WILL URBANIZATION IMPACT YOUR BUSINESS PLANNING?
The latest news on population growth by Odometer (based on UN stats) informs that planet earth
- has reached 7 billion on October 31, 2011
- is projected to reach 8 billion by 2025
- is currently growing at a rate of around 1.15 % per year
China¹ carries the biggest share with 1.34 billion and a yearly growth of 0.5. India¹ follows with 1.22 billion but a growth rate of 1.4. These two lead by far, which suggest that any company with a good sense of business should be in these markets. Especially companies located in shrinking or just so stable populations, like countries in Europe.
Doug Saunders (see below) predicts a further movement of rural to urban, based on the wide assumption that individuals who moved to cities in the past, could offer a better life for their families. Better education and health gave their offspring the chance to step up social life. Most arrived in the middle class within one or two generations. Such improvements did work out for many, but we should not forget that as many failed and are failing today, staying in the shanty towns of urban centres.
How should you consider these trends in your future business planning? Let’s look at where these people will be and what budget they will have to spend.
Cities population will expand, but is slowing down due to decreasing fertility as education levels rise. The rural to urban migration will be a major source of growth. The arrivers are mostly farmers, poor and live in immigrant enclaves and shanty towns on the outskirts of the city. Their target: open a small business, obtain a title deed for their shacks (most built illegally), move upward.
The question then: are you planning to sell to the arrivers? If yes, you should define your target market as urban areas including the outskirts. Otherwise, focus on the city areas itself. That would leave rural areas uncovered. This might be much more efficient and achievable in a timely manner than attempting to cover various whole countries all at once.
Lets assume you sell low end products that ‘everybody’ has, e.g. a low cost phone. You should look at the biggest cities including their unofficial suburbs, so your top choices would be: urban areas
- 37,126,000 Tokyo, Japan
- 26,063,000 Jakarta, Indonesia
- 22,547,000 Seoul, South Korea
- 22,242,000 Delhi, India
- 21,951,000 Manila, Phillipines
If you are selling middle or high end products, e.g. a laptop, you want to see where the high income people and companies serving them are. You might be looking for partner companies or future local offices to sell your goods internationally. If so, you should start looking for representatives covering the biggest cities according to their administrativ boundaries:
- 17,836,133 Shanghai, China
- 13,483,052 Istanbul, Turkey
- 13,052,000 Karachi, Pakistan
- 12,478,447 Mumbai, India
- 11,810,000 Moscow, Russia
As you can see, your prime markets can vary quite a bit dependent on what your business targets. The fast conclusion that China and India are by far the most populated and one has to be in these countries is a dangerous conclusion that might be very misleading. Looking at the cities can be much more promising.