Boston: The Boston Consulting Group (BCG) has launched an innovative tool to help companies assess their ability to compete in emerging markets.
In a recent survey of executives of multinational companies conducted by BCG 73 percent said that emerging markets were a priority, but only 13 percent said that their companies were ready to win in them.
It is to address this disparity that yesterday BCG introduced the Globalization Readiness Index, which gives companies a quick read on their preparedness to compete in emerging markets.
The Globalization Readiness Index identifies strengths and weaknesses in a company's ability to succeed in emerging markets and can serve as a benchmarking tool. Unlike metrics such as revenues and market share, the Globalization Readiness Index looks forward and anticipates how well a company is likely to perform in emerging markets in the future.
The index specifically measures a company's potential in these markets by doing a best-practice analysis of its leadership commitment, product portfolio, go-to-market capabilities, people and organizational functions, and scale and reach.
"Executives of global companies understand how important emerging markets are to their future in this two-speed world. But until now, they have had a hard time judging whether or not they were ready to win," said Bernd Waltermann, a senior partner based in the firm's Singapore office.
"The Globalization Readiness Index will let them know, quickly and accurately, what areas need to be addressed for international success."
Past Success Is No Guarantee of Future Performance
Emerging markets are expected to grow by 6 percent annually over the next five years, four times as fast as developed markets. From 2010 through 2020, 270 million new households in emerging markets will enter the global consuming class--an increase of more than 40 percent.
BCG says the Globalization Readiness Index will be especially helpful in preventing companies from being lulled into a false sense of security by early success in emerging markets. Many global companies that have secured quick wins by appealing to the high-end segment with Western products and services have struggled to move into the mass market. The Index can highlight weaknesses in the product portfolio and distribution capability that may not be apparent when the company is focused at the high end.
The Globalization Readiness Index covers 13 dimensions of emerging-market readiness and maturity. Working with BCG, companies can develop a full understanding of their strengths and weaknesses within a few weeks and then start to adjust their business model in order to win in emerging markets.