present the most important sources of new growth in a world where a new business landscape is taking shape, but globalization continues to progress.

Previously, we had outlined three structural issues affecting the global marketing environment and three consumer behavior issues. All were identified by a global panel of  business executives, government leaders and academics as those most important to the world economy and critical to international marketing management planning.

The Sources

The current economic crisis has dramatized the extent and impact of globalization, and the integration of international economic activity. It has also shown key differences in economic vitality among countries. After many precipitous slides, global companies look to regain traction in new markets outside the major G-7 economies, where consumer spending can drive new business growth.

Business cycles inevitably move from troughs to new peaks. Yet the 2008-2009 trough for the developed nations has been significantly deeper than that for the developing Asian economies. Though curtailed, Asia still grows. While most Western nations experience actual economic decline in 2009, China and India are expected to deliver gross domestic product growth in the range of 5%-7%.

Businesses in search of economic vitality (and most of them are), look to Asia and other developing regions for growth. For example, in early 2009, China overtook the United States as the largest auto market and General Motors Corp. has identified China as its most important growth market. China is currently the number two market for shipments of personal computers, and Hewlett-Packard is in talks with mobile carriers in China about offering small, portable mini-notebook computers. India seems a likely market for that as well.

Here are the specific sources for new growth from among countries, industries and market segments that our experts identified:

Converting economies. Nations converting to market economies led by China and India will continue to increase their impact on the world. Economic power is likely to shift globally to Asia, in terms of investment, output and the integration of Eastern business practices. Asian players will have a major role, but they will pursue differentiated paths.

China will continue to be the player to watch. Success in China will be the crucial indicator of global competitiveness. “If you can make it there, you can make it anywhere” will be the guiding anthem for businesses seeking global competitive advantage. Chinese firms themselves will become more aggressive in pursuit of global ambitions. The Forbes 2000 list already  includes 89  Chinese companies and their share will keep on growing. The challenge for Chinese firms will be in adapting business strategies to become more consumer-driven with greater branding power.

India will continue to be the other major player. In its efforts to rival China for rapid growth, India will look for competitive advantage in services and technology. As India reduces its barriers to trade and investment, companies are likely to see it both as a primary place for process outsourcing and as an important market for goods. The country’s linkages in the communications and information sectors are likely to soar. With an enduring democratic tradition, close alignment with the rule of law, and widespread facility with the English language, India will be a must for marketers.

Despite ongoing setbacks in negotiations, survey participants expressed confidence in an eventual completion of the Doha Development Round. Their viewpoint is supported by the strong performance of India’s Congress party in the May 2009 elections. India has been the most reluctant of the key players on reaching a Doha agreement. A strong Indian government and a more willing Brazil might bring about the conclusion of global trade negotiations in the next few years.

Growth industries. Our panelists see the communications/information technology industry as the leading source of global growth as it pursues greater penetration in developing markets. Ranking second are businesses that provide and coordinate services for specific demographic segments such as the elderly. Success in the service industries will depend on a sophisticated knowledge of the needs, wants, desires and frustrations of specific market segments and fast customized response to them. The pharma/biotech industry ranks third, reflecting the global need for improved medicines to combat ancient and new maladies. Within these opportunities, new measurement capabilities will increasingly permit tradeoffs between, say, lower priced medical procedures in Panama versus carbon footprint cost spent on transportation in getting there.

Consumer expectations that government and industry address environmental concerns will increase the importance of environmental industries, particularly as they intersect with the supply of clean energy. Key opportunities for growth will also result from the need for sustainability, the saving of water and natural resources, the growth of genomics and nanotechnology.

Demographic segments. The world will need to plan for its grandparents, whether you call them oma and opa, abuela and abuelo or ama and agong. The aging of populations of North America and Europe will be joined by those of Asia and Latin America. They will become a growing customer segment for the financial services sector, as well as to providers of healthcare and appropriate lifestyle and household products. While societies will be challenged to properly support aging citizens, there will be major opportunities for corporations to satisfy the needs of reasonably affluent elders for more education, entertainment and involvement.

As baby-boomer societies experience waves of retirement, companies will seek to increase employee longevity and loyalty. New and substantial incentives will be designed to retain expertise, knowledge and continuity and to maintain a corporate conscience and soul.

Global worker mobility offers a major opportunity for regions to enrich their quality of life and improve their competitiveness through the acquisition of young, upwardly mobile immigrants. Highly educated immigrants from developing economies, who are flexible, mobile and possess a global mentality, will be in growing demand by countries and corporations. The challenge will be for countries to balance security concerns and the job-related anxieties of local populations with the advantages of attracting the best and the brightest talent.

A New View

Today’s challenging economic environment may very well lead to a new perspective of the economic growth construct and to changing growth expectations. Many have come to believe that mere stability and constancy is wrong and indicative of “falling behind.” Yet the consolidation and rearranging of resources and the acceptance of non-linearity in growth are not necessarily wrong. It may well emerge that growth on a global level parallels the angles on a protractor: Growth does not always have to take place at all degrees, on all levels and simultaneously, because there are many different areas to grow. Therefore, the previously prevalent “go-go-grow” mentality may give way to a more strategic and deliberate approach.

Indeed, this time of “business-unusual” should encourage us to reconsider things that have been taken for granted. Times of prosperity seem to lead to excess. Times of challenge can open the window to the fresh air of reflection and reform, ideally led by business rather than government.

Charles Skuba teaches international business and marketing at Georgetown University. He may be reached at cjs29@georgetown.edu.