Bangkok--5 Apr--Aziam Burson-Marsteller
ASEAN Companies Have Yet to Meet International Revenue and Profit Expectations Despite Strong Outbound Investment Growth, According to AccentureTalent and cultural obstacles inhibit international success
Less than a quarter (23 percent) of large ASEAN companies reported meeting their revenue and profit expectations for their international business in the past three years. This is despite a 60 percent increase in the outbound investment by the region’s companies in the past decade, according to new research by Accenture (NYSE: ACN). The research also revealed that talent and cultural issues are the greatest internal barriers to successful global expansion.
The research, published in a report, ‘Growth Journeys’, included a survey of 249 senior executives of Asia-based companies with annual revenues in excess of US$250 million, from ASEAN; mainland China, Hong Kong and Taiwan; India; Japan; and South Korea.
ASEAN companies have increased their international investments by 60 percent from US$36 billion in 2003 to US$58 billion in 2011, according to the report. Their primary objectives are to access new markets for sales growth (71 percent) and to build global brands (61 percent). More than one third (42 percent) said a key goal for international expansion was to access advanced skills and capabilities.
The geographic focus of investment is also shifting. While more than two thirds (71 percent) of ASEAN companies said their investments today mainly focus on the Southeast Asia region, less than one third believed that they would still have the same focus in three years’ time. Survey participants also said they will reduce their investments in China, Europe and North America while more companies will be focusing on Australasia and Latin America.
Barriers
Nearly two-thirds (65 percent) of ASEAN companies said the greatest external barrier to international success was their lack of understanding of overseas markets, customer preferences and segments.
The greatest internal barriers to successful global expansion are talent and cross cultural issues. Nearly half of the ASEAN respondents (45 percent) said they cannot attract or retain the right talent to expand outside the region.
In addition, language barriers between headquarters and local offices, lack of understanding of foreign consumers and the inability to navigate complexities in local regulations were cited as the top barriers to success overseas.
The study also found that more than three quarters (77 percent) of ASEAN business leaders are not confident with their operational capabilities to translate international strategy into execution.
Emerging trends
“ASEAN companies are now competing with multinationals and stronger local players in crowded overseas markets,” said Paul Gosling, senior managing director, Accenture Management Consulting, Asia Pacific. “As ASEAN companies step beyond their national boundaries, their cost advantage changes and operating complexity increases. In the quest for sustainable growth, they will need to compete on more than cost and invest more in differentiation, understanding target customers and sophisticated talent management.”
The report showed that while a majority of ASEAN companies cite low cost operations as a driver of their global competitive advantage today, only 32 percent say this will be the case in three years. 39 percent of ASEAN respondents say that in three years, they intend to drive their competitive advantage through their brand equity (compared to 29 percent today), and 48 percent through the skills of their workforce (compared to 35 percent today).
Despite the obstacles and mixed results to date, 90 percent of ASEAN companies are still committed to continuing their international growth initiatives.
Key to Success
Moving forward, to reap the fruits of success, Accenture believes ASEAN companies must focus on four key points:
1. Being clear about their purpose for expansion to prevent conflicting strategies; then ensuring resources and capabilities are aligned to those corporate objectives.
2. Differentiating offerings in overseas markets based on deep understanding of customers and localised marketing and product development activities. Both social media and data analysis tools play an important role for success.
3. Building efficient and flexible operations with a focus on scalability and the ability to react to dynamic and volatile environments.
4. Putting in place the talent, leadership and cultures for global growth, which may involve role rotations, offshore placements, cross-cultural training and enhanced internal communications.
“Companies based in ASEAN today have tremendous opportunities ahead of them and enjoy advantages such as dynamic and fast-growing domestic markets and government support,” said Mr. Gosling. “However, they are discovering that they can’t simply repeat the strategies of the first wave of Asian globalizers. Instead, they must forge new paths and that will mean new steps such as moving up the value chain, ensuring their brands are strong in target markets, forming an intimate understanding of customers and creating new operating and technology platforms relevant for today’s marketplace.”
Learn more at www.accenture.com/growthjourneys
Contacts:
Piyanute Thongjiem
Accenture
+66 2686 7451
[email protected]
James Best
Aziam Burson-Marsteller
+66 2252 9871
[email protected]