Blue Oceans Everywhere?

Blue Ocean Strategy is a book that has sold over one million copies. Why? Because it presents a simple attractive theme coupled with a cover depicting a wide-open ocean of opportunity. In blue ocean markets, there’s ample demand and opportunity for growth that’s both profitable and rapid. Blue Ocean Strategy suggests that an organization should create new demand in an uncontested market space, or a "Blue Ocean", rather than compete head-to-head with other suppliers in an existing industry. While there is competition, the pie is huge, with a piece for all at the table.

One of these blue ocean markets is for infrastructure in emerging markets.

And the global slowdown has created an ideal entry point where coming out on the other side it should lead the recovery. There are two unmistakable trends.

Trend #1: Rapid Urbanization

In 1975, there were only three cities in the world of over 10 million. In 2012, there are 22 cities of which 17 are in emerging markets. China alone has over 100 cities with a population exceeding one million and every week, one million people are either born in or migrate to cities around the world.

Trend #2: Stronger Growth Fueled By International Trade

Along with this urbanization has come stronger economic growth and expanded international trade. This means that unless these countries build more airports, roads, railways, seaports and pipelines, they’ll literally choke on their growth.

·         Morgan Stanley predicts that $22 trillion will be spent on these projects over the next decade.

·         Here are some interesting facts that highlight the “blue ocean” infrastructure opportunity:

·         Only 5% of Brazil’s roads are paved.

·         Merrill Lynch projects that $6 trillion will be spent on global infrastructure during the next three years.

·         The Royal Bank of Scotland estimates an average $1 trillion a year will be spent by emerging markets through 2030.

·         China is planning to build 97 new regional airports by 2020.

·         The top 20 container terminals have seen growth of 42% during the past three years.

·         40% of Indian households don’t have access to electricity.

·         Half of Jakarta’s 10 million citizens don’t have access to running water.

·         Mumbai has an astounding 18,424 people per square mile (New York has 1,274).

·         South Africa is world’s fourth-fastest mobile phone market in world

·         Mexico City has a population of now over 20 million.

·         China is spending just under 10% of its GDP on infrastructure a year.

The companies that are profiting from this growing demand for emerging market infrastructure are global in nature, but they do not have to be. The key question is what impact the current global slowdown will have on ongoing infrastructure projects and those in the pipeline. One argument is that tighter budgets will slow these projects but I believe the opposite – that governments will be priming the pump to stimulate the economy.