Record high business confidence among Asia Pacific CEOs - They hail access to new markets through geographic expansion, PwC poll finds.
Thailand, 16 February 2007 – Nine out of ten CEOs in Asia Pacific are upbeat about revenue growth in the next 12 months and over the next three years. Global CEOs’ confidence about prospects for revenue growth has also reached a record level: nearly twice as many global CEOs feel very confident about revenue growth over the next 12 months compared to five years ago, according to the latest PricewaterhouseCoopers (PwC) 10th annual Global CEO Survey where nearly 1,100 CEOs from 50 countries were polled on their views on the current business environment, opportunities and obstacles.
Focusing on growth opportunities, Asia Pacific CEOs hail access to new markets through geographic expansion (26%), better penetration of existing markets for existing products (23%), new product development (14%) and mergers and acquisitions - often across borders - (13%) as factors fuelling their business expansions in the next 12 months.
“Knowing that CEOs in this part of the world share the same record high business confidence for revenue growth, both in the short and longer term, with an overwhelming 91% optimistic about the future of their businesses, is heartening and gives an extra boost to Asia’s position on the world stage,” said Gautam Banerjee, Chairman of PwC’s regional network of firms in Asia.
The top five countries identified by CEOs in this region where significant growth opportunities exist beyond the BRIC countries (namely Brazil, Russia, India and China) are Indonesia, Vietnam, Korea, Thailand and Mexico. Asia Pacific CEOs, akin to their global peers, expect growth to continue in both emerging and developed markets. Globally, 49% of CEOs agree that increased globalisation has significantly lessened cultural differences; but closer examination reveals a split between the views of developed economy CEOs (43%) and those in emerging economies (58%). This difference of opinion is also reflected in global CEOs’ belief in where the next generation of global brands will come from, with 41% of Asia Pacific CEOs opting for emerging markets as the answer, dropping to 31% for North American CEOs.
Barriers to Growth
Optimism notwithstanding, CEOs in Asia Pacific are significantly more concerned about a range of business threats and hence are expending more resources in preparing for these threats. They are generally more worried than their global counterparts on the availability of key skills (88%), over-regulation (83%), low-cost competition (80%) and intellectual property rights (76%).
In addition, Asia Pacific chiefs are more concerned about non-business risks. Close to two thirds of Asia Pacific CEOs are anxious of pandemics (66%), scarcity of natural resources (75%), terrorism (63%) and global warming/climate changes (58%).
“The global winners of tomorrow are those that can change their outlook from local to global in the true sense, and learn to operate in a world now subject to far more influences from a wider array of sources than ever before,” said Mr Banerjee. “For CEOs in Asia Pacific to make the most of global opportunities for the long term, they must fully understand the realities and risks of fuelling their growth, working in diverse cultures, managing dispersed resources and competing with a growing set of global players”.
Balancing the Global Equation
To help drive business growth, 45% of Asia Pacific CEOs say they have completed or are planning a cross-border M&A in the next 12 months, with Asia being the choice destination (51%). However, among all CEOs, Western Europe is the favourite M&A destination (43%), followed by Asia Pacific (31%) and North America (25%). Among CEOs in emerging economies, Asia Pacific (33%) is the preferred region, followed by Western Europe (23%), Eastern Europe (21%) and Latin America (20%). A closer look at the regional data also reveals an interesting pattern. Regardless of increases in global FDI inflows, the majority of CEOs are investing close to home – targeting countries in their intra-regional area or traditional trading partners. They seem to be avoiding bold moves away from their comfort zones.
Overwhelmingly, gaining access to new markets and customers is the main purpose given for cross-border M&A, cited by 69% of Asia Pacific CEOs. However, they do not underestimate the difficulties faced in cross-border acquisition and integration. Along with the global trend, cultural issues and conflicts (51%) and differences in regulations (45%) are the main obstacles to cross-border M&A activity cited by these business leaders.
To finance this growth, CEOs in Asia Pacific mirror those globally, preferring to do so through internally generated cash flows (76%), debt markets (34%) and equity markets (28%). Seventeen per cent (17%) of CEOs in this region would also consider divesture of existing assets and private equity or venture capital financing (8%) as financing options.
On identifying their company’s competitive advantage, the three most cited sources by CEOs in Asia Pacific are outsourcing manufacturing (31%), outsourcing outbound logistics (27%) and owning the company’s entire value chain (25%).
“Globalisation is a movement clearly at a crossroads, one still driven by exciting new financial and market opportunities, but one no longer realised through a ‘one-size-fits-all’ model. To achieve global competitiveness, manage scale and risks, and overcome regulatory hurdles, CEOs must revisit their strategies to emphasise collaborative opportunities – not only across boundaries within their own network – but externally as well, with strategic partners and peers in both the public and private sectors,” concluded Mr Banerjee.
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