Fast Expanding Markets: A new needed economic lens in the 21st century

Fast Expanding Markets: A new needed economic lens in the 21st century

By Terence Tse, Mark Esposito

This seminal paper on FEM was presented for the European Business Review in March 2013.

“While cost cutting can lead to an immediate increase in profit, an expansion of the sources of revenue will lead to far more sustainable advantages in the future.  A company cannot cost-cut its way to prosperity.”

“Fast-Expanding Markets” refers to any rapidly growing opportunity in which the market is the focal point. Such a market may exist at the supranational, national, regional, industrial, cluster, sector, corporate or product level. FEM are everywhere.”

Where will we find growth opportunities, the kind that will take our businesses to the next level? The usual and popular choice of terms we use when looking at current markets and potential ones often include “developed markets” and “emerging economies”, which have inspired new golden age of race to the new treasure, hidden in the capacities of these markets. But we find these terms limiting, perhaps even deficient and definitely distractive in most part. Is a term really that important, you may ask?  We think it’s vital.  Here’s why.  The terms themselves focus only on markets at the country level. But what if you’ve got a rapidly growing market opportunity that exists on a supranational, national, regional, industry, cluster or even firm level?  We found that the ability of a term to address a new economic complexity is missing and for too many years we have simplified the premises of the emerging economy within a confined use of a term.

To take these different levels of analysis into account, we propose a new term called “Fast-Expanding Markets” (FEM).

These markets are not restricted to traditionally defined boundaries, such as geographical, industrial or firm boundaries. It is possible to argue that the term is too broad to pinpoint real economic drivers and determinants of growth, but we believe that it is also this unique characteristic that allows managers and policy makers to find new sources of wealth and prosperity. Thinking along the lines of FEM frees our minds to wave off the restrictions and boundaries of geographies or industries, in order to find new ways of achieving economic growth. As a positive side effect, FEM liberate us from a rigid classification of countries performances and rankings, which speak little about the real state of things at the market level.

Revenue growth and not just cost cutting

But before looking into the future, let us go back in time. From the end of the dot-com crash in 2001 to the beginning of the financial crisis in the first decade of this century, markets blossomed and new business opportunities emerged around the world. We could be and certainly felt enveloped by prosperity, which could have led to over-spending and over-consumption – which in turn fueled more new business opportunities than ever before. The fires of commerce raged on.

We – the general public and businesses – found it easy to part with our money, and just as easy to borrow the money that we didn’t have. Over-stretching was the name of the game for many households as well as businesses. It was a tremendously prosperous period for everyone. But it was also a grand house of cards, potentially exposed to a drastic fall.

And now, just a few short years later, the “golden decade” has already been consigned to history. Given the financial meltdown and the subsequent economic crisis, we now live in a world in which people have no choice but to start (belatedly) exercising financial discipline. Additionally, many companies and businesses have shifted their focus away from profitability to simply ensuring their economic survival, primarily by cutting costs. Additionally, like every fashionable trend, the concept of “insourcing” back to the countries that pioneered outsourcing in the previous decades is becoming an increasingly adopted practice. But are these the best tactics for businesses to take in order for the general economy and the business themselves to turnaround?

We believe that the answer is no. We think it is far more important for firms to concentrate on top-line growth rather than on lowering costs. While cost cutting can lead to an immediate increase in profit, an expansion of the sources of revenue will lead to far more sustainable advantages in the future.  A company cannot cost-cut its way to prosperity.  New markets and new market opportunities must be found in paths less traveled.

While the current economic outlook remains bleak, we do not believe that the situation is all “doom and gloom.” We understand why some companies have adopted a policy of retrenchment in response to a real economic recession. In difficult times, firms usually tend to favor business processes focused on “re-engineering,” “streamlining,” “re-structuring,” re-organizing,” “optimizing” “downsizing,” and “outsourcing” in order to maintain profitability. Indeed, they are (much) easier to pursue because of their linearity than revenue growth, which requires growing existing markets or discovering new ones. But cutting and simultaneously growing are not easy feats.

And one more thing: we were steadfast in our view that cost reduction is a short-term solution that temporarily boosts earnings. It produces few benefits in the long run because it relies on a strict accountancy perspective: costs can only be slashed to a certain point without causing unintended consequences.

