NZ must stay relevant in sophisticated markets
Any business that engages in an Asian market needs to understand and monitor how the market evolves. In the past, we could probably get away with having limited knowledge of the market when we were just exporting. But Asian consumers are becoming increasingly sophisticated, which means they are also more selective. How long can New Zealand’s ‘‘clean and green’’ image last? What premium does this image fetch?
I’m afraid it doesn’t mean much these days unless we can explain what ‘‘clean and green’’ actually stands for. In other words, ‘‘clean and green’’ needs to be interpreted from their perspective, not ours.
How do Apple and Samsung continue to sustain their pricing models even in competitive markets?
The simple answer to that is that their consumers continue to believe they are worth it.
And that’s how ‘‘clean and green’’ needs to be pitched.
In addition to the increase in consumer sophistication, there’s also an increase in the inter-connectedness of Asian economies.
Japan’s exports to other Asian countries constituted 34 per cent of its total exports in 2000. By 2015, this had become nearly 48 per cent.
Other notable shifts in the export business are Philippines (40.4 to 62.6 per cent), Hong Kong (50 to 69.6 per cent) and Singapore (53.8 to 68.3 per cent) in the same period.
Australia’s numbers also shifted dramatically in the period, from 52.6 per cent in 2000 to 72 per cent in 2015.
Comparatively, New Zealand’s exports to Asian countries went from 33.8 to 41.1 per cent.
So, as much as New Zealand is increasing its trade with Asia, Asian countries are trading more aggressively among themselves.
Not that this will affect what we sell. It’s just another reminder that our value propositions need to be crystal clear.
It also reminds us that our monitoring scope will have to expand beyond the single market focus that we tend to associate with our products and services.
China is passing much of its low-value manufacturing on to a few southeast Asian countries.
A one percentage point growth slowdown in China will cause a slowdown greater than one percentage point in Singapore, Malaysia, Thailand and Indonesia.
Similarly, we experience remarkable downward movements in Asian currencies when China depreciates its yuan.
The inter-connectivity and the competition within Asian markets have made it difficult, even for Asian businesses, to be optimistic, according to a Thomson Reuters/Insead survey.
The Asian Development Bank estimates that in 2017 and 2018, Asia will experience its slowest growth since 2001.
It’s not all bad news, though – the continent is still forecast to grow at 5.7 per cent.
And we can expect India, the Philippines, China and Vietnam to grow more than 6 per cent during these two years.
Surprisingly, Australian businesses are very optimistic about the Asian markets, more so than Asian businesses. Maybe we should investigate why this is the case.
For the time being, it makes a lot more sense to focus on what we do best, and to be aware of developments in Asia as a whole, even if we just have interests in a particular country in the region.