BackgroundOne of Australia’s largest FMCG’s was facing the pressure of declining market share in one of its key segments in Australia. Given its core capabilities, a decision was made to look at international adjacencies with a focus on Asia and preliminary work was undertaken by the client. Specifically around financial modelling and a high level market analysis. PwC was engaged to critique this process and our initial review highlighted that detailed refinement was required not only on the selected markets, but also the supporting operating model – if these were not addressed, there was a significant risk of failure.

The Asia Question PwC SolvedAs was typical of the Asia Ready methodology, the initial question posed by the client regarding Asia underwent a major change as a more holistic approach was adopted.

Further exploration indicated that the key question for the client was:-

“What is the most appropriate location within our selected market and what is the most appropriate phasing that will minimise risk and provide a platform for profitable growth and leverage across the region.”

Outcomes & BenefitsThe two major benefits of the Asia Ready process were firstly, that the client “now knew what they didn’t know” and secondly, there was clear alignment across all stakeholder groups around the timing, responsibility and go to market model.

The end result was a business case based on local Asian insights and experience that was endorsed by the Executive. PwC provided an independent and pragmatic lens to drive an implementation plan that will deliver financial returns and a platform for future growth.

The Asia Ready process provided significant benefits to our organisation as we looked to unlock the potential of Asia. The PwC team opened our eyes to all the different considerations when making the decision to proceed and the in-market assistance gave us the real edge in shaping our business case. What pleased me the most was that our senior stakeholders commented that our plan was the most comprehensive they had ever seen and that every time they had a question – they turned the page and the answer was there. Having one partner to guide, challenge and align us – all in an accelerated fashion, delivered real value.

Our ApproachThe Asia Ready proposition has been purposely designed to drive accelerated exploration and decision making around an Asia question. As a result PwC was able to work closely with the client over an intensive 8-week period to test and challenge all work completed to date and to introduce a more holistic approach to the key considerations of the final go/no-go decision. We worked with senior stakeholders in an innovative way to:

• Identify the key motivators for entry into Asia and whether alternate strategies could deliver similar outcomes;

• Confirm the non-negotiables that could not be compromised with a decision to pursue Asia;

• Test how well aligned the organisation was around an understanding of, and the opportunities within Asia;

• Confirm the actual Asia question;

• Provide on the ground insights and local expertise through organising in-market workshops and site visits;

• Provide in-depth operational assistance to how the business should operate (including local partner reviews, the go-to market model, staffing and remuneration, risk management, capabilities, systems, technology and real estate);

• Unpack the cultural nuances of key markets; and

• Co-create the required implementation plan.

Throughout the process, PwC brought in expertise from across the Asian region to provide detailed assistance. This included advice from different PwC offices, industry experts and Government advisors.

Asia Ready Case Study

Matthew Dobbin Partner – Asia Ready +61 (2) 8266 3154, matthew.dobbin@au.pwc.com

Contact:© 2015 PricewaterhouseCoopers. All rights reserved. PwC refers to the Australian member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. Liability limited by a scheme approved under Professional Standards Legislation.

Find the starting pointUnderstanding your objectives and your Asia question

1 Connect

Identify the question Clarifying and confirming the Asia question and area of focus

2 Discover

Make it realClarifying responsibilities and activities to ensure success

Co-design the answerIntensive workshop involvement by PwC, suppliers, industry experts, Government advisors, and case studies to help co-create a tailored roadmap.

4 Decide

5 Act

The typicalAsia Ready

process

People living in Indonesia

248mil

Ease of Doing Business rank

114 out of 189

GDP per capita (USD)3,404

Major Strengths• Diverse natural resources•Highly competitive • Low labour costs• Dynamic tourism industry• Lively domestic market• Strengthened banking sector

Potential Threats• Low investment rate• Raw materials exports increasingly

dependent on Chinese demand• Lack of infrastructure• Persistent corruption• Lack of transparency• High unemployment and poverty,

accentuating inter-ethnic tensions

S&P rating

BB+

Country Risk Assessment rating

A4

Business Climate rating

B

Indonesia

Recent Economic Indicators

4.6%

6.2%5.8%

5.2%

6.3%6.5%

Real GDP Growth (% change)

