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Asia 10 Facts About

Eastern Europe Emerging-Market Estonia September 8, 2011

Africa Nigeria Kenya

Middle East Julie Pohlig Chief Project Architect California (Headquarters) Agenda

1 Review 10 Key Characteristics about Global Emerging-market Cities

2 Introduce a Segmentation for Emerging- markets Cities

3 Discuss Implications for Multinational Corporations

© 2011 Vital WaveTM 1 Proprietary and Confidential: Do not copy or distribute. Fact 1: Urban population is soaring in emerging markets

Moscow

Istanbul Mexico Bogota

Kinshasa

Rio de Janeiro Sao Paulo

Buenos Aires

Nearly half of top-25 emerging- market cities are in BRIC countries

Top-25 Cities in Emerging Markets

© 2011 Vital WaveTM 2 Proprietary and Confidential: Do not copy or distribute. Fact 1: Urban population is soaring in emerging markets

Moscow

Istanbul Tehran

Baghdad Cairo Dhaka

Mexico City Karachi Chittagong Manila

Lagos Ho Chi Min City Bogota

Kinshasa Jakarta Lima Belo Horizonte Sao Paulo

Nearly half of top-25 emerging- market cities are in BRIC countries

Top-25 Cities in Emerging Markets Cites in the Top 25 in Emerging Markets after Removing Cities in China and India

© 2011 Vital WaveTM 3 Proprietary and Confidential: Do not copy or distribute. Fact 1: Urban population is soaring in emerging markets

Population 2010 (000) Mumbai 20,072 (Bombay) Guangzhou Sao Paulo 19,582 Jakarta 19,485 Istanbul Moscow Delhi 17,015 Chennai (Madras) Shanghai Bogota Shanghai 15,789 Wuhan Lagos Kolkata Lima 15,577 Beijing & Metro Manila (Calcutta) Dhaka 14,796 Buenos 13,089 Karachi Aires Karachi 13,052 Tianjin Rio de Janeiro Dhaka Cairo 12,503 Rio de Kinshasa Mexico City 12,171 Mumbai (Bombay) Janeiro Buenos Aires Beijing 11,741 11,662 Manila Lagos 10,572 Cairo Sao Paulo Istanbul 10,530 Moscow 10,495 Jakarta 9,703 Delhi Guangzhou 9,447 Kinshasa 9,052 Lima 8,375 Urban population in emerging markets represents a Bogota 8,320 concentrated opportunity. Cities comprise large markets and Tehran 8,221 Chennai can provide an entry point into national markets. 7,559 (Madras) Wuhan 7,542 Comparable Country Tianjin 7,468

© 2011 Vital WaveTM 4 Proprietary and Confidential: Do not copy or distribute. Fact 2: Nearly half of the world’s population will live in emerging-market cities by 2030

2010 2030

33% 46% Emerging- market Cities Emerging- market Cities

A collection of emerging-market represents a market that rivals the United States or Europe in size. These rapidly growing cities will increasingly demand a wide variety of goods and services.

© 2011 Vital WaveTM 5 Proprietary and Confidential: Do not copy or distribute. Fact 3: Economic growth is closely linked with urbanization

Top 15 Emerging-market Cities in Total GDP (2010, USD Billions in PPP) $421 $421 $388

$342

$265 $236 $218 $198 $189 $189 $163 $163 $160 $138 $129

© 2011 Vital WaveTM 6 Proprietary and Confidential: Do not copy or distribute. Fact 3: Economic growth is closely linked with urbanization Philadelphia / Washington DC Philadelphia / Washington DC Philadelphia / Washington Boston Diego San Barcelona Barcelona Denver Denver Montreal Aviv Tel

© 2011 Vital WaveTM 7 Proprietary and Confidential: Do not copy or distribute. Fact 3: Economic growth is closely linked with urbanization

Top-15 Emerging-market Cities in GDP Per Capita (2010, USD in PPP) $35,000

$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

$-

Companies can benefit from the urbanization trend in emerging markets through an ability to target many different market segments in a smaller geographic

© 2011 Vital WaveTM 8 Proprietary and Confidential: Do not copy or distribute. Fact 4: Consumption in emerging-market cities is on the rise.

As consumers in these cities become more influential, multinationals will benefit from understanding and addressing their needs with new products and services.

© 2011 Vital WaveTM 9 Proprietary and Confidential: Do not copy or distribute. Fact 5: Midsized emerging-market cities should not be overlooked

GDP Per-Capita (2010, USD in PPP)

<$10,000 $10,000-$15,000 $15,000+

Kolkata (Calcutta) Delhi Beijing Mexico City Lagos Mumbai (Bombay) Shanghai Istanbul Dhaka Cairo Sao Paulo Buenos Aires

> 10M Karachi Metro Manila Rio de Janeiro Moscow ()

Chongqing Tianjin Lima Guangzhou Lahore Bogota Bangkok Pune Tehran 10M Wuhan Belo Horizonte - Chennai (Madras) Kinshasha Ho Chi Min City Santiago

5M Chittagong Jakarta

Chengdu Dar es Salaam Shenyang St Petersburg

Population (2010) Population Addis Ababa Xi’an Fortaleza Alexandria Brasilia Lucknow Monterrey Surat Recife Algiers

5M Jaipur Luanda Curitiba East Rand - Kanpur Nairobi Izmir

2M Abidjan Salvador Puebla Kano Cape Faisalabad Porto Alegre Medellin Top-25 city in GDP per-capita growth over next 15

© 2011 Vital WaveTM 10 Proprietary and Confidential: Do not copy or distribute. Fact 5: Midsized emerging-market cities should not be overlooked

Jakarta Xi’an

Hanoi Fortaleza

Managers who take a closer look at some of these mid-sized cities might find a diamond in the rough, and discover market opportunities that give them a competitive edge.

