A global high-tech manufacturer wants to grow its already-strong business in Asia by more than 20 percent a year. This company is a leading European business-to-business and business-to-consumer manufacturer with operations in more than 40 countries.
The company's business was focused on the United States and Europe, but Asia already accounted for 25 percent of global sales. The CEO believed that the company needed to expand its market share in Asia significantly and wanted a strategy for doing so.
The BCG team and the client were certain that the ultimate key to success in the region was the development of a localized approach to product offerings and management capabilities. Achieving this would entail a significant commitment from the company at the senior-executive level and, especially, on the ground. Compounding the challenge was the fact that many of the company's senior executives were unfamiliar with Asian markets and tended to shy away from large-scale—and potentially higher-risk—growth initiatives there.
To tackle the challenge, BCG created a highly collaborative team structure. The ten-person team comprised six BCG consultants (one partner, one principal, one project leader, and three consultants) and four client senior managers and team leaders who were dedicated full-time to the project. The senior BCG partner and one senior client vice president shared high-level oversight of the project.
The team analyzed the company's presence across the region, looking at China, India, Korea, Japan, and members of ASEAN. The team worked closely with business unit managers to identify both local expansion opportunities (growing existing sales and introducing new products) and ways to eliminate some of the internal and market constraints that had prevented growth in the past. The team conducted in-depth interviews and analyzed client and market data to identify and quantify potential areas of opportunity that would help achieve the targeted 20 percent annual growth rate.
The team was also charged with determining an optimal management and organizational structure to support the growth targets. Team members believed that strong local management was critical to the successful execution of new business launches and that achieving the desired growth would strain the existing organization and reporting structure. The team conducted an in-depth organizational study to identify what additional capabilities would be needed to make the most of these opportunities.
The team's analysis confirmed its original view that greater localization of management resources and product offerings would play a critical role in the company's expansion efforts. To address the former, the team developed an HR strategy to attract and retain top local talent. In parallel, the team developed a new organizational structure that would increase the autonomy of local management teams to develop and implement strategic business initiatives. To address the latter, it identified a range of promising opportunities in specific markets and mapped out steps for seizing those opportunities.
The team determined that greater localization of the company's R&D capabilities would substantially boost its speed to market. The team mapped out a plan for the reallocation of R&D resources in order to deploy sufficient capital and HR talent to the individual markets.
The strategic opportunities for growth included the following:
- One country presented strong demand for specific features in one of the company's top-selling consumer-product lines. The team created a plan for capitalizing on this through investment in R&D and new-product development
- Another country offered attractive opportunities in the middle and low-end segments of one of the company's business-to-business markets. (The company had focused exclusively on the high end.) The team developed a strategy to close this gap through the acquisition of a local manufacturer and R&D facility
- In Southeast Asia, favorable local-trade agreements among members of ASEAN meant that locally manufactured goods had an edge over those imported from low-cost neighboring countries such as China and India. The team developed a plan for establishing a local manufacturing presence: transferring existing assets to these markets, producing goods at a lower cost, and realizing increased margins
; Pop.focus();)
Constant collaboration between BCG and the client meant that when the joint team made its final recommendations, the company's senior management was ready to green-light the plans. The company's board of directors was equally committed, several members having made multiple trips to Asia during the project to get a firsthand understanding of the opportunities and to signal their support of the strategies.
The team's work created momentum and confidence across the organization, allowing the country managers to fast-track implementation of the strategies. The results to date have been impressive, with growth exceeding expectations: increased revenue of more than $1 billion in targeted business units, development of new R&D facilities, and successful localization of top management in each country. It is, therefore, not surprising that Asia is now squarely atop the CEO's agenda and the company has an implementation plan in place to ensure that progress continues.
"For a company that already has significant market share in the region, is the size of a battleship, and operates across highly diverse geographies, it's an incredible challenge to achieve 20 percent year-on-year growth," says a member of the project team. "We persuaded them [the client] that it would be possible if the operating units—those responsible for the implementation—took ownership of the strategies. They have done so, and the results speak for themselves."
