Are you rewriting your Asia strategy with the new rulebook?

Asia continues to thrive as a global leader in technology and innovation. While business leaders have long viewed it as a region of opportunity for investment and growth, those who rely on traditional success models without considering the new driving forces are at risk of falling behind. With healthy economic growth and rapid digital disruption led by a thriving youth population, it’s time to throw out the old rule book. CEOs and boards must embrace the complexities of the new Asia to secure future success. Here are three essential factors CEOs and business leaders should take into account in devising their Asia strategy for long-term success.

1. Capture economic growth from a changing landscape

With economic activity constantly evolving in Asia, CEOs and boards must pay attention to the new growth drivers to ensure long-term success:

• China’s renewed focus on improved social and economic development measures, sustainability, technology and urbanization initiatives calls for new business models and offers growth opportunities for different, multiple sectors. 
• The region is seeing increased investment and expansion, as evidenced by record-high M&A activities and values.
• Regional Comprehensive Economic Partnership (RCEP) eliminating barriers to trade and offering new rules and possibilities for growth and development.

Despite the major disruptions of the pandemic, Asia’s economic growth is leading the global recovery, and investors are viewing the region with renewed confidence for long-term opportunities. While the pandemic resurgence led the IMF to downgrade Asia’s growth to 6.5%, it remains the fastest growing region in terms of GDP followed by the Americas, Europe and Middle East and Africa.

Even with a stronger than expected drop in public spending, China is expected to be a leader in the region’s growth. The country’s slowed GDP along with caution around government actions and supply chain challenges means that organizations must understand this complex but lucrative market and implement adaptive strategies for sustainable value in China and the region. Short-term returns are not the answer. The focus has shifted to better health, jobs, growth and trade, with future success requiring new business models instead of traditional levers.

With solid investment and expansion activity in the region, Asia-Pacific outbound value has bounced back to pre-COVID levels, while inbound value has increased by over 170% from pre-COVID averages to a historic US$74 billion. The EY  Global Capital Confidence Barometer found 71% of organizations in Asia-Pacific are placing their M&A focus in the region.

Mergers and acquisitions in the region reached record highs in the first half of the year. Our latest analysis indicates M&A values targeting the region this year increased by 88% compared to the same period in 2020. Patrick Winter, EY Asia-Pacific Area Managing Partner said, “Asia is in a position of optimism, driving rapid consumer adoption and digitalization.”

This reflects the new Regional Comprehensive Economic Partnership (RCEP), which eliminates a wide range of tariffs and creates common rules for e-commerce, trade and intellectual property. With the 15 Asia-Pacific member countries making up a third of the world’s population and GDP, the RCEP is shaping economies and strong investment interest in the region strengthening its position as a powerhouse for growth.

It is vital for business leaders to consider the changes that will come from Asia’s new and emerging economic forces and the opportunities they represent in the development and direction of a sustainable regional strategy.

2. Embrace youth or risk failure

Leaders must understand the driving forces behind Asia’s rapidly changing consumerism. Asia is home to an ambitious, youthful population with an appetite for innovation and digital experiences, with over 800 million millennials in comparison to 66 million in the US and 60 million in the EU.

Millennials, or Generation Y (born between 1981 and 1996) form the basis of the aspiring middle class in Asia. In emerging economies, they expect a better quality of life than previous generations. This puts Asia in a position of optimism, driving rapid consumer adoption and digitalization.

This pattern will continue with Generation Z (born between 1997 and 2012), which by 2025 will form 25% of Asia’s population, a larger percentage than in any other region. Spending 60% of their waking time on devices, these digitally savvy, mobile first natives will be a driving consumer force.

Looking beyond to Generation Alpha (born after 2010), we will see increasing power and consumer influence from a generation that was born digital, growing to a population of more than 2.5 million by 2025.

These demographic segments combined present a unique opportunity for expansion and growth through innovation not found in other regions of the world. Effective leaders will understand these generations and realize the opportunities they represent. Strategies that embrace and empower them are critical for success.