SINGAPORE, 25 SEPTEMBER 2008 -- Most executives worldwide remain confident about near-term business performance despite the lacklustre economic outlook, a new study has revealed.
About 87 per cent of respondents were ‘optimistic’ or ‘very optimistic’ about prospects for revenue growth in the next two years, according to the Economist Intelligence Unit (EIU) study. The study covered some 1,300 respondents from major enterprises (annual revenues of at least US$100 million) in 15 emerging markets worldwide.
Respondents represented all major industry segments and evenly comprised of domestic and multinational companies.
Thanks to a growing middle class and wealthy customer base, companies are pursuing ambitious revenue and gross margin targets, the study noted. 26 per cent of respondents only considered a gross margin of 35 per cent or more as ‘acceptable’.
Putting quality first
According to the study, 56 per cent of respondents considered high quality goods and services as a more important success factor than competitive pricing. A significant 24 per cent considered strong brand loyalty to be crucial to company performance.
In particular, some respondents contended that brand loyalty is now greater in emerging markets than ‘mature’ economies. From the findings, the study concluded that ‘western’ firms entering emerging markets must use their financial, brand reputation and management strengths to achieve rapid growth.
On the other hand, respondents from domestic companies in such markets said that their strong local knowledge and established contacts gave them an edge over foreign competitors.
The study noted however, that most respondents recognised the importance of collaboration. More than half, or 55 per cent, said they were already working closely with foreign businesses. Another 31 per cent said that they would consider doing the same at some point. Motivation factors for collaboration include access to expertise as well as to international sales and export channels.
Market penetration challenges
“The study shows that emerging economy customer bases represent a bright opportunity for firms with international brands,” said Francois Barrault, CEO for BT Global Services. “But finding value in these markets is not a simple task and businesses will need to supplement their core skills with local knowledge and expertise.”
While 61 per cent of respondents believe that business environments in emerging markets are becoming more ‘westernised’, some major operational differences remain, the study said.
Nearly eight out of 10 respondents who represented international companies entering emerging markets have customised their products and services to compete against local players. Of these, 18 per cent had to do complete redesigns.
However, most respondents did not view the state of physical infrastructure, like roads, rail, electricity supply and communications, as a major challenge to growth.
“Simple access is no longer the key communications challenge in emerging markets,” Barrault said. “The real value comes from bringing together global and local experts into a secure collaborative environment to deliver new levels of innovation, customisation and service support for a changing customer base.”
The study was sponsored by BT Global Services.
