Capitalizing on the high growth markets opportunity. January,

Transcription

1 Capitalizing on the high growth markets opportunity January,

2 CAPITALIZING ON THE HGMs OPPORTUNITY Why HGMs? (1/2) In 2030 more than 50% of the population in Asia will belong to the middle class segment almost doubling compared to 2009 figure * North America Europe Middle East & North Africa 525 Share of Middle Class 2-5% 6-8% 10-18% Central & South America 22-36% 54-66% *Size of population as measured in Millions Sub-Saharan Africa Asia Pacific 1

3 CAPITALIZING ON THE HGMs OPPORTUNITY Why HGMs? (2/2) The GAP between the current Real GDP level, and the forecast value for 2030 is much larger for BRIC countries, emphasizing their faster economic growth RUSSIA USA EU27 CHINA JAPAN BRAZIL INDIA DEVELOPED COUNTRIES BRIC COUNTRIES Real GDP 2010 Real GDP 2010 Real GDP 2030 Real GDP

4 Company investment plans for HGMs

5 HGM expansion is the leading area for spending increases Q. In which areas do you expect your company to increase spending the most in the next 12 months? Geographic expansion 69% 83% New products or services Acquisition of a business 28% 33% 28% 40% Expanding facilities Research and development 18% 17% 14% 17% Information technology Business model transformation 13% 9% 12% 33% Employee compensation and training 3% 13% 4

6 Companies expect a higher share of global revenues from HGMs Q. What percentage of your company s global revenues do you anticipate will come from high growth emerging market countries in the next 12 months? 0% 2% 5% 1%-10% 22% 37% Average 11%-20% 27% 30% 24% 21%-30% 31%-40% 8% 15% 14% 17% 41%-50% 51%-60% More than 60% 1% 1% 4% 5% 12% Realize the opportunity gap: Companies average 24% of global revenues in HGMs, but HGMs contribute 50 % of global GDP 5

7 Executives are looking to a broader range of HGMs than ever before Current Investment made in HGM 2014 China 49% Brazil 35% India 21% Mexico 19% Chile 12% Argentina 10% Philippines 10% Indonesia 9% Malaysia 8% Russian 8% South Africa 8% Vietnam 7% Saudi Arabia 6% 5% South Korea % 26% 24% 24% N/A N/A 6% 6% N/A 13% 3% 6% N/A 7% Planned Investments for the next year in HGM 2014 China 30% Brazil 22% India 17% Vietnam 9% Chile 8% South Africa 8% Argentina 7% Malaysia 7% South Korea 7% Indonesia 6% Mexico 6% Poland 4% Turkey 4% Russian 3% % 27% 13% 4% N/A 5% N/A N/A 6% 6% 17% N/A 6% 4% 6

8 Preferred type of investments Q. Which of the following type of investments does your company plan to make in these new High Growth Market countries over the next 12 months? Joint venture 37% 45% M&A 22% 43% Greenfield 11% 25% Alliance/Partner 9% 38% (Multiple responses allowed) 7

9 Challenges and barriers in HGMs

10 Market entry challenges in high growth markets Q. What do you believe are the biggest challenges and risks for your company to enter and invest in High Growth Market countries? Cultural and language Infrastructure Role of government. Bribery, fraud, corruption Political risk and instability Cost management Inflation/exchange rate Regulatory compliance Local competition/innovation 0% 0% 0% 12% 12% 21% 20% 18% 24% 36% 34% 32% 29% 30% 29% 27% 42% 50% Credit risks Securing and retaining talent Supply chain Tax exposure and compliance Slowing GDP growth 0% 0% 7% 9% 15% 15% 14% 16% 17% 33% (Multiple responses allowed) 9

