Multinational companies that have a presence in emerging markets such as Asia, the Middle East and Africa, are seeing their stock prices climb faster than those that do not have an emerging markets focus, according to new research by Vanson Bourne on behalf of Tata Communications.
According to the “Connected World” report, which surveyed 1,600 senior decision makers across ten countries, 87 percent of business leaders are actively engaging in emerging markets. China is the most popular target, followed by India and Brazil.
British companies are expected to increase their investment in emerging markets by 34 percent in the next year, with 47 percent considering a move in to China. This is reportedly driven by growth opportunities, cost effectiveness and the “culture of innovation” in those regions.
During a keynote session at Tata's Global Media and Analyst Summit in Dubai this week, the company's senior vice president of corporate strategy, Srinivasa Addepalli, said multinationals that have had a presence in emerging markets for more than a decade are now starting to reap the benefits.
In particular, the economic downturn in developed markets has prompted a number of companies to consider setting up shop in emerging markets where labour is relatively cheap, there are opportunities for growth, and the technology being adopted is leapfrogging much of the legacy IT infrastructure that is still in use in developed countries.
“Large companies in the UK, France and Germany have no choice,” said Claude Sassoulas, managing director of the European region for Tata Communications. “The growth is coming from emerging markets. The 0.5-1 percent GDP growth that we're seeing in Europe is not going to help these companies meet their growth requirements.”
Addepalli stressed that investment in local talent is critical in entering new markets, as this brings strong customer knowledge. However, talent was identified as a critical challenge by 37 percent of all those surveyed, with those in India particularly lamenting the lack of software development skills and communications technology experience in other emerging markets.
“Technology and communications service providers can play a big role in improving skills development in each of these markets,” said Addepalli. “The moment you open up the classroom to a digital classroom, education can become much more widely available, skill development can happen, and there is access to talent through technologies like telepresence and other forms of communications.”
Other concerns raised by respondents included government regulation, established competition, and the availability of communications and digital infrastructure.
Tata Communications has gone some way to addressing the infrastructure issue with the completion of the first round-the-world fibre optic cable network. The company’s CEO Vinod Kumar said that the ring allows users of Tata’s services around the world to have the maximum possible uptime.