Description
The high growth dynamics for the global market for market expansion services have been confirmed with an annual growth rate of 7.4% through 2018. The MES market therefore remains one of the most promising sectors in the outsourcing industry.
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DIGITIZATION AND THE MARKET
EXPANSION SERVICES INDUSTRY:
DRIVING OMNI-CHANNEL
GROWTH
Fourth Global Market Expansion Services Report
2 |
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© Copyright by DKSH Holding Ltd. and Roland Berger AG Strategy Consultants, Zurich, September 2014
All market data and market projections presented in this report are based on a detailed market model independently developed by
Roland Berger Strategy Consultants.
DIGITIZATION AND THE MARKET
EXPANSION SERVICES INDUSTRY:
DRIVING OMNI-CHANNEL
GROWTH
Fourth Global Market Expansion Services Report
2
3
4
Global MES market (USD tn) Global growth driven by…
2018
2013
3.8
2.7
7.4%*
6.4%
Growth driven by change
in MES penetration
Growth driven by change
in consumption
1.0%
4 | MARKET EXPANSI ON SERVI CES REPORT
1
Digitization is enhancing traditional business models but not changing the basic
business logic
Digitization as a megatrend is impacting all areas of corporate business models. Companies are
adapting their strategies and business models to cope with challenges and opportunities arising
from the digital age. While growth in digital commerce has shown tremendous growth figures
in recent years, global penetration is still below 5% of total sales.
Three trends are driving digitization
Three key trends are driving digitization and are likely to have an immediate effect. Mobile
commerce, business intelligence and smart infrastructures are the key topics that have a
significant short- to mid-term impact on companies and customers, and on ways of doing
business.
Digitization is reshaping customer interaction and business transactions
Digitization is reshaping the ways in which customer interaction is handled and is opening new
paths for marketing and customer influence. Social media strategies, digital marketing and big
data analysis are tools for fostering customer-company relationships. With new technology, the
sales process is being redesigned and new channels for sales are becoming available.
STUDY HIGHLIGHTS
Creating value in all channels
Continuous growth in the global market expansion services industry with Asia Pacific
as the biggest market
The high growth dynamics for the global market for market expansion services have been
confirmed with an annual growth rate of 7.4% through 2018. The MES market therefore
remains one of the most promising sectors in the outsourcing industry. Ongoing growth of the
middle classes, intra-regional trade in Asia, Africa and South America, as well as the increasing
trend towards outsourcing, are fueling the demand for market expansion services.
* 7.8% annual growth expected
for Asia (CAGR 2013–2018)
Figure I: Global consumption
market versus global MES market
(CAGR 2013–2018)
Sources: Euromonitor, Espicom
Business Intelligence, Global
Industry Analysts, SRI,
UNCTADstat, Roland Berger
Strategy Consultants analysis
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Clients and customers are at different stages in their digital journey
Clients and customers pursue different strategies reflecting their stage of digital readiness
and objectives. International and digitally advanced players (multi-digital natives) sharply
focus on improving their customer relationships, while local and digital beginners (small-town
laggards) expect to boost growth through digitization. Local and advanced digital companies
(local e-heroes) want to make existing digital operations more efficient, whereas international
digital beginners (global old schoolers) are increasingly considering digitization as a means for
improving both their sales and customer relationships in order to remain globally competitive.
5
7
As companies often lack the key resources and capabilities to drive a digital strategy
through omni-channeling, they are turning to qualified partners
Companies pursuing a digital market expansion strategy are seeking partners that have
experience and capabilities in providing superior services in digitization as well as market
expansion. Partners with existing digital capabilities as well as local expertise and access to
multiple sales channels and digital marketing opportunities are in demand.
MES providers succeed with comprehensive set of services
MES providers are the preferred choice for companies, as they are well positioned to provide
their clients with the best mix of market expansion and digital transformation services. While
digital specialists only serve specific steps of value creation, MES providers offer an integrated
approach to supporting companies along the entire value chain.
MES providers are combining the best of the old and new world
Cross-regional MES providers are in an optimal position to drive omni-channel market expansion.
Due to their local presence, expertise and know-how, they are able to offer their clients superior
services along the entire value chain and combine both online and offline services for market
expansion and market development.
6
8
7
Figure II: Rating of competence along transaction
and interaction processes
P
hysical channels
D
igital channels
MES
providers
Customers/
experts/shoppers/
consumers
Clients
1. Sell and distribute
3. Inform and infuence
2. Buy and pay
4. Respond and refer
6 | MARKET EXPANSI ON SERVI CES REPORT
PREFACE
The market expansion services (MES) industry saw yet another year of promising growth,
despite revised economic prospects and increased uncertainty in emerging markets. The sector
remains one of the most prospering areas in the outsourcing industry, offering further growth
opportunities for MES providers, their clients and customers. Demand from companies for
market expansion services has increased steadily and is fueled by continuous overall economic
growth in emerging markets.
This year's report provides an update on the development and growth expectations of global
market expansion services and focuses specifically on digitization. Digitization is perceived
as the major topic of the 21st century and offers increased opportunities for companies to
enhance growth, improve efficiencies and develop their business operations in new and
existing markets.
Since many companies lack the necessary resources and capabilities needed to drive a digital
strategy, they are turning to experienced and qualified partners. To remain competitive,
reduce complexity and improve cost efficiencies, partners who can offer an integrated
approach while combining traditional and digital market expansion strategies are in high
demand. Consequently, market expansion services providers are valuable partners in driving
digitization and offering an omni-channel approach.
DKSH and Roland Berger Strategy Consultants have once again collaborated to produce the
fourth edition of this report on current trends and developments in the market expansion
services industry. Positive feedback from previous years has shown that these reports are
acknowledged by the market as an industry standard.
This year's report reflects the leading research on digitization and includes the findings from
over 380 survey responses and insights from industry experts and thought leaders. The results
aim to help decision makers gain a better understanding of the impact of digitization on their
business models, and of the digital readiness and mindset of different market participants. It
also highlights how companies can work with market expansion services providers to leverage
the potentials of digitization and drive digital transformation in overseas markets.
We hope you enjoy reading this study and are looking forward to receiving your suggestions,
feedback and comments.
Dr. Joerg Wolle Matthias Hanke
President & CEO DKSH Holding Ltd. Managing Partner Roland Berger
| 7 CONTENTS
CONTENTS
A. The global market expansion services industry – an industry on the rise
Market expansion services – outsourcing on a new level
Market expansion services – a multi-faceted growth driver
Global trends driving the growth of market expansion services
B. Digitization of the business model – a trend without limits?
Digitization as a global phenomenon
Powerful trends are reshaping the industry
Strong growth of digitization in emerging markets
Digital opportunities – improving the way business is done
Digitization – a game-changer?
