Less than a fifth of companies in an Economist Intelligence Unit survey are well prepared for competition from Asia

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2010-02-09 08:53

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Hong Kong--(뉴스와이어)--Two-thirds of respondents in a survey of 1,017 executives from around the world believe that the global recession is accelerating the shift of economic activity towards Asia. But few say their companies are well-prepared. This is the main finding of The big tilt: the rise of the East and what it means for business, a special report by the Economist Intelligence Unit due to be published on February 11th.

“The emerging Asian markets require a new approach, which is why we have focused resources on getting closer to the growth, innovation and talent that is coming out of this part of the world,” says John Chambers, CEO of Cisco, who was interviewed for the report. Cisco, a US technology company, has appointed a chief globalisation officer and located the executive in Bangalore, India, in response to changes in the world economy.

“The shift in the centre of economic gravity is perhaps the most important economic trend facing companies, yet most admit they are not ready for it,” says Nigel Holloway, editor of the report. ”To prepare, companies need to build a business that fully understands consumers in every market. You can’t do that if all your top executives are cloistered in the head office.”

The main findings from the survey include:

· Only 19% of executives who took the survey say they are well prepared for competition from Asia. Twenty-seven percent say they are well-prepared for competition from the West.

· Shanghai will become one of the world’s top three financial centres in 10 years’ time, after New York and London, executives predict.

· Asian M&A in the West will come to dwarf Western M&A in Asia. Almost nine in ten respondents in the 1,017-respondent survey foresee a rise in Asian purchases of Western businesses in the next 10 years. Only four in ten expect an increase of transactions in the opposite direction.

· Asia will no longer rely on trade with the West as its main source of growth. Four-fifths of the 303 CEOs who took the survey predict that Asian economies will rely increasingly on domestic demand and on intra-regional exports to fuel growth.

· The most important ways to defend the home turf against intensifying competition from the East are to focus on customers and cut costs, according to a subsequent survey of 180 executives who said they are well-prepared for the big tilt.

· About half of companies who describe themselves as well prepared for the shift eastward are innovating their way to success by partnering with local firms in the foreign markets and with local customers.

· Almost half the well-prepared firms are also going to enormous lengths to understand local cultures – something that will become a competitive differentiator in the next 10 years.

· The best way to prepare for penetrating foreign markets is to locate senior corporate executives in those markets rather than at global headquarters, according to the survey and interviewees.

In addition to the survey, the report contains interviews with, among others, the CEOs of SAP, Novartis, Infosys and the Bank of East Asia. The paper will be published globally on February 11th together with a webcast discussion of the topic comprising Sir Martin Sorrell, CEO of WPP Group, Jim O’Neill, head of global economic research at Goldman Sachs, and Bill Emmott, former editor of The Economist and consulting editor to the report.

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