Tata Communications commissioned leading business research company, Vanson Bourne, to conduct an online study of business leaders in the Middle East, South Africa, Hong Kong, Singapore, India, China, France, Germany, the US and the UK. According to the survey, South African companies expect to increase their investment in emerging markets, including South Africa, by one-third in the next year.
The research was conducted from executive to manager level, across 10 sectors (financial services, manufacturing, business and professional services, IT/technology, healthcare, retail, transport/travel, telecommunications, utilities, media and entertainment).
Emerging market survey respondents (China, India, South Africa and the Middle East) were asked which markets they felt offered the most opportunity for rapid growth. India was rated the second strongest market at 46% with China leading the pack at 51% and Brazil at 26%. South Africa was selected by 18% of respondents ahead of Russia and the United Arab Emirates (11%).
Respondents from South Africa identified their home market as offering the most growth opportunity to them with 46% of the survey choosing this option, while 24% selected China and 22% chose India.
Furthermore, when asked which of the FTSE Emerging Market Index countries they considered to be most progressive, 42% of respondents from China, India, South Africa and the Middle East selected China. This compares with the 27% who selected India and just 1% who indicated that they believed Russia to be most progressive. 6% of the survey believes South Africa to be most progressive, with 27% of South African respondents selecting this.
87% of business leaders from both developed and emerging markets (China, India, South Africa, France, Germany, Hong Kong, Singapore, the Middle East, the US and the UK) are actively engaging in emerging markets, despite 56% acknowledging that they associate emerging markets with political instability. In South Africa, 34% of companies are currently looking at operating in emerging markets, compared with 61% of Chinese and Indian companies.
55% of Singaporean respondents, 45% of Middle Eastern and 40% of South African businesses have already set up operations in emerging markets, the only markets in the survey to have a higher figure with an established presence than those considering such a move (e.g. India, China).
The most popular choice for market expansion is China with 51% of global respondents stating that their organisation is looking at expanding there; 39% selected India and 33% Brazil as likely target markets, with 16% identifying South Africa as a market under consideration. The respondents most likely to select South Africa as an expansion destination came from South Africa (38%), China (28%) and India (21%).
The main driver for moving to emerging markets is the potential to capitalise on growth opportunities with 63% of business leaders surveyed selecting this as a reason. In line with the focus on growth, competitor activity is also a factor with 44% of the overall survey selecting this as a reason for moving into emerging markets. The survey reveals that on average respondents who are looking into, or are already operating in emerging markets; expect to increase investment in emerging markets by 36% over the next year.
However, South African companies are most likely of all surveyed countries to look to new markets in order to benefit from cost savings with 35% selecting this as a reason their organisation has discussed moving into emerging markets, 16% as the main reason for doing so and 49% associating emerging markets with cost effectiveness.
Sunil Joshi, MD and CEO of Neotel, says, "The fact that 16% of the 1600 business leaders surveyed globally are planning to invest in South Africa speaks of the growth potential of this market. Reliable communications infrastructure is an enabler of growth in the domestic and global market place. A significant number of South African business leaders are looking to expand into other emerging markets and the comnpay sees itself as an enabler for these businesses."
Vinod Kumar, MD and CEO, Tata Communications, adds, "For companies to capitalise on that potential, we need to see greater levels of investment in the infrastructure that is essential to support it. That will inevitably require more focus on developing talent and innovative thinking in markets that can have less educational investment in those areas. It is clear that businesses are prioritising communications and digital infrastructure as a critical part of their operations. The ability to manage those communications and to ensure reliability and security requires a level of global, and in particular, emerging market experience."
There are significant challenges ahead of those looking to operate in emerging markets. When asked to select their single most critical challenge for organisations moving to an emerging market respondents were almost evenly split with 18% citing government regulation, 16% established competition, 14% finding skilled staff and 11% communications and digital infrastructure.
Respondents from South Africa indicated that government regulation is their most critical challenge with one-quarter of those surveyed selecting this response. The lack of a reliable communications infrastructure is a blocking factor for over one-third of those surveyed and was the fourth most selected item in the survey.
Talent was identified as a critical challenge by 37% of all those surveyed, with 44% of emerging market respondents stating that availability of talent is a reason they would call a market progressive. However, the kind of talent valued varies market to market with 60% of South African respondents citing software development skills and communications technology experience, as key factors, while 52% of Middle East based respondents focus on business management and 63% of Chinese business leaders look for general education levels as an indicator.
Respondents were also asked what one factor they felt was most crucial to successfully running a global organisation. Having reliable communications amongst all branches/territories and a flexible business strategy and emerged as the most important with 28% of respondents selecting them. Reliable communications is the most important factor according to business leaders in the US, Germany and Hong Kong.
Communications infrastructure is the fourth most selected critical challenge for companies looking to move to emerging markets and four in ten people stated that a lack of a reliable communications infrastructure would prevent them entering a market. This emphasises the importance of telecommunications in an increasingly connected world and demonstrates that reliable communications continue to be seen as a must-have part of any market that wishes to compete internationally.
As part of the survey, respondents were asked what characteristics they felt most important in a telecommunications supplier, with 54% selecting reliability, 34% security and a third also choosing experience across multiple markets (both emerging and developed) as essential.
Kumar concludes, "There is a different approach to developing and maintaining communications infrastructures depending on the individual characteristics of the market in question. In my mind reliability and security are must-haves but where a telecommunications supplier can add real value is in the experience of working in different environments, across multiple geographies and the innovation that a global mind-set can bring to bear."
