In their search for growth in emerging markets, most multinational companies have followed a well-worn path—one leading straight to a chosen subset of countries and megacities. The next phase of growth will take place on a different stage: cities with populations of 5 million or less that are spread across the developing world. To make the most of this opportunity, companies are beginning to look beyond tier 1 and tier 2 cities. Starbucks, for example, has announced plans to triple the number of stores in China, with smaller cities playing a pivotal role in the expansion.
Simon Targett, BCG’s editor-in-chief, spoke with David Michael—the leader of the firm’s Global Advantage practice—about the unique challenges and opportunities of the next chapter in emerging-market growth.