For example, in order to cut costs, many companies have moved production to countries with less-expensive labor. This, however, does not necessarily lower costs. Lower and lost labor efficiency alone might cancel out anticipated savings. Similarly, reducing costs for parts can have counter-productive effects: cheap parts usually result in an increase in costs associated with quality, service, operations and overhead. These are all causes for concerns because in economically difficult times customer retention becomes even more important. Our bottom line: it is far more paramount for businesses to concentrate on top-line growth than on lowering costs.

Fast-Expanding Markets

We know that new ways of lifting sales in tough times have been widely discussed in the past, but we think the answer lies looking at markets in a different way. To identify potential opportunities for top line revenue we propose looking at “Fast-Expanding Markets” (FEM), that we want to position as a new economic lens of intelligence for the understanding of markets in the 21st century.

Put simply, “Fast-Expanding Markets” refers to any rapidly growing opportunity in which the market is the focal point. Such a market may exist at the supranational, national, regional, industrial, cluster, sector, corporate or product level. FEM are everywhere. At times, they grow intuitively, while at other times they grow counter-intuitively, so that the application of traditional market and economic theories is often inappropriate, which place in forecast and predictability a quintessential part of how value is generated.   FEM are distinct from some of the previous concepts related to new markets and new market spaces due to the fact that FEM represent potentially extremely lucrative markets that many people are unaware of or have overlooked.

To better understand FEM, we conducted extensive pilot research in an attempt to identify markets that could expand by more than 15% per year over a period of three to five years. This time span enabled us to exclude distortions arising from speculative behavior, which can be recursive in several prime and equity markets.

To our surprise, the markets that we identified as “fast” and “expanding” were much more “fast and furious” than we initially assumed. For example, the bio-stoves market in Kenya has been growing by at least 300% annually for the last three years, with growth peaking at 500% in 2012. This discovery led us to acknowledge that not only does the environment benefit from the growth of this market but also entire territories, which are spread out across the country.  Similarly, in Uganda, money transfers made through SMS-based technologies totaled USD 17.5 billion in the last five years, with annual growth peaks ranging from 200% to 290%. This highlights an opportunity to turn the cancerous nature of an informal economy into something formal.  We also investigated whether a form of FEM could be found in agriculture. We found that, for example, Bolivia’s economy has been supported by the rapid increase in demand for quinoa, which resulted in an annual growth rate of 26% for the last three to five years. This FEM was not only inspired by technological innovation but also by a truly territorial emergence across a number of organised economic complexities. Even better than this, FEM do not follow any traditional reflection of the GDP rankings, as a market could grow exponentially rapidly over our cycle of three to five years, literally anywhere in the world. Put in perspective, FEM do not behave through the traditional phases of economic development, from resource-based economies, all the way to innovation driven. They tend to generate acceleration beyond the current standing of the economy in which they operate, so they are unpredictable in most of its behavioral emergences.

Why FEM is a better term to describe new growth opportunities

Why have we not looked at potential markets this way before? We believe that a combination of limitations, inherent in the existing terminologies and the prevalent conservative views on growth, play important roles. Thus far, people have associated such expressions as “emerging markets,” “emerging economies,” “frontier markets,” and “developing markets/economies” with growth opportunities. In our view, such concepts suffer from various shortcomings when describing new growth opportunities.

The term “emerging markets” traditionally refers to countries or regions with inadequate economic welfare and structures – but it has become misleading. The label is also applied to those economies that have already “emerged.”

Confused? Here’s an example. Until recently, The Economist viewed Singapore and Hong Kong as emerging economies, and the FTSE labels them as “advanced emerging markets.” But according to the World Bank, the purchasing-power-adjusted per capita GDPs of Singapore and Hong Kong in 2010 were USD 43,867 and USD 31,758, respectively. On this basis, Singapore exceeded Japan, Germany, France and the UK, and both economies ranked above Spain, Israel and Portugal. In contrast, numerous “advanced”, “emerged” and “developed” economies, such as Greece, Spain and Italy, are on the verge of economic contraction. They might even be described as “submerging” markets!

Moreover, the stigma once attached to the concept of “emerging markets” is really no longer valid. Emerging countries tend to be seen as possessing small equity markets with levels of liquidity and price fluctuations typical of inefficient capital markets. In reality, however, equity markets in some “emerging” countries are sufficiently sizeable, with liquidity and volatility levels that match those of their more “advanced” counterparts. At the same time, the level of corporate governance in various “emerging markets” is moving close to, if not surpassing, levels seen in developed markets.1 As the distinction between “emerging” and “developed” markets blurs, the applicability of these descriptions becomes increasingly limited. It is no wonder then that The Economist called for the term “emerging markets” to be rendered obsolete.

