Asia has experienced rapid growth in the 21st century, which has driven a need for goods and services as its burgeoning middle class begins to expand.
Australia is well placed to take advantage of this growth. In fact, the country has already enjoyed a steep rise in demand for its natural resources over the last decade, helping to strengthen the mining sector.
However, as the resources boom begins to taper off, Australian companies must shift their efforts in order to continue benefiting from the multitude of opportunities available in Asia.
A 2012 whitepaper by PricewaterhouseCoopers (PwC) noted that while the majority of Australia’s trade is with Asia, the country only spends 6 per cent of its overseas direct investment in the region.
PwC said this figure is far too low for businesses to take full advantage of potential growth opportunities.
Similarly, a Deloitte report last month urged organisations to become ‘first movers’ rather than ‘fast followers’ when it comes to commercial deals abroad. This means firms must establish themselves as innovators rather than settling for second best.
Selwyn D’Souza, lead strategy partner at Deloitte, said: “Strengthening our already strong relationships with the new global giants such as China and India will become more important than ever as we seek to establish a stronger presence in their markets and their companies continue to enter ours.”
Opportunities in Asia
According to Deloitte, a billion people are expected to enter the middle-class globally within the next 20 years – and a significant proportion will be in Asia.
The OECD estimates 66 per cent of middle-class people will be Asian by 2030, compared with just 28 per cent in 2009.
This increase in consumption provides opportunities to Australian companies across a wide range of sectors, particularly financial services, telecommunications and retail.
Businesses that seek cross-sectoral collaboration between other companies, governments and non-profit organisations are likely to perform better, as this creates a greater social impact.
“It will be the forward-looking Australian businesses that proactively take opportunities to innovate and serve the needs of low-income consumers in the Asia-Pacific region which will enjoy the benefits of increased market share, profit growth and brand differentiation,” Ms D’Souza stated.
However, PwC said organisations must be willing to invest in Asia to have the best chance of gaining market share and forging ongoing relationships with businesses in the region.
Australian CEOs will also require a keen understanding of the many different Asian cultures in the region. The conflict between Western and Eastern values could be a stumbling block unless enterprises are adequately prepared.
Building an Asian presence
Despite the challenges businesses will face growing market share in Asia, the positive outcomes and expansion opportunities are significant.
Here are some strategies that PwC noted could help your company make the transition a little easier.
Invest in human capital: Recruiting or promoting people with extensive Asia expertise is vital.
Not only will this help your business to better understand the marketplace, it also facilitates relationships with Asian firms, which are typically built in person rather than over long distances.
Assess market potential: Review your existing growth strategy through an Asian perspective and identify the best opportunities for your particular business.
Isolate risks, re-evaluate existing brands and products, and strengthen any existing ties you may have in Asia.
Select appropriate market entry options: Entering new international markets can be a challenge, so consider different investment vehicles.
Whether you opt for a joint venture, export-only model, licensing arrangement or other operating structure will depend on your specific commercial objectives.
Given that the resources sector is already beginning to slow in Australia, the need to build further economic drivers in other sectors becomes more apparent.
Organisations that fail to cater to growing Asian demand could find themselves struggling to succeed against more forward-thinking competitors.
However, CEOs must move fast. These changes are already underway and building for the future must begin as soon as possible, particularly when it comes to attracting and retaining the right staff to excel in new market conditions.
“While many organisations understand the need to recruit resources with the necessary skill set, the demand for this key talent far outweighs supply,” PwC stated.
“It is imperative that companies start planning now how to position their organisations and their people for the Asian Century.”