When the year 2025 rolls around, nearly half (46%) of all Fortune 500 Companies will come from emerging markets. This report can from the well-known consulting firm McKinsey & Co. Looking back at 2010, there were only 17% of companies coming from “emerging” markets, in 2000 – that number was as small as 5%. The graph from McKinsey’s report (below) shows the trends over the past decade.
The annual ranking of the Fortune Global 500 companies is measured by revenue. There are a total of 8000 companies worldwide that generate revenue of greater than $1 billion, the really interesting thing is that 75% of these are currently based in developed markets. So, how is this percentage going to change so drastically over a little more than a decade? McKinsey’s report goes on to explain that they expect an additional 7000 companies to grow to this size of which 70 percent will be based in emerging markets.
The Right Conditions in Emerging Markets
Westernization is too strong of a term, but emerging markets are starting to desire urbanized areas and more access to high-tech material gadgets. Income is growing in these economies and so they have money to spend. Demand for consumer goods and services is growing at an unprecedented pace which is just one reason (albeit, one of the major reasons) why more and more companies from emerging markets will grow past the $1 billion revenue threshold.
Population is also a major factor. It is well known that the BRIC countries carry a significant proportion of the population. If you take a look at India alone, there population is over 2 billion people and there are approximately over 750 million cell phone being actively used. The cell phone market in India is night and day (with respect to size) to markets like Canada, for example, who’s population is a little over 33 million people.
Population, a desire for more consumer goods, increased income levels and urbanization are 4 of the major reasons why we will see more Fortune Global 500 companies coming from emerging markets.