Despite an aggressive strategy to venture overseas, only less than a quarter of ASEAN companies are able to meet their revenue and profit expectations, according to an Accenture survey.
The research, 'Growth Journeys', included a survey of 249 senior executives of Asia-based companies with annual revenues in excess of US$250 million, from ASEAN; mainland China, Hong Kong and Taiwan; India; Japan; and South Korea.
"ASEAN companies are now competing with multinationals and stronger local players in crowded overseas markets," said Paul Gosling, senior managing director, Accenture Management Consulting, Asia Pacific. "As ASEAN companies step beyond their national boundaries, their cost advantage changes and operating complexity increases. In the quest for sustainable growth, they will need to compete on more than cost and invest more in differentiation, understanding target customers and sophisticated talent management."
Nearly two-thirds (65 percent) of ASEAN companies said the greatest external barrier to international success was their lack of understanding of overseas markets, customer preferences and segments.
The greatest internal barriers to successful global expansion are talent and cross cultural issues. Nearly half of the ASEAN respondents (45 percent) said they cannot attract or retain the right talent to expand outside the region.
In addition, language barriers between headquarters and local offices, lack of understanding of foreign consumers and the inability to navigate complexities in local regulations were cited as the top barriers to success overseas.
The study also found that more than three quarters (77 percent) of ASEAN business leaders are not confident of their operational capabilities to translate international strategy into execution.
The survey found that ASEAN companies increased their international investments by 60 percent from US$36 billion in 2003 to US$58 billion in 2011, according to the report. Their primary objectives are to access new markets for sales growth (71 percent) and to build global brands (61 percent). More than one third (42 percent) said a key goal for international expansion was to access advanced skills and capabilities.
The geographic focus of investment is also shifting. While more than two thirds (71 percent) of ASEAN companies said their investments today mainly focus on the Southeast Asian region, less than one third believed that they would still have the same focus in three years' time. Survey participants also said they will reduce their investments in China, Europe and North America while more companies will be focusing on Australasia and Latin America.
The report showed that while a majority of ASEAN companies cite low cost operations as a driver of their global competitive advantage today, only 32 percent say this will be the case in three years. Thirty-nine percent of ASEAN respondents say that in three years, they intend to drive their competitive advantage through their brand equity (compared to 29 percent today), and 48 percent through the skills of their workforce (compared to 35 percent today).
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