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XXX STUDY / SURVEY / WHITE PAPER / FEATURE XXX
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Continuing opportunities for market expansion services in Asia
Report on the markets of Southeast Asia, Greater China
and Northeast Asia – 2016 update
Matthias Hanke, Moritz Werner, Georgia Theodoridis, Julius-Ferdinand Kolb
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Continuing opportunities for market expansion services in Asia
Highlights
Asia continues to offer attractive growth opportunities for both Western and Asian
companies. While some Asian markets mature, we see others emerging, creating
new possibilities for growth in the region. However, any company entering the
Asian market faces various challenges along the value chain. These include high
market complexity and uncertainty, market entry costs, fierce competition from
local champions, and a lack of local expertise and infrastructure when interacting
with customers.
The fifth edition of the report will take a closer look at the development and growth
expectations of market expansion services (MES) in three geographic regions:
Southeast Asia (ASEAN), Greater China and Northeast Asia (including Japan).
Based on data and reports from leading research institutions, it offers valuable
insights on current and projected market developments. In accordance with earlier
studies, the report aims at addressing mid-term trends and developments with a
clear view on four key industries for market expansion services: fast moving
consumer goods (FMCG), healthcare products, specialty chemicals and
engineered products.
Our 5-year forecast suggests a positive outlook, despite recent signs of an
economic slowdown in China. The total market for market expansion services in
Asia is expected to grow on average by 6.6% annually until 2020. Additionally, a
slight upwards trend in the overall penetration rate of market expansion services
from 20.0% in 2014 to 20.4% in 2015 is being estimated.
The devaluation of many Asian currencies as well as the recent drop in China's
short-term growth expectations increase uncertainty about the further development
of the region among stakeholders. Nevertheless, we believe that the underlying
trends in the region and the market expansion services industry are still intact. A
rising population, an increasing purchasing power of a growing middle class as well
as continued investments into manufacturing in less developed Asian countries not
only by Western but also by more developed Asian companies fuel growth in the
region. In addition, a strong commitment of governments to develop their physical
and financial infrastructure and a growing integration through regional agreements
(e.g. Trans-Pacific Partnership) and bilateral free trade treaties function as robust
stabilizers of growth.
The underlying figures confirm a higher need for market expansion services as
manufactuers increasingly focus on their core competencies due to rising
competitive pressure and because higher market volatility, market complexity and
political uncertainty have become the norm. As the need for market expansion
services increases, new competitors, especially in the field of digital services (e.g.
online trading platforms), enter the market. While those companies offer a cost
efficient approach to access local markets, they rarely can provide services along
the entire value chain and even rely on partnerships with integrated MES providers.
This study includes detailed tables on the estimated market size, the penetration
rate of market expansion services and growth expectations for 2015-2020. These
figures can offer valuable insights not only for market expansion services providers
operating in Asia but also their clients.
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Continuing opportunities for market expansion services in Asia
Figure 1: Market size in 2015 by industry and region
1) FMCG excluding categories with dominant local orientation (e.g. fresh food) or restricted markets (e.g. tobacco China) 2) Southeast Asia excluding Brunei, East Timor 3) Northeast Asia excluding North Korea 4) Includes industrial machinery, industrial apparatuses & equipment and power generating machinery; based on national import figures (not demand figure) Sources Business Monitor International, Epsicom, Euromonitor, IMF, IMS Health, SRI, IHS, United Nations Statistics Division, WHO, World Bank, expert interviews, Roland Berger
Figure 2: Market growth rates 2015-2020 by industry and region
1) FMCG excluding categories with dominant local orientation (e.g. fresh food) or restricted markets (e.g. tobacco China) 2) Southeast Asia excluding Brunei, East Timor 3) Northeast Asia excluding North Korea 4) Includes industrial machinery, industrial apparatuses & equipment and power generating machinery; based on national import figures (not demand figure) Sources Business Monitor International, Espicom, Euromonitor, IMF, IMS Health, SRI, IHS, United Nations Statistics Division, WHO,
World Bank,expert interviews, Roland Berger analysis
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Continuing opportunities for market expansion services in Asia
Figure 3: Fast moving consumer goods1) – Market sizing
1) FMCG excluding categories with dominant local orientation (e.g. fresh food) or restricted markets (e.g. tobacco in China) 2) Southeast Asia excluding Brunei, East Timor 3) Northeast Asia excluding North Korea 4) Belongs to Dah Chong Hong Holdings Ltd. 5) Excl. Chinese & Japanese competitors results in the following ranking of top market expansion services providers: 1. DKSH, 2. LF Asia, 3. PT Arta Boga 6) Mainly 3PL business in South Korea; others include local conglomerates and 3PL companies; Li & Fung Distribution focuses on sourcing in South Korea 7) Excluding Chinese competitors results in the following ranking of top market expansion services providers: 1. LF Asia, 2. Sims Trading, 3. DKSH Sources Euromonitor, IMF, World Bank, expert interviews, Roland Berger
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Continuing opportunities for market expansion services in Asia
Figure 4: Fast moving consumer goods – Growth projections
