How 'itty-bitty multinantionals' can serve the world's rising middle class

How 'itty-bitty multinantionals' can serve the world's rising middle class

As the world's consumers get richer, older, more urban and more demanding, small companies will see more and more rewards for exporting their goods. Photo: <a href="http://www.flickr.com/photos/usdagov/5978367807/in/photostream/">USDA (Flickr)</a>
As the world's consumers get richer, older, more urban and more demanding, small companies will see more and more rewards for exporting their goods. Photo: USDA (Flickr)

The global consumer market is changing, and big companies are taking notice. According to an article this month in The Atlantic, small companies should think globally, too.

Coca-Cola chairman and chief executive Muhtar Kent writes in a BBC news op-ed that businesses "must understand the drivers that will transform our industries during the rest of this decade and beyond."

Referring to five ‘mega-trends’ shaping global markets identified last year in the Consumer Goods Forum's report on the "Future Value Chain,” Kent writes that countries and companies should look to the insights of home-grown businesses and entrepreneurs to both succeed at business and best serve consumer demands.

Here’s a look at the five ‘mega-trends,’ according to Kent in his BBC news piece:

1) Mass urbanization: “More than half the world's population now live in cities. By 2050, this figure will balloon to 70 percent.”

2) We’re getting older: “By 2047, people over 60 will outnumber those under 15...we can expect more focused marketing and greater reliance on home delivery.”

3) The middle class cometh: “More than 90 percent of the world's middle class will live in emerging markets by 2030, up from 50 percent today.”

4) Consumers in the driving seat: “Consumer expectations are increasing while their tastes and preferences change at a dizzying pace. By 2020, a third of consumer purchases are expected to be made online.”

5) What about the planet? “By 2030, the world's population will reach 8.3 billion, boosting demand for food and energy by 50 percent and for fresh water by 30 percent. In this light, sustainability is simply smart business.”

Large companies like Coca-Cola have the money and resources to adapt their practices to mega-trends. But thinking globally isn’t just good for the big players, according to The Atlantic’s article, "The Itty-Bitty Multinational."

Emerging markets have grown from 23 percent of the world economy in 1999 to nearly 40 percent in 2011, and will be the majority of the global GDP soon, making this an excellent time for U.S. small businesses to explore new markets.

But small businesses can be hesitant to invest and expand services abroad for two big reasons, reports The Atlantic.

First, there is a misconception that doing business overseas creates a zero-sum game between American workers and their foreign counterparts. Not true. Small exporters and those who invest abroad hire better-skilled workers and pay higher salaries; [and] they grow larger and are more productive.

Second, small firms contemplating expansion into global markets still face significant challenges, including sourcing reliable foreign partners, protection for intellectual property, financing, and navigating the complexities of foreign tax regulations and political risks.

But successful efforts have been underway to introduce U.S. small businesses to services that can help them to expand successfully into lucrative emerging markets.

Kent’s comments coincided with the annual global summit of the Consumer Goods Forum last week in Istanbul, and he writes that “a more appropriate location for this year's conference would have been tough to find, with Turkey's economy growing by 8.5 percent last year.”

Much has been made recently of the growing global middle class and the rising consumer power of emerging economies, as highlighted last week in the Wall Street Journal. As more people globally move into the consumer class, they gain power to shape how companies operate.

Big multi-nationals are paying attention to this shift, as evidenced by Kent’s perspective. And it’s time for little companies to become multi-nationals too, for the benefit of everyone involved.

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