Global firms saw their sales in Asia rise sharply in 2010, yet most still feel they are falling short of the region’s potential, according to the annual Asia Business Outlook Survey by Economist Corporate Network.
Some 85% of respondents manage operations with more than US$1 billion in global sales, and nearly one-third of the respondents are executives from large global firms with more than US$10 billion in global sales.
Revenues from Asia are increasing as a percentage of global firms’ revenue, yet only those committed to the region feel they will realize its full potential. Eighty-four percent of respondents say their Asia revenues were below the potential opportunity in the region today—although half felt they would close that gap in five years’ time. Most respondents who do not believe they will realise their Asian potential by 2015 were from medium-sized operations, with no board members or global operational heads in Asia.
The growing number of Asian-based executives sitting on the boards of global firms signals the region’s rising strategic importance, says the report. Some 30% of non-Asian firms had at least one board member based inAsia—and over 40% of these companies had two or more.
The study also finds that Indonesia is ascending as a preferred market and production centre. 19% of respondents felt that after China and India, Indonesia was the next most attractive market for sales growth potential.
While outsourcing of non-core operations continues, companies say they are more open to explore outsourcing core capabilities such as R&D and product design as well.
Looking forward, respondents expect Asian revenue to make up 21% to 25% of global revenue by 2015. More than 10% of respondents expect Asia to comprise at least half of their revenue pool by 2015, compared with 2% in 2010.
“Global firms understand Asia has become central to their growth agenda. The fact that many of our respondents feel they are not realising their Asian potential today (and may not even in five years’ time) is a result of many factors,” says Ross O’Brien, Director of the Economist Corporate Network.
“Our members often observe that their ability to expand in Asia is hampered by an overly cautious outlook back at headquarters, as the gloom of western markets clouds even the sunniest Asian prospects. Yet more importantly, given how successful the Asian operations of foreign multinationals have been in recent years, the core sentiment among survey respondents is optimism about the future of Asia’s market potential.”
Economist Corporate Network—the Economist Group’s advisory service for senior executives of global businesses—surveyed 130 firms from a wide cross section of business across Asia including professional services, financial services, consumer goods and the chemical sector.
This year’s survey—the fifth in a series—focuses on issues such as the sustainability of Asia's growth, board representation in Asia, outsourcing practices, talent management and the role of innovation.
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