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Emerging-market players now key drivers of intra-Asian trade

Update: September, 16/2013 - 09:35
Leonard Tan, general director of DKSH Vietnam
Satrategy consulting firm Roland Berger and market expansion services provider DKSH have published the latest Market Expansion Services report, which highlights the role of emerging market players in driving domestic growth. Leonard Tan, general director of DKSH Vietnam, speaks to Viet Nam News about emerging market players.

What are emerging market players?

As the name suggests, emerging market players refer to companies originating from emerging markets. Based on the strong growth in their home markets spurred by the rising middle classes, emerging market players are looking to expand their business beyond their home markets. Thanks to established local networks, a thorough knowledge of local customs and habits, and sufficient agility to adapt quickly to a dynamic environment, many emerging market players are now increasingly serious competitors for western companies in their own game and strengthening their market position at every link in the value chain. Over the past five years the top 10 Asian emerging market players have grown at an annual rate of 22 per cent -almost four times faster than the 6 per cent annual growth delivered by the world's 10 ten developed market players.

What factors are driving intra-Asian trade? Why is this relevant for the market expansion services (MES) industry?

Intra-Asian trade can be best summarised as a derivation from the following three factors: exploring growth opportunities beyond borders of Japan, promising sales market of China, and strong growth of ASEAN with open policies in future. In ASEAN countries, governments as well as economic and geo-political organisations have responded to these trade developments by implementing regulatory reforms that facilitate international commerce and market expansion. With Chinese and Southeast Asian firms ramping up their foreign investments and commerce - and bolstered by low to zero import tariffs since the China-ASEAN Free Trade Agreement went into effect in 2010 - trade flows within the region continue to gain strength. This trend is expected to go on as the ASEAN Economic Community (AEC) drives the region towards economic integration by 2015. That integration would make ASEAN, a region with a population of more than 600 million, the world's third largest after China and India, whose inhabitants exceed 1,350 million and 1,200 million respectively.

Such economic integration in the Asian region will further boost intra-Asia trade, thus opening even more doors of opportunity for MES providers who can deliver vital services to their clients seeking to establish a footprint throughout Asia. Strong growth expected through 2017 will drive the Asia Pacific MES market to a total volume of around US$1.1 trillion, making it by far the largest such market in the world.

What is your advice to emerging market players?

To expand their business beyond their boundaries, they need to overcome language barriers, know local regulations and comply with local requirements. They will also need to have the necessary financial and human resources, understand different markets and mentalities, and ultimately gain access to local infrastructures and customers.

The need for these skill sets is a powerful driver of the MES industry, particularly in Asia, and will drive new growth opportunities for the region.

We also see several success strategies based on a survey of 250 emerging market players. The study organised them into six groups - growth speeders, cost cutters, efficient expanders, innovative expanders, international networkers and regional contenders - who are respectively focusing on growth, cost efficiency and internationalisation. However, efficient expanders are best positioned in emerging market environments since they recognise the need to escape the pure cost focus and take on an expansion mindset while maintaining the efficiency to be successful in the long term.

How do you judge the Viet Nam market in this respect? How involved is DKSH Vietnam with emerging market players?

According to the market expansion readiness index (MERI) across the Asia Pacific in 2013, four market groups are formed- globalisers, expanders, explorers, and scouts - with Vietnam being in expanders together with Thailand, New Zealand, India and Indonesia. Viet Nam shows a strong interest in market expansion but our reach is still limited to geographic region. The potential is high as we are expanding dynamically, facilitated by closer integration with the ASEAN region.

DKSH is the leading market expansion services provider in Viet Nam and is bridging nearly 230 clients world-wide with over 100,000 local customers in our comprehensive network. Emerging market players are one of our key client groups beside multinationals from developed economies that have been driving globalisation for decades. DKSH not only increasingly serves Vietnamese clients with market expansion services in their home markets but also supports many Asian companies to expand and grow in Viet Nam. Leveraging on our in-depth market knowledge of Viet Nam and other Asian countries, we are well positioned to give companies sound commercial advice and help them develop a professional market entry strategy for the Vietnamese market and beyond. — VNS

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