Each year when we release KPMG's Global CEO Outlook there are surprises in the data, including viewpoints from top executives that may seem to defy the daily headlines and conventional wisdom.
That's the case with our 4th annual study, based on interviews with 1,300 CEOs from 11 of the world's largest economies, to uncover their strategic priorities over the next 3 years.
Among the intriguing findings: despite the seemingly high state of geopolitical uncertainty around the world - and a move towards protectionism in some regions - many global CEOs are increasingly bullish on conquering emerging markets to grow their organizations.
For example, when asked about the geographic markets they will prioritize for expansion, 70 percent of CEOs cited emerging markets, versus 28 percent who are focused on developed markets. This is a shift from our 2017 Global CEO Outlook, in which CEOs said they planned to concentrate their growth efforts in developed markets such as the US or UK.
Looking more closely at this trend, among CEOs who have set their sights on emerging markets, Central and South America is the most favored area for growth, followed by Eastern Europe, with the Middle East, Asia Pacific and Africa garnering a smaller share of CEO interest.
It's also interesting that CEOs based in Italy, the Netherlands and the US are most bullish on the Latin American region, and industries most enthused about the southern continent are the technology, consumer and retail, insurance and telecom sectors.
What's driving this attraction to emerging markets? The CEOs I speak to see the demographic potential and steady economic growth in many of the Latin American countries. Continued liberalization of trade in the region is no doubt also a draw, despite current uncertainty over NAFTA in Mexico and political volatility in several countries in the region.
Packing wisely for an emerging market foray
This fresh interest in emerging markets is timely in light of recent discussions we are having with our clients about navigating often unfamiliar geo-political risks. While many CEOs say their companies are adept at handling a wide range of business risks, they admit that managing the geo-political risk landscape is an organizational capability in which they feel less confident. As we pointed out in a recent whitepaper we published with Eurasia Group, CEO as the Chief Geopolitical Officer, CEOs realize this is boardroom issue and they can't draw up a strategy without considering this critical threat, including how it might impact the execution of your strategy and the tools you have to play with.
We're also seeing an increased level of understanding among global CEOs that they cannot lean on a 'one-size fits' all approach to emerging markets. In the past, many multi-nationals entered new markets with the attitude that what worked in their home country will work everywhere. Today, these companies appreciate that they must take account of cultural and other differences. It's about really understanding the nuances of the market you are investing in and tailoring what you do, and the products you sell, to the local community. In many cases, our clients are focusing on developed markets with a historic connection to their home nation and focusing on cautiously-paced expansion, often with carefully-chosen local partners, alliances or joint ventures to learn the lay of the land, from consumer tastes to regulatory complexities.
Essentially, it's the same advice you would offer a friend embarking on overseas travel, without knowing that their destination is about to enter the rainy season. You wish them “Bon voyage”, but encourage them to review all travel advisories and pack essentials to ensure a successful trip. Global CEOs are well-versed in taking these risk mitigation measures in their core businesses and now they must apply the same discipline as they pack their bags for high potential emerging markets.