As Asian companies seek to develop more sophisticated and high-value products and services, developed-market companies will face much greater competition on cost in their core segments.
Asian companies have deep expertise in producing price-competitive products at the lower end, but they will use this expertise to drive cost competition on higher-end products as well.
Our research for Beyond Asia: strategies to support the quest for growth shows that having a low-cost business model – Asian companies’ main competitive advantage a decade ago – is now close to the bottom of the list of what they consider their most relevant strengths and advantages as they expand internationally.
They view leading technology and the quality of their products, services and workforce as their advantages.1
Think carefully about where you can compete
Focus on differentiating yourself in the marketplace
Refresh your business model to maintain your competitive edge
“By moving up the value chain and introducing high-end products at a cheaper price, Asian companies have already proven to be highly disruptive in a number of sectors,” says Richard Baker, Global Client Service Partner, Ernst & Young UK.
“This requires developed-market companies to think carefully about where they can compete and how they continue to differentiate themselves in the marketplace.”
Patrick Flochel, Global Life Sciences Market Leader at Ernst & Young, uses the example of the pharmaceuticals sector to argue that developed-market companies could make greater use of business-model innovation to maintain their competitive edge. “We believe that pharmaceutical companies will have to collaborate with companies from many different sectors, including technology and telecoms, to create innovative business models that deliver health outcomes to patients,” he says.
“You can’t talk about innovation in healthcare without talking about delivery, and that’s where companies can develop some interesting new models.”
Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.