The Tougher Competitors in Emerging Markets

Companies in developing economies are becoming battle hardened as they vie for growth and plug into advanced technologies.

Global companies have long sought new growth in emerging markets. What they’re likely to find lately, however, are local players that are competing fiercely for the same markets and are now better managed and much sharper on strategy. These companies are overcoming hurdles to the adoption of advanced automation technologies ranging from robotics to machine learning and are steadily improving their processes.

Rising to the top and staying there appears to be much harder than it is in high-income countries—and only the strongest survive. For example, according to analysis by the McKinsey Global Institute, less than half (45 percent) of companies that reached the top quintile with respect to economic-profit generation between 2001 and 2005 were still there a decade later. By contrast, 62 percent of incumbents in high-income economies stayed in the top quintile for the same decade.

As developing-economy companies create greater value, personal wealth is increasing at an impressive rate as a result, particularly in emerging Asia. Incumbents in industries such as asset management will need to follow the money, or face a sharp decline in profitability.