How can you accelerate growth in a decelerating Asian economy?


Vikram Chakravarty

EY ASEAN Transaction Advisory Services Leader

Experienced strategy advisor. Thought leader in Asia business. Wine connoisseur, avid squash player, ardent cricket fan and doting father.

4 minute read 30 Sep 2016

As the rate of Asian growth slows, should businesses focus their strategy on where they have the best chance of winning market share?

Until recently, the central fact about Asian markets was that they were growing fast.

In the last few decades, millions of Asian households have become middle class, and Asia has added billions of new consumers. Most companies in Asia have been fishing in a pool of purchasing power that was not just growing each year, it was growing at a faster rate each year.

That made growing a business in the continent relatively easy; just being present in many regional markets guaranteed growth.

Adapting to an Asian slowdown

Today, Asia is still growing – but its growth is slowing compared to the rest of the world. India’s rate of growth is no longer increasing. The mainland Chinese economy seems increasingly to be reliant on stimulus spending as its slowdown in growth rate continues. Growth in Taiwan, South Korea and Indonesia is also slowing down.

And in a market with slower growth, the focus is increasingly shifting towards profitability. Shareholders who spent millions of dollars funding to drive growth in Asia are now challenging management teams to achieve greater profits.

Profitability is most often linked to a business’ level of market share and relative scale within the country in which it is operating. The top 2-3 players capture majority of the profit pool, and the laggards often struggle to show returns.

But interestingly, very few companies are able to retain market share dominance across geographies. And this gives a clear guidance to companies on where to focus – depth over width. Leadership in a country – category should be prioritized over sub-scale presence in many markets.

Considering the Asian economic slowdown and the potential variance of performance within each territory, how should you assess your business strategy?

Step 1: Review your portfolio

For a company seeking market leadership in one category, the first task will be to review their portfolios. The question to ask is: how easy it would be for your company to become the market leader in the countries and categories in which it is competing?

Companies should look at which segments of their offering are driving growth in any given market or category. They should assess the potential market size for each of those sectors. Crucially, they should assess the company’s ability to reach market leadership in each segment.

Step 2: A country strategy or a category strategy?

A category approach – the idea of seeking dominance in one category – can work well if categories are large and distribution channels are well-established. This is often the case in mature markets in Europe and North America.

Asian countries, however, are often different. Volumes within individual categories are often still small. Distribution sometimes presents challenges, so trying to achieve market leadership in many categories and many markets can be very hard.

Given this, it makes sense for companies to assess whether to try to be a market leader in one product line across multiple geographical markets, or to be a market leader in many product lines but in just one market.

This should be a key part of the internal assessment a company does before deciding how to proceed in the emerging new business environment in Asia.

A man at a desk looks at a tablet computer

Step 3: Use mergers and acquisitions to boost market share

It often takes a long time for companies to achieve market leadership in their chosen sector or country by growing organically. It can be quicker to strategically choose existing companies in the right sector to merge with or acquire.

That was Kellogg’s strategy when it decided to enter the Asian snack food market. In Asia, that market is roughly ten times larger than the market for breakfast cereal, in which Kellogg’s dominates in the Americas and Europe. Kellogg’s decided not to wait for their brands to grow until they were the market leader in the sector, which anyway might never have happened. Instead they acquired the Pringles potato chip brand from Procter & Gamble. It bought instant scale in Asian markets.

Step 4: Cut costs

Fast growth is rarely combined with a rigorous focus on minimizing costs. Given that, a company that has grown by grabbing as much of a market as possible is likely to have inefficiencies in its supply chain and processes which need to be ironed out.

This means that the path to profitability often involves a focus on cost cutting. Companies should check the agreements that they have in place with third party manufacturers or marketing agencies honestly and critically.

Step 5: Exit where no path to profitability

Choosing one category in which to aim for market leadership or one country on which to focus will mean shutting down the operations that cannot transition to meet new needs. This sometimes means taking losses, writing off investments, and accepting the losses as a cost of achieving market leadership ultimately.

Sometimes it will make sense for companies to set up a dedicated divestiture team to handle the process, concentrate knowledge, and make it happen as smoothly and painlessly as possible. That team will often have to work out how to offer stakeholders a plan for redeploying the capital the process releases.

A bright Asian future

Asian markets are at an inflection point. Companies that have made the most of the good times and enjoyed robust growth will have to learn some new tricks and techniques to make the most of the future.

Those companies that are able to undertake the transition, however, will be rewarded with greater profitability in the years ahead.


During the Asian economic slowdown, companies able to transition and adjust will be rewarded with profitability in the years ahead.

About this article


Vikram Chakravarty

EY ASEAN Transaction Advisory Services Leader

Experienced strategy advisor. Thought leader in Asia business. Wine connoisseur, avid squash player, ardent cricket fan and doting father.