How are consumer products companies restructuring their operations in emerging Asia?
Emerging markets have long been key sources of revenue growth for consumer products companies. Today, however, they must also be the engines of profitability. As we explored in our report Profit or lose, companies need to focus on profit in these markets, or risk losing out to competitors that instill this discipline from the outset. This emphasis on profitable growth is prompting a renewed focus on how companies organize their operations in Asia to build platforms for long-term profitable growth.
Traditionally, companies have tended to favor either a highly centralized model, with most major activities taking place at the head office, or a decentralized version comprising country-based operations with a thin regional headquarters. Both approaches have their drawbacks. A highly centralized “full principal” model facilitates economies of scale but hampers agility and responsiveness. By contrast, a highly decentralized model leads to duplication of effort and hinders the transfer of best practice.
The disadvantages of these two approaches are prompting companies to seek out a middle ground in the form of a regional model. This enables key activities to be centralized without jeopardizing the entrepreneurial capabilities of the market.
The emphasis on profitable growth in emerging Asia is prompting consumer products companies to reconsider the structure of their operations across the region. Although there is no one-size-fits-all model, a clear pattern is emerging: the need for a strong regional headquarters that brings together not only the back-office services of HR, IT and finance, but increasingly procurement, supply chain and innovation.
Learn the four questions that companies must ask themselves when considering how and where to regionalize their operations.
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