1) FMCG excluding categories with dominant local orientation (e.g. fresh food) or restricted markets (e.g. tobacco China) 2) Southeast Asia excluding Brunei, East Timor 3) Northeast Asia excluding North Korea Sources Euromonitor, IMF, WIS forecast database (IHS), World Bank, expert interviews, Roland Berger analysis
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Continuing opportunities for market expansion services in Asia
Figure 5: Healthcare (prescription drugs and OTCs) – Market sizing
1) Southeast Asia excluding Brunei, East Timor 2) Northeast Asia excluding North Korea 3) Zuellig Pharma as majority shareholder of PT Anugerah Pharmindo Lestari 4) Local legal name different due to legal requirements 5) Exclusion of Chinese and Japanese competitors leads to following top ranking of market expansion services providers: 1. Zuellig Pharma, 2. DKSH, 3. Geoyoung Note Ranking of competitors is based on sales as market expansion services provider in Healthcare (prescription drugs and OTC); sales
resulting from production or non-Healthcare products is excluded. Companies in the prescription drug / OTC and medical device industries required rough estimations regarding the allocation of sales to respective product categories Sources Business Monitor International, Euromonitor, IMF, IMS Health, World Bank, expert interview, Roland Berger
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Continuing opportunities for market expansion services in Asia
Figure 6: Healthcare (medical devices) – Market sizing
1) Southeast Asia excluding Brunei, East Timor 2) Northeast Asia excluding North Korea 3) Zuellig Pharma as majority shareholder of PT Anugerah Pharmindo Lestari 4) Exclusion of Chinese and Japanese competitors leads to following top ranking of market expansion services providers: 1. DKSH, 2. Zuellig Pharma, 3. LF Asia Note a) Medical devices include consumables (e.g. wound care products and catheters), diagnostic devices (e.g. diagnostic instruments
and X-ray apparatus), dental products (e.g. drills and supplies) and orthopaedic and implantable devices b) Ranking of competitors is based on sales as market expansion services provider in Healthcare (prescription drugs and OTC); sales resulting from production or non-healthcare products is excluded. Companies in the prescription drug / OTC and medical device industries, required rough estimations regarding the allocation of sales to respective product categories Sources Epsicom, IMF, Onesource, WHO, World Bank, expert interviews, Roland Berger
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Continuing opportunities for market expansion services in Asia
Figure 7: Healthcare (prescription drugs) – Growth projections
1) Southeast Asia excluding Brunei, East Timor 2) Northeast Asia excluding North Korea Sources Business Monitor International, IMF, IMS Health, WHO, World Bank, expert interviews, Roland Berger
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Continuing opportunities for market expansion services in Asia
Figure 8: Healthcare (OTC products) – Growth projections
1) Southeast Asia excluding Brunei, East Timor 2) Northeast Asia excluding North Korea Sources Euromonitor, IMF, WHO, World Bank, expert interviews, Roland Berger
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Continuing opportunities for market expansion services in Asia
Figure 9: Healthcare (medical devices) – Growth projections
1) Southeast Asia excluding Brunei, East Timor 2) Northeast Asia excluding North Korea Sources Espicom, IMF, WHO, World Bank, expert interviews, Roland Berger
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Continuing opportunities for market expansion services in Asia
Figure 10: Specialty chemicals – Market sizing
1) Southeast Asia excluding Brunei, East Timor 2) Northeast Asia excluding North Korea 3) Excluding Chinese and Japanese competitors leads to following top ranking of market expansion services providers: 1. Brenntag, 2. DKSH, 3. Connell Brothers Note Ranking of competitors is based on sales as market expansion services provider in specialty chemicals only; sales resulting from production or distribution of own products (incl. conglomerate) or non specialty chemical products are excluded. Japanese competitors are only shown in Japan, Hong Kong and Singapore as outside of those areas distribution is focused on own products (incl. conglomerate) Sources IMF, SRI, IHS, World Bank, expert interviews, Roland Berger
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Continuing opportunities for market expansion services in Asia
Figure 11: Specialty chemicals – Growth projections
1) Southeast Asia excluding Brunei, East Timor 2) Northeast Asia excluding North Korea Sources IMF, SRI, IHS, World Bank, expert interviews, Roland Berger
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Continuing opportunities for market expansion services in Asia
Figure 12: Engineered products – Market sizing
1) Southeast Asia excluding Brunei, East Timor 2) Northeast Asia excluding North Korea Note a) 'Engineered products' based on national import figures (not demand figures) b) Ranking of competitors is based on sales as market expansion services provider in the defined product categories of engineered products and focuses on competitors distributing Western products in the entire Asian region or at least a relevant sub-region; Competitor ranking excludes local competitors (focus on one or two countries only) and market expansion services providers focusing on Japanese and/or Chinese products only Sources IMF, United Nations Statistic Division, World Bank, expert interviews, Roland Berger
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Continuing opportunities for market expansion services in Asia
Figure 13: Engineered products – Growth projections
1) Southeast Asia excluding Brunei, East Timor 2) Northeast Asia excluding North Korea Sources IMF, United Nations Statistics Division, World Bank, expert interviews, Roland Berger
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Continuing opportunities for market expansion services in Asia
Methodology
For the purposes of this study, Roland Berger developed a market model that
covers four main industries (including over 70 subindustries and segments) in 14
Asian countries. The model provides a market outlook through 2020.