C. Digital MES – supporting companies in capturing the potential of digitization
Finding the right approach to digital market expansion – a combination of traditional
services and digital expertise
MES providers as preferred partners for taking advantage of new opportunities
MES providers enabling digital customer and channel management
MES and digitization – combining the best of both worlds
Checklist: Are you ready for digital market expansion?
Methodology
08
08
11
15
22
23
24
29
31
34
38
41
46
50
52
54
55
8 | MARKET EXPANSI ON SERVI CES REPORT
consumption and reduce the dependency of their
economies on exports. The economic upturn witnessed in
recent years has led to the gradual emergence of strong
and affluent middle classes, increased levels of education
and more disposable income. With Western economies
recovering more slowly than expected from the recent
recession, they have understandably shown increasing
interest in emerging markets as prospering sales
markets, too. Accordingly, Western and Asian companies
alike today see Asia as an important sales market.
Selling products in emerging countries is anything but
straightforward, however. Overcoming language barriers,
navigating local regulations and legal restrictions,
understanding regional and cultural differences, adapting
products and services to local preferences and thereby
gaining access to distribution channels and infrastructure
are only a few of the many challenges new entrants face.
Both aspects – companies' desire to focus more strongly
on their core competencies and the emergence of
prospering but complex sales markets – have led to the
rise of a new type of service industry. Market expansion
services (MES) providers help companies to enter new
Market expansion services – outsourcing on a new
level
Focus on core competencies and growth
opportunities
Companies across all industries and geographic regions are
increasingly shifting their focus to their core competencies
as global competition increases and pressure on earnings
intensifies. In recent years, companies have realized that
they can best serve their customers and make the best
use of their talents by focusing on their core strengths
and outsourcing all other processes. At the same time,
turning to specialized service providers gives companies
access to a broader pool of knowledge, experience and
leading-edge technology.
To reduce their cost base and obtain access to resources
not available on their home markets, companies have
moved production abroad. Asia in particular has long
been considered the "extended workbench of the
West", with companies transferring production here to
take advantage of lower labor costs. This perception has,
however, changed over the past few years. Governments
in emerging markets are now pushing to boost domestic
A. THE GLOBAL MARKET EXPANSI ON SERVI CES
I NDUSTRY – AN I NDUSTRY ON THE RI SE
Market expansion services – outsourcing customer-oriented processes for growth
Figure 1: Market expansion services within the outsourcing landscape
Functional focus Customer-oriented processes
Market
expansion
services
Knowledge
process
outsourcing
Strategic focus
Support-oriented processes
Growth
Cost
Information
technology
outsourcing
Business process
outsourcing
| 9 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
markets or develop existing ones more efficiently and
effectively. They support companies at different links
in the value chain, including marketing, sales and
distribution as well as customer service and support.
Combining local experience with a focus on customer-
oriented processes, market expansion services providers
are able to reduce complexity and costs for both their
clients and their customers as these seek to grow their
business.
Market expansion services differ fundamentally from
traditional outsourcing activities. Traditional outsourcing
generally occurs in three different forms: The out-
sourcing of specific business processes such as payroll
accounting, recruiting and procurement is known as
business process outsourcing (BPO). The outsourcing
of IT-related processes, including the writing of source
code, hardware maintenance and server operations, is
referred to as information technology outsourcing (ITO).
Knowledge-intensive activities such as research and
development, patent management and clinical research
trials are subsumed under the term knowledge process
outsourcing (KPO).
By contrast, market expansion services providers place
more strategic emphasis on activities that add value,
focusing in particular on business growth and front-
end processes such as marketing, field marketing, sales,
customer services and support. As a result, companies
are turning to market expansion services providers not
only to reduce their cost base, but also to increase their
market share, improve market coverage, deepen market
penetration, lower fixed costs and reduce complexity.
Integrated service solutions
MES providers adopt an integrated service approach
and offer a comprehensive set of services covering the
entire value chain. They provide clients with solutions in
areas such as field marketing, key account management,
sales, inventory management, accounts receivable
management and customer services. Since these services
focus heavily on interaction with customers, they clearly
need an in-depth knowledge of the local market, the
skills to identify market opportunities and sufficient
local resources to support sales and capillary distribution
on the ground. Unlike single-service providers (such as
sales agents and market research firms), MES providers
offer their clients and customers end-to-end solutions
Integrated solutions along the entire value chain
Figure 2: Market expansion services along the value chain
Marketing Sales
Distribution and
logistics
Customer service
and support
> Promotion
management
> Public relations
> Product
management
> Brand building
> Field marketing
> B2B and B2C
sales
> Key account
management
> Product training
> Order taking and
processing
> Stock reporting
and planning
> Importation
> Warehousing
> Stock
management
> Invoicing, cash
collection
> Transportation
and delivery
> Product
packaging
> Installation and
commissioning
> Customer
service, technical
support
> Repairs and
maintenance
Strategic support in market entry and development
Research and
analysis
> Market research
> Market entry
studies
> Applications re-
search and support
> Testing
> Product
registration
> Customer insights
Backflow of information from customer to client
C
l
i
e
n
t
C
u
s
t
o
m
e
r
10 | MARKET EXPANSI ON SERVI CES REPORT
SDI
sophistication (see figure 3). While the SDI depicts only
the state of the economies in focus at a certain point
in time, it will, over time, allow the dynamics in their
service development levels to be observed and analyzed.
This year's update to the index reveals various develop-
ments and insights:
• Singapore has defended its position in the "Leaders"
group, having joined Japan there only a year ago
• South Korea has fallen back to the "Chasers" group
and been overtaken by Australia, although its scores
for the level of innovation and integration of
technology are still among the highest
• Compared to last year's figures, Malaysia and
Indonesia have advanced most in terms of their overall
innovation level and readiness to adopt technology.
Thanks to positive economic development in recent
years and large sums of foreign direct investment,
local companies are willing to take new technology
on board in order to remain globally competitive.
• The countries in the "Starters" group" have moved
closer together. Although these countries have
experienced significant economic growth over the
past couple of years, they are still at a stage where
they are seeking basic services and solutions.
These developments indicate that the Asia Pacific region
remains as dynamic as ever, and that the readiness
of countries to accept new services will continue to
increase. Consequently, MES providers must continue
to add innovative services to their portfolio while at the
same time making due provision for different readiness
levels and expectations in the countries they serve. In
doing so, integrated, cross-border and industry MES
providers can build on their local knowledge and
expertise, as they are already accustomed to adapting
existing services to the needs of specific industries and
markets.
