Zinnov, a leading market expansion and globalization advisory firm has announced the launch of its “research center of excellence (rCOE) for emerging markets” and released its latest study on emerging economies titled, ‘Growing in the E+ Markets’. E+ markets are key clusters among emerging economies with rapidly expanding consumption.
The report encapsulates an in-depth analysis of the markets of 5 key E+ economies, namely India, Indonesia, Malaysia, Philippines & South Africa and highlights the spends and trends in various sectors like Information technology, telecom, retail, automotive, education and healthcare contrasting these 5 economies with the United States, a representative of developed markets.
According to the report, the E+ economies demonstrate a strong growth potential outpacing markets such as the US. While domestic and foreign investments are the key growth drivers in these economies, presence of a large number of small and medium businesses is giving the required thrust to the economic growth.The report also highlights that the domestic consumption is rapidly expanding in the E+ economies and the fact that the rapidly expanding youth populations and labor force in emerging economies is all set to yield demographic dividends.
Speaking about the findings, Praveen Bhadada, Director- Market Expansion, Zinnov, said, “There are 90,000+ large enterprises in E+ countries compared to 41,000 in the US. 112 of the world largest 2,000 companies are headquartered in E+ markets. A base of 75 million SMBs makes these E+ markets the largest SMB market globally. The per capita GDP in these economies is growing 250% more compared to the US. These are great indicators which is why E+ markets are becoming a force in reshaping global industry across sectors.”
Trends in various sectors:
Information Technology: With over USD 50 billion spent in IT investments E+ economies demonstrate the fastest growth in IT across the world. Large enterprises and governments are key spenders on IT in these economies. India had the maximum increase in IT spend as compared to any other E+ Economy in CY 2012.
Though PC shipments are showing constrained but positive growth, tablets and smartphones are expected to drive the computing future in these economies. Multi-national IT vendors as well as local players are evolving their offerings and go-to-market models to aggressively serve E+ markets. Volume licensing deals with trade bodies, innovative financing models for SMEs, local talent development and evangelism are key initiatives taken by IT majors to win in these markets.
Telecom: E+ economies with 1.33 billion telecom subscribers globally have almost 4 times the subscriber base in the US. The telecom revolution in E+ countries started with mobile phone networks and hence internet traffic across E+ countries is led by mobile devices, whereas 87% of internet traffic in the US comes from PC/desktops/fixed line. With over 50% internet traffic in E+ coming from mobiles, they are positioned as mobile first economies. Vendors are increasingly moving to mobile enabled versions of their solutions to win enterprise and end-customers.
Retail: E+ retail markets prove attractive for foreign investments due to liberalization with India ranking 5th in the global retail ranking for market attractiveness. In emerging markets retail sales grew by over 2 times the growth in the US. The year on year growth rate of the retail sector is fuelled by increasing demand potential in E+ economies, going up to as much as 12% for India and Indonesia. Unorganized retail account for over 3/4th of the overall retail sales in E+. Only 8% of India’s retail sector is organized, the rest being unorganized. The USA however is the exact opposite with 85% organized retail. Even unorganized retail is embracing technology to stay competitive. Further, governments are encouraging unorganized retail to stay competitive through loans and group buying.
Automotive: E+ countries are positioned as low cost manufacturing hubs for international brands and the next wave of growth in the auto sector is expected to be driven through emerging markets. The automobile industry in E+ economies is driven by the small car segment with more than 50% of car sales in India being accounted for by small cars (like hatchbacks). Many E+ markets such as India and South Africa have become hub for small car exports.
Education: Education sector in E+ is very large sector given the increased push from government towards ‘education for all.’ India is the top spender in the E+, with a budget of USD57.6 billion dedicated to education. E+ lag the US in the student-teacher ratio and the average public spending per student, however information and communication technology (ICT) is playing a pivotal role in driving the expansion of the education sector in these countries. Initiatives taken up by countries include offering full time online education courses, distributing tablets and laptops to students to enable accessibility and governments focusing on PPPs to ensure better infrastructure for schools, colleges etc.
Healthcare: In order to increase the effectiveness of healthcare delivery Emerging markets are extensively using technology to reach and service the patients.Healthcare budgets in E+ nations are significantly lesser than that of the US. India spends the most out of the 5 nations at 4.8% of the GDP, while the USA spends 23% of the GDP on healthcare. E+ markets also lag considerably in the doctor-patient ratio. However, low cost technology (like GE’s low cost ECG machine) is driving the healthcare ecosystem. Further, low cost healthcare is rapidly expanding medical tourism in E+ economies, an industry that is expected to show a wave of growth in the coming years.