Asia to Contribute 52 pct to Global GDP!
Asia, which currently accounts for 30 percent of global GDP, expected to grow up to ~52 percent by 2050 has significant untapped opportunities in Tourism, Healthcare and Retail, a US based global strategy consulting firm, Stax said.
“High growth industries in the region like Tourism, Healthcare and Retail are abundantly rich in untapped data assets that hold insights to accelerate growth and optimize spend,” Ruwindhu Peiris, Managing Director of Stax said.
“Millennials (those born after 1980) are entering their peak earning years and currently account for around one-third of all business travel expenses,”
“In the next 5-10 years they will provide the majority of spending for travel and leisure,”
“Being tech-savvy, they rely heavily on online information sources and are sophisticated travelers who carefully plan their trips,”
“With “High-Yield Segment Targeting” companies in the leisure sector can engage with potential guests online at different stages of their travel with the winning messaging to reach the right audience at the right time.”
Stax Inc. is a global strategy consulting firm with offices in Boston, Chicago, New York, and Colombo, Sri Lanka. The company, celebrated its 10th year of operations in Sri Lanka.
Peiris said growing opportunities for businesses in healthcare, as demand is increasing fast due to an aging population and high prevalence of chronic diseases such as diabetes.
In 2012, public healthcare expenditure in Sri Lanka accounted for only 40 percent of the country’s total healthcare expenditure, with the private sector accounting for the balance.
Further, Out of pocket (OOP) expenditure by consumers on healthcare services accounted for over 80 percent of private healthcare spending in 2012, indicating patients’ willingness to pay for what they perceive to be high quality of care Peiris said.
Retail spend in the region is also on an accelerated growth path, with the emergence of Asia’s middle class.
“Stax’s work with global retailers has shown that most retailers tend to overprice, as well as under-price several items within their key product categories—essentially leaving millions of dollars on the table,” Peiris said.
“There is a great opportunity for retailers in the region to leapfrog on strategies already tried and tested in the West in optimising the thin margins in this industry by using data analytics from “test and learn” platforms to tweak most effective promotions and loyalty plans.”
The firm helps private equity (PE) investors find good places to invest their money and Asian family businesses on how best to attract capital and improve growth.
“We believe that multi-generation family businesses and increased private equity investment in the region will contribute to growth further,” Rafi Musher, Chief Executive of Stax said.
“Family businesses with additional generations in the office are expanding their areas of interest. Private equity firms around the world are looking to capitalise on the economic growth and investment opportunities in the region, with the average Asia-focused funds size growing steadily over the last few years to reach 422 million dollars in 2014 compared to a low of 197 million dollars in 2009,”
“Additionally, dry powder, which refers to private equity funds available for investment, currently stands at 129 billion dollars, indicating opportunities for corporations and growing family run businesses to take advantage of this significant investment pool to leverage for growth.”
Echoing the CEO’s statements, Kumudu Gunasekera, Director of Stax said it is importance of positioning one’s firm for attracting investment.
“Many companies perceive lack of funds as an impediment to growth and often look to raise funds through either debt financing or an IPO. However, this might not be the best option for a firm at a given time. It is important for a business to evaluate where its current opportunities lie, and to then assess which funding options can best grow the business,” Gunasekera said. He said it is important to explore other avenues of funding such as private equity investment rather than immediately listing a firm on the CSE.
“The influx of smart capital will allow a well-established company listing that will garner a higher valuation,” Gunasekera said.
“Having a mature, well-positioned listing in the CSE is important for the company as well as the CSE,”
“There is a misconception that all capital is equal.”
He also discussed how many companies with strong growth potential often fail to capitalise on opportunities as they are reluctant to trade equity.
Trading equity for smart capital can position a firm for higher growth and a higher valuation in the longer term.
Identifying and attracting smart capital is vital, given the large amounts of dry powder in the market, Gunasekera said.