<strong>Roland</strong> <strong>Berger</strong> Str<strong>at</strong>egy Consultants introduction Highly sensitive, linked and vol<strong>at</strong>ile emerging markets complic<strong>at</strong>e forecasting considerably
Study 5 "In emerging markets, vol<strong>at</strong>ility is <strong>the</strong> new normality. We cannot look more than three years ahead in <strong>the</strong>se countries." Siegfried Gänßlen, CEO of Hansgrohe, a leading German sanitary and fittings company Signs of more vol<strong>at</strong>ility are everywhere. The s<strong>to</strong>ck markets of emerging countries are one good example. Over <strong>the</strong> last five years, for instance, <strong>the</strong> Shanghai Composite moved between 1,500 and 6,000 points, and EGX, Egypt's leading share price index, swung between 12,000 and 5,000 points. During this same period, oil prices fluctu<strong>at</strong>ed from USD 40 <strong>to</strong> 140 a barrel – a range exceeding 250%. O<strong>the</strong>r commodities, such as raw m<strong>at</strong>erials from emerging markets and <strong>the</strong> developing world, also s<strong>how</strong> large price swings. For example, aluminum prices over <strong>the</strong> same five years ranged between USD 1,400 and 3,300 a <strong>to</strong>n, a difference of more than 100%. Vol<strong>at</strong>ility is found not only in <strong>the</strong> economic sphere, but in politics as well. A prime example here is <strong>the</strong> Arab world. Since <strong>the</strong> Arab Spring began in January 2011, one country after <strong>the</strong> next has experienced some degree of upheaval. Foreign companies are uncertain about <strong>the</strong> consequences for <strong>the</strong>ir Middle East business and investments, which recently <strong>to</strong>taled USD 15 billion annually. f1 Given this vol<strong>at</strong>ility, managers <strong>find</strong> it increasingly difficult <strong>to</strong> anticip<strong>at</strong>e <strong>how</strong> changes and trends could impact <strong>the</strong>ir business. Traditional foreign investment <strong>planning</strong> cycles of ten years or more are no longer feasible. Plans must be reviewed and revised <strong>at</strong> much shorter intervals. f2 Wh<strong>at</strong> are successful companies doing differently As this book seeks <strong>to</strong> s<strong>how</strong>, emerging markets have enormous business potential. Emerging countries plan <strong>to</strong> invest a <strong>to</strong>tal of nearly USD 30 trillion in <strong>the</strong>ir B2B and B2C sec<strong>to</strong>rs over <strong>the</strong> next 20 years, according <strong>to</strong> <strong>Roland</strong> <strong>Berger</strong> estim<strong>at</strong>es. These immense disbursements will improve <strong>the</strong> lives of millions of citizens across <strong>the</strong> world. But leveraging <strong>the</strong> full potential of <strong>the</strong>se investments can be achieved only by companies th<strong>at</strong> correctly position <strong>the</strong>ir str<strong>at</strong>egies. Companies must adapt skillfully <strong>to</strong> market movements. Rapid economic growth in China, for example, is turning many people in<strong>to</strong> millionaires. The number of Chinese households worth <strong>at</strong> least USD 1 million leapt by over 60% in 2010. China recorded 1.1 million millionaire households th<strong>at</strong> year, considerably more than <strong>the</strong> 670,000 it had in 2009. Many of <strong>the</strong>se new millionaires prefer products th<strong>at</strong> c<strong>at</strong>er <strong>to</strong> <strong>the</strong>ir unique cultural tastes. Foreign companies now need <strong>to</strong> design and deliver products <strong>to</strong> s<strong>at</strong>isfy a more diverse cus<strong>to</strong>mer base. A good example is Hansgrohe, which wins plaudits for intern<strong>at</strong>ional competitiveness based on high-style, high-quality minimalist
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