Sixty-nine percent of U.S. business executives who are involved with business development and corporate strategy anticipate their companies will invest in geographic expansion, particularly in high-growth and emerging markets, according to a new survey by KPMG LLP.
When asked about the new markets in which their companies planned to make capital investments of more than $5 million over the next year, Brazil (27 percent), China (26 percent), Mexico (17 percent), and India (13 percent) were the most popular destinations among the 100 U.S. business executives polled.
The survey also found that 77 percent of the respondents anticipate their company’s revenue in high-growth and emerging markets to increase over the next year. Joint ventures (37 percent) and M&A (22 percent) were cited most frequently as the types of investments that companies plan to make when entering into new emerging and high-growth markets over the next year.
When asked what percentage of their companies’ global revenue they anticipated coming from high-growth and emerging market countries over the next year, 37 percent responded 1 to 10 percent, 30 percent said 11 to 20 percent, and 14 percent said 21 to 30 percent.
“U.S. businesses are seeing positive momentum in the domestic economy and now appear ready to loosen their purse strings to invest in emerging and high-growth markets to fuel growth in years to come,” said Mark Barnes, national leader of KPMG’s U.S. High Growth Markets practice, in a statement. “Not surprisingly, these businesses are honing in on vast markets with strong growth rates. We also see some investment moving outside of the BRICs and into other markets such as the Philippines, Turkey, South Africa, Korea, Indonesia, Vietnam and Colombia, which possess natural resources, a hunger for goods and services such as healthcare and financial services, and a need for vital infrastructure. While some of these countries may not generate immediate returns, they have bright, long-term growth prospects and companies that establish an early presence can gain a competitive advantage.”
However, the executives who responded to the survey do perceive some barriers in the way of growth at their companies. Lack of local talent or human resources (38 percent), slowing GDP growth (38 percent), inflation (29 percent), rising wages (28 percent), and local competitive activities (22 percent) were cited as the biggest barriers to revenue growth in high-growth and emerging markets over the next year.
The role of government and bureaucracy (50 percent), political risk (42 percent), securing and retaining talent (33 percent), bribery and corruption (30 percent), and regulatory issues (27 percent) were cited by respondents as the biggest operational challenges for their companies in high-growth and emerging markets.
“Various growth challenges such as rising labor costs and operational challenges are precipitating investments into new high-growth and emerging markets,” said Barnes. “But many of these challenges are not insurmountable and can be overcome with the right know-how and counsel.”
