Sales Force

Why Emerging Markets are the Future for U.S. Businesses

A customer leaves a KFC fast food restaurant in Dengkil, outside Kuala Lumpur, November 3, 2012.
A customer leaves a KFC fast food restaurant in Dengkil, outside Kuala Lumpur, November 3, 2012. (Bazuki Muhammad / Courtesy Reuters)

At the end of 2012, Apple announced that it would start producing a few existing lines of Macs in the United States, which would bring some jobs back home. In parallel, Jeffrey Immelt, the CEO of GE, declared outsourcing “outdated as a business model.” And the title of a recent Boston Consulting Group report, “Made in America, Again,” which examined “economic trends that point to a U.S. manufacturing renaissance,” seemed to sum it up.

So is this the end of globalization? No. In fact, the U.S. economy was never truly globalized in the first place. That was always a myth -- one spawned by the very real facts of information traveling at the speed of light, business executives traveling at the speed of a Boeing 747, and fast food flying out of McDonald’s outlets in 122 countries.

Globalization has two parts. One involves relocation of manufacturing or IT services to lower-cost countries. The United States feels this kind of globalization viscerally. It leads to lost jobs, decayed industrial towns, and news reports of factory disasters in unregulated countries in which costs are low. The other part involves the extent to which national companies ply their wares abroad. On this second front of globalization, American industry barely ever made a start. According to the IMF World Economic Outlook, the top twenty fastest-growing economies are all outside the Western hemisphere -- exactly the places the United States has not tapped. Therein lies the real opportunity.

LOST GROUND

In 2010, emerging markets represented 36 percent of global GDP, the majority of global oil and steel consumption, 46 percent of world retail sales, 52 percent of all motor vehicle purchases, and 82 percent of mobile phone subscriptions. According to the IMF, the emerging markets’ share of GDP will rise to 55 percent by 2018. The U.S. National Intelligence Council singled out the growth of a global middle class from these markets as a “tectonic shift,” valued at a $30 trillion market opportunity by McKinsey.

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