There’s been a lot of focus lately on the changing business dynamic between the developed and developing economies—the West and the East. Clearly, the center of gravity is moving to the developing world, where the increased spending power of an emerging middle class is creating opportunities for growth. The implications of this changing global business landscape are profound, particularly as they affect strategic matters of most concern to multinational companies hoping to succeed in a brave new world.
For developed-world organizations, much can be learned by assessing the perspectives of their counterparts in the emerging world. As an APEC1 Knowledge Partner, PwC conducted a survey of more than 300 APEC region industry leaders representing 26 countries and all 21 APEC economies. Despite economic stresses, such as weaker than desired US growth and euro-area uncertainty, nearly all (96 percent) were somewhat or very confident about their 15 organizations’ prospects for revenue growth over the next three to five years.
Such confidence is well founded. In the US, growth seems to be starting, but at lower than needed levels, while unemployment remains persistently high; and in Europe, growth is all but stalled. However, wages in APEC markets are continuing to rise, creating higher disposable incomes. This, along with growing regional trade links and the evolving promise of a networked economy, is creating substantial opportunities. But I think there’s more to it. I believe this confidence is also rooted in their ability to take the long view with regard to tomorrow’s opportunities and to cultivate resilience rather than aversion when confronting risk.
Let’s consider a few examples. With regard to the long view, many of the APEC leaders understand that they are the beneficiaries of a major shift in economic power, and they are planning now to seize opportunities as they become available. For instance, 44 percent of APEC business leaders see the rise in spending power in Asia as the single biggest opportunity for growth. In preparing for that growth, nearly all (94 percent) are planning a change to their current approach to innovation, with 43 percent considering significant change. And while talent shortages and high turnover among top performers remain strong concerns, 43 percent of businesses in APEC plan to expand headcount by at least 5 percent a year over the next three to five years.
In addition, APEC leaders are equally focused on the growing significance of technology in a rebalancing global economy. In fact, more than 80 percent of business leaders in APEC countries plan change in their use of new technologies, like enterprise mobility and cloud computing, with one-third planning significant changes.
Despite their confidence and long-term perspective, APEC-market companies—like Western companies—are not free from risk.
They tell us they are coping with complex regulatory regimes, inconsistent and haphazard standards, corruption, talent shortages, and natural disasters. And they are certainly not immune to the effects of the global economic crisis, particularly the continued weaknesses evident in certain economies or the downstream impact of slowing economies, for example, in China. Unlike many Western companies, however, they have not stopped taking risks. They are, in fact, continuing to invest in the region.
While 44 percent are making their largest investment in China over the next three to five years, they are also investing in less predictable locations such as Indonesia and Vietnam. Only 10 percent expect to be making their largest investment in the US, perhaps for the very reasons that risk taking has declined in the West—uncertainties around, for example, fiscal and monetary policies, demand for goods and services, and regulations.
In drawing these comparisons concerning business foresight and risk taking, I want to stress that differing cultures, experiences, and priorities will always result in different approaches. But I think we can all learn something from an awareness of such differences.
The US and Europe have, understandably, been engaged in coping with the economic crisis and its aftermath—a necessary and ongoing task. The fiscal, monetary, and regulatory issues need to be addressed, but so too do the barriers that are impeding the long-term perspective required to create investment and risk-taking opportunities that ensure prosperity and growth. While the former is surely important, it is in the latter where the solutions necessary to maintaining future competitiveness reside.
That’s my view. What’s yours? We’d like to know. Send us your comments here.
1 Asia-Pacific Economic Cooperation. According to its mission statement, “APEC is the premier Asia-Pacific economic forum.” The full statement is available at http://www.apec.org.