Business Management

In developed markets, executives point to high labour costs and saturated markets as the critical challenges with innovation being a key priority. In emerging markets the challenges are quite different: labour costs are low and markets are largely untapped. Whilst 2007 promises to deliver much, executives need to be realistic about the complexity of the task ahead.
Optimism delivers investment
Top line growth will be a higher priority than cost control for most executives throughout 2007. Spending will be targeted at the front office first and foremost: sales and marketing are the areas of the business to receive the greatest share of the investment.
Globally, China and India continue to grab headlines and attract the largest share of investment. Within the next 3 years more than half of the executives surveyed expect to get more than half of their revenue from abroad.
Huge Growth
Demand and supply issues dominate the CEO’s agenda: by 2010 India alone is expected to have some 500 million middle class people. Supplying the increased demand is a huge opportunity and a challenge and many firms are struggling to keep pace with demand.
In addition, rising volume of trade within emerging markets (rather than merely between developed and developing markets) is putting added pressure on infrastructure. The notoriously poor transport networks within developing countries remain a major challenge and transport providers need to invest in putting domestic transport solutions inside China and India to allow these economics to develop and to allow consumers to consume.
Increasing Competition
Executives recognize that emerging markets such as India and China not only provide today’s new customers, but also tomorrow’s new rivals. A small but significant minority of firms point to the threat of rising competition from domestic companies based in emerging markets
Shortage of Talent
One of the biggest challenges facing Chief Executives during 2007 is a shortage of talent. This is especially true in emerging markets where one in two respondents identify a lack of available talent as the primary barrier to growth.
Competition for the best talent is an international game with some of the world’s major banks traveling to India to recruit for their offices in London, New York, Hong Kong and Singapore.
With the increased pressure on talent comes issues around turnover and wage costs. Wage inflation in the Indian information technology sector is about 20% and staff turnover is double that as highly skilled workers switch jobs to boost their salaries. It is a similar story in China with most multinational operations contending with a 20-30% annual turnover rate.
Global Corporate Strategies for 2007:
Nearly 60% of executives surveyed for this report believe that they will invest more time and money in emerging markets than developed markets. China vies with the US and UK as the overseas market that executives expect to visit most frequently in 2007.
Managing an enterprise that sprawls across several continents and many more countries may be good for the air miles account but poses huge challenges.
To succeed, firms must localize their products and services, differentiate themselves appropriately in a range of markets and have the right people in place around the world
Localise Products and Services - Market leading companies recognize the need to develop products that are tuned to local needs, cultural preferences and demands A tube of toothpaste or soap in Western packaging won’t sell in India, for instance, unless it’s packaged in smaller containers more easily transported and sold within smaller retailers
Differentiate – three quarters of respondents will differentiate themselves on quality in future rather than cost as consumers become more discerning
Fight for talent – executives are putting more effort into building successful training and development programmes and placing greater emphasis on performance based compensation
Pam Kennett is a business consultant with more than 20 years' experience working with organisations to help them understand the talent of their staff through the implementation of competency models. She has an MBA from City University Business School (London), is a Member of the Chartered Institute of Personnel and Development and is a registered member of the British Psychological Society. She also manages a property portfolio worth over £2 million and is in the process of launching a wealth creation coaching business.