Local Growth Opportunities

Some of the local BOP markets are very large. A large population base is one indicator of the size of the market opportunity at the BOP, not necessarily the per-capita income. For example, China, India, Indonesia, Brazil, Mexico, Russia, South Africa, and Nigeria can potentially be large emerging BOP markets. If an industry or a firm finds the “sweet spot”—meaning the right business model and the right combination of products and services—these markets could have explosive growth. Consider growth opportunities in China, the world’s largest producer of steel. The growth of the appliances, building, and auto markets has created an insatiable appetite for steel. China’s steel capacity is estimated at 220 million tons compared to 110 million tons in Japan and 90 million tons in the United States. China has also an installed base of more than 250 million cell phones. That is larger than the installed base of the United States. China is also one of the largest markets for televisions, appliances, and autos. The growth spurt in China is without parallel. Similarly, India is at the early stages of a growth spurt in a wide variety of businesses such as two-wheelers (4.8 million during the fiscal year 2002–03), housing loans, and wireless. The housing loan business went from a low of Rs. 19,723 crores during fiscal 1999–2000 ($4.4 billion) to Rs. 51,672 crores ($11.5 billion) in 2002–2003. During the latter part of 2003, India was adding about 1.5 million telephone subscribers/month.

Needless to say, this growth was not all derived from the poor. There are a lot of emerging “middle”-class customers here, but most of them earn less than $1,500 per capita ($6,000 per family of four). This growth is not funneled by the top of the pyramid. What is it that MNCs learn in these markets? The lessons for Samsung and LG (South Korean suppliers of cell phones to India), not just for Reliance and Tatas (Indian providers of service), is that they have to adjust to rapid growth, not 2 to 5 percent per year, but perhaps 50 to 100 percent per year.