Challenges and Opportunities for Consulting in Asia, and Focus on China as a Growing Market
“When the wind of change blows, some build walls, while others build windmills.” – Chinese proverb.
Asia as a region is dynamically growing, and we can assert that being the first to take advantage of the change in a new landscape gives you a tremendous competitive advantage.
1. Asia is the fastest growing region in the world –
Despite the slowdown in China, Asia will continue to drive global growth stabilized at around 6%. But at the same time, the region shows significant differences across the various countries. India is spearheading the region north of 7%, with Japan close to 1% and South East Asia accelerating thanks to the robust local demand.
Demand is increasing for business strategy, corporate structure, and human resource management services.
The primary market remains Western companies expanding into Asia.
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2. India – Government’s new reforms promote business –
With a growing middle class and eager young generations, India is taking advantage of business-friendly government reforms and is now the fastest growing economy in the world. It is expected to become the 5th largest economy by 2025, surpassing the UK after having overtaken France.
In 2014, the government launched an initiative to incentivize companies to manufacture their products in India. The ‘Make-in-India’ program aims to increase investments with up to 100% in Foreign Direct Investment spread over 25 sectors. However, the technology sector today with $100 billion remains the growth engine of the country.
India is experiencing exponential growth of digital, online, and automation. This will continue at a steady pace, even though offshoring seems to have lost some of its attractiveness to other countries, like the Philippines, and Eastern Europe.
Important to note that Financial services with growth in credit demand, the need for mobile payment technologies, and the demonetization underway, present a tremendous opportunity.
3. South East Asia – Fires Up –
Singapore, Indonesia and Malaysia are the region’s powerful economic engines, making South East Asia the 2nd fastest area of the region. But some countries such as the Philippines and Vietnam, are now growing faster than China. What started as a trading hub decades ago, is now a vibrant manufacturing and tech marketplace. The region is also rich with natural resources such as Oil, Mining and Agriculture with the largest producers of Palm Oil in Indonesia and Malaysia. Foreign investments continue to flow to the area, thanks to its political stability. Looking ahead, the economy remains bright, and steadily closing the gap on China.
Even though each country is rather small, the area has now reached half the size of North America or Europe at $50B. With some of the fastest-growing markets in the world, the region is expected to drive global consulting growth in the years to come.
4. Japan and South Korea –
Together they represent almost half of the consulting market in the region. Consulting firms are progressively overcoming cultural issues and skepticism toward consulting. In Japan, business expansion overseas, M&A deals and growing demand for digital and cybersecurity are driving the market upwards. Whereas, in South Korea, the growth is coming from the need for digital and innovation support, as well as turnaround and restructuring.
Taking a More Detailed Look at China and Its Unique Features
Republic of China is fascinating for many different reasons. And the Chinese economy itself, is quite impressive. It is quickly becoming the world’s biggest economy in many industry sectors. The Consulting market is registering an impressive growth as well. Despite the fact that 2018 has seen some slowdown, the previous few years were quite solid.
- Compared to the GDP, China is still considered an emerging market. However, it has now a size equivalent to markets like France with a double-digit growth expected over the next 5 years. Major Consulting Multinationals have made it a strategic priority. Chinese companies tend to focus on long-term goals, and it is the right time to take advantage of such opportunities.
- Chinese companies are increasingly seeking support in making a move and establishing a presence in Western countries – Europe and North America.The need to adjust to local cultures and practices is favoring the emergence of local Consulting Companies. All sectors are starting to use consulting more regularly.
- Management Consulting market in China grows 12% to $4.5 billion (as of early 2017). China’s consulting market outpaced its economy, growing at double-digit growth to reach a total market value of $4.5 billion. In the future, China is likely to continue its enhanced rate of performance. And as these numbers suggest the current market size of $5.4 billion, China is now a larger management consulting market than France ($5.1 billion) and Australia ($4.6 billion), as well as the entire continent of Africa ($2.6 billion) and growing rival economy India ($2.2 billion). While it is still substantially behind the world’s largest consulting market of the US ($59 billion), it is rapidly competing with the UK whose sluggish growth due to Brexit, has slowed the Consulting market too. (maybe check these numbers again and mention the sources?)
- Biggest Consulting Firms – China has continued to attract a flood of management consulting companies keen to tap into the booming market. Most major global consulting firms have expanded into China, with market leaders McKinsey & Company, The Boston Consulting Group, Bain & Company all present, together with other firms. They continue to dominate the largest market share in China, with strong brands, solid global credentials, ability to leverage their audit base, and end-to-end solutions, well suited to local and international clients as well. They mainly offer services in the fields of strategy, operations, human resources and marketing.
- Changing Market & Demands by Sectors – The rising demand for consultants seems to be driven by multinational corporations increasing their investments in the country. Also government initiatives including the $4 trillion ‘Belt and Road’ infrastructure investment plan is also transforming the landscape for domestic companies, and clients across many industries who are transforming their business models in tune with digital innovation, and a slower-growing economy in 2018.
- China remains the world’s manufacturing reference country. Modernized services have just surpassed industry and construction as the largest share of Chinese GDP. 1421 Consulting identifies eight high growth sectors for China.
- Main Industry sectors include – 1/Advanced Manufacturing with greater efficiency and environment-friendly technologies; 2/Aerospace and 3/Automotive, as the country tries to bring more local production and create its own national champions; 4/Retail and Culture invigorated by the needs of the growing middle class; 5/Oil & Gas where the demand for energy is expected to almost double by 2030; 6/Life Science & 7/Healthcare with an aging population and an outdated hospital system; 8/Renewable as China aims to improve CO2 Emissions.
- Challenges for Consultants – it is disappointing that China’s consulting industry is not maturing as quickly as Consultants hoped. Pricing pressures experienced by developed consulting markets continue to limit growth, while talent shortages have protracted the success of many firms attempting to stand out among an increasingly crowded market. A general lack of regulation and delayed payments on projects are also frustrating.
Key to success in China for Western consultants is to develop a customized, culturally sensitive approach, with sufficient local expertise.
Are you planning to start a Consulting project in China?
We will be happy to offer you the experience and expertise to streamline your project on the path to success.
Please contact us today, to learn more about Consulting Quest and allow us to learn about your goals and needs too.
Hélène Laffitte is the CEO of Consulting Quest, a Global Performance-Driven Consulting Platform and author of “Smart Consulting Sourcing”, a step by step guide to getting the best ROI from your consulting. With a blend of experience in Procurement and Consulting, Hélène is passionate about helping Companies create more value through Consulting.