© 2011 Vital WaveTM 11 Proprietary and Confidential: Do not copy or distribute. Fact 6: Passenger travel through in emerging-market cities is skyrocketing

World's Busiest Airports 2000 2010 1 Atlanta Hartsfield-Jackson 1 Atlanta Hartsfield-Jackson 2 O'Hare 2 Beijing Capital 3 International 3 Chicago O'Hare 4 Heathrow 4 London Heathrow 5 Dallas-Fort Worth 5 International 6 Tokyo International 6 Los Angeles International 7 Frankfurt 7 Charles de Gaulle 8 Paris Charles de Gaulle 8 Dallas-Fort Worth 9 San Francisco International 9 Frankfurt 10 Amsterdam Schiphol 10 Denver International 11 Denver International 11 Hong Kong International 12 Las Vegas McCarran 12 Madrid-Barajas 13 Minneapolis-Saint 13 Dubai International 14 Gimpo 14 New York JFK 15 Phoenix Sky 15 Amsterdam Schiphol 16 Detroit 16 Jakarta Soekarno-Hatta 17 Houston George Bush 17 Bangkok Suvarnabhumi 18 Newark Liberty 18 Changi 19 International 19 Guangzhou Baiyun 20 Madrid-Barajas 20 Shanghai Pudong

Developed-market airports Emerging-market airports

© 2011 Vital WaveTM 12 Proprietary and Confidential: Do not copy or distribute. Fact 6: Passenger travel through airports in emerging-market cities is skyrocketing

These major shifts over a relatively short time span indicate that emerging- market cities are rapidly becoming hubs of commerce.

The world's fastest-growing airports

1. Istanbul Sabiha Gökçen , 2. Viracopos-Campinas, Brazil 3. Rio de Janeiro, Brazil 4. Charleroi, Belgium 5. Moscow Sheremetyevo, Russia 6. Belo Horizonte, Brazil 7. Bogota, 8. Phuket, 9. Shanghai Pudong, China 10. , 11. Ankara, Turkey 12. St Petersburg, Russia 13. , 14. Shanghai Hongqiao, China 15. Milwaukee, WI, USA

© 2011 Vital WaveTM 13 Proprietary and Confidential: Do not copy or distribute. Fact 7: China dominates rankings of emerging- market cities on IT connectivity

Harbin

Beijing Dalian

Nanjing Wuhan Shanghai Hangzhoui

Xiamen Guangzhou

While emerging-markets cities are engines of regional growth, their potential is shaped by the market environments of the countries in which they are located.

© 2011 Vital WaveTM 14 Proprietary and Confidential: Do not copy or distribute. Fact 8: Emerging-market cities are economically diverse

Shengyan Beijing Benxi Baoji Irbid Zarqa & Mafrq Xian Wuxi Jerash & Ajloun Wuhan Shanghai Balqa & Madaba Fuzhou Mexico City Chiangmai Hanoi Udonthani

Barranquilla Caracas Lagos Addis Ababa Bogota Ipoh Nairobi Fortaleza Pointe-Noire

Brasilia Goiana Belo Horizonte

Catamarca Johannesburg East Rand Santiago Maseru East London Chillan Buenos Aires Most Unequal: Gini Coefficient over 0.55 Unequal: Gini Coefficient between 0.51 and 0.55 Most Egalitarian: Gini Coefficient Less than 0.39

Understanding distinct customer segments within cities helps to open up new possibilities, such as greater opportunities for BoP marketing that can be harnessed in cities with high levels of inequality.

© 2011 Vital WaveTM 15 Proprietary and Confidential: Do not copy or distribute. Fact 9: Emerging-market cities represent market opportunities and risks

While there are tremendous growth opportunities in emerging-market cities, there are hazards as well that need to be mitigated, such as ease of doing business and livability.

10 Least Livable Cities 1.Harare, Zimbabwe 2.Dhaka, 3. Moresby, PNG 4.Lagos, Nigeria 5.Algiers, Algeria 6., 7.Karachi, 8.Douala, Camaroon 9.Tehran,

Beijing, Mexico City, Johannesburg, Moscow, 10.Abidjan, Côte d’Ivoir New Dehli and Sao Paulo have intense traffic

© 2011 Vital WaveTM 16 Proprietary and Confidential: Do not copy or distribute. Fact 10: Booming infrastructure investment in emerging-market cities signals growth

Infrastructure is key to growth. Cities that are investing in different types of infrastructure may represent more favorable growth environments for multinational companies

Location of Top-50 Cities for Container Traffic, by Sum of Container Traffic (in thousands TEU)

161,221

107,275

35,550

5,506 2,395 2,252

Developed China & Sub-Saharan America Countries (Developing, North Africa Africa excludes (Developing) China)

© 2011 Vital WaveTM 17 Proprietary and Confidential: Do not copy or distribute. Summary

Emerging-market cities are diverse, but there are strategies that companies can pursue to be successful

Cities have large income disparities. Yet, with the right business models companies can tap into both BOP and higher-income segments

There are both rewards and hazards to pursuing emerging market cities. Managers should consider how local conditions will enhance or impede the ability to do business.

Strategies for addressing emerging-market cities should carefully weigh purchasing power, growth, infrastructure, the ease of doing business, and risks against goals

© 2011 Vital WaveTM 18 Proprietary and Confidential: Do not copy or distribute. Thank you Julie Pohlig Chief Project Architect [email protected] 1-949-484-4608