Scenario planning – how to find the right strategy at ... - Roland Berger

Study 5
"In emerging markets, volatility is the new normality.
We cannot look more than three years ahead in these countries."
Siegfried Gänßlen, CEO of Hansgrohe, a leading German
sanitary and fittings company
Signs of more volatility are everywhere. The stock markets of
emerging countries are one good example. Over the last five years,
for instance, the 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 fluctuated from USD 40 to 140 a barrel – a range exceeding
250%. Other commodities, such as raw materials from emerging
markets and the developing world, also show large price
swings. For example, aluminum prices over the same five years
ranged between USD 1,400 and 3,300 a ton, a difference of
more than 100%.
Volatility is found not only in the economic sphere, but in politics
as well. A prime example here is the Arab world. Since the
Arab Spring began in January 2011, one country after the next has
experienced some degree of upheaval. Foreign companies are
uncertain about the consequences for their Middle East business
and investments, which recently totaled USD 15 billion annually.
f1 Given this volatility, managers find it increasingly difficult to
anticipate how changes and trends could impact their business.
Traditional foreign investment planning cycles of ten years or
more are no longer feasible. Plans must be reviewed and revised
at much shorter intervals.
f2
What are successful companies
doing differently
As this book seeks to show, emerging markets have enormous
business potential. Emerging countries plan to invest a total
of nearly USD 30 trillion in their B2B and B2C sectors over the next
20 years, according to Roland Berger estimates. These immense
disbursements will improve the lives of millions of citizens across
the world. But leveraging the full potential of these investments
can be achieved only by companies that correctly position their
strategies.
Companies must adapt skillfully to market movements. Rapid
economic growth in China, for example, is turning many people
into millionaires. The number of Chinese households worth
at least USD 1 million leapt by over 60% in 2010. China recorded
1.1 million millionaire households that year, considerably more
than the 670,000 it had in 2009. Many of these new millionaires
prefer products that cater to their unique cultural tastes.
Foreign companies now need to design and deliver products
to satisfy a more diverse customer base.
A good example is Hansgrohe, which wins plaudits for international
competitiveness based on high-style, high-quality minimalist