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Sweden’s Asia footprint – nothing more than a good start

Asia is home to more than half of the world’s population and accounts for one third of total global GDP, but only 20 per cent of leading Swedish companies’ global sales were generated in the Asia-Pacific region last year. Every such company should have a “Double Asia” plan in place and transition it into full execution, writes Tobias Glitterstam, head of Business Sweden’s Asia-Pacific operations.

TEXT: Tobias Glitterstam
15 JUNE, 2018

Living and working in Asia, it’s easy to understand the size and importance of this region. But some facts deserve to be repeated. Asia is home to more than half of the world’s population, contributes to almost two-thirds of global economic growth, and accounts for one third of total global GDP. The region is home to the majority of the world’s megacities and a rapidly expanding middle class. There is no doubt in my mind that this will be the Asian Century.

All of this means opportunities for Swedish companies, which are strong in the very fields Asian countries are investing in heavily – such as transportation, infrastructure, energy, digitalisation, healthcare and smart cities.

These are well known facts, so the question is how are these opportunities going to be converted into real business? Are we, as Swedish companies devoting enough attention and investments to Asia? Are we ready to take the necessary risks? Do we have enough Asian exposure?

In order to get a clear picture of Swedish companies’ performance in the Asia-Pacific region, Business Sweden is systematically gathering data on Swedish companies’ sales in the region. This provides a good view of the overall footprint of Swedish companies in Asia.

The results show that even the most global, large Swedish companies on average generate 20 per cent of their sales in the Asia-Pacific.

The companies in our sample, 56 of the largest and most global Swedish companies, had a combined sales volume of around SEK780 billion in the Asia-Pacific region in 2017. Compared to 2016, this represented a growth rate of 9 per cent – indeed more than double the growth rate compared to other regions – or in absolute terms a total net growth of SEK70 billion in Asia-Pacific sales in 2017.

Some business leaders would say that the 20 per cent Asia exposure is “good enough” – but I am convinced that we need to aim a lot higher.

If we aim to capture the full growth opportunities of the region and stay relevant in the global economy it’s simply not good enough to have just one-fifth of global sales in a region with some of the fastest-growing economies and more than half of the world’s population.

Some companies have adopted a “wait and see” strategy – waiting for the right moment to enter key Asian markets, when they are “ready” for our products. This is too reactive. Without a strong footprint to begin with, we will not be there when the local markets become ready for our products – which may happen faster than expected. It is probable that international competition will have arrived earlier, or that local competition has grown too strong already.

The competition aspect is especially important in China. Domestic competition is already fierce and as these companies venture out of China we now see how competition from Chinese companies outside of China is rapidly intensifying. We are discovering equivalents to Huawei in more and more industries – companies that are fully able to compete internationally, even in the premium segments.

Facing these new competitors can be daunting for companies that are used to a more slow-paced environment in Europe and North America. The new competitors from the East are not only cost-conscious, but fast-moving and very customer-focused – they are hungry and willing to make strategic bets through investments, and are increasingly innovative in their own right.

It’s simply not good enough to have just one-fifth of global sales in a region with some of the fastest-growing economies and more than half of the world’s population.”

My view is that Swedish companies with a strong foothold in China and the rest of the Asia region will be much better equipped to also face competition from Asian companies on global markets. These global markets – many of them in Europe and considered our home markets – will without doubt be under attack from the East, with market dynamics becoming more and more similar to the ones we see in Asia today.
In other words, Swedish companies with deep experience from new Chinese and Asian competitors’ home markets, and ideally even with Chinese partners and own local Asian brands in their global product portfolios, will be much better positioned to face this new competition on global markets.
In short, we cannot expect to benefit fully from Asian market growth without a significant market exposure, and without it we will not only miss out on the Asia business opportunity, but be at risk of being caught by surprise by new competition in our home markets.

So, if 20 per cent is not enough, what would a more ambitious target be?

At Business Sweden, we believe a reasonable goal is that Asia should contribute to at least one-third of major Swedish companies’ global sales within the next three to five years. Considering rapid underlying Asia market growth, this means a doubling of current sales volume in Asia. Consequently, in my view we need to abandon the current trajectory of 5-10 per cent annual growth. Instead every company should have its “Double Asia” plan in place and transition it into full execution.

To be considered a leader in Asia there is reason to aim even higher. In terms of a benchmark, Fortune 500s have an average of almost half of their global business volume in Asia, where companies such as BMW, Airbus, Cisco, GE and Apple all generate more than one-third of their total revenue in the region. I can see no reason why our Swedish companies cannot perform just as well.

And it’s not just about our large companies. There are thousands of Swedish companies with solutions for many of Asia’s challenges. With an Asia strategy and local partners these companies are fully able to benefit from Asia’s booming economies. And conversely, smaller companies are just as vulnerable to Asian competition. Avoiding Asian exposure does not mean avoiding competition – again, it means missing out on Asia’s growth opportunities and ultimately putting global market leadership at risk.

One possible objection to this “Double Asia” step-change is that the strength of Swedish companies is normally in the premium segment, which isn’t as big in most Asian markets as it is in Europe and North America. Yet some of the most successful Swedish companies, and other multinationals, have proven that it’s possible to expand beyond premium. Others have proven their relevancy of their premium solutions even in these low- and middle-income countries by providing superior value.

Some of the common traits among these trailblazers should act as inspiration for others looking to dramatically accelerate growth in Asia. These companies often share a sense of urgency and an “Asia mind-set” with bold targets, speed, flexibility and willingness to adapt at the centre of their core strategy – without losing their core identity, technology leadership and brand values.
They also have global leadership teams and boards that take Asia very seriously – devoting considerable attention and resources to the region, making long-term investments and giving local Asia management leeway to explore the full potential of their markets.

Acquisitions, alliances and joint ventures often play a key role in expanding market reach through offerings that span more segments or effective sales channels with wide coverage. This does not come without risks but when done right it has proven to have transformative potential.

Digitalisation is also a key enabler for growth in Asia, both for consumer-oriented and business-to-business companies. Finding success in Asia is almost impossible without online success. E-commerce is booming across the region but is very different from the e-commerce of Europe and North America – with different platforms, operating models and consumer behaviour. China and Asia require and deserve a tailored digital strategy as well as empowerment of the local Asia market organisation to adapt global solutions.

The good news is that our Swedish companies still have an edge in many regards thanks to global technology leadership, relevant solutions and strong brands – but the clock is ticking. Now we need to act and seriously strengthen our foothold in Asia. Let’s join forces to “Double Asia”.

Tobias Glitterstam is vice president and regional head of Asia-Pacific at Business Sweden. Based in Shanghai, he is leading the organisation with 11 trade commissioners, 15 offices and 150 market expansion consultants in the region. Glitterstam was appointed to VP Asia-Pacific in 2016, after having first joined Business Sweden as trade commissioner to China.

Glitterstam has operated in Asia since 2003, with a particular focus on the Chinese market, and was previously partner at the global consulting firm Accenture. He holds a degree in Business Administration from Lund School of Economics and Management. He lives in Shanghai with his wife Karin and their three children.

Business Sweden’s purpose is to help Swedish companies to grow their global sales and international companies to invest and expand in Sweden. It provides Swedish companies with strategic advice, sales execution and operational support to help them grow their international revenues.