HR Forum

Expansion plans in 2012: Asian businesses taking cautious steps

THERE is no question that the economic storm clouds that have cast a pall over Europe are producing fallout across Asia.

Business leaders across the Asian region cannot help but look at Europe's ongoing credit crisis and speculate on how it may impact their own activities, which have been largely immune from the latest global slowdown.

The outlook for Asia in 2012 is caught up in this unfolding European drama, yet the prevailing view among the majority of business leaders is that the real impact will be fairly muted. Essentially, they believe that the Asian region will continue to grow, though at a slower pace than in recent years.

But the key theme is one of caution, as businesses look to optimise their domestic operations in Asia, while keeping a watchful eye not only on the economic situation in Europe and the United States, but also on the powerhouse economy of China.

“Economic recession is likely in certain parts of the world, particularly in Europe, but other markets will still grow, particularly in the Asia Pacific and North America, but below previous average rates,” says Fairiz Azrul, chief executive officer of Free Alliance, Malaysia, a leading wireless solutions provider.

The complexity of the business landscape facing Asian firms is matched by the uncertainty around talent acquisition and workforce development.

So is this the time to be hiring? Should I be waiting for the economic clouds to lift? Is this the right time to be looking at upgrading skills or acquiring new ones?

Business leaders have a complex array of factors to weigh up in determining whether they grow their businesses, consolidate around current levels, or scale back in anticipation of serious economic upheavals abroad.

They need to decide if, and to what degree, they should invest in their human capital. And, of course, the needs of different industry sectors will vary depending on their place in the business cycle.

Darma Putra from PT Bhakti Investama, Indonesia, says that in the current market, industries that cater to the retail sector and consumer goods will be seeking more people, while others will consolidate and work on improving the quality of their existing headcount.

But a digital marketing business in Thailand relies heavily on highly-skilled personnel and will be on the hunt for trained professionals.

“Finding and retaining good people is the key to our success. The nature of our market is still relatively new in this region and experienced resources remain scarce and subject to poaching by competitors. We have to protect ourselves against this. Good HR and good market intelligence are critical,” says Anthony Blake, chief operating officer of Digital Marketing Solutions, Thailand.

In all, the Asian market remains a complex set of markets, with varying needs, county-by-country and industry-by-industry.

The twin problems of Europe and the United States have served to confound the best business minds. Even where businesses move forward confidently with plans to expand and recruit, there are difficulties in meeting skills shortages, and nervousness on the part of some workers about switching jobs in an uncertain economic climate.

Priority areas

As businesses confront the many economic and business challenges of 2012, they are putting in place the strategic plans to deal not only with the “big picture” issues, but also the key operational priorities that are relevant to their areas of operation.

One of the keys to business success is the ability to meld the high level strategy with the broad range of business, social and demographic trends that are particular to the business cycle.

The way that business leaders are reading these trends gives an insight into the important forces influencing business decision-making in the region.

What becomes clear is that certain industries will do better in coping with the uneven economic situation, and that there will be some added focus on internal business dynamics until the external environment is more settled.

Dr R.V. Navaratnam, group corporate adviser of Sunway Group, Malaysia, says his organisation's strategy is to pick carefully the right markets for the near term. “Do good business with the stronger markets in Apac and adjust away from the weak demand economies,” he says.

Colgate Palmolive thinks that the FMCG market in Asia will continue to do well and perform better than those in Europe.

Andrew Shepard, managing director for Thailand, nominates two industries electronics and automotive which will face difficulties in the export market, but might do better locally. Most agree that the luxury goods market will find conditions more difficult.

It is sometimes remarked that the prudent person should only worry about those things that they can actually influence. All the rest is out of their control.

In the present climate, there is certainly plenty to worry about. And many of the things that are keeping business executives awake at night are, in fact, beyond their control.

In this section, Asian business leaders discuss the main concerns that they have, ranging from economic conditions, to staffing problems and government regulation. What is clear, is that the array of challenges for business in 2012 means that executives need to be both watchful and nimble in sidestepping the pitfalls.

On the international horizon, it's a three-cornered alert Europe, the United States and China.

“Recession in the United States and Europe is the big concern,” says Darma Putra from PT Bhakti Investama.

But he will be paying close attention to the Chinese economy for any signs that its growth may falter, and thus not be able to absorb Indonesian exports that have already been hit by the slowdown in Europe and the United States. Also, there is a need to think about markets closer to home that have not been affected by the downturn.

A good example is the automotive sector. Already under pressure, the downturn in the developed economies is having a domino effect on car sales and exports. Gunther Schurz, CEO of Proton Edar, Indonesia, says that growth in the market in 2012 will be somewhat slower than previously forecast because of the spillover from the northern hemisphere slump, and the resulting decline in exports. Carmakers will be looking to local demand to achieve growth targets.

Contingency planning

The scale of volatility that has been experienced around the globe over the past year, and the likelihood of more to come, warrants some extraordinary contingency planning.

The final section of this paper looks at a few of the steps that business leaders across the region plan to take to ensure that they are in the best possible position to withstand any sudden deterioration in business conditions.

Chan Hock Lye, chief operating officer of global mineral processing giant, Sibelco Asia, based in Singapore, says that medium-range plans are no longer sufficient in coping with the volatility that prevails. “We see the cycle getting shorter. Also, being flatter' or more globalised', we quickly feel the impact of a major event in another country very quickly. Although we have a three-to-five-year plan, and an annual plan for each country, we also meet quarterly to adapt our strategy to the change in events, as a region.”

The Asian region is doing better than most other parts of the world. In fact, it has amazed many observers with the resilience it has demonstrated in the face of unprecedented global economic upheaval.

But business leaders across the Asian region are not being complacent. The most farsighted and prudent enterprises recognise that economic conditions could suddenly deteriorate, and that the Asian economic miracle will also suffer.

Even the most optimistic business leaders understand that there are simply such large and complex obstacles on the global highway that it makes sense to plan for all possible outcomes.

The prevailing view is that it is important to maintain liquidity and to consolidate around known business activities, avoiding expansions into high-risk ventures. It is also a time to manage human capital with an eye to preserving talent and upgrading key skills.

It is important for enterprises to focus on meeting customer needs and to entrench quality processes, so that firms are in the best position to preserve their market position in the event of renewed economic turbulence.

They may need to review pricing and marketing strategies in order to remain competitive in a market where many consumers are curbing their spending.

They may need to re-think their business strategies or consider a new approach to entire markets in situations where the industry sector has been hard hit by the slowdown.

Of course, not all businesses will take a cautious path. Some will see the current trough as an opportunity to gamble on an upturn, and will plough ahead in the hope that the West's political and economic leadership can avoid a catastrophe.

What is clear is that the best corporate leaders are taking nothing for granted, and are treating 2012 as a year like no other.

Article extracted from Talking HR with Anthony Raja Devadoss, StarBiz. Anthony Raja Devadoss is the vice president, Asia Pacific, with the Outsourcing & Consulting Group of Kelly Services and he is generally optimistic about the outlook for 2012 given that there will be a few challenges companies will be faced with.