19 Jul 2018

What happens when your competition can do everything you can, only faster?

The challenge to multinationals in Asia is coming at unprecedented speed

The rise of fierce local competition for multinationals in Asia is progressing at breakneck speed. In the third chapter of our ‘Leadership Disrupted’ report, we look at why the accepted rules of competition haven’t just changed, they have often disappeared completely.

It’s an increasingly competitive world in Asia for multinationals, according to many of the 70 APAC leaders of multinationals we interviewed for our report.

“The preference of the Asian consumer is changing to local. The pace of change is much faster in this region and our competition is driving that change faster. HQ does not always get this. Entrepreneurial businesses we compete with are run by founders. It’s both their strength and their weakness. In the EU we compete with six companies. In China, it’s 32.”

“Six years ago, I saw the first Chinese MRI machine. This year, that supplier became the biggest player. Ten years ago, we owned the market in APAC. Today we have fifteen competitors.”

And in some Asian countries, some competitors play by a different set of rules.

“In China, a state-owned competitor went from zero to 50% global market share in 20 years! We have solutions, but we don’t have a financial model to compete with the Chinese.”

“The speed of copying our products in Asia is amazing. We can introduce a new product in the US and it has been copied in China before we launch there”.

“We launched a new product in Japan and our competitor knew everything about our launch and launched their product at the same time and killed us. We had no idea they would be so well prepared. They beat us and our product has flat-lined.”

Growing aggression

Deep-pocketed Asian competitors take market share through aggressive pricing models that make it impossible for some MNCs to respond.

“We used to be the dominant player, but in the last two years, new competitors have appeared. One of these is a Chinese company and they are not playing the same game. Their Chairman is a government appointment and they are playing a short-term game that has cut prices in our market by 30 to 40%.”

“Some of our competitors have adopted a business and pricing model that will not be competitive in the future. It will discount pricing in a way that will lose their sales network. This will kill the business.”

GDPR has created new limitations for the marketing teams of MNCs, but many Asian companies are taking advantage of this.

“The privacy of data through call centres in Asia is less affected by compliance to Western privacy practices.”

Get big quick

Technology has enabled new companies to scale much quicker. This is a real issue for established players who are heavily invested in an existing structure and business model.

“Today, smaller companies can scale quicker than in the past and this is the biggest disruptor for big companies.”

“Digital has changed the cost of entry. We now have competition that could not afford to compete with us in the past.”

“Being global was only for big global companies. Now a small entrepreneur can go global. The barriers to entry have decreased significantly.”

Some companies are really feeling the pain of this.

“There is a low barrier to entry to our market and technology is speeding up the entry of new competitors. There are unidentified players that are coming from nowhere. The analysts have no visibility. We no longer have any idea of what is coming at us tomorrow, but what we do know is that it will be at a low price point. You used to need a TV ad and a retail outlet to be in our market. Today, companies are being kick-started on a few thousand dollars. By the time something becomes a visible trend, it’s too late.”

Differentiation at speed

Where the barrier to entry for local competitors is low, MNCs are most vulnerable.

“My biggest worry is our ability to differentiate. The only way to win is to be the disruptor.”

“For us, disruption comes from competitors who have a better operating model.”

It appears that MNCs at the top end of the value chain are less affected.

“The value proposition gap for us compared to the local competition is such that we have not been affected – we have always been one step ahead.”

There is no room for complacency though, and everyone is paranoid.

“Is there an Uber around the corner? Service is our value – if that gets automated, we can’t respond.”

Many see the ability of local competitors to innovate and implement as a serious threat.

“Our competition in Asia can implement and execute before we have made a decision. Many of our other global markets face the same challenges, but local competition in Asia is stronger.”

“Local competition in China is very aggressive. Their speed of innovation and execution is faster than MNCs. We are working to find out how they are doing this. We talk about this a lot.”

“There are no secrets any more. Digital has made everything transparent. This affects the way we compete.”

Despite this, some MNCs seem unconcerned.

“None of our competition is playing the game like we do and we are growing at double the pace of our nearest competitor.”

“I don’t see a difference between local and MNC competition. We can replicate what local competition does.”

Blurred lines

Technology has been driving industry consolidation for many years, but this is now accelerating in a way that is forcing companies to constantly re-define themselves and their business models. It’s the pace that is the challenge.

“Our traditional partners have become competitors enabled by digital. Like Microsoft, for example. We are being disrupted by the blurring of lines between industries.”

“One of our clients is a clothing company who created an online health community. They now see themselves as a technology company who deliver clothes.”

“We see ourselves as a tech company with a banking licence, rather than a bank that is good at tech.”

Most of the concepts and comments quoted here will not be new to experienced APAC executives. What is new is the pace at which customers and competitors are challenging MNCs. Most of the leaders we interviewed see a constant acceleration of pace being fuelled by technology. Responding to this is tough.

Even though some B2B companies are not yet feeling the financial impact of technological disruption, it’s just a matter of time. Some are being aggressively pro-active, some reactive, whilst, for some, it’s business as usual...for now.

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In the next chapter of ‘Leadership Disrupted’, Odgers Berndtson explores how the 70 APAC leaders of multinationals interviewed are being forced to re-examine and re-engineer their business models to respond to rapid technological disruption.

To read further chapters of the ‘Leadership, Disrupted' Report, click below: