Michael Andrew -- Chairman of KPMG International
THREE waves of globalization pushed Asia toward the center of the world
economic stage. However, these achievements are not the most significant
changes. The most fundamental and revolutionary development in Asia has been the
rise of the middle class.
The middle class arises out of economic prosperity, and it is what makes a market-oriented economic regime thrive. Its proclivity toward reason and stability keeps social unrest and turmoil at bay.
The middle class is also an important group of consumers. Their demand for quality goods and services contributes to economic sustainability and social evolution. An economy without a mass group of consumers at its foundation cannot be sustained in the long run.
Middle-class consumers in Asian emerging markets have huge potential and increasing influence. They also have fundamental differences from their developed market counterparts. Enterprises that want to acquire and retain market share must recognize this group and cater to its diverse preferences.
Firstly, emerging middle-class consumers differ in their preferences, demands and habits.
Secondly, the middle class in Asian emerging markets is comprised of a younger population compared with counterparts in the US and Europe.
Thirdly, the emerging middle class is embracing online shopping.
Fourthly, the middle class in Asian emerging markets is not necessarily concentrated in big cities.
Vast business opportunities lie in the huge demands of the middle class. Enterprises can ill afford to ignore or lose these customers.
Two commercial forces are worth mentioning in this analysis, namely multinationals and local enterprises. Local enterprises actually have an advantage over multinationals in appealing to the grassroots, while multinationals are more successful in attracting the wealthy. As for the competition between local enterprises and multinationals for middle-class consumers, multinationals seem to be a notch ahead, but the verdict is still out on who the winner is.
Domestic enterprises will stand to lose middle-class consumers to their multinational competitors if they do not work harder to meet the demands of this class for a higher standard of living and increased brand value.
On the other hand, multinationals have to broaden their customer base beyond big cities and realign their strategies in customer segmentation, product design and marketing to cater for diversified needs and adapt to local markets.
While local enterprises should try to attract more wealthy consumers, multinationals need to tailor their products and services to suit local preferences.
Both parties can thrive in this competitive environment. Through competition, middle-class consumers are offered more choices and better quality. With them more willing to loosen their purse strings, the size of the consumer pie is enlarged for both local enterprises and multinationals.