Service innovation – leading through innovation
In a competitive environment, it is increasingly impor-
tant to offer clients exceptional services that extend
beyond the standard portfolio. MES providers aiming to
position themselves as leading market players must not
only raise their basic service offerings to excellent levels,
but also continuously improve their services to win
over clients and customers with innovative solutions.
Innovative services in line with what markets want
and need are a key growth driver for the MES industry.
MES providers eager to tailor their service offerings
to local needs must also be mindful of varying levels
of sophistication in the services required by different
countries. The Service Development Index highlights
the differences between the individual countries in
the Asia Pacific region and indicates the extent to
which companies are ready for, or actively demanding,
innovative services.
The Service Development Index
The Service Development Index (SDI) measures the
level of service sophistication of an economy by com-
bining generally established macroeconomic indicators
and market experts' opinions.
This assessment of the level of service sophistication
in different countries is based on the average score
for four equally weighted key parameters – a survey
of executives and market experts (1), the countries'
innovation levels (2), their business sophistication
(3), and their technological readiness (4) scores as
measured by the World Economic Forum. Using this
information, the Service Development Index identifies
each country's overall level of service sophistication.
The resulting scores can be used to identify groups
of countries that share similar levels of service
| 11 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
that significantly reduce both complexity and the work
involved in coordination.
The customized services offered by MES providers
facilitate effective interaction between clients, customers
and even end-consumers on home and foreign markets.
MES providers' ability to provide support along the
entire value chain also enables them to channel valuable
feedback from markets and customers to manufacturers.
They can deliver a seamless flow of information that
bypasses the risks and complexities caused by different
interfaces with different partners. In addition, MES
providers enable efficient business transactions
between clients and customers by leveraging their local
infrastructure, market access and knowledge of local
distribution channels to professionally position clients'
product on the market and efficiently perform fulfillment
services.
Figure 3: The 2014 Service Development Index (SDI) for the Asia Pacific region
Sources: World Economic Forum, survey data, Roland Berger Strategy Consultants analysis
Service sophistication dynamics in Asia Pacific environment
35
40
45
50
55
60
65
70
30
Philippines
Sri Lanka
Myanmar
Laos
Indonesia
India
Vietnam
Tailand
China
Malaysia
New Zealand
Australia South Korea
Hong Kong
Taiwan
Singapore
Japan
Starters
Pursuers
Maturity
SDI
Chasers
Attackers
Leaders
Cambodia
To offer state-of-the-art services, market expansion
services providers must continuously adjust their service
offerings in line with clients' and customer’s rapidly
changing market needs. This requires them not only
to permanently improve their existing services, but also
to anticipate future trends and proactively push new
services onto the market.
Market expansion services – a multi-faceted
growth driver
Differences in the dynamics of growth in the various
industry sectors and geographic regions are more
pronounced than in previous years. This is due to revised
global economic growth rates and higher levels of
uncertainty, particularly in emerging markets. Even so,
overall long-term forecasts for the market expansion
services industry remain promising.
12 | MARKET EXPANSI ON SERVI CES REPORT
Stabilizing consumer markets
Demand for market expansion services is strongest
in industries that require local sales and marketing
platforms and strong capillary distribution networks.
Clients and customers in these industries require
customized services along the value chain and therefore
turn to MES providers. Demand is also influenced by the
level of product complexity (in the case of long-term
projects such as plant engineering, for example) and the
need for technical expertise. As a general rule, the more
standardized a product, the greater the demand for
market expansion services. Given these considerations,
demand for market expansion services can clearly differ
substantially from industry to industry.
As in the preceding reports, the four selected industries
– consumer goods, healthcare, engineered products and
specialty chemicals – therefore once again form the focus
of this report's analysis. Underscoring its importance
to the MES industry, the consumer goods sector again
made up the largest share of the global MES market,
accounting for a total MES market value of USD 1,664
billion in 2013. This sector is followed by healthcare,
with a transaction volume of USD 629 billion, engineered
products, at USD 337 billion, and the specialty chemicals
industry, with a total MES volume of USD 51 billion in
2013.
Consumer goods
In the consumer goods sector, the MES penetration rate
differs significantly between developed and emerging
regions, standing at around 13% in Europe and North
America, while exceeding 20% in Latin America and the
Asia Pacific region.
Figure 4: MES framework: interactions and transactions
Adding value to clients, customers and consumers
Transaction
Interaction
MES
providers
Customers/
experts/shoppers/
consumers
Clients
1. Sell and distribute
3. Inform and infuence
2. Buy and pay
4. Respond and refer
| 13 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
Consumer markets Industrial markets
Total MES
market, 2013
(USD bn)
629 1,664 51 337
MES penetration
rate, 2013
(% of global
consumption market)
24%
15%
16%
27%
7%
11%
28%
33%
7%
17%
11%
19%
18%
10%
32%
6%
15%
25%
21%
4%
36%
10%
4%
17% 45% 8% 10%
Europe incl. CIS
North America
Latin America
Asia Pacific without Japan
Japan
Africa and Middle East
Specialty
chemicals
Engineered
products
Healthcare Consumer
goods
Consumer markets out in front
Figure 5: Global market expansion services market and penetration rates by industry
Sources: Euromonitor, Espicom Business Intelligence, Global Industry Analysts, SRI, UNCTADstat, Roland Berger Strategy Consultants analysis
4%
Stronger demand for market expansion services in
emerging regions is to a large extent due to the coexis-
tence of modern and traditional retail channels. Companies
must effectively and efficiently combine modern and
traditional delivery in their "go-to-market" approaches
while also coping with the complexities of underde-
veloped logistics infrastructures and cultural differences.
To successfully enter or develop emerging markets,
companies are increasingly asking market expansion
services providers to enhance their approach by supplying
customized solutions, integrity of the value chain,
access to a local capillary distribution network, accounts
receivables management, specialized marketing services
and carefully tailored support at the point of sale (POS).
The outlook for market expansion services in the
consumer goods segment remains highly positive over
the next five years, with a growth rate of 8.1% expected.
The overall sector has so far proven relatively immune
to revised economic growth prospects, as drivers such as
growing middle classes and a higher level of disposable
income in emerging markets are still fueling overall
consumption.
Healthcare
The healthcare sector consists of three subsectors:
prescription drugs, over-the-counter (OTC) products
and medical devices. Even though the overall healthcare
market is only 15% of the size of the consumer goods
market, it nevertheless boasted an impressive average
MES penetration rate of 45% in 2013.
For healthcare companies, foreign markets represent
highly complex challenges. The complexity derives
14 | MARKET EXPANSI ON SERVI CES REPORT
Figure 6: Growth of global MES by region (2008–2018)
Sources: Euromonitor, Espicom Business Intelligence, Global Industry Analysts, SRI, UNCTADstat, Roland Berger Strategy Consultants analysis
Market expansion services – continuous growth in emerging markets
Overall, the healthcare market is expected to grow at
a stable rate of 5.4% in the years ahead. At the same
time, however, it is becoming increasingly volatile as
two major but conflicting developments unfold: While
many underserviced emerging economies in particular
offer plenty of scope for continued growth, most
governments are restricting spending in order to contain
rising healthcare costs.
Engineered products
The global MES penetration rate for engineered products
rose from 7.9% in 2012 to 8.1% in 2013. Many industrial
companies have in the past utilized their own resources
or relied on dedicated single-service providers (i.e. local
sales agents) to develop their foreign markets. However,
as they themselves move from offering individual
products to integrated solutions, they find themselves in
need of partners who can offer services along the entire
from higher standards in terms of lead times, strict
corporate governance requirements, rigorous regulatory
environments, local healthcare systems and pharma-
covigilance (or drug safety). In addition, manufacturers
experience more pressure on their margins due to increased
competition from generic brands, pricing difficulties,
rising product development costs and government-
enforced caps on drugs spending. Pharmaceutical
companies therefore are increasingly focusing on their
core competencies. For all these reasons, the healthcare
industry is aiming to outsource most of the links in its
value chain to third-party providers. Demand for market
expansion services in the healthcare segment is therefore
likely to increase further, because MES providers can
offer companies an excellent, integrated approach
thanks to their expertise and specialized knowledge of
local regulations and healthcare systems.
MES
market
(USD bn)
MES penetration rate (% of global consumption market)
1,000
1,100
1,200
1,300
0
22 18 20 16 14 12 10 26 24 30 28
900
800
700
600
500
400
300
200
100
North
America
Africa &
Middle East
Latin America
Europe
incl. CIS
Asia Paci?c excl. Japan
Japan
2008
2008
2008
2018
2008
2008
2013
2013
2013
2013
2013
2013
2018
2018
2018
2018
2018
2008
| 15 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
value chain. Accordingly, demand for market expansion
services is likely to increase further.
By contrast, overall growth forecasts for engineered
products have been adjusted downward in line with
revised economic growth prospects. Uncertainty prevails
in many markets, such as some peripheral European
countries, Greater China and Brazil. In this climate,
companies tend to be reluctant to expand and are
holding back investments in the short term. In the long
term, growth in the engineered products industry is
expected to pick up again as government investment in
infrastructure and transportation projects resumes and
confidence returns to the market.
Specialty chemicals
Specialty chemicals serve a wide range of applications
relating to industrial, consumer and healthcare products.
They can, for example, be found in fertilizers and crop
protection agents for the agricultural sector, in sealants,
coatings and paint for the construction industry, and
in perfumes and detergents in the consumer goods
segment. Since the specialty chemicals sector is a pure
B2B business, it depends heavily on trends in its end-user
industries.
The industry itself is characterized by low turnover
volumes, high unit prices and considerable custom-
ization. Many manufacturers lack the critical mass they
would need to directly manage small and midsized
customers in local markets and therefore ask market
expansion services providers to do it for them. MES
providers can reach the required scale by bundling
volumes from various clients (acting as a single point of
sourcing) while at the same time managing marketing,
sales and distribution processes and providing consulting
in relation to product development and innovation.
The slowdown in industrial production in both developed
and emerging markets has caused demand for specialty
chemical products to drop, although part of this decrease
has been offset by higher demand for innovative
products in consumer industries. Given the current
climate of increased uncertainty about industrial out-
put, the expected five-year growth rate has been revised
downward from 6.2% in the previous report to 5.2%.
Global growth fueled by emerging markets
Besides differing from industry to industry, demand for
market expansion services also varies considerably in
different geographical regions. As predicted in last year's
report, the Asia Pacific region has taken over from Europe
as the largest global MES market and is now worth USD
691 billion. Europe now occupies second place with a
volume of USD 649 billion, followed by North America
(USD 529 billion), Latin America (USD 342 billion); the
remaining countries taken together (USD 256 billion),
with Japan taken in isolation (USD 213 billion).
In the next five years, Asia Pacific’s high MES growth rate
of 10.6% is expected to widen the gap between the Asia
Pacific region and Europe and North America. At the
same time, the other emerging regions, Latin America
and Africa and the Middle East are catching up with the
developed regions, posting projected growth rates of
12.5% and 10.7% respectively. Growth in these regions
is driven by strong overall development in consumption
and in the industrial market, but also by increasing de-
mand for market expansion services.
On average, MES penetration rates and growth expecta-
tions are higher in regions with a large share of emerg-
ing countries – regions whose markets tend to be highly
fragmented and complex. Cultural and language bar-
riers, regulatory restrictions and local peculiarities pose
huge challenges for Western and Asian companies alike.
In addition, local competition in emerging markets is
growing stronger, forcing companies to build up detailed
knowledge if they are to remain competitive. To work
the market with maximum efficiency and effect, compa-
nies are therefore increasingly turning to MES providers
in emerging countries.
Global trends driving the growth of market
expansion services
Despite the recent correction in short-term economic
growth rates in emerging markets, volatile exchange
rates resulting from the US tapering and geopolitical
uncertainty in Latin America, South East Asia and the
Commonwealth of Independent States (primarily Russia
and Ukraine), long-term growth prospects for emerg-
ing markets remain robust. The revival of economies in
16 | MARKET EXPANSI ON SERVI CES REPORT
Europe, North America and Japan has helped to further
stabilize global MES growth at a high level. The overall
MES growth rate for the next five years is estimated at
7.4%, compared to 7.5% in last year's report. It is es-
timated that the worldwide MES market will be worth
USD 3.8 trillion in 2018.
Growth in the MES markets is driven by the overall
change in demand in the consumption market and the
change in MES penetration. Both of these drivers are di-
rectly impacted by three global megatrends.
Growing middle classes
Growth in consumption is being driven by an increasing
population, declining unemployment rates and growing
middle classes that have more disposable income. Accord-
ing to the OECD, the global middle classes are set to double
in size by 2030, by which time a total of 4.9 billion
members will generate demand totaling USD 56 trillion.
In combination with higher levels of education, the trend
toward urbanization and improved health awareness,
this development has led to a trade up from necessities
and standard products to convenient and branded qual-
ity products. The shift is not only boosting the consumer
goods and healthcare markets, but will also, indirectly,
have a positive impact on industrial goods – such as
specialty chemicals and engineered products – that are
needed to locally manufacture these consumer products.
