The shift in consumer power from the West to Asia!

India, China and several South East Asian countries have brought an important shift in today’s “consumer power”. The reallocation of “trade” (cf. blogpost; “Modern trade becoming tripolar” - Fact 2, 2010) is a direct result of this shift in “consumer power” to Asia (who used to come from Europe and the US). The population of these economies is subject to rising income levels (especially China and India) giving them a growing purchasing power. Spending more on cloths, electronics, food, drinks, cars, amusement; those new “Asian” middle-upper classes are now the “spenders” and the ones to look at!

This fact also highlights how most Asian economies have sailed more efficiently through the recent economic downturn than their Western counterparts. As a result, today and in the future, your organization will have to target those new market segments to be able to succeed as a “global player” in the long term. Opportunities are appearing in all kinds of industries and there is no time to waste to go ahead (remember DragonGate can help you to quickly move in successfully…)!

For instance, lucrative opportunities appear for Fast Moving Consumer Goods companies (FMCG); i.e.: not only are the potential target markets expanding quickly, gross margins are in general higher than what they are in the west.

Though this might seem to be an “easy in” to make lots of $! Well it is not! Numbers of companies have tried, spent lots of time & money and failed! There is no secret to success, you need to plan ALL aspects of your market introduction and that is; to start by understanding your target market, the spending behaviors of rural/metropolitan consumers. China and India are so huge that you need to come up with a process and step by step approach to market your products. Develop a brand promise (customer focus) and a “brand delivery system” (system in place behind the brand to support its value proposition) to match your target market. Furthermore, scalability is key, and this is where DragonGate can help you maximizes your chances of success!

Finally, there is no doubt that China and India will be the 21^st century heavyweights. Their striving economies are supported by their current geopolitical orientations and actions that will reinforce their position in the global economy over the next century. With interests in the Middle East, Africa and South America, they are securing resources (creating partnerships) at a faster rate than any other countries.

National Expos used to be the “big deal” back in the early 1900’s, till then they have fallen in the shadow of the Olympics or even the soccer world cups (anybody remember the last two expo’s ?) ; thus becoming events nobody really knows about. Nevertheless, China is putting the ”Expo” back at the top of the “shows” by investing more than US$ 4.5 billion in a project as wide as twice de size of the city of Monaco in the middle of Shanghai (hosting 189 countries). This project cost even more than the last Olympics in Beijing and is supposed to attract at least 70 million visitors until the end of October (up to now some 300 to 500 thousands visitors per day attend the expo; though mostly Chinese citizens…).

So why has the Chinese Government invested so heavily in this expo? One of the most probable answers is related to the “growing influence of China” (now the second largest economy by nominal GDP and PPP); the expo positions and promotes China throughout the world putting the country at the forefront of the global economy. Its main purpose is “educational”; it is to explain to the Chinese people their country’s “new” position in the world and how it has become so important and influential (for example: the size of the Chinese pavilion is about twice the size of all the other countries).

The expo is also a great platform to foster “cultural exchanges” and is an excellent basis for future “business” or economical relationships between China, Asia and the world. Most countries having invested many million USD’s in their “pavilions” hope to develop or strengthen their relationship with China.

It has generated so many constructions and improvements among public transportation (subways, airports) and areas (the bund area, parks…) that the benefits of this expo will be seen long after it is over (it is believed that the returns will be more than 10 times its investment). Not only did this event “speed up” the development of the city, it has “pulled” the overall export-oriented economy of Shanghai and promoted its new and more “service oriented” aspects.

The downside? It’s hard to tell; though there has been the relocation of thousands of people, its positive aspects are believed to strongly outpace its negative impacts. The big question is; will the government know how to maximize all that space and buildings after its finished? What will happen with all those great constructions?

Finally, the Olympics and Expo combo is something we had already seen in the 70’s in Japan. At the time Japan had successfully promoted it’s raising “Empire” as a “modern” country! Is China trying to do the same today? Probably it is; and it’s doing it at a faster pace…

In our next blog post will continue our “what to know when doing business/investing in Asia episode” and talk about “The shift in consumer power from the West to Asia!”…