Although growth rates have dipped in recent months, the future looks bright for Asia.
The rise of Asia over the past few decades has transformed the global economic landscape.
Since the 1980s, major economies in Asia have seen impressive economic growth. This has lifted millions out of poverty and created huge new markets for domestic consumption. Although growth rates have dipped in recent months, the future looks bright for Asia.
According to a report from the Asian Development Bank, the region’s per capita income could increase six times in purchasing power parity (PPP) terms between now and 2050. This would reach levels that are similar to those in Europe today.1
This economic transformation has created a highly fertile environment for business growth across Asia. Over the past decade, a new generation of Asian companies has emerged to take advantage of increased spending power and opportunities in the region.
As we explored in our recent report Beyond Asia: strategies to support the quest for growth, these new multinationals are now fanning out across the globe, capitalizing on a platform of strong domestic markets, government support and readily available capital to become major players in international business.2
Foreign direct investment (FDI) outflows from East and Southeast Asia recorded a compound annual growth rate of 22.9% in 2005–2011, jumping from US$70b to US$242b. Investors from East and Southeast Asia are major drivers of growth in global FDI outflows, making up 16% of the world’s total FDI (up from just 7% in 2005).3
This reportexamines how companies based in developed markets can explore the implications of Asian overseas expansion and figure out responses that will both anticipate change in global competition and maximize new opportunities.
Based on in-depth interviews with business leaders and Ernst & Young professionals, the report offers practical perspectives into how both Asian and developed-market businesses can turn this trend to their advantage and attain a common goal - growth.
Lou Pagnutti Asia-Pacific Area Managing Partner Ernst & Young
Business implications for developed-market companies
The recent spike in overseas investment by Asian multinationals has many developed-market companies fearing increased competition and loss of market share in regions where they have been the major players for decades. Media reports have further fueled these fears.
While it’s true that developed-market businesses face threats to their longstanding dominance, the changing landscape of global competition also opens up opportunities for growth that were not available earlier.
By capitalizing on each other’s strengths and capabilities, both Asian and developed-market businesses stand to gain from the growing global presence of Asian companies.
Winning at this game, however, requires a careful assessment of both the challenges and the opportunities. These include:
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