Only 5% of companies report actively monitoring market opportunities in Asia.

Summary: One in five organizations surveyed report scaling back in Asia. Companies are replacing initial unrealistic expectations with long-term commitments.

The fifth opportunity on the ladder is one that has been a source of much hype as well as some dashed expectations: the rise of the emerging markets, not simply as centers for low-cost labor, but as centers of global consumer demand.

Despite the difficulties experienced by many firms entering these markets, it is hard to disagree with this long-term trend, and respondents on an average see this opportunity rising on the ladder by 2013.

Opportunity outlook and impact

Unsurprisingly, emerging market demand growth is a top current focus for executives in India and Russia, and is also ranked third by respondents from the Middle East.

It is also a top-three opportunity for the oil and gas and the life sciences sectors.

For executives in most other countries and sectors, however, emerging markets are a much less significant opportunity than might be expected: in France, for example, they are ranked 9th overall, and in Italy, 10th.

This may be largely due to an increasing sense of the difficulty of profiting from emerging markets. One in five organizations in our survey reported that they had limited their focus on Asia, following setbacks there, in order to concentrate on their home market.

Challenges to emerging market demand growth, as reported by organizations surveyed

Geographic view

• Executives from continental Europe — particularly from France, Germany and Italy — were the most likely to perceive such barriers to entering emerging markets.
• Executives from the UK, India and the Middle East were least likely to report such obstacles.

Sector perspective

Regardless of current obstacles, the sectors are unanimous in predicting a rise in this opportunity by 2013.

Emerging market demand growth

Responding to the opportunity

The most common factor driving organizations to seek growth in emerging markets was a perception of rising competition in traditional markets: this was mentioned by 4 in 10 companies surveyed.

A number of organizations also mentioned the sheer rapidity of market growth (and expected growth) specifically in Asia, as a factor.

Executives in nearly all countries reported a substantial recent rise in engagement with emerging markets — with the exception of France and Germany, where the retrenchment from Asia seems to have been particularly pronounced.

We saw less evidence, however, that companies were positioning themselves to make use of this opportunity to the full. Only 5% of companies were actively monitoring market opportunities in Asia, and only 1% of respondents (primarily from the power and utilities sectors) reported that they had invested in innovative local companies in emerging markets.

In addition, relatively few companies had attempted to develop products specifically for the Asian market. These findings may help explain why many companies have found it difficult to profit from this opportunity.

Factors enabling emerging market demand growth, as reported by organizations surveyed

Sector strategies

• Respondents in the oil and gas sector and the retail sector were particularly likely to focus on this opportunity as a route to growth: over half of organizations in these sectors said they had expanded business in emerging markets, particularly in Eastern Europe or Asia.
• Health care and public administration organizations were most likely to monitor customer needs in Asia, and to attempt to develop products and services specifically for that market.
• Banking was least likely to develop an Asia specific portfolio of products or services.

Organizations' responses to emerging market demand growth

Perceived impact of emerging markets demand growth, by sector, 1–10 scale

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