The McKinsey Global Institute published a report last month that should be required reading for anyone in international marketing. Almost all marketing data you see in international trade concerns entire countries, but there is a growing awareness that, while countries control trade policies and restrictions, marketing needs to focus on cities and their metro regions. This was unheard of when I was in business school, but became obvious to me when I worked in Germany in the late 1980s and early 1990s. At that time, the typical marketing approach was to decide what country you wanted to go after and then focus on the main business city in that country, blithely assuming that a rep in that city could cover the entire country for you. That worked well in some places, such as going to Paris in France, but was meaningless in the German market where no one city dominates business (no, not even Frankfurt). We were forced to take separate looks at what was happening in all the major cities.
McKinsey applies that concept worldwide and their new report, Urban World: Mapping the economic power of cities, pinpoints the world’s 600 largest cities and gives plenty of information about each. It is going to take time to fully absorb the full report, but let’s go over some of the high points.
McKinsey calls them the City 600. They are home to 22% of the world’s population, markets of some 1.5 billion people. More important, they have a combined GDP of $30 trillion (2007), close to 60% of global GDP. In other words, the City 600 tells you where your potential customers are concentrated. And the City 600 GDP is going to grow to $64 trillion by 2025.
Are you selling consumer goods? The City 600 contains 485 million households with an average per capita GDP of $20,000 or more. By 2025, they will have 735 million households with an average per capita GDP of $32,000. And don’t assume that is all in the present developed world. There will be 235 million households in developing countries with an average annual income in excess of $20,000.
The economic power of the cities today is still predominately in the developed, mostly Western world, but that is going to change big time. Today (2007 data), 385 of the City 600 are in developed countries and account for half of the world’s GDP. Twenty percent of global GDP comes from 190 cities in North America alone, so it is way too soon to neglect developed markets. That said, the cities of China and Latin America already account for 4% each of world GDP and they are growing swiftly.
We will look more into what is coming in another post.