Despite the uncertainty and volatility surrounding the 2012 economic environment, corporate expectations for emerging market business units remain high, across regions and industries. Companies such as Heinz (NYSE: HNZ-P) and BlackRock (NYSE: BLK) are expecting emerging markets to continue to drive growth, but Frontier Strategy Group has observed two potential red flags that emerging markets executives should consider as they look to 2012:
1.Expectations are aggressive, but strategies are conservative
–Profitable growth is the priority in 2012. Most executives are emphasizing conservative methods for expansion over riskier and more resource-intensive options
–Companies are expecting to achieve targets by taking market share, rather than entering new markets, launching new products, or M&A
2.Strategies may be undermined by the tactics used to implement them
–Despite the emphasis placed on profitability, a majority of companies plan to compete on price, lowering the prices of their existing products developed for Western markets, rather than adjusting product features, which would allow them to reduce costs while increasing value
–Margins will be further squeezed if deteriorating market conditions cause customers to be increasingly price sensitive
FSG has surveyed senior executives running emerging markets business units to collect detailed insights into growth targets and strategies, hiring, salaries, organizational structure, and more.
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