How to capitalize on this opportunity?
By Jeong Young-moo
Over the next two decades, rising per capita wealth in rapid-growth markets will generate a significant growth opportunity for multinational companies. Understanding this market, and developing products and services that meet its needs, will therefore become a strategic priority that cannot be ignored.
Currently, the middle class in Asia alone numbers some 525 million people. Between now and 2030, an additional three billion people globally will enter this income bracket. And this offers companies a rare and highly valuable opportunity to seize a new market of unprecedented size ― by thinking differently about how they innovate.
Companies that downplay its importance, and only keep focusing on traditional premium markets in developed economies, will not just miss out on this massive opportunity but also find themselves increasingly disrupted by agile new competitors in their home markets. And this cannot be an exception for South Korean enterprises.
Innovating for the next three billion, then, will not just mean the establishment of a rapid-growth market strategy. As the world becomes more polycentric ― causing ideas, capital and people to flow in every direction ― the key is to understand the similarities across markets as well as the differences.
South Korean companies too should realize what this means for their business. Here is a primary advice from Ernst & Young: product development and strategy execution may need to be local, but they should draw on global resources and re-apply ideas and knowledge in other markets ― whether rapid-growth or developed.
Today’s leading innovators seem well aware that they should combine local knowledge along with global resources and capabilities across multiple dimensions. This ensures that products and services will meet the price points of different customer demographics, but also fulfill their unmet needs in a way that has rarely been achieved before.
Although the emergence of the new purchasing power is still at an early stage, companies must ``act now’’ to create attractive products and services, establish a presence, and build market share and scale.
Those who can sustain both a long-term commitment and the ability to innovate for the next three billion will be well positioned as this market swells in the next 20 years.
Jeong Young-moo is the Strategic Growth Market Leader of Ernst & Young Korea.