Senior executives searching for growth face a stark new reality: roughly 400 midsize cities in emerging markets—cities they mostly will have never heard of—are posed to generate nearly 40 percent of global growth over the next 15 years. That’s more growth than the combined total of all developed economies plus the emerging markets’ megacities (those with populations of more than ten million, such as Mumbai, São Paulo, and Shanghai), which together have been the historic focus of most multinationals. Learning about consumer attitudes in the emerging markets’ “middleweight” cities (three-quarters of which have less than two million people), figuring out market entry strategies for them, and deciding how to allocate resources within and across them will all be crucial priorities in the years ahead.
New research from the McKinsey Global Institute (MGI) seeks to arm executives with the knowledge they’ll need to tap into global urban growth. (For assumptions underlying the data in this narrated slideshow, see sidebar, “Urban world uncertainties and assumptions.”) Midsize cities in emerging markets are poised not only to generate much of the world’s growth in the years ahead but also to become dramatically richer. By 2025, for instance, more of the world’s middle-class households will be in emerging rather than in developed markets. Companies selling products for middle-class children and retirees alike will find many of their biggest markets in emerging economies. The same will be true for infrastructure and basic-material companies that are helping to create these rapidly growing cities. It all adds up to a brave new world for the multinationals targeting them—and a better one for their inhabitants.
McKinsey Global Institute’s Urban World app for iPhone, iPad, and Android devices uses a database of more than 2,600 cities around the world to illustrate how global economic power is shifting. For more information, visit our Urban World site.
This article was updated on April 20, 2011, to reflect a changed metric for per capita GDP, now expressed in 2007 purchasing-power-parity (PPP) exchange rates. A previous version reported per capita GDP in US dollars measured at the real exchange rate (RER).