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KPMG: US executives remain optimistic on emerging market expansion

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KPMG: US executives remain optimistic on emerging market expansion

Expanding globally tops executive agendas; Continued interest in BRIC countries and beyond.

Ninety percent of U.S. business executives involved with business development and corporate strategy have seen revenues from high growth and emerging markets (HGEM) increase and expect them to continue increasing in the coming months, according to a recent survey by professional services firm KPMG. This number is up 13 percentage points from a similar survey in 2013, and while there are still a number of challenges associated with entering new markets, businesses are looking to expand globally.

"High growth and emerging markets have moved to the top of the corporate agenda, and companies are investing beyond the BRIC countries," said Mark Barnes, national leader of KPMG's U.S. High Growth Markets practice. "With anticipated growth of six to seven percent in the coming years, frontier markets such as Nigeria, Kenya, Bangladesh, Myanmar, Mongolia, Iran, Iraq, Saudi Arabia and the UAE will attract investment."

Strategic Priorities & Growth Objectives

An overwhelming majority of executives (84%) say that HGEM countries are important to their company's strategy and growth – a significant increase of 37 percentage points from last year's survey. More companies (29%) expect a higher share of their global revenues ($31m- $50m) to come from these countries – an increase of 17 percentage points over prior year survey results.

"On average, executives this year expect that nearly one quarter of their global revenues will come from HGEM countries," said Barnes. "This number has increased from last year and may indicate an opportunity gap throughout the world as emerging countries contribute 50% of the global GDP."

Current Investments & Investment Plans

Executives reported current HGEM investments in the amount of $5m+ within the following countries at year-end 2013: China (49%), Brazil (35%), India (21%), and Russia (8%). Countries such as Mexico, Chile, Philippines, Argentina and Indonesia have seen increased executive perception over the past year.

The vast majority of executives plan to invest more than $5m in high growth countries over the next 12 months, and 76% say they will increase capital spending in those markets over the same time period – up 7 percentage points from last year. According to executives, nearly 65% of investments will go to current high growth operations, with 37% of investments allocated to new emerging countries. 

Success Drivers

A broad range of drivers are important for success in HGEMs, with cultural sensitivity and a blend of US/local leadership increasing from last year. Cultural adeptness is also a key success driver due to the relationship that occurs when global partners conduct business for the first time. In order to drive accelerated growth over the next 3-5 years, 59% of executives surveyed said that their companies are willing to deploy a strategic planning process as well as dedicating their leadership to focus on creating/managing/executing hyper-growth plans.

Challenges & Growth Barriers

Executives identified numerous entry challenges and risks in this year's survey, placing significant importance on Culture/Language (36%), Infrastructure (34%), Role of Government (32%), Bribery Fraud Corruption (29%), and Political Risk (29%). Executives also identified local barriers as the greatest threat to a company's revenue growth in HGEM countries.

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