After the derivatives-fueled recession starting in 2007, the prevailing narrative was that emerging markets were resilient, impervious economic machines that could balance the slowdown in mature markets. Today, things are a little different, and the shiny emerging-markets engine is showing worrying signs of wear and tear. Persistent reports of capital flight, market instability, political turmoil, and knock-on effects from a Chinese slowdown are enough to scare the most hardened speculators. Managers at tech and pharma companies are wondering how the slowdown will reduce demand and undermine hard-fought strategic investments.
For many companies, however, all the doom and gloom may be obscuring real opportunities. Big Data and mobile-based services are disrupting old business models, while advances in transportation and logistics (drones, driverless vehicles, and the Internet of Things) have the potential to transform many others. Young people and the emerging middle class have gained a strong appetite for new technologies, and forward-looking governments are instituting policies to encourage the shift to more consumer-led economies. Consumers in these markets may be more value conscious in the short-term, but solid growth should continue in industries like health and financial services. Pulling back now because of threatening macro-economic headwinds is no way to navigate emerging markets.
Tech companies will capture opportunities by identifying and supporting public- and private-sector customers in select geographies and industries. Managers with responsibility for growth in emerging markets will need to present strong business cases that demonstrate how their products and services will reduce costs, increase productivity, and create new revenue opportunities – primary concerns in a challenging economic environment. These strategies may sound familiar; they helped some companies avoid catastrophe during the recession, and they will help others avoid the gloom in the months to come.