2011 2012 2013 2014

5.0%5.1% 5.3%

6.4%6.0%

4.0%

Inflation(%change)

2009 2010 2011 2012 2013 2014

7.9%7.1%

6.6% 6.1% 6.3%

Unemployment Rate (%)

2009 2010 2011 2012 2013 2014

N/A

Goods & Services Trade

Goods & Services export (as a % of GDP)

23.5%

2009 2010 2011 2012 2013 2014

23.5%25.2% 24.0% 23.7% 23.5%

A$5.6bnMerchandise exported to Indonesia vs A$1.3bn in services trade

A$6.4bnMerchandise imported from Indonesia vs A$2.6bn in services trade

Business Reforms From 2014 Starting a Business Indonesia made starting a business easier by allowing the Ministry of Law and Human Rights to electronically issue the approval letter for the deed of establishment. This reform applies to both Jakarta and Surabaya.

Paying Taxes Indonesia made paying taxes less costly for companies by reducing employers’ health insurance contribution rate. This reform applies to both Jakarta and Surabaya.

Trading Across Borders InIndonesiatradingacrossbordersbecamemoredifficultbecauseofinsufficientinfrastructureattheTanjungPriokPortJakarta.Thischangeapplies to both Jakarta and Surabaya.

Getting Electricity In Indonesia the electricity company in Jakarta made getting electricity easier by eliminating the need for electrical contractors to obtain multiple certificatesguaranteeingthesafetyofinternalinstallations–thoughitalsoincreased the cost by introducing a security deposit for new connections.

Compiled by PwC using the latest data from various international sources, including Department of Foreign Affairs and Trade, International Monetary Fund, World Bank Group, United States Census Bureau, and Standard & Poor’s. Last update: January 2015.

Major Imports Major Exports

Major merchandise trade ($mil)

A$310 A$298

A$391 A$391

A$500 A$461

A$2,078 A$1,194Crude petroleum Wheat

Refined petroleum Live animals

Iron, steel, aluminium Sugars, honey, molasses

Heating & cooling equipment & parts Crude petroleum

Average age is 30.9 years30.9

Population Distribution

Average age Female 31.3 Years

Average age Male

30.0 Years

0-19

20-29

30-39

40-49

50-59

60-69

70-79

80+

15.8% 16.5%

34.4% 35.6%

Approx. 60.5% of working age

Approx. 60.6% of

working age

15.4% 16.2%

12.9% 13.7%

10.5% 9.0%

5.9% 5.2%

3.6% 2.9%

1.2% 0.7%

127026108_Asia Ready - Proposa_Indonesia_OSV7.indd 1 23/04/15 5:33 AM

People living in China

1,360.8mil

Ease of Doing Business rank

90 out of 189

GDP per capita (USD)7,572

24.7%27.7% 27.2% 26.1% 25.0% 23.9%

S&P rating

AA-

Country Risk Assessment rating

A3

Business Climate rating

B

China

Goods & Services export (as a % of GDP)

2009 2010 2011 2012 2013 2014

A$10.09bnMerchandise exported to China vs A$7.4bn in services trade

A$5bnMerchandise imported from China vs A$2bn in services trade

Business Reforms From 2014 Starting a BusinessChina made starting a business easier by eliminating both the minimum capital requirement and the requirement to obtain a capital verification report from an auditing firm. This reform applies to both Beijing and Shanghai.

Paying TaxesChina made paying taxes easier for companies by enhancing the electronic system for filing and paying taxes and adopting new communication channels within its taxpayer service, changes applying to both Beijing and Shanghai. In addition, China made paying taxes less costly for companies in Shanghai by reducing the social security contribution rate.

