Given the strong growth in consumption and expectations of sustaining its position as one of the largest consumers in the emerging world (see below), multinational corporations (MNCs) should begin to witness more investments from their competitors into manufacturing products in ASEAN for consumption in ASEAN. They should also see increasing customization of products/services for the needs of this huge consumer market. Not only is ASEAN in the same consumption league as most of the BRIC nations, but it has overtaken Russia, Mexico and Brazil to become the second largest consumer among these large, emerging economies globally.
The current GDP growth trajectory of the ASEAN region is at its highest compared to the past two decades as it benefits from the positive externalities of China’s growth and its own rise in consumption. The region has come out of the 2008 to 2009 financial crisis in a much stronger position on the back of rising domestic consumption, both private and public. Over the past 10 years, the size of the middle class (greater than US$ 3000 in disposable income) in ASEAN has grown more than six times in size, from roughly 50 million in 2004 to more than 300 million by 2014.
The per capita income in majority of the ASEAN countries is expected to remain above that of India, with Malaysia and Thailand forecasted to stay ahead of China. Demographic trends are also positive; the young population and the growing middle class should continue to support healthy growth in demand.
MNCs must ensure that they are assessing and adapting to local customer preferences. Executives should particularly focus on keeping the feedback loop short and remain flexible enough to exploit opportunities. There should be further emphasis on need-based product development and meet consumer requirements closely. Many Westerns MNCs have been less interested in making the necessary investments in learning and adaptation for the market, especially to target the large and fast growing middle-income consumers.
FSG’s Seven Crucial (Less Talked About) Facts about ASEAN
This update is Part Five of a seven-part series of quick insights that I will be publishing over the next few weeks on the ASEAN region (see full list here). These have been selected carefully based on FSG’s numerous interactions with regional executives. I will discuss the topics which have proven to have high importance for senior executives of western multinational companies and ones with a lack of coverage in the business spheres. Next week’s update: “Brand Value of ASEAN Companies is Already Comparable to Global MNCs (if not higher).”