Emerging markets in vogue

According to the report, with global markets increasingly interconnected and curbed demand in Western markets, companies are taking a second look at emerging markets. These are now seen not simply as extended workbenches, but rather as hotbeds of growth. As much of North American and European industry and commerce is stagnant, many companies are looking towards emerging markets and Asia to win new customers.

These growing markets, particularly those in Asia, are more dynamic than ever. Rising prosperity has given birth to an ever-expanding middle class with more money to spend on everything from high-quality consumer goods to luxury and healthcare products.

Rapidly expanding domestic industries are emerging to cater to the needs of these fast growing middle classes. To do so, new production facilities have to be established in Asia, and those new facilities need state-of-the-art technologies, materials and ingredients, often from the West.

Topping Asia as a growth driver, market expansion services (MES) providers are benefiting from the increasing shift in the focus of companies, large and small, on their core competencies. To optimise financial and human resources, many companies are focusing on core activities such as research and development, global marketing, and manufacturing, while outsourcing other elements of the value chain to specialised partners who can provide integrated services along the value chain, research and analysis, marketing, sales, distribution, logistics and customer after-sales support.

“Demand for this caliber of services is projected to drive global growth in MES by 7.1 per cent per year up to 2015. The global market is expected to grow by  $3.1 trillion by 2015,” said the report.

It said MES providers held the biggest share of the outsourcing industry in Asia’s markets.

However, because Western companies were often less familiar with the business terrain in Asia, “growth will continue to be especially strong throughout that continent.”

Among emerging markets, Asian countries hold the most promise for the MES industry, both in terms of growth and innovation potential. By 2015, Asia will become the biggest market for the MES industry, outstripping the now-dominant European and North American markets, with an annual average growth rate of 8 per cent. Furthermore, the variety of innovation levels across the continent provides ample opportunity for exchange of best innovation practices and mutual development.

Within the huge, diverse continent, five groups of countries are surfacing, with the most economically developed countries offering the most sophisticated service innovation levels.

With its long export history and highly service-oriented culture, Japan is the leader in the field. The island nation has become the second largest source of foreign direct investment in Asia, often moving production to lower cost markets like South East Asia. Rapidly-growing Singapore,

Taiwan, Hong Kong and South Korea are not far behind. Today, they are considered economies on par with Western countries. Australia, New Zealand and Malaysia are next in line and catching up quickly.

 China, Thailand, India and Vietnam are today’s economic powerhouses, but they continue to struggle with uneven development. Cities, for example, may have highly sophisticated offerings, while rural areas are still lagging.

China is the uncontested regional superpower with an increasing amount of financial resources to invest abroad. India, often seen as the call centre capital, is making major gains that will soon put it on par with other Asian heavyweights.

Finally, Sri Lanka, the Philippines, Cambodia, Myanmar and Laos are just starting out on their journey of growth and should see an uptick in services sophistication as they develop.

Also according to the report, clients and customers want their partners to offer innovative services and solutions that are not just new, but customised to their needs. In the world of MES, there are no simple off-the-shelf answers.

No two packages of services are alike. Instead, solutions must be tailor-made and adapted to the needs of clients and customers, regional conditions and the individual natures of the managers involved. In a survey of 350 decision-makers, 48 per cent pointed to the need for more customised services solutions.

“Innovation is not of primary concern. Rather, necessary improvements to the current [core] services offering need to be considered,” said a managing director of a consumer goods company.

“The rapid growth of Asia with rising middle classes, strong domestic markets, growing inner-Asian trade, and increasing focus on core competencies are all factors driving the growth of the MES industry,” said DKSH president Joerg Wolle.