However, long-term economic growth rates in larger
emerging countries such as China and India have been
revised, and the lavish monetary policies in which Europe,
North America and Japan are now tailing off. These de-
velopments seem to indicate that further economic de-
velopment in emerging countries and developed nations
alike is becoming more volatile and uncertain – witness
the recent minor economic crises in Brazil, India, South
Africa and Indonesia. On another level, political unrest
Global MES market growth
Figure 7: Global consumption market versus global MES market (CAGR 2013–2018)
Sources: Euromonitor, Espicom Business Intelligence, Global Industry Analysts, SRI, UNCTADstat, Roland Berger Strategy Consultants analysis
Global MES market (USD tn) Global growth driven by…
2018
2013
3.8
2.7
7.4%*
6.4%
Growth driven by change
in MES penetration
Growth driven by change
in consumption
1.0%
* 7.8% annual growth expected
for Asia (CAGR 2013–2018)
| 17 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
Growing emerging market middle classes are driving global demand
Figure 8: People associated to the global middle class and amount of spending
(USD trillion, calculated at fixed 2005 prices and exchange rates)
Sources: OECD, Roland Berger Strategy Consultants analysis
Amount of spending
(USD trillion)
Developed countries
Emerging countries
6.0
16.6
35.4
2010 2015 2020 2025 2030
0
2.0
3.0
4.0
5.0
1.0
13.7 16.2 17.2
in Thailand and smoldering political tensions between
China and Japan, and between China and Vietnam in the
South China Sea have only added to economic instability
in the region. In the eyes of the middle classes, such vola-
tility can pose a significant risk to further growth. Par-
ticularly in emerging countries, the correlation between
GDP growth and poverty reduction is significant. People
who have worked their way up to the middle class during
the years of plenty are at risk of falling back below the
poverty line if economic growth would decelerate. Even
in developed countries, the middle classes are likewise in
danger of shrinking, having borne much of the burden of
the recent economic crisis.
In the short-term, the impact of growing middle classes
on global demand should thus be treated with caution
and in the light of what may happen to economic growth
rates in the near future. In the long-term, however, both
the assumptions and the underlying trend remain intact.
People
associated
to the
middle class
(bn)
18 | MARKET EXPANSI ON SERVI CES REPORT
Increasing intra-regional trade, especially in Asia
Exports between leading emerging markets are another
megatrend that is driving global growth in market ex-
pansion services. According to UNCTAD, what is referred
to as south-south trade has doubled to over 25 percent
of total world exports over the past 20 years. While de-
veloping Asia has hosted the bulk of intra-regional trade,
trade within the developing Americas and developing
Africa has likewise climbed significantly in recent years.
Countries at the forefront of this trend include China,
Vietnam, Egypt, India, Turkey, Peru, Columbia, Brazil,
Mexico and Chile, for example.
Asia has over the years become increasingly integrated
with the rest of the world, its rapid development driven
largely by exports to the United States and the European
Union (EU). In the past, though, even as the world's
"Our company has adjusted to increased
market volatility by reducing internal
complexities and through a continuous
re-evaluation of the value chain."
General Manager, European-based pharmaceutical company
Inter-regional exports (USD bn)
100 500 1,000
Intra-regional exports (USD bn)
50 500 5,000
9.8% p.a.
Growth of intra-regional
exports (2007 – 2013)
% p.a.
India
Greater China
7.2% p.a.
South East Asia
2.1% p.a.
North East Asia
9.1% p.a.
Asia with vibrant growth in intra-regional trade
Figure 9: Inter-regional and intra-regional merchandise exports within Asia
(absolute figures 2013, annual growth rates for intra-regional exports in 2007–2013)
Sources: UNCTADstat, Roland Berger Strategy Consultants analysis
| 19 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
main economic arteries shifted eastward, intra-regional
integration within Asia itself still lagged behind. The last
global financial crisis and the still relatively low growth
rates in Western markets have changed the focus of
emerging companies. The regional Asia Pacific markets
are becoming more attractive for expansion to Asian
manufacturers. Growth in intra-Asian trade will also be
fueled by the establishment of the ASEAN Economic
Community (AEC) in 2015, a project aimed at fostering
economic integration among the South East Asian
nations.
Close geographical proximity to other markets within
a region should not obscure the fact that companies
seeking to operate across borders still face a series of stiff
challenges. A company that is based in China and wants
to sell its products in Thailand, for example, also needs
help in accessing local customers, building up capillary
distribution networks and aligning its marketing activities
to local needs. Hence, intra-regional trade is another key
driver for further growth in market expansion services.
Trend toward outsourcing
Companies today operate in what has aptly been
termed a VUCA world – a world of volatility, uncertainty,
complexity and ambiguity. Confronted by fiercer compe-
tition, constant cost pressures and political uncertainty,
they have begun to focus increasingly on their core
competencies. In the process, they are outsourcing
more and more links in their value chain, which again is
driving demand for integrated MES providers. Moreover,
companies are seeking to mitigate risks as economic
development in emerging countries becomes increasingly
volatile. For many market players, "going it alone" as
they enter or develop foreign markets poses too high a
risk, so trusted partners are increasingly being seen as
the more rational solution. Companies feeling uncertain
about political situations – such as that in Thailand, for
instance – are therefore hedging against potential risks
by relying on a strategic partner with a knowledge of
local conditions and an established local infrastructure.
Indeed, as marketing and distribution systems in
emerging markets also become more complex and
resource-intensive, the need for and the competitive
advantage offered by specialized MES providers is
becoming ever more pronounced.
Summary
As markets become ever more uncertain and vola-
tile, companies are reviewing their current business
model to look for ways to boost further growth and
mitigate risk. Increasingly, this exercise is causing
them to turn to market expansion services providers
as they move to enter new markets or develop exist-
ing ones. An in-depth knowledge of local customs,
practices and cultures, a strong local infrastructure
and proven access to sales channels leaves MES pro-
viders well placed to significantly reduce companies'
risks and costs while at the same time increasing their
sales and market share. The global market for MES is
expected to grow further and offer attractive oppor-
tunities in the years to come. Accordingly, growth ex-
pectations for MES have been revised only slightly, to
7.4%, despite adjusted economic growth forecasts
and increasing uncertainty in the marketplace.
To maintain high growth rates and meet the needs
of their clients, MES providers keep a close watch on
future trends in order to constantly develop and en-
hance the services they offer. As the middle classes
grow in emerging countries, more and more custom-
ers are gaining access to advanced technologies such
as smartphones, which will ultimately impact on how
they shop and interact. This development is flanked
by the demographic shift, as increasing numbers of
users become accustomed to digital technologies in
all walks of life. In contrast to this emerging trend,
the digital market is still on a low level in South East
Asia in particular, where offline interactions and
transactions remain the predominant form.