“Emerging” markets are the engines of the world economy, while “developed” economies are experiencing marginal growth, at best. “Emerging” countries have experienced above-average, if not substantial, GDP growth in recent years, although part of this has been the result of starting from a lower base. Clearly, a new term is needed to describe growth markets, hence FEM. The fact that The Economist uses the term “emerging markets” while it simultaneously calls for a halt in the use of the term highlights the genuine need for new term to describe up-and-coming markets.  It is a good thing that we came along!

But perhaps the greatest problem with the term “emerging markets” is that as long as markets are maintained as the critical unit of analysis, at the country level, it is easy to miss growth markets in countries with lackluster overall economic performance. If we only conduct analyses at the macroeconomic level, many growing business opportunities that have yet to contribute substantially to a country’s GDP will go unnoticed. It is exactly the identification of markets that are “off the radar” that create businesses advantages for companies.

For example, many researchers have viewed Japan as a languishing economy for the past two decades. Its traditional businesses are facing ever-mounting cut-throat competition from China and Korea, and it ranks low in competitiveness.2 From this perspective, it may be tempting to view Japan as a nation in continuous decline with few growth prospects and to discount it as a potential source of new opportunities. However, this view reflects a focus on the country’s macroeconomic situations. If we look deep enough, pockets of exceptional growth can be observed. Whereas Japan’s consumer-electronic industry may appear to have passed its prime, its pop-culture industry has been expanding in the global market.

For instance, the popularity of Japanese comics, or manga, has been booming in the US for the past decade, even though this genre is culturally distinct from mainstream US comics.3 The same is true of “cosplay”, a sub-culture originating from Japan in which people dress in costumes and take on the roles of various characters from animated series or computer games. In Japan alone, the cosplay costume industry grew by 5% in 2009 to around USD $500M.4 Cosplay is becoming an important part of Japan’s pop-culture exports. Indeed, a “World Cosplay Summit”, which was sponsored in part by Japan’s Trade Ministry and publicized by Japan’s Ministry of Foreign Affairs, has been held annually for nine years. This example illustrates that new opportunities exist at more granular levels, even in countries with stagnant or faltering economies.

We can discover a new configuration for how markets emerge by focusing on the pockets of growth that develop in a much more spontaneous manner than what we have been trained to anticipate. Pockets are spontaneous in nature, rebellious in behavior, and expanding at a rate that would impress in terms of traditional indicators and analysis. Pockets of growth are cells of FEMs in that they are embryonic transporters of new business opportunities that are often untapped and undetected.

Some may suggest that the term FEM is too broad to be useful. But we believe that it is exactly this characteristic that allows the term to encompass a vast variety of business opportunities and new sources of wealth, which could truly shape new seeds of prosperity. It is only by broadening our horizons that we can break away from the limitations imposed by such popular terms as “emerging”, “developing/developed” or “frontier” markets.

Moreover, some may argue that FEMs are nothing more than conjectures, as forecasting naturally entails disappointments. This may be true – admittedly, not every FEM will deliver promising results. However, analyses of the FEM phenomena should help us prepare for the future. In a sense, these markets are similar to a compass.  While they may not provide enough information to pinpoint exactly what lies in the future, they can generate opportunities that honor real economy as the agency of development.  It is a brave new world where our global economy is concerned and it begs for a new term to help us evolve with it.


  1. Everest Capital (2009) “The End of Emerging Markets,” November,, accessed on 7 November 2011. 2. According to the IMD World Competitiveness Yearbook (2011), Japan ranks twenty-sixth, putting it behind Qatar (8), Malaysia (16), China (19) and Korea (22), and just marginally above Thailand (27), the UAE (28), Chile (29) and India (32).3. Matsui, Takashi (2009) “The Diffusion of Foreign Cultural Products: The Case Analysis of Japanese Comics (Manga) Market in the US“, Working Paper #37, Center for Arts and Cultural Policy Studies, Princeton University, Spring.4. The Economist (2011) “Cosplay with me,” 10 August,, accessed on 9 November 2011.
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