Market sizing
The market model is based on industry-specific data and reports from leading
institutes in the industries covered. For each industry, we talked to experts about
which data source best fits our purposes. Wherever possible, Roland Berger based
its analysis on only one source per industry. This was done to make the results
across different countries as reliably comparable as possible. However, for some
industries (such as specialty chemicals) and certain countries (especially peripheral
countries such as Cambodia, Laos and Myanmar), the chosen data source did not
provide all the information required. In these cases, the missing data was either
retrieved from additional leading data sources or modeled from the best available
proxies, using regression analysis based on the available data set (e.g. GDP for
consumer goods, national health expenditure for medical devices, etc.).
Macroeconomic data such as GDP figures and national health expenditure were
retrieved from sources in the public domain (e.g. UNCTAD, World Bank, IMF, WHO
and national statistical offices). Figure 14 provides a detailed overview of the most
important sources:
Figure 14: Data sources used for each industry
Source Roland Berger analysis
Market breakdown
After calculating the size of the market for each industry, Roland Berger estimated
the size of the market for market expansion services in a multi-step approach. The
input for this market breakdown conducted in the course of preparing the initial
report in 2011 was a combination of (quantitative) market data and (qualitative and
quantitative) expert opinions.
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Continuing opportunities for market expansion services in Asia
Figure 15: Multiple-stage approach to market sizing
Source Roland Berger analysis
Market projection
Our market projections forecast both market demand and the penetration rate for
market expansion services.
All our market projections are reported in current prices and based on fixed
exchange rates (base: 2015), thus price changes as well as volume increases are
both considered in the forecast figures, although a differentiated presentation of
both effects is not included in this report. Where available, future projections (for
demand) were taken directly from market databases published by the relevant
research institutes (e.g. Euromonitor). Where these leading sources did not provide
the data needed for specific segments or industries, future data was modeled
based on the best available macroeconomic proxies.
Please note that in some cases, 'change in consumption' and 'change in MES
penetration' do not add up to 'Total compound annual growth rate' due to rounding
errors.
Validation
To validate the assumptions underpinning the market model and the company-
specific data, Roland Berger originally conducted more than 100 interviews with
industry leaders, experts and academics. The current update was validated further
by means of additional interviews with various general experts on market
expansion services and the Asia Pacific markets.
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Continuing opportunities for market expansion services in Asia
Restrictions
As with any model, forecasting methodology or competitive analysis, our analysis
tool is subject to certain limitations. For the methodology described above, the
most important restrictions are as follows:
> Market size: The market sizes are based on market data from leading
institutes. As explained above, incomplete data was modeled on the basis of
the best available proxies. However, the market sizes modeled are only
approximations and may differ from actual market sizes.
> Market breakdown: The market breakdown is the result of our analysis of
quantitative and qualitative information consolidated from market reports and
interviews with experts. Qualitative information is necessary for a realistic
market breakdown. By consequence, however, estimates are inherent in the
methodology, resulting in best approximations that may again differ from actual
market sizes.
> Market forecasts: The market forecasts are projections of the future and can
never fully take account of all eventualities. They remain predictions – nothing
more, nothing less. It follows that any unpredictable events that impact
economic developments cannot be mirrored in such forecasts. The forecasts
made in this report incorporate expected future market trends based on the
information available at the time of quantification. Certain deviations are to be
expected.
Despite these significant restrictions, we are convinced that our analysis presents a
true and fair picture of the markets analyzed.
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Continuing opportunities for market expansion services in Asia
Authors
We welcome your questions, comments and suggestions.
Matthias Hanke
Partner
+41 43 336-8650
matthias.hanke@rolandberger.com
Moritz Werner
Consultant
+41 43 336-8652
moritz.werner@rolandberger.com
Georgia Theodoridis
Consultant
+41 43 336-8683
georgia.theodoridis@rolandberger.com
Julius-Ferdinand Kolb
Consultant
+41 43 336-8600
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Continuing opportunities for market expansion services in Asia
Disclaimer
To create transparency in an industry not yet researched by any independent
analysis, this report, commissioned by DKSH, has been prepared by Roland
Berger AG on a neutral, objective and independent basis.
The present report is provided by Roland Berger AG for information purposes only.
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accept no liability, and disclaim all responsibility for the consequences of the
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numerous factors that may impact the various components of the estimates or
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forecasts or predictions, factors in the process, such as market behavior, are
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Continuing opportunities for market expansion services in Asia
Publisher
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8008 Zürich
Switzerland
Tel. +41 43 89 336-8600
Fax +41-43 336-8609
www.rolandberger.ch
Photo credits
Cover: Thinkstock / Getty Images, Goodshoot
© 2016 Roland Berger AG
All rights reserved
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Continuing opportunities for market expansion services in Asia
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