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Innovating for the next three billion - Opportunity in emerging markets - EY - Global

Innovating for the next three billion

Opportunity in emerging markets

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Shares of global middle class consumption, 2000–50

EY - Shares of global middle class consumption, 2000–50

Source: Homi Kharas, The emerging middle class in developing countries, Working Paper No. 285, OECD Development Centre, January 2010

Finding opportunity in frugal innovation

Please complete the following sentence based on the statement that best describes your company's view on the opportunities for frugal innovation in rapid-growth markets. "Adopting frugal innovation to create products and services is..."

EY - Finding opportunity in frugal innovation

Source: Homi Kharas, The emerging middle class in developing countries, Working Paper No. 285, OECD Development Centre, January 2010



More than three-quarters of our respondents think that adopting frugal innovation to create products and services is a major opportunity.

Over the next 20 years, global economic trends will completely transform the customer base for most industries.

Rising per capita incomes, favorable demographics and continuing economic growth are creating massive growth in the numbers of the global middle class. By 2030, there will be an additional three billion people joining this cohort, and most of them will live in Asia.

The numbers are staggering. In 2000, only 10% of spending by the global middle class took place in Asia. By 2030, this proportion could rise to 40%.

 

EY - Shares of global middle class consumption, 2000–50 Shares of global middle
class consumption, 2000–50

A mismatch in the offering

Yet many companies have been slow to capitalize on this emerging demographic.

Although rapid-growth markets account for 80% of the global population and 50% of global GDP at purchasing power parity, the average S&P 500 company earns just 10% of its revenues from these emerging market economies1.

A new generation of frugal innovators

Recent years have seen a number of high-profile innovations that target middle- and lower-income customers in rapid-growth markets.

 

EY - Finding opportunity in frugal innovation Finding opportunity
in frugal innovation

Launched in 2009, the low-cost Tata Nano car is probably the best-known example. Tata's goal was to create a car that would sell for INR100,000, or around US$2,500, which is much cheaper than any other production car in the world.

Although there have been teething problems with the Nano since it was launched, there is no doubt that this was a breakthrough innovation.

1Innovation in Emerging Markets



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