In the past few years, large numbers of Asian companies have entered the global stage, challenging the dominance of Western firms. Despite economic growth currently slowing in Asia, there is much to suggest this trend will continue.
The shift in the balance of corporate power from West to East is evident from Forbes Global 2000 list, ranking the world’s largest publicly-listed companies. Last year, Asia edged out in front of North America for the first time, with 674 companies to 629.
Unsurprisingly, China had more new entrants to the list in 2014 than any other country in the world. A famous example of a Chinese company propelled to corporate superstardom is Alibaba, shooting up from a modest 18-man start-up to become China’s dominant ecommerce business in just 15 years.
India’s Tata Group has a considerably longer history, but is another great example of an Asian company that has made its global presence felt, now employing more than half a million people in 100 markets worldwide.
Those wondering where the next Tata or Alibaba is going to come from might be encouraged by a recent survey we commissioned, pointing to a thriving pipeline of future Asian business winners.
Asia’s mid-sized businesses are confident in the future
We asked 300 CEOs and CFOs of mid-sized companies (USD30-100 million annual turnover) in China, India, Malaysia and Indonesia about their business plans and growth ambitions, and their confidence in the future was astonishing.
Nine out of ten of these business leaders expected to grow their turnover in the next five years (by an average of 39 per cent), and three out of four expected to take on more workers and increase headcount by an average of one-third.
Most of the mid-sized companies we spoke to already trade internationally, riding the wave of increased regional and global trade
Much of the confidence of these mid-sized companies is down to growing domestic demand, buoyed by a fast-growing middle class. By 2030, Asia is expected to account for two-thirds of the global middle-class population, up from less than one-third five years ago.
However, not content with success within their borders, most of the mid-sized companies we spoke to already trade internationally, riding the wave of increased regional and global trade. More than two-thirds have ambitions to ramp up global overseas sales, both within the Asia region and further afield. Europe was cited as a preferred trading partner by more than half of the Indian and Chinese companies.
Support is needed for companies to realise their ambitions
Their ambition and confidence is inspiring, but what our study also showed very clearly is that mid-sized companies need support from governments, regulators and banks to realise their ambition and make the leap into the large-corporate bracket. Governments and regulators can be important sources of advice, whilst effective regulation is critical to level the playing field.
Around three-quarters of the businesses said increasing competition and rising cost were significant challenges, and nearly half talked of problems securing the funding they need to meet their business ambitions. Also significant, the second most cited reason for not expanding internationally was the lack of local expertise.
Around three-quarters of the businesses said increasing competition and rising cost were significant challenges
Mid-sized companies can take several steps to address these challenges. For example, strengthening financial transparency (e.g. by appointing accredited international auditors) or bolstering corporate governance (e.g. by appointing independent directors) can help increase availability of funding from banks or equity investors.
Something as simple as employing a full-time professional finance manager or accountant can also make a huge difference, strengthening the company’s financial management and facilitating interaction with banks.
Partnerships and collaboration can help
In order to access international markets, mid-sized companies should seek out partnerships or even acquisitions in new geographies as a means to acquire local market know-how and expertise. Collaboration with international banks with strong local networks as well as other advisors, such as lawyers and accountants, can also help to bridge the knowledge gap.
Alibaba-founder Jack Ma has spoken of his driving ambition to create ‘a global company’ when he first started the company – which he eventually did. Many of the mid-sized companies we surveyed had a similar goal – to be the leader in their chosen industry, driven by their aspiration to “open up in new foreign markets” and be able to “compete in international markets”.
If we can help them overcome their challenges and make it into the super league, such ambition is great news – not just for Asia, but for the global economy.