As the global economic axis tilts towards Asia, European businesses are at risk of being left behind, a report released yesterday by HSBC bank said.
The model where the West did the development work and the East took care of production with cheap labor is dead, it said, adding that innovation will increasingly originate from the East.
“Unless European business confronts the implications of the rebalancing of economic power and the growth of Asia, business opportunities will be lost and business threats will increase,” it said.
The Looking East: The changing face of world business report investigates the challenges and opportunities of the rise of Asia for European businesses and identifies current and future trends.
It warns that European companies are at risk of not engaging with the new economic world order.
“We are no longer looking at when West meets East, but at how the East will redefine the West and the way we do business,” said Alan Keir, HSBC’s group general manager and global co-head of Commercial Banking. “It’s crucial that European businesses are not only appreciative of this fundamental and fast-paced change, but that they are able to respond swiftly and effectively. Our competitiveness as a region is at risk.”
Firms must look at how they can capitalize on Asia’s diverse consumer base, skilled workforce and advances in research and development, while mitigating the risks posed by the macro-economic climate.
Booming Eastern populations and consumer wealth will create unprecedented market opportunities for European businesses, the report said.
However, “the free market, liberal principles on which the West was built are often in direct contrast to methods of rule in the East,” it said.
“European businesses need to be aware that the competitive playing field is not necessarily level,” the report said.
In the Asian workforce, the result partly of huge investment in education means the paradigm where the West did the design and development work and the East took care of production and manufacturing is anachronistic.
Lines have been blurred. China and India are now world leaders in the knowledge economy.
“They’re beating the US, Europe and Japan at their own game,” the report said.
Joe Ballantyne of The Futures Co, which carried out the research for HSBC, said innovation will need to become more global in focus and new strategies across different markets will need to be adopted.
Greater investment in renewable technologies will also be necessary as the world’s conventional energy supplies become stretched, he said.
“The story of globalization and the integration of the world economy isn’t turning out the way many people expected,” Ballantyne said.
“In future, successful businesses will need to understand how the dynamics of cultural change play out across different markets, how the geopolitical landscape is changing and even how different models of capitalism are evolving in different parts of the world,” he said.
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