11 Revenue growth barriers in high growth markets Q. What do you believe will be the biggest barriers to achieving you company s revenue growth in current High Growth Market countries in the next 12 months? Local competitive activities 22% 39% Lack of local talent/hr 31% 38% Globalization of industries 18% 23% Slowing GDP growth 23% 38% 2014 Reverse innovation/frugal engineering 11% 19% 2013 Inflation 16% 29% Rise of Wages Population 10% 10% 11% 28% (Multiple responses allowed) 10

12 Strategies to overcome challenges in HGMs

13 Strategies to overcome challenges in HGMs CULTURAL AND LANGUAGE INFRUSTRUCTURS ROLE OF GOVERNMENT Challenge Description Differences in accepted norms, customs, communication can determine success or failure Infrastructure makes a difference in a company s revenue potential, since it impacts cost and time of doing business The role of government and bureaucracy is pervasive in many HGMs Our Impressions "Culture sensitivity is an important driver for success in Korea. While people speak English, you need to understand the culture and be a part of Korea if you want to succeed." Joon Kim Partner KPMG US Korea Practice " Poor highways make it difficult to get products to areas outside of major cities in Brazil. Successful companies will be those that can optimize their supply chain to mitigate these infrastructure risks. Devon Bodon Partner KPMG US Brazil Practice "The conflicts and security concerns in the Middle East can make it difficult to conduct business in some countries. Understanding government priorities is key to successful operations." Emad Bibawi Partner KPMG US Africa & Middle East 12

14 Strategies to overcome challenges in HGMs REGULATORY COMPLIANCE SUPPLY CHAIN SLOWING GDP Challenge Description Regulatory complexity and uncertainty pose numerous hurdles for market entry and ongoing operations Establishing effective supply chain operations is fraught with challenges from difficult- to-navigate regulations to supplier relationships Like the rest of the global economy, HGMs have experienced slowing GDP growth in the recent past Our Impressions "China has a fairly stable regulatory environment. The issue for many companies is learning how to apply the rules in daily competition. Companies that are able to do this will have a strategic advantage." "Ensure your supply chain is purpose built for the market you are penetrating. Leverage processes, policies, and producers from other markets but recognize the differences and adapt." "Its cyclical!" HGM executive Linda Zhang Partner KPMG US China Practice HGM executive 13

15 Key drivers for success

16 Cultural sensitivity and blending Italian and local leadership are key drivers for success Q. What are your management s key drivers for achieving success in High Growth Markets? Cultural sensitivity and adeptness 35% Blending local and Italian leadership 33% Patience to realize results 27% Be able to adapt the business model 27% Talent acquisition and retention 26% Adequate capital investments 25% Understanding business environment 23% Having on-the-ground trusted advisor 22% Knowing how to deal with the gov't 16% Corruption policy 15% Spending time in foreign operations 15% Learning from local HGM companies 13% (Multiple responses allowed) 15

17 KPMG Internationalization Practice Going Global Making the Right Moves

18 INTRODUCTION Key Initial Questions ASSESS GLOBAL OPPORTUNITIES FOCUS ON THE TARGET MARKET FUNDING & IMPLEMENTATION What is the size of your industry in the world? What about the competitive arena? Who wins? Who loses? Is there any effective opportunity for your business? What are the expected results by the management in the medium term? In which market your company should invest? Which Value Proposition is most suitable for the chosen market? What type of product? At what price? Throughout what channels? What is the investment level needed to seize the opportunities offered? What resources and skills your company would need in order to develop a growth path abroad? How your company can support the growth path? What are the changes and effort required to the Management? 17