The trend toward digitization presents tremendous
opportunities to companies wishing to enter new
markets and/or develop existing ones. Yet it also pos-
es significant additional risks. MES providers can be
valuable partners in driving digitization and offering
an omni-channel approach while mitigating the as-
sociated risks.
This report looks at how digitization is changing the
way people and companies do business – and how
MES providers are able to support companies in that
process.
20 | MARKET EXPANSI ON SERVI CES REPORT
Figure 10: Growth of global MES market by industry (2013–2018)
Sources: Euromonitor, Espicom Business Intelligence, Global Industry Analysts, SRI, UNCTADstat, Roland Berger Strategy Consultants analysis
Enhanced growth in consumer markets…
Consumer markets
Healthcare (USD bn) Growth driven by… (annual rate, 2013–2018)
2013
629
+5.4% p.a.
2018
816
+5.4%
+4.9%
Consumer goods (USD bn) Growth driven by… (annual rate, 2013–2018)
Consumption
market growth
MES
growth
premium
MES
market growth
+8.1% p.a.
2013
1,664
2018
2,453
+7.1%
+8.1%
... change in MES
penetration
... change in
consumption
... change in MES
penetration
... change in
consumption
+1.0%
+0.5%
Consumption
market growth
MES
growth
premium
MES
market growth
| 21 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
…and cautious but stable industrial markets
Engineered products (USD bn) Growth driven by… (annual rate, 2013–2018)
+6.5%
2013 2018
495
+8.0% p.a.
+1.5%
+8.0%
Specialty chemicals (USD bn) Growth driven by… (annual rate, 2013–2018)
2013
51
2018
65
+5.2% p.a.
+1.0%
Consumption
market growth
Industrial markets
+4.2%
+5.2%
336
... change in MES
penetration
... change in
consumption
... change in MES
penetration
... change in
consumption
Consumption
market growth
MES
growth
premium
MES
market growth
MES
growth
premium
MES
market growth
2005 2010 2015 2020
94m
74%
37m
74%
17m
81%
81m
7.1%
38m
27%
48m
72%
48m
67%
68m
34%
Japan
South Korea
Australia
India
Russia
UK
Germany
Brazil
France
41m
66%
If Facebook were a
country…
…it would be home to 1 in 6
of the world's entire population
6
11
40
1 ZB = approx.
1,126,000,000,000,
000,000,000 bytes
2017
2015
2013
2012
2005
2000 300
1,100
1,300
1,500
2,400
600
21
1
Global data Internet users by country B2C e-commerce
Revenue forecast (USD bn) in Zettabyte Millions and percentage of
nation's population
USA
227m
74.7%
China
298m
22.4%
E
-
c
o
m
m
e
r
c
e
C
o
n
n
ectedn
e
s
s
S
o
cial m
e
d
i
a
B
i
g
d
a
t
a
22 | MARKET EXPANSI ON SERVI CES REPORT
Digitization as a global phenomenon
Figure 11: Highlights of the digital era
Sources: UNECE, Facebook, CIA factbook, eMarketer, Internet World Stats, Roland Berger Strategy Consultants
B. DI GI TI ZATI ON OF THE BUSI NESS MODEL –
A TREND WI THOUT LI MI TS?
| 23 DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS?
Digitization as a global phenomenon
By the end of 2013, global smartphone penetration
had increased by 1.3 billion devices in only four years to
approximately 25% of the global population. In the USA,
nearly half of all American adults own either a tablet or an
e-reader. In China, the number of mobile subscribers has
reached 1.2 billion, four times more than in the USA and
two times more than in the whole of Western Europe.
In Germany, Facebook has 25 million active users, of
whom 19 million use the service daily – equivalent to the
audience for the best rated show on German television,
but for the whole year. Google consumes over two
billion kilowatts of energy per annum to run its servers
and data centers, roughly a quarter of the output of a
nuclear power plant.
Books have become e-books. DVDs and VHS movies
have given way to online streaming services. Music is
played from media files. And the best way from A to B
is not seen on a physical map, but is calculated in real
time from a combination of GPS signals and traffic data.
These are just a few of the more prominent examples of
how digitization has changed our world. The growing
presence of digitization in our daily lives and the emer-
gence of new technologies have also led companies to
adapt their business models and anticipate new forms
of consumer behavior. Digitization is a new way of
thinking about business, innovation and opportunity
at corporate level. It allows companies to interact with
their customers more efficiently while at the same time
reducing transaction costs.
A company's digital transformation can take place both
internally and externally. Internal digitization focuses on
shifting from analog to digital business processes. This
includes internal data processing, content management,
financial reporting, order processing and merchandise
management, for example. On the other hand, external
digitization tackles the digitization process at either
end of the value chain. On the supply side, companies
are becoming ever more closely connected to their
suppliers, with processes such as procurement, in-
ventory management and stock replenishment being
increasingly automated. At the other end of the value
chain, consumers are likewise becoming interconnected
with companies' information systems. Customers and
shoppers place orders and handle the purchasing process
via an interface that is integrated in a company's internal
information system and thus allows for real-time stock
information and demand-related price adjustments.
Information about the client or consumer is also collected
and analyzed in real time, which vastly increases upselling
potential.
Digitization has gone through many different phases in
the past few decades (the invention of computers, the
launch of the internet, etc.); and the speed at which new
game changing technologies are being introduced is
growing faster by the year. This phenomenon is leading
to higher overall investment costs combined with greater
uncertainty and complexity as companies address the
issue of digitization.
Tesco – bringing online grocery retailing to the
mass market
Shopping for groceries was long considered unsuit-
able for internet-based retailing. Yet Tesco, the lead-
ing UK grocery and merchandise chain, began look-
ing into opportunities to sell its products online 17
years ago. The road to success has been long and
challenging, with the low point reached during the
dotcom crisis. Thanks to process automation and
warehousing, real-time data availability and intelli-
gent demand forecasts, Tesco has nevertheless been
able to make online grocery retailing a marketable
proposition, enabling same-day delivery and guaran-
teeing the freshness of its products. Today, Tesco is
the world's leading online grocery retailer, with rev-
enues of approximately GBP 2.5 billion. Compared to
a global market size of USD 2.3 trillion for packaged
food in 2013, however, even this impressive digital
sales figure accounts for only a very tiny fraction of
the overall grocery market. ?
24 | MARKET EXPANSI ON SERVI CES REPORT
The speed of innovation is constantly increasing
Figure 12: Conceptual illustration of digital phases
Source: Roland Berger Strategy Consultants analysis
Back to the future – the next generation of
game-changing technologies
New disruptive trends are emerging that will have a
lasting impact in the long term. These technologies
have not yet matured to the point where they are
likely to have a business impact within the next 7–10
years. Further development work and research are
necessary if they are to become both marketable and
cost-efficient. However, companies addressing the is-
sue of digitization today would do well to keep an
eye on the longer-term trends, too, as they will prob-
ably have a massive impact on the business models
of the future.
According to technology research company Gartner,
3D printing is at the heart of the next "digital indus-
trial revolution". 3D printing uses computer-created
Powerful trends are reshaping the industry
Within the wider scope of digitization, we have identified
three megatrends that are likely to have a significant
short- to mid-term impact on companies and customers:
mobile commerce, smart infrastructures and business
intelligence.
Time
Data mining
Cloud computing
Mobile commerce
Social media
Smartphones
E-commerce
Data warehouse
Networks
CRM
Mainframe computer
ERP
Database
I PC II Internet III Big data Technological
innovation/
disruption to
the business
model ?
| 25 DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS?
Powerful trends are reshaping the industry
Within the wider scope of digitization, we have identified
three megatrends that are likely to have a significant
short- to mid-term impact on companies and customers:
mobile commerce, smart infrastructures and business
intelligence.
digital models to create real-life objects. While the
production of individual spare parts is already feasible,
3D printing is one day expected to be able to build
houses from scratch or assemble replacements for
human organs. In manufacturing, 3D printing – also
referred to as additive manufacturing – is set to revo-
lutionize product realization and reduce the cost and
time needed to produce customized components.
Wearable devices are already available in the form
of smartphones, intelligent glasses and highly engi-
neered watches such as the Samsung smartwatch.
However, these devices still largely depend on manual
input by the user. Looking ahead towards the internet
of things, devices will become more sophisticated and
practical, capturing and processing a person's move-
ments automatically. At the same time, more and
more goods are being equipped with digital sen-
sors that can communicate with consumer devices
or with each other. UK-based luxury fashion label
Burberry has woven RFID chips into its dresses at
selected flagship stores. If a customer approaches
an advertising screen, the selected dress is detected
and the corresponding promotional film is played.
An entirely different development trajectory is
emerging in the drone industry. While military
applications are already highly developed, the un-
derlying concepts will sooner or later be transferred
to the commercial sector. Selected companies have
successfully tested the use of drones for same-day
delivery services, although commercialization is
currently being held back by the unclear legal basis.
Disruptive megatrends of the future
Figure 13: Digital megatrends
Source: Roland Berger Strategy Consultants experts
Te next
big thing
beyond 2020
Sensors
Internet of
things/wearable
devices
Drones
Cognitive
intelligence
3D printing
Digital home
environment
26 | MARKET EXPANSI ON SERVI CES REPORT
The success code
In early 2013, DKSH Performance Materials (PM)
introduced a user-friendly, utility-oriented app for
Apple smartphones and tablet devices. The tool was
designed to deliver industry news in real time, pro-
vide a location finder and fact sheet for every DKSH
PM location worldwide and support travelers to and
in Asia with utilities such as a translation tool and an
event planner. The app was developed, coded, test-
ed, approved and launched by DKSH in less than six
months. Backed by a focused awareness campaign,
it has been a huge success in terms of the number of
downloads.
Mobile commerce: connected everywhere
Independent technology research company Forrester
Research predicts that, by 2017, half of all smartphone
users will also be mobile shoppers. This "mobile
commerce" is a subcategory of e-commerce that is
optimized for use on mobile devices. As mobile commerce
solutions deepen their market penetration, a brand new
sales channel is enabling companies to compete with
traditional sales and conventional e-commerce solutions.
Mobile commerce will not only impact on customers'
purchasing behavior, but will also give rise to all kinds
of new solutions, such as mobile marketing and mobile
payment solutions. However, many companies are
not yet prepared to maximize the benefits of mobile
applications. According to market experts, only one
in four companies has so far optimized its online sales
environment for mobile devices. Ever more demanding
customers expect companies to have a mature sales
platform on all available channels. Similarly, the customer
experience is becoming increasingly important to each
purchase decision, with customers less and less willing
to tolerate synchronization issues between mobile, online
and offline sales channels. Omni-channel shopping is
thus becoming the norm, as more and more customers
want to use channels seamlessly. Companies that are
not present in all these channels and fail to combine
online and offline sales in a manner that delivers a
superior customer experience are likely to lose business.
Interestingly, in many emerging countries, people are
skipping fixed broadband connections altogether and
opting straight for mobile connectedness. In Indonesia,
the world's fourth largest cellphone market, eleven
million fixed lines stand against 180 million feature
phones. Companies that do not service the mobile
commerce channel will therefore miss out on large
swathes of the consumer base.
Mobile commerce is gaining ground
Figure 14: Mobile retail buyers as a percentage of mobile internet users
Source: Forrester Research Mobile Commerce Forecasts, 2012–2017
Share of global
mobile commerce
shoppers
2017
50%
2012
20%
| 27 DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS?
China Unicom – reaching for the clouds
The race for a share of the global cloud market has
so far been dominated by Western technology gi-
ants such as Oracle, SAP, Amazon and Apple. China's
state-owned telecommunications company, China
Unicom, has now launched a full-service cloud com-
puting and big data service offering under the Wo-
Cloud brand. Wo-Cloud will focus on Infrastructure-
as-a-Service (IaaS) and Platform-as-a-Service (PaaS)
products. China offers substantial opportunities and
is expected to become one of the major cloud mar-
kets over the next few years.
Smart infrastructures: the digital world
The advancement of smart infrastructure technology
opens up exciting opportunities for consumers and
companies alike. Smart infrastructures improve the
speed, safety and efficiency of the ways people live, work
and do business. Using smart infrastructures correctly can
give companies a clear competitive advantage through
higher efficiencies and superior standards of service – by
letting them reduce inventories and operate just-in-time
strategies, for example, but also by ensuring that the right
products are available via the right channels at the right
time (thanks to data-based automated replenishment
and production planning).
Smart infrastructures comprise any technology that
makes business processes more efficient through
automation, connectivity and decision-making based on
collected information. Smart infrastructure applications
can be found in a variety of industries: Retail companies
use them to manage stock and optimize distribution
while also enabling real-time ordering. Pharmaceutical
companies track the incidence of diseases through a
system that links them to local doctors and hospitals in
order to provide the right amount of sensitive drugs in
the right locations at the right time. Communications
companies are currently working on multimode net-
works – a barrier-free combination of Wi-Fi and cellular
systems – to improve network coverage.
