Increasing manufacturing costs, a surge in the number of Mergers & Acquisitions from Asian companies, a complex and biased road to market, and a significant improvement of innovation capabilities in Asia are the new challenges that European businesses are facing in Asia and on their own soil. However, the potential for EU companies in Asia remains huge.
A new insight by Frost & Sullivan reveals what European industry leaders can expect in the future regarding their relationship with the Asian market and Asian companies, and how they should prepare for likely changes.
In Asia, European companies can sell high-value products to a large population that is getting richer. "Chinese children born in 2009 are likely to consume approximately 38 times more than their grandparents during their lives", says Frost & Sullivan consultant, Nicolas Smolarski. They can also tap into the large reserve of low-wage workers in the ASEAN region.
Mr. Smolarski explains,"Whether they are competing with Asian players in Europe, sourcing products manufactured in Asia or selling to the Asian market, European firms need to put in place functional strategies backed by in-depth local market knowledge, field experience and upfront analysis. Only the best prepared ones will be able to defend their ground and benefit from Asia's formidable value. "
As mentioned, several challenging trends for these European companies have emerged. Asian innovations have significantly improved. Furthermore, mergers and acquisitions by Asian companies in Europe have surged over recent years, with Chinese investment in 2011 reaching $12 billion, accounting for a 24 per cent increase since 2010.
At the same time, between 2010 and 2012, Europeans cut investments in China by 42.5 percent because of increasing labour costs (15-20 per cent in China annually) and volatile shipping costs. "Manufacturing in Asia can be risky and is expected to become more expensive, however, there are alternatives that can help lower costs and reduce risks," Smolarski says.
To succeed among the rising labour costs and uncertain legal framework, businesses need a deeper understanding of the Asian companies they source. Smolarski states,"This will help European companies gain confidence on the production process, quality management, warranty details, real costs and after-sales support in Europe."
Only by doing so, EU businesses will be able to continue to flourish and grow, both in Asia and at home.
If you are interested in more information on this topic and to receive a copy of our Market Insight, please send an email with your contact details to Chiara Carella, Corporate Communications, at chiara.carella[.]frost.com.
About Frost & Sullivan
Frost & Sullivan (frost.com), the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants.
Our "Growth Partnership" supports clients by addressing these opportunities and incorporating two key elements driving visionary innovation: The Integrated Value Proposition and The Partnership Infrastructure.
The Integrated Value Proposition provides support to our clients throughout all phases of their journey to visionary innovation including: research, analysis, strategy, vision, innovation and implementation.
The Partnership Infrastructure is entirely unique as it constructs the foundation upon which visionary innovation becomes possible. This includes our 360 degree research, comprehensive industry coverage, career best practices as well as our global footprint of more than 40 offices.
For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organisation prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies?