The Growth Potential in Emerging Market Cities

The world’s economic balance is starting to tilt in the favor of the east and the south at surprising speed and scale, owing to a massive wave of migration and urbanization that is encouraging growth across the emerging world. Said wave of urbanization is expected to bring rise to less than five billion people by the year 2025, which is a huge improvement over the mere 1 billion in 1990. These new emerging cities will be able to add almost $25 trillion into the global economy through a combination of investment in physical capital and consumption, which is a very big shot in the arm for a global economy that is still reeling from the pockets of acute fragility.

Few business leaders are paying much attention to the potential in new cities when considering growth priorities. Many surveys of business leaders point out that as few as one in five executives have the good sense to make location decisions at the city level, with the rest only considering the country.

It seems that many executives still write off cities as mere “irrelevant units of strategic planning,” which is a big mistake as the new urban-growth zones start to flourish, companies that fail to look at the details in favor of the big picture will miss out on very important matters, particularly with regard to the potential for proper resource allocation.

The executives’ unfortunate decision to lock in resources and look only at the country level meant that they’ve been missing out on some of the middle class emerging market cities, which are unfamiliar but very, very lucrative.

Cities like Porto Alegre (Brazil), Surat (India), and Foshan (China) are not very famous and may not be part of many executives’ list of priorities. However each of these cities has a population of a almost five million, a booming economy and an active consumer base. Properly targeting these cities may add a lot to a company’s growth than overly saturated and highly contested cities like Madrid, Zurich, or Milan.

Not only are emerging market cities ideal due to their healthy consumer base, companies that try to target them will benefit from being early-movers. This means companies will have to develop better insights into some cities, such as knowing where senior people or retirees, other members of the target segment that have the buying power is growing most rapidly, as well as learning the existing market dynamics present in the cities.

Paying attention to emerging market cities will not only help support their country-level push, it will also help companies polish their marketing strategies at a smaller scale. Additionally, it allows them to use pinpoint accuracy when releasing new products, as product adoption rates are usually tied to local preferences and may vary across different cities within a single country.

These types of preferences are frequently missed by executives and marketers, who only look at strategies at the country level. The awareness of these shifting preferences and dynamics at the city level will both; increase possible income as well as reduce wastage, as companies will be better able to allocate resources and marketing campaigns.

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