Finding Opportunities in Emerging Market Cities

By Shlomo Maital       

         Urban Growth

  The above table is from a McKinsey Quarterly article, “Unlocking the potential of emerging market cities”, by Dobbs, Remes and Schaer, Sept. 2012.  The main point:  

“Urbanization will create an over-four-billion-strong global “consumer class” by 2025, up from around one billion in 1990. And nearly two billion will be in emerging-market cities. These cities will inject nearly $25 trillion into the global economy through a combination of consumption and investment in physical capital”.   During 2013-25, 440 emerging market cities will account for half of global GDP growth. 

    So, what can forward-looking global managers do with this information?  Use a city-specific lens, advise the McKinsey consultants.  The Exhibit above suggests five different sets of focuses:  elderly, youth,  laundry care,  commercial office space and municipal water.  Some of the cities in Exhibit 2 may be unfamiliar to some readers.  Ouagadougou is the capital of Burkina Faso (which excelled in the recent African Cup competition in football).  Ghaziabad is the capital of the Indian province of Uttar Pradesh. 

    For years I have taught that a manager with a truly global mindset treats the entire world as his or her playing field. But this is no longer sufficient.  Today, ‘think global’ means:  Identify the cities that are the best sites for the products your company enjoys competitive advantage in, and that at the same time have the best prospects of continued urban growth.  Find locals who can help you and who are well connected.   And keep in mind that nearly all the 50 cities in Exhibit 2 (all but 6) are in emerging markets. (The six exceptions are LA, Osaka, NYC, Tokyo, Washington DC and Dallas).

 

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