The world's population now stands at 6.8 billion people. At recent growth rates, it could add 80 million more each year. For companies, that's an annual opportunity to serve 80 million new customers -- provided those businesses can think outside the box.
The customers no one knows about
Bear in mind that many of those new arrivals will live below the poverty line. The sad truth is that some 3 billion people, nearly half of the world's population, live on less than $2.50 per day, and more than a billion live on less than $1.25.
As a result, while many big companies' growth rates at least keep pace with the world's annual 1.2% increase in population, the gains they reap aren't as huge as you might expect. Here's a sampling of annual growth from large companies across a variety of industries:
|
Company |
Market Capitalization |
3-Year Avg. Annual Revenue Growth Rate |
|---|---|---|
|
Nike (NYSE: NKE) |
$34 billion |
5.5% |
|
Arcelor Mittal (NYSE: MT) |
$67 billion |
4.9% |
|
Colgate-Palmolive (NYSE: CL) |
$42 billion |
8.1% |
Source: Motley Fool CAPS.
Those aren't the 10% or 15% rates we might prefer to see, but then again, such big outfits often already have a massive slice of the market. Their huge size makes grabbing a greater share increasingly difficult. United Technologies (NYSE: UTX), a $68 billion company, has only averaged 4.3% annual growth, while Wal-Mart (NYSE: WMT), a $200 billion giant, has averaged just 5.9%.
Don't forget that the past few years have also been especially tough for most businesses. Big names such as Tyson Foods and Lowe's (NYSE: LOW) struggled to post 1% average annual gains over the past three years.
Thinking outside the box
Big, slow-growing companies could enjoy much more dramatic growth, however, if they're willing to pursue unconventional strategies. As the following statistics from Valeria Budinich at the Harvard Business Review blog reveal, billions of people could benefit from products offered by the world's largest companies:
- $158 billion: The low-income health care market
- $332 billion: The low-income housing market
- $2.90 trillion: The low-income global food market
Companies' difficulty in tapping these markets often lies in connecting people with the products that they so desperately need. But more and more businesses are finding innovative ways to get around those problems.
In Mexico, where many poor working people live in overcrowded conditions, the big cement company CEMEX (NYSE: CX) developed a win-win proposition. It put together a program encouraging people to save up to expand their homes, offering special discounts on the cement they'd need to do so. Getting the word out to potential customers proved difficult, until CEMEX successfully partnered with a person-to-person network that was already established within the area.
Nothing's stopping other companies from following suit. Hypothetically, Nike could offer inexpensive shoes in developing markets around the world, via networks of people who are already dealing with Nike's potential customers. It's a great way to reach people who don't own TVs, read magazines, or otherwise get exposed to traditional advertisements.
A former Motley Fool Foolanthropy beneficiary, Ashoka, has coordinated some arrangements like that of CEMEX. Watch for your companies to pursue similar strategies as they move deeper into the developing world. And if they don't, consider giving management the idea yourself.
In what other ways could businesses better reach unconventional customers in emerging markets? Share your ideas in the comment box below.