19 WORK & DELIVERY PLAN Our answers to your requests WORK PHASE A. GLOBAL OUTLOOK B. TARGET MARKET ANALYSIS C. PREPARATION TO MARKET ENTRY D. FUNDING & EXECUTION ROSE Global PROJECT Market Analysis ROSE Target PROJECT Market Analysis Growth Options and Partners Evaluation Business Case Deliverable N.1 Deliverable N.2 Deliverable N.3 Deliverable N.4 The following are the documents that will be released during the project: KEY ELEMENTS Global analysis of Client Business or related Industries Opportunities and risks of most attractive markets Target Market identification Client Business Model Assessment Target Market Industry Analysis Opportunities and risks assessment Market Entry options evaluation Partner selection criteria identification Partner List Initial contact and feedback gathering Meeting follow up Pro & Cons evaluation and sensitivity analysis Evaluation of the economic impacts the targeted market entry will have on the Client actual situation DELIVERY PHASE 1 month 1 month 2,5 months 18

20 WORK & DELIVERY PLAN Our answers to your requests WORK PHASE A. GLOBAL OUTLOOK Global Market Analysis 1 COMPANY BUSINESS MODEL BUSINESS MODEL NETWORK MATCHING KNOWLEDGE ANALYSIS Analyzing the company business model, allows KPMG to initiate a Pre-Screening over global opportunities KPMG identifies potential attractive Markets, and connects with KGS which initiate the analysis on the targeted market SHARING KGS provides the feedback, KPMG Italy elaborates it, and shares the final results with the country-related KPMG desks FINAL ELABORATION Country-related KPMG desks provide feedback and initiate the Partner scouting activity Deliverable N.1 KEY ELEMENTS Global analysis of Client Business or related Industries Opportunities and risks of most attractive markets Target Market identification DELIVERY PHASE 1 month 3 days 19

21 WORK & DELIVERY PLAN Our answers to your requests WORK PHASE A. GLOBAL OUTLOOK Global Market Analysis 1 COMPANY BUSINESS MODEL BUSINESS MODEL NETWORK MATCHING KNOWLEDGE ANALYSIS Analyzing the company business model, allows KPMG to initiate a Pre-Screening over global opportunities KPMG identifies potential attractive Markets, and connects with KGS which initiate the analysis on the targeted market SHARING KGS provides the feedback, KPMG Italy elaborates it, and shares the final results with the country-related KPMG desks FINAL ELABORATION Country-related KPMG desks provide feedback and initiate the Partner scouting activity Deliverable N.1 KEY ELEMENTS Global analysis of Client Business or related Industries Opportunities and risks of most attractive markets Target Market identification DELIVERY PHASE 1 month 2 weeks 20

22 WORK & DELIVERY PLAN Our answers to your requests WORK PHASE A. GLOBAL OUTLOOK Global Market Analysis 1 COMPANY BUSINESS MODEL BUSINESS MODEL NETWORK MATCHING KNOWLEDGE ANALYSIS Analyzing the company business model, allows KPMG to initiate a Pre-Screening over global opportunities KPMG identifies potential attractive Markets, and connects with KGS which initiate the analysis on the targeted market SHARING KGS provides the feedback, KPMG Italy elaborates it, and shares the final results with the country-related KPMG desks FINAL ELABORATION Country-related KPMG desks provide feedback and initiate the Partner scouting activity Deliverable N.1 KEY ELEMENTS Global analysis of Client Business or related Industries Opportunities and risks of most attractive markets Target Market identification DELIVERY PHASE 1 month 4 days 21

23 WORK & DELIVERY PLAN Our answers to your requests WORK PHASE A. GLOBAL OUTLOOK Global Market Analysis 1 COMPANY BUSINESS MODEL BUSINESS MODEL NETWORK MATCHING KNOWLEDGE ANALYSIS Analyzing the company business model, allows KPMG to initiate a Pre-Screening over global opportunities KPMG identifies potential attractive Markets, and connects with KGS which initiate the analysis on the targeted market SHARING KGS provides the feedback, KPMG Italy elaborates it, and shares the final results with the country-related KPMG desks FINAL ELABORATION Country-related KPMG desks provide feedback and initiate the Partner scouting activity Deliverable N.1 KEY ELEMENTS Global analysis of Client Business or related Industries Opportunities and risks of most attractive markets Target Market identification DELIVERY PHASE 1 month 1 week 22

