Bridging markets and adding value for clients, customers and consumers will be critical to succeeding in dynamic, customer-driven markets.
It’s 9 a.m. in Shanghai, Hong Kong and Singapore, the start of a new day in Asia’s primary financial centers. In Dubai, it’s 5 a.m., the London clock reads 2 a.m., and it’s 3 a.m. in Frankfurt. In New York, it’s 9 p.m. on the previous day. Despite this dislocation of time, trillions of dollars of commercial transactions are being powered by universal digitized interconnectivity, while consumers sat at their breakfast tables, at their work desk or in front of the TV are purchasing products and services online.
The reality of the globalized economy is that business pays no heed to clocks, and borders and regions exist only on maps. Trade flows are shifting. Supply and demand are no longer dominated by the east-west transcontinental axis. Today, in markets across Asia, which reside at the heart of global growth, entire value chains have developed to conceive, produce, manufacture, ship, sell and consume products and services locally, regionally and internationally. Economies of scale are created, synergies are exploited. Barriers to doing business, both physical, legislative and psychological, continue to be broken down and removed.
Asia’s surging influence on the global economy means brands across Europe, North America, the Middle East and Asia itself are assessing strategic investments in each continent, and in untapped markets across Africa and South America. The irreversible process of globalization creates challenges and opportunities in equal measure, and developing strong customer relationships and linking suppliers and consumers will define the growth of the Market Expansion Services (MES) industry, both in Asia and beyond.
As Asian markets have changed, MES providers have rebalanced their approach from being formally client-centric, to engaging more closely with customers and consumers.Dr. Joerg Wolle, President & CEO, DKSH
A modern approach to service delivery
The MES industry emerged from the old trading houses model based on a recognition that changing market conditions for the traditional trading house had instigated new requirements across entire value chains. As Asia drives growth in the post-2008 global economic order, new business challenges and opportunities require a proactive modern approach to service provision.
Changing commercial backdrops have been a constant economic narrative throughout history, of course. One hundred and fifty years ago, the predecessor Swiss trading houses that evolved to become DKSH were on the scene when Japan opened to the outside world, and 50 years later they helped to open up Thailand to global trade. Today, DKSH remains at the forefront in China and across South East Asia as the region’s economies become increasingly self-sustaining and interconnected regionally and globally.
In the 21st century, as timelines, trade barriers and physical borders become smoother, multinational and internationalizing Asian companies seek greater economies of scale to tap new opportunities for growth in emerging markets. Consequently, the role of outsourcing has become a strategic imperative – and the MES model has diversified accordingly.
“Contrary to ‘conventional outsourcing’ like IT, payroll or accounting, Market Expansion Services are not focused exclusively on cost reduction, but are aimed at top- and bottom-line growth, increasing market shares, penetration and coverage and reducing fixed costs and complexity,” says Prof. Robert A. Burgelman, Edmund W. Littlefield Professor of Management, Executive Director of the Stanford Executive Program (SEP), and author of two detailed DKSH case studies published by the Stanford Graduate School of Business in 2011 and 2012. “In this way, MES providers add substantially more value than traditional outsourcing organizations.”
Three Asian megatrends
Multi-layered, often overlapping, influences are at play. “In today’s Asian markets, there continue to be three key factors impacting business strategies: the ongoing growth of the middle class, the expansion of intra-regional trade, and the trend toward outsourcing,” says Prof. Burgelman.
Homegrown brands that developed from spotting and optimizing unique opportunities in their home markets will be increasingly central to the growth of intra-regional trade – and their own outsourced service requirements will change. “A large number of entrepreneurial Asian companies will stimulate the demand for MES services, and they will require additional competencies that complement their businesses,” says Prof. Burgelman.
“International companies taking on local players in Asian markets must clearly understand the differentiated cultures and societal changes in the places they are doing business. They must apply the benefits of both globalization and localization, and establish trust-based relationships and collaborative partnerships,” says Prof. Burgelman.
“Localized features of demand are critical factors both between and within countries in Asia,” Prof. Burgelman adds. “As consumer demand grows, understanding the demand side, both in quantitative and qualitative terms, will be a source of competitive advantage.”
Delivering added-value services
Adding value means assuming a flexible, multi-dimensional competitive mindset. By focusing on the entire value chain, MES providers can deliver the tailored services that customers increasingly demand.
“Back in 2002, we made a strategic decision to carve a very specialized niche strategy for India and China, and to develop a capillary mass market penetration strategy for ASEAN, where we were already the MES market leader,” says Dr. Joerg Wolle, President & CEO of DKSH. “Thirteen years ago, ASEAN was not top of everyone’s mind, but we always aim to focus on our strengths and be a step ahead, to be able to advise our clients of changes in each market so they can adjust their strategy accordingly.”
As Asian markets have changed, so too has the nature of MES. In particular, Dr. Wolle notes, MES providers have rebalanced their approach from being formally client-centric, to engaging more closely with customers and consumers.
“Moving the company to a more balanced approach between client and customer focus was a substantial transformation process. Across Asia today, it is not enough to operate as an extended arm of manufacturing companies bringing products into these markets,” says Dr. Wolle. “You must also think about your customer, and how you can help the customer to better serve their own customers, whether that may be a supermarket in Hong Kong or Bangkok or a doctor’s surgery in a rural area of South East Asia.”
Adding value to a client’s business is, says Dr. Wolle, a process of constant evolution. “It is about always creating new valueadded services. We had a strong logistics and distribution background and were very strong in sales, but we have been upgrading our offering constantly for many years. We now have more than 50 addedvalue services from which clients choose when they outsource to us.”
In particular, Dr. Wolle highlights the importance of using field marketing to better understand the seismic shifts in Asian consumer markets. “Influencing the end customer at the point of sale in a pharmacy, a mom-and-pop store or in a supermarket is a very important ‘add-on’ to our service offerings. We are not just delivering products for sale, instead, we are taking care of the store shelves, arranging the products on display, influencing inventory management, and providing specialist in-store promotional and consulting services so consumers derive the maximum value and pleasure from the products they buy.”