Developing Countries as Market Opportunities
Beginning with this issue and continuing with each subsequent issue of Strategies, Hezel Associates will identify a number of international trends that have implications for higher education, particularly for U.S. institutions that may want to offer programs globally.
Elena Koneva, MPIA, Research Associate and Josh Mitchell, MPA, Manager, Strategic Services
The world’s economy is increasingly knowledge-based. This has long been true in industrialized nations, but many developing countries also are beginning to shift away from industrial production. This shift requires talent, and thus, quality education – particularly higher education, which is a necessity for countries to succeed in a constantly changing and increasingly complex global economy.
An example of this shift in developing countries is China. China's potential talent pool is enormous: 4.13 million students earned degrees in 2006, compared to 1.15 million in 2001. At the same time, China’s National Development and Reform Commission reported that 60 percent of China's upcoming university graduates will be unable to find work. The reason is that multinational companies are finding that few graduates have the necessary skills for occupations in the information service sector, a growing component of China’s economy.
In many developing countries there is a mismatch between education and training received by graduates and the skills that open jobs require. Employers face increasing skill shortages, yet unemployment and underemployment among graduates is rising. This makes it necessary to understand the dynamics between higher education and the labor market in the context of globalization. This dilemma in developing countries creates a potential opportunity for U.S institutions to fill the skills gaps by providing necessary training in areas experiencing tremendous growth. Examples of high-need areas in the developing world include retail, hospitality and tourism, logistics, and commercial banking.
Retail
At least 35 of the top 50 global retailers are now in China, according to a report from PricewaterhouseCoopers. In 2005 alone, the Ministry of Commerce approved over 1,000 investments by foreign-invested retailers and wholesalers with contractual foreign direct investment of $1.9 billion. At the same time, the retail sector in India is expected to receive investments of $22 billion over the next five years and to grow 40 percent by 2011. This growth indicates that China and India will both have a need for professionals with experience and skills in managing complex supply chains, merchandising, and store planning.
Hospitality and Tourism
Another industry in need of qualified individuals, especially in China and India, is hospitality and tourism. There are nearly 10,000 star-rated hotels in China, but there is a shortage of 10,000 senior managers. Further, among China’s 300,000 hotel management professionals only about ten percent are qualified, according to a report from China Business News.
Travel and tourism in India is expected to generate $53.5 billion of economic activity in 2006, growing to $128 billion by 2016. The demand is expected to grow by 8.4 percent in 2006 and by 8 percent annually between 2007 and 2016, according to World Travel and Tourism Council report. Industry leaders are concerned that the talent shortage may undermine potential growth.
Logistics
Developing countries continue to attract multinational companies for three main reasons: market, manpower, and materials. Efficient supply chain management is the key to maintaining a competitive advantage in the global environment. The globalization of products and delivery systems requires more expertise in supply chain management. Today, logisticians are more involved in forecasting, marketing, problem-solving and systems design and analysis, creating a need for specific skills and training.
Banking and Financial Services
A recent study of 36 sectors by the Confederation of Indian Industry indicates that total employment potential in the banking and financial services sector is 1.1 million jobs. Other important sectors in India where high employment is possible include retail with 9 million, and tourism with 19.6 million jobs. The study points out that the lack of a skilled workforce in these sectors may constrain future growth in these sectors in particular, and in the economy in general.
The robust growth of the manufacturing and professional services industries in Brazil, Russia, India and China has promoted the development of a new middle class. The growth of the middle class, in turn, is creating a need for more sophisticated banking services. Competitive global banks have embarked on a race to capture financial assets and markets not only in industrialized countries, but in these and other emerging economies, as well.
Program Areas with Potential
The trends discussed in this article have implications for potential demand for higher education. Programs that address these skill shortages and emerging needs may provide U.S. institutions with opportunities to expand internationally. Potential programs that could be offered by U.S. institutions in response to these trends include, but are not limited to:
- Hospitality and Tourism Management
- Tourism and Planning Development
- Ecotourism
- Fashion and Retail Management
- Fashion marketing
- Visual merchandising
- Logistics
- Banking and Financial Services Management
- Banking
Melvin, Shiela, China’s College Revolution, The Wilson Quarterly, Autumn 2006, Volume xxx, Number 4 p37-42
Kaul, Pummy and Mahesh, Prashant, The real story of India's retail boom, Business Outlook, January 19, 2007