Logistics and transportation professionals expect emerging markets to contribute 36 percent of their global revenue on average by 2017, more than double the share today, according to the Business Perspectives on Emerging Markets 2012-2017 Report by Global Intelligence Alliance.
The 17 logistics and transportation professionals surveyed said China, Brazil, India and Russia would remain the industry’s top four emerging markets during the next five years, followed by Indonesia, Vietnam, Singapore and Chile.
Looking to 2017, large operators have the opportunity to leverage their scale, and streamline processes and business models to manage the regional complexities in fast-growing markets. A quarter of the survey respondents say they see emerging markets as future large markets.
One such market is China, particularly in the area of cold-chain logistics. The Chinese central government’s plans to overhaul food safety means that up to 90 percent of meat, fish and fruit products will be required to utilize cold-chain logistics by 2015, up from only 10 to 45 percent today.
Holding companies back will be bureaucracy, red tape and poor infrastructure, which are rated as the top threats. This is particularly true for landlocked regions or archipelagos. This won’t be lost on APL Logistics, which is expanding India’s double-stack train operation to connect key ports and major North Indian industrial centers by 2016. By taking the initiative to address India’s underdeveloped infrastructure, APL Logistics is better positioned to win in this third-ranked emerging market.
Another example of hard-to-access markets is Indonesia, which has more than 1,700 islands. The crowded ports and shallow berths in Indonesia are preventing direct links to markets such as Europe, and are forcing the country to feed goods overseas through terminals in Singapore, according to PT Maersk Indonesia, the Indonesian logistics and container arm of A.P. Moller-Maersk.
To win in the long term, logistics and transportation companies say the top success factors will be a localized competitive positioning, access to customers and product and service quality.
But respondents to the GIA survey said they would like to have done something differently in how they planned and executed their emerging markets strategy. Some would like to have made greater efforts to adapt to local conditions, while others regret not addressing supply chain issues or the lack of strong local talent and partners sooner.
Many would have entered emerging markets earlier or ensured they had better local market intelligence and due diligence. Overall, availability, accuracy and completeness of market intelligence on emerging markets are an issue for any industry.
In total, 60 percent of the more than 400 companies featured in the cross-industry study say decision-making is delayed because of lack of information, while 75 percent doubt the accuracy and completeness of the information they do have on emerging markets.
Emerging markets present a lot of uncertainties, but by understanding the facilitators of growth and the unique characteristics of each market, with local market knowledge and partners, transportation and logistics companies will be better positioned to take advantage of the forecast growth to 2017 and beyond.
Carsten Gayer is managing director, Germany, for the Global Intelligence Alliance, a Helsinki, Finland-based market intelligence and advisory group. Contact him at Carsten.Gayer@globalintelligence.com.