issue: January 2013 ApplianceMagazine.com
The Emerging Era of Huge Consumption
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Asian officials and company leaders met during the recent World Economic Forum to put forth a vision of a world on the verge of unprecedented prosperity, driven by the emergence of millions of new consumers.
Despite ongoing global concern over the state of the world economy, many Asian financial watchers are quite optimistic about the future. They expressed that optimism at a recent panel hosted by the Confederation of Indian Industry and The Boston Consulting Group (BCG), during the January 2013 World Economic Forum annual meeting in Davos, Switzerland.
In general, panelists see great potential for global prosperity coming from the rise of emerging nations.
Designing for Cultures
Forum speaker Adi Godrej pointed to his company's ChotuKool refrigerator as an example of designing products to meet the specific needs of emerging Asian consumers. In 2012 the ChotuKool was recognized with a Gold Edison Award in the category of Social Impact. Edison Awards described the unit as a
One of the speakers was Adi Godrej, president of the Confederation of Indian Industry and chairman of the Godrej Group (Mumbai). The group is one of India's largest conglomerates, and it includes the appliance business Godrej & Boyce.
Adi Godrej pointed out that explosive growth of Asia's consumer class is creating a massive market for a wide range of goods. But the diverse nature of the consumers requires global companies to develop highly tailored strategies and approaches.
Kamal Nath, India's Minister for Urban Development, said that, despite current economic and financial challenges, he sees the world entering a period of unprecedented prosperity, driven by globalization, the engagement of new countries in the global economy, and worldwide gains in living standards. "I would say, the best period is yet to come," Nath said. "We are on the fringe of it, because so many things have happened which will be kicking off in the next decade."
Huge Consumption Opportunity
In emerging Asia, Nath said, the expansion of the middle class, rising disposable incomes, regional trade agreements, and huge potential gains in consumption will help fuel substantial economic growth and socioeconomic well-being. "Asia is home to 60% of the world's population...but [it accounts for] only 20% of the world's consumption," he noted. "[That] shows the huge consumption opportunity which is available in next five or 10 years."
Prijono Sugiarto, president and CEO of PT Astra International, one of Indonesia's largest diversified conglomerates, said his country is on a much sounder growth trajectory than it was 15 years ago. Citing research by BCG, he said that Indonesia has about 74 million people who can afford to spend between US$200 to US$500 per month. "This number will double eventually in the next five to eight years."
Adi Godrej reiterated that addressing the Asian markets will require knowing, and designing for, some very specific groups of consumers. "Established formats of product design and marketing will no longer be valid," he said. "We will need to meet the aspirations of new consumers through innovation and tailored design of products."
Godrej cited the inexpensive Tata Nano car, the Tata Swach water purifier, and his own company's small ChotuKool refrigerator as examples of addressing low-income segments successfully.
Janmejaya Sinha, chairman of the Asia-Pacific region for BCG, agreed that "we find it hard to live beyond the quarter and to see the seismic changes that are taking place today."
A Global Economic Reset?
Sinha offered evidence to support the view that "this is a global reset":
* Deaths from civil war and terrorism are down 50% since the 1990s.
* Since 1980, per capita global GDP has gone up from about $5,000 to $7,800 in real terms.
* Also since 1980, life expectancy has increased from about 63 years to nearly 70 years.
* Poverty has been cut in half in the last 50 years - a greater reduction in poverty than in last 500 years," Sinha said.
BCG's President and CEO Rich Lesser said he believes that, decades from now, people look back on the period between 1980 and 2030 and see it as a time that reshaped the world in terms of wealth creation, poverty reduction, improvements in health care, and gains in connectivity. Despite today's formidable challenges, that 50-year period will be remembered as a time when billions of people enjoyed an improvement in the quality of their lives.
The challenge for today's leaders, Lesser said, is to avoid being caught up in the noise and the quarterly challenges, and to focus instead on "the signal."
"The signal is the fundamental economic change that's going on in the world, the opportunity that's presenting itself to millions of people and companies to shape their own futures."
People and companies, Lesser said, will need to be bold in seizing those opportunities. "Because they won't come easily."