24 Survival of the smartest: you have to be FLEXIBLE to compete globally

25 LESSON LEARNED Dairy, a more globalized business 24

26 LESSON LEARNED React when the rules are changing Russia -4 Mil.Tons Bilion Mil.Tons Production at stable Dairy Product Consumption Population USA +4 Bilion ,3 Brazil -1 Mil.Tons Bilion ,2 Europe +12 Mil.Tons Bilion ,5 India +0 Mil.Tons Bilion , ,15 Mil.Tons China -7 Bilion ,4 New Zealand +19 Mil.Tons Bilion ,01 Markets like China and Russia in 2013 offered high potential for dairy exporters since demand was substantially higher than the internal production. Therefore, such markets have been main destination for countries with high product surplus such as New Zealand, Australia, Germany and France. 25

27 LESSON LEARNED React when the rules are changing Crude Milk Price / 100 Kg Italy USA New Zealand China EU (G, F,H) " An increasing number of cow keepers in China are deciding to discard the milk they collect and close business, as raw milk procurement price keeps diving amid rising cost and competition from import. " China Daily, 6 Gennaio 2015 The sharp demand rise for dairy 1 products has increased internal production. 2 Competitive pressure of large producers, has increased dairy imports in China Countries controlling the market has controlled raw milk price (New Zealand). Large Chinese players buy at competitive price dairy products from abroad, causing in the shortterm an excess in local offering. In order to keep competing successfully on the dairy market small-medium dairy producers are requested to enrich their product offering with higher value products, rather than just milk 26

28 LESSON LEARNED In the long run Source: Tetra Pak 27

29 LESSON LEARNED In the long run Source: Tetra Pak 28

30 LESSON LEARNED In the long run In 2013, prices in the EU rose by 6 per 100kg, and by 10 per 100kg in New Zealand. Price drop in 2014 not sustainable. Farm Gate Price for Milk in the EU and New Zealand: Source: Tetra Pak 29

31 LESSON LEARNED In the long run Dairy companies focusing on innovation and developing other liquid dairy products (OLDP), targeted at younger adults Convergence of categories, such as milk and juice or milk and cereal Yoghurt and smoothies gaining traction Nutritional benefits driving the value-added category Source: Tetra Pak 30

32 LESSON LEARNED React when the rules are changing OPPORTUNITY IMF GDP PPP 2013 $Bln IMF GDP Growth 2013 (%) IMF Proj. GDP PPP Rank 2050 ASIA EUROPE CHINA INDIA KOREA RUSSIA POLAND $13,37 $4,96 $1,66 $2,55 $ % 2 3.8% 6 2.8% 8 1.3% 1.3% N/A SOUTH AMERICA ASEAN AFRICA MIDDLE EAST BRAZIL MEXICO ARGENTINA INDONESIA MALAYSIA VIETNAM NIGERIA SOUTHAFRICA TURKEY SAUDIARABIA $2,42 2 $1,84 5 $77 1 $1,28 4 $52 5 $35 9 $47 9 $59 6 $1,16 2 $ % 1.2% 3.5% 5.3% 4.7% 5.3% 6.2% 2.0% 3.8% 3.6% N/A N/A EASE OF DOING BUSINESS INDEX Revenue Growth Barriers Market Entry Challenges Culture/Language Infrastructure Role of Government Bribery & Corruption Political Risk Cost Management Regulatory IP Protection Credit Risks Supply Chain Tax Exposure Local Competition Lack of Talent/Competition for Talent Slowing GDP Reverse Innovation Inflation Rise of Wages CHINA INDIA KOREA RUSSIA POLAND BRAZIL MEXICO ARGENTINA INDONESIA MALAYSIA VIETNAM NIGERIA SOUTHAFRICA TURKEY SAUDIARABIA High Challenge/Barrier Medium Challenge/Barrier Low Challenge/Barrier

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