Asian Companies Miss Their International Revenue and Profit Expectations Despite Strong Outbound Investment Growth, According to Accenture
Talent and cultural obstacles inhibit international success
; Apr 2, 2013 – Less than a third of large Asian companies report meeting their revenue and profit expectations for their international business in the past three years. This contrasts with more than a doubling of annual outbound investment by the region’s companies in the past decade, according to new research by Accenture
(NYSE: ACN). The research also revealed that understanding foreign consumers and sourcing the right local talent were among the biggest barriers to success overseas.
The research, published in a report, ‘Asian Paths to Global Growth,
’ included a survey of 249 senior executives at Asian based companies with annual revenues in excess of $250 million. Only 28 percent of surveyed companies say revenues and profits from their international business were in line with expectations in the last three years (ranging from 37 percent in China to 12 percent in Japan). This comes against $2.9 trillion of outbound investment in the past decade by Asian companies[i]
, of which, according to Accenture, 63 percent was directed beyond the region in 2011.
The biggest barrier to successful international expansion is a lack of understanding of overseas customers and markets, according to 61 percent of respondents. A majority (53 percent) pointed to complex local procedures and government regulations as a barrier. Thirty-five percent said their weak brand or reputation in these target markets was their biggest obstacle.
Talent and cultural issues
are the greatest internal barriers to successful global expansion. Just over half (51 percent) of respondents said they cannot attract or retain the right talent to expand outside the region. Cross cultural barriers were identified by 46 percent and the inability to manage foreign workforces by a further 37 percent.
“Asian companies are increasingly enthusiastic about overseas opportunities but face stiffer competition and crowded markets,” said Paul Gosling
, senior managing director, Accenture Management Consulting, Asia Pacific. “Today, Asian companies make up 35 percent of the world’s largest businesses, but only one in ten of the world’s top brands. To close this gap and improve their relevance they will need to compete on more than cost and invest more in differentiation, understanding target customers and sophisticated talent management.”
The report shows that, where a majority (54 percent) of respondents say low cost operations are a driver of their global competitive advantage today, only 20 percent say this will be the case in three years. Forty-four percent of respondents say that in three years, they intend to drive their competitive advantage through their brand equity and 44 percent through the skills of their workforce.
Despite the obstacles and mixed results to date, 90 percent of the companies surveyed remain committed to continuing their international growth initiatives.
For their ambitions to succeed, Accenture believes Asian companies must focus on four key points:
||Being clear about their purpose for expansion to prevent conflicting strategies; then ensuring resources and capabilities are aligned to those corporate objectives.
||Differentiating offerings in overseas markets based on deep understanding of customers and localized marketing and product development activities. Both social media and data analysis tools play an important role for success.
||Building efficient and flexible operations with a focus on scalability and the ability to react to dynamic and volatile environments.
||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.
“Today’s Asian companies have tremendous opportunities ahead of them and many enjoy advantages such as strong positions in 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 move up the value chain. They need to ensure their brands are strong in target markets, form an intimate understanding of customers and create new operating and technology platforms.”
Notes to editors
The survey of 249 companies with annual revenues in excess of $250 million covered ASEAN, mainland China, Hong Kong, Taiwan, India, Japan and South Korea. Accenture commissioned the Economist Intelligence Unit to conduct the survey. Accenture experts also completed in-depth interviews with 18 executives and compiled original analysis on investment flows using data from Thomson Reuters and fDi Markets.
Accenture is a global management consulting, technology services and outsourcing company with over 261,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. Through its Skills to Succeed
corporate citizenship focus, Accenture is committed to equipping 500,000 people around the world by 2015 with the skills to get a job or build a business. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com
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Source: Thomson Reuters and fDi Markets, a service from The Financial Times Limited 2013.