By 2016, it’s estimated that 88% of the world’s population will be living in these developing countries. But why should UK SMEs look to get involved in these upcoming economies?
Global real estate portal Lamudi, which operates exclusively in the emerging markets, explores the key factors leading to business success in these countries and explain why UK SMEs should look to get involved.
Growth is expected to be three times that of developed markets between 2013 and 2020
According to data from Euromonitor International, in the seven years between 2013 and 2020, emerging market economies are forecast to grow three times faster than developed economies, with an average of 65% of global economic growth. While not all emerging markets grow at the same rate, the overall economic output from this group is increasing year on year.
Every country is different
While it sounds obvious, many throw all countries on a continent, or within a region, into the same bracket. However, there are vast differences from one country to another, regardless of their proximity. From Internet penetration to infrastructure development, local culture to taxation laws, each and every country in the emerging markets needs to be approached differently, with a tailor-made business strategy in place. Take Ethiopia and Kenya as two examples: despite being neighbors, in the second quarter of 2014, 47.3% of Kenya’s population was using the Internet, in comparison to only 1.9% in Ethiopia.
Technology adoption is faster
Many emerging markets have skipped steps taken in more developed countries when it comes to the implementation of landlines, desktops and dial-up Internet. As a result, new technologies – including wireless, mobile and app usage, and mobile banking – are adopted by young, tech-savvy populations at a more rapid rate. In Indonesia, one of the largest smartphone markets in the world, there are currently more than 280 million mobile subscribers. Kenya, meanwhile, is leading the emerging and developing world in mobile payment technology.
Emerging middle classes are pushing consumer spending
The middle classes in emerging markets are growing rapidly, creating a new group of consumers. As consumers in these markets have an increasing amount of disposable income as a result of economic development, the demand for high-quality products grows. Furthermore, the middle classes in the emerging markets are increasingly young in comparison to their developed counterparts. These younger age groups are more focused on using technology, influencing spending habits by looking online to buy quality products and services.
Paul Philipp Hermann, co-founder and managing director of Lamudi Global, comments, “Young and growing populations, coupled with economic growth, make the emerging markets a desirable choice for start-ups, small and medium enterprises, and multinational corporations.”
“Growing middle classes in these countries are flocking into the cities, bringing a strong purchasing power, high penetration of mobile phones and an enormous demand for online service – presenting plenty of opportunities for new business ideas.”