beyondbrics

By Alan Keir of HSBC

We’re experiencing a fundamental shift taking place in the global economy with a very clear move from West to East. As Asia and the Middle East assert themselves as the brightest prospects on the global landscape, it has massive and exciting implications for Europe’s business community.

This changing global economic landscape is truly fascinating. Who would have thought just 25 years ago, that today in India, two thirds of exports would go to markets other than the US and Europe? And that China would become the largest importer of Brazilian goods?

This is the emergence of South-South trade: globalisation isn’t just a process of goods moving from developing to developed countries; it crosses and connects emerging markets.

What does this mean for me you might ask – a business based in Europe? What can I do to keep up with these Eastern powerhouses? Well it’s more than just keeping up. It’s about working with the East and benefiting from the region and all that it has to offer.

As we said in our recent report, the challenges European businesses face because of the rise of the East are difficult, but by no means insurmountable. An increasingly skilled workforce in Asia, more discerning Eastern consumers who won’t just accept any Western product, rising energy prices, and uncertain political climates are but a few. These are not theoretical points but reality. Failure to adapt means business opportunities will be lost and business threats will increase.

In the face of these challenges, seven key considerations have been identified to influence strategic decision-making of any European business looking East. We believe all European businesses should heed the following:

1. Maximise human capital – Look beyond your domestic borders to capitalise on Asia’s investment in up-skilling. Asia is no longer just a source of low cost labour;

2. Create an ‘innovation supply chain’ – Forget about the traditional model of Western innovation and Eastern delivery. Take advantage of Asia’s investment in R&D;

3. Invest in consumer insight – Tap into the opportunities afforded by unprecedented growth of a diverse and fast changing Eastern consumer market;

4. Employ a global mindset – Overturn preconceptions about the East and foster a culture which accommodates different business models and ‘rule books’;

5. Mitigate risk effectively – Accurately research, understand and weigh up the risks versus the significant rewards of engaging with the East;

6. Rethink consumption and distribution – Acknowledge individual business’ role in tackling global sustainability issues, particularly the East’s energy consumption, and consider new models of manufacturing and export as a result;

7. Create an advisory-led business – Acknowledge the role of external experts to provide local market insight into doing business globally.

These findings mark a wake up call for European businesses. It might sound simple, but business needs to go where the business is and in our view, all eyes should be on the East. The evidence so far shows we are going to see the decline of the western-centric mindset and a new way for the world to do business; quite simply, Europe has to keep up.

Alan Keir is co-head of commercial banking at HSBC