To remain competitive Australian companies will have to be innovative and adapt to the needs of customers in new markets, says a new business report.
In its report Australian Business Trends 2014 How Australian Business Can Capitalise On The Latest Global Trends, Deloitte examines how Australian businesses can capitalise on the latest global trends.
The report notes that in order to benefit from new technologies and an accompanying “explosion” in the movement of goods, services, capital, people, ideas, cultures and values, Australian business must become more innovative.
One of the key trends in the report, Another Billion, identifies opportunities if a billion people enter the “middle class” globally over the next two decades.
“This spread of prosperity will offer a raft of opportunities for businesses that move first, and will present challenges for those that lag behind,” the report finds.
Increased consumption in the Asia-Pacific region will provide huge opportunities to Australian companies, especially across the financial services, retail and telecommunications industries.
“Australia is well placed to capitalise on this changing economic landscape, especially due to its proximity to the growth markets of Asia,” says Jenny Wilson, Customer Strategy and Insights Partner with Deloitte Consulting. “Strengthening our already strong relationships with the new global giants such as China and India will become more important than ever, as we seek to establish a stronger presence in their markets and their companies continue to enter ours.”
Ms Wilson says reaching the one billion is not a simple “acquire and enter strategy.”
Inherent within this mass opportunity is a myriad of micro segments, which will drive different meaning to why consumers value and consume products and services.
The recent Australia-China Free Trade Agreement will produce big winners on the Australian side from the dairy, mining and services sectors as these industries will benefit from the eventual elimination of current tariffs and other trade barriers.
“China is already Australia’s largest trading partner by some distance, taking a stunning 38 percent of Australian merchandise exports,” said Ms Wilson.
“The detail of the agreement is still to be seen but it appears to offer significant opportunities for many Australian exporters to better access the massive Chinese market. There will also soon to be trade benefits in ‘new’ export sectors such as health, education and financial services, with firms in these sectors having additional access to operate in China.”
As businesses turn their attention to the next billion, they’re finding the past strategies of reducing costs and exporting affordable, scaled-down versions of successful products or services may not suffice. Customising for every local market is both impractical and expensive.
New approaches and new ways of thinking – about categories, cultures and commonalities – are needed.
Serving the next billion is a tantalising prospect, but reaching them profitably will be anything but straightforward.
The free trade agreement provides impetus to extend Australia’s trade relationship with China further, including in a range of service delivery and investment activities.
How to capitalise from an Australian perspective:
- In a highly competitive Australian market, the next wave of growth is likely to come from emerging Asian markets and their burgeoning middle classes.
- Acquire a real understanding of the social, cultural, environmental and behavioural needs of these growth markets, whether via acquisition, alliance or through organic market entry.
- Find commonalities and patterns across markets and consumers
- Listening to customers then interpreting their unmet needs will be critical to success
- Adapt products and services to suit consumers with less money and different needs.
“Companies wanting to establish an Asian foothold will need to increasingly partner with local companies and to gain a far greater understanding of the unique dynamics of local cultures,” Ms Wilson points out.
“Successfully reaching the next billion is also likely to require investments in new capabilities. But the opportunity is too great, and the longevity of the rewards for success too enduring, for many companies to ignore this massive demographic shift.
“It will be the forward-looking Australian businesses that proactively take opportunities to innovate and serve the needs of low-income consumers in the Asia-Pacific region which will enjoy the benefits of increased market share, profit growth and brand differentiation.”