Major Imports Major Exports

A$4,871Telecom

equipment & parts

A$4,830Computers

A$2,194Furniture, mattresses & cushions

A$9,311 Coal

A$8,110 Gold

A$2,137 Copper

Major merchandise trade ($mil)

Major Strengths• External accounts

benefitting from industrial competitiveness and diversification

• Limited risk of external indebtedness thanks to the high level of foreign exchange reserves and a current account surplus

• Sovereign risk contained: public debt mainly domestic and denominated in local currency

• Gradual move up-market• Infrastructure development

Potential Threats• Social tensions linked to

rising inequality• The share of consumption in GDP

remains weak: rebalancing the Chinese growth model remains a challenge in the medium term

• Aging population and gradual drying up of the pool of cheap and abundant labour

• Overcapacities in industry• Chinese banks weak, considering

the credit dynamism and uncertainties over the level of non-performing loans

• Environmental problems

9.2%10.4%

9.3%

7.7% 7.8% 7.4%

Real GDP Growth (% change)

2009 2010 2011 2012 2013 2014

-0.7%

3.3%

5.4%

2.6% 2.6% 2.3%

Inflation (% change)

2009 2010 2011 2012 2013 2014

4.3% 4.1% 4.1% 4.1%

0.0% N/A

Unemployment Rate (%)

2009 2010 2011 2012 2013 2014

Recent Economic Indicators

Compiled by PwC using the latest data from various international sources, including Department of Foreign Affairs and Trade, International Monetary Fund, World Bank Group, United States Census Bureau, and Standard & Poor’s. Last update: January 2015.

Iron ore & concentrates

A$57,043Clothing

A$5,057

Average age is 36.4 years36.4

Population Distribution

Average age Female 37.1 Years

Average age Male

35.8 Years

0-19

20-29

30-39

40-49

50-59

60-69

70-79

80+

16.5% 16.8%

22.7% 24.8%

Approx. 70.6% of working age

Approx. 69.6% of

working age14.5% 14.3%

17.9% 17.5%

12.6% 12.4%

9.1% 8.6%

4.6% 4.1%

2.1% 1.5%

Goods & Services Trade

127026108_Asia Ready - Proposa_China_OSV7.indd 1 23/04/15 5:35 AM

140% Asia Strategy metrics:

Decision recommendation to proceed

-Nil additional benefits assumed (blue sky)

-Two year time horizon to achieve cost-outs

-Reduced COGS % from 54% to 52%

-Capex program in FY16 of $50 million

Sum

mar

y of

Inve

stm

ent C

ase

Value change from investment case

No confidence Minimalconfidence

Moderateconfidence

Strongconfidence

Extremeconfidence

% that gave each response from the below options:

Major institutions in Asia will provide adequateprotection of our interests

We have adequately addressed all intellectualproperty and legal risks associated with expanding

into Asia

We have an active risk management process andset of controls to actively manage risks in Asia

We have a well-considered crisis management planand documentation system for the Asia market

Institutional Landscape

1.3

2.3

4.3

2.8

Asia

2.6out of 5

Average Confidence

Noconfidence

Minimalconfidence

Moderateconfidence

Strongconfidence

Extremeconfidence

Noconfidence

Minimalconfidence

Moderateconfidence

Strongconfidence

Extremeconfidence

Sample: Delegates who registered for the PwC-AICD Silk Road series and completed the PwC Asia Ready Diagnostic (Base: 52 respondents)

Mindset & Expectations: 3.0Average confidence ratings out of 5. Note: A higherscore indicates greater confidence in the Asia market.

Asia

2.6out of 5

Average Confidence

1.3

2.3

4.3

4.2

1.8

1.22.6

2.6

2.2

2.8

2.7

1.3

2.8

2.6

2.4

2.2

Understand the contextA deep dive 360 degree assessment including in-market field visits, in-market research, business environment and industry reviews, competitor analysis, resilience reviews, Asia NPV Modelling, Performance Alignment and the Asia Ready Diagnostic.

3 Diagnose

50% GDP by 2025

3.2bn middle class

by 2030

only 9% are engaged

with Asia

65% no intention of

changing stance

The starting point

• Strategy?• Market?

• Operational?• Regulatory?

The opportunity The issue

Introducing Asia ReadyApril 2015

Activity M T W T F S S

1

2

3

4

5

6

7

8

9