Business models change in Asia

10 January 2013

SINGAPORE: Overseas companies are adjusting their operating models in Asia, both in terms of managing local business units and relocating senior teams and executives to the region, a study has revealed.

The Economist Corporate Network, the advisory service, polled 207 executives and found just 11% of Western companies had all their Asian teams report back to a headquarters outside Asia Pacific.

Another 55% of firms made all national markets report to an Asia Pacific headquarters, while 34% asked some to follow this approach and made others responsible to a headquarters on another continent.

"In Asia Pacific, the challenge of deciding how to carve up the region into meaningful units is especially hard," the study said. "For one, the region is huge ... For another, Asia is incredibly diverse.

"As the Asia Pacific region grows, and becomes an ever bigger part of the global economy, so companies are starting to break up their Asia Pacific management units into smaller more manageable blocks."

Among the firms with more than one reporting line outside Asia Pacific, some 52% placed their Chinese division under the authority of a headquarters beyond the region's confines, as did 49% for Japan. India posted 43%, ahead of Australia on 42%.

Elsewhere, the head of at least one global business unit now worked in Asia at 51.9% of enterprises, up from 45.6% last year. This figure was forecast to hit 68.4% by 2017.

While a more modest 38.3% of operators had a member of the main board based in Asia, this marked an increase from 38.3% on an annual basis, and was pegged to reach 52.6% in four years' time.

The motivation behind such moves among the Western firms featured predicted that the proportion of revenues derived from Asia Pacific should rise from 22.2% in 2012 to 31.7% in 2017.

However, a 44% share of executives did not believe their organisation was "investing and hiring at the right rate" to capitalise on the opportunities, and another 4% were "not sure" on this subject.

China remained the priority market, with 73.8% of companies planning to boost expenditure in the country, beating India on 54.1%, Indonesia on 53.3% and Malaysia on 43%.

Looking at "frontier markets", a total of 9.3% of firms had invested in Mongolia and Laos, as had 16.5% in Cambodia and 18.4% in Myanmar. A third of businesses also currently traded in each nation.

Data sourced from Economist Corporate Network; additional content by Warc staff