Toronto, September 19, 2006 — In a new report "Innovation in Emerging Markets: Strategies for achieving commercial success," released today by member firms of Deloitte, more than half of the global manufacturers surveyed expect to substantially grow revenues in emerging markets over the next three years, with nearly three-quarters anticipating significant increases in China. However, the findings reveal that only 23% of respondents are optimistic about prospects in developed markets.

Luc Martin, Canada's manufacturing industry leader for Deloitte notes, "The most profitable global manufacturers are using emerging markets as the catalysts for new product and service innovation. Canadian manufacturers need to recognize the challenges, if they are to realize the enormous potential of these emerging economies, such as those in China, India and Russia. Long-term success requires more than simply tinkering with existing products, lowering prices, and developing new sales channels. Manufacturers must understand the unique needs of each local market and develop new offerings accordingly."

The research report, based on a global survey and in-depth interviews of more than 400 senior executives at global manufacturers, shows that only 29% of the companies surveyed enjoyed higher margins in emerging markets than in developed ones. Of those that did, 54% provided different product features to the ones offered in their home markets, compared to 43% of those whose margins were the same or lower.

Five challenges
Deloitte has identified five major challenges that Canadian manufacturing companies with global aspirations must tackle to achieve success in emerging markets:

• Build new value propositions to deliver different product offerings that meet the unique needs of emerging market customers. In many cases, this will be at dramatically lower price points than in developed markets. Martin adds: "The most successful manufacturers offer products at dramatically lower prices that match the lower purchasing power of most buyers in emerging markets."
  
  
• Globalize research and development by locating R&D facilities in emerging markets to acquire deeper customer knowledge, and build, market and distribute tailored products. Forty-nine percent of the companies selling new products conducted R&D locally. The executives surveyed cited 'better understanding of the local market,' 'faster time to market' and 'lower R&D costs' as the top three reasons for conducting R&D in emerging markets.
  
  
• Tailor talent management strategies to the unique needs of employees in emerging markets, rethinking how to effectively recruit, develop, deploy and connect people.
  
  
• Master the complexity of global value chains to provide autonomy at the local level while leveraging the strengths of headquarters, including governance and management know-how.
  
  
• Build risk management capabilities to effectively detect, correct and manage the unique profile of risks presented by emerging markets, such as the protection of intellectual property.

About the Research:
The research by Member Firms of Deloitte Touche Tohmatsu into the topic of "Innovation in Emerging Markets" examines what is required for global manufacturers to realize the enormous market potential of the developing economies of Asia, Eastern Europe, and Latin America. Ten emerging markets were examined including: Argentina, Brazil, China, Czech Republic, India, Indonesia, Mexico, Poland, Russia and South Korea. The research involved a global online survey completed by over 400 senior executives from a broad range of manufacturing sectors, 12 in-depth case studies, and points-of-views developed from the extensive experience of Deloitte member firms in advising major manufacturers operating in emerging markets.  The executive summary report, "Laboratories of Innovation:  Leveraging Emerging Markets for Commercial Success", which highlights the preliminary findings of the research, was released at a Deloitte CEO Breakfast during The World Economic Forum in Davos, Switzerland.

About Deloitte
Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 6,200 people in 50 offices. Deloitte operates in Québec as Samson Bélair/Deloitte & Touche s.e.n.c.r.l. The firm is dedicated to helping its clients and its people excel. Deloitte is the Canadian member firm of Deloitte Touche Tohmatsu.

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