Many companies have understood the vast potential
afforded by cloud computing, which is essentially the
virtualization of computer resources and systems – and
is the newest form of IT outsourcing. Cloud computing
lets companies purchase IT hardware and software as a
service rather than a physical, on-site solution. This in
turn lets them slash their investments in IT infrastructures
and flexibly adjust demand in line with changing
requirements. There is much more to the concept than
the potential to reduce infrastructure costs, however: It
can also "virtualize" collaboration between the people in
an organization, allowing them to share information in
real time and improve working efficiencies.
Monetary transaction systems are another form of smart
infrastructure. Many start-ups have invested in building
solutions that enable credit card payments by combining
mobile devices with credit card dongles. Other solutions
provide a more secure or convenient way for companies
and customers to finalize transactions.
28 | MARKET EXPANSI ON SERVI CES REPORT
Figure 15: Development of data volumes
Source: Roland Berger Strategy Consultants analysis
Exponential data growth in all areas leads to information overload
Business intelligence: predicting behavior
In a world where markets are becoming increasingly
transparent – thanks to the emergence of price
comparison websites, customer review features and
smart search engine algorithms, for example – under-
standing the customer becomes ever more crucial to
business success. A range of new technologies now
allows customer data to be collected, processed and
analyzed more efficiently and at lower cost. At the same
time, consumers are increasingly getting used to sharing
information, seeing customized advertising and receiving
personalized offers. The copious data volumes collected
in the process often exceed the capabilities of commonly
used software. Companies are therefore advised to invest
in tools that can manage and process such data within a
reasonable time frame and at affordable cost. Examples
include analytical software and predictive models,
whose effective and smart analysis of the data reveals
dependencies and new insights. These insights in turn
enable a company to identify new revenue potentials (by
increasing their share-of-wallet or improving customer
loyalty) and/or cost saving opportunities (by reducing
marketing expenditure).
Aware of its associations with massive data volumes,
frantic velocities and huge varieties, many companies
are wary of the perceived complexity and resource-
intensive nature of big data and business intelligence.
And there is indeed a real danger that companies could
be overloaded with irrelevant data and spend most of
their resources and time on the wrong analysis. Data
is often collected from a variety of different sources,
which makes comparison difficult and can leave data
analysis unstructured. On the other hand, if they want
to remain competitive and meet the exacting demands
of international customers, companies must at some
point come to terms with advanced business intelligence
from big data, either by investing in new technology
themselves or by outsourcing the entire process of
collection, analysis and interpretation of customer and
market data to third-party providers.
D
a
t
a
v
o
l
u
m
e
s
Information overload
Today In the future
Relevant data
videos are
currently watched
each month on
youtube
6 bn
30+
Petabyte
450
bn
of user generated
data is being stored
and analyzed by
facebook
in 2013
Estimated number
of B2B and B2C
daily business
transactions on the
internet in 2020
| 29 DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS?
Metro Group – eating healthily thanks to
historic information
Metro Group, the global cash-and-carry group, in-
troduced a digital shopping list in 2009. Optimized
for mobile devices, the list provides customers with
individual dietary plans and suggests products for
purchase based on detailed analysis of previous pur-
chases. At the same time, analysis of sales receipts
allows Metro to make precise predictions about
future demand for individual products.
Strong growth of digitization in emerging markets
The impact of digitization differs depending on the
developmental stage of the economy in which a company
operates. Emerging markets stand to make significant
employment gains from digitization, but will reap fewer
rewards in terms of output and productivity. In developed
economies, digitization adds more to GDP growth than it
does to employment. The rapid adoption of new digital
technology in emerging markets is evident in global
connectivity trends such as mobile phone penetration,
access to the internet and network expansion. The latest
statistics from the International Telecommunication
Union (ITU) estimate that there are about 5.3 billion
mobile subscribers in the world, of whom roughly 73%
(3.8 billion) are in the developing countries. China and
India are fueling most of the growth, having added 300
million new mobile users in 2010 alone – a figure larger
than the entire mobile subscription base of the USA.
The number of web users currently stands at 642 million
in the BRIC nations, compared with only 409 million
in the four top developed economies (the USA, Japan,
Germany and France).
Euromonitor forecasts that, as of 2018, consumers in the
Asia Pacific region will spend USD 500 billion on online
retailing, roughly 8% of the region's entire retail market.
This figure singles out Asia Pacific as the region with the
busiest e-commerce activities and transactions in the
world. In China, e-commerce has become very popular
and is growing at a tremendous pace. China's biggest
online retailer announced sales of USD 5.75 billion on
Singles' Day, two and a half times more than online sales
on the equivalent occasion known as Cyber Monday
in the USA. The leading product categories are apparel
and accessories, electronics and books. As highlighted in
figure 16, the share of online retailing is growing strongly,
albeit from what is still a very low baseline. In terms of
volume, traditional retail will remain the dominant form
of shopping, especially in emerging markets.
On the other hand, companies in developed markets
still find themselves hampered by legacy systems in the
shape of physical networks, software, and support and
maintenance contracts. Emerging economies can often
bypass these aging technologies and advance directly
to new, innovative systems. Additionally, companies
in emerging markets appear more willing than their
counterparts in industrialized nations to adapt to
disruptive digital technologies. They generally show
a greater willingness to change established business
practices, try new technologies and take greater risks.
"Data is becoming the new raw
material in business."
Rollin Ford, Executive Vice President, Walmart
MARKET EXPANSI ON SERVI CES REPORT 30 |
Experts suggest that a combination of both scenarios is
the most likely outcome. As emerging markets outstrip
the developed markets in terms of digitization, the
developed countries would come under increasing
pressure to remain competitive, and would therefore
have to invest heavily to regain their dominant position.
The developments taking place in emerging and
developed countries could potentially lead to two
different outcomes: In one scenario, emerging countries
would close the gap on developed countries and then
stabilize at around the same level. The current fast pace of
digital development in emerging countries would in the
future slow down as it approached the level of developed
countries. In a second scenario, emerging nations could
surpass developed countries as digitization is advancing
much more dynamically in these regions. In this scenario,
emerging countries would lay a firmer foundation for
the years ahead, as they are not encumbered by legacy
systems and are more willing to adapt to new, innovative
technologies. Developed countries, however, have
already missed out on the opportunity to invest early in
new technology.
Share of online retailing is growing from a low base
Figure 16: Share of online retail as of total retail
Sources: Euromonitor
13.9
trillion
4.3
trillion
3.1
trillion
3.3
trillion
1.1
trillion
World Asia North America Western Europe Latin America
7.1% 7.6% 10.7% 8.4% 3.4%
4.6% 4.3% 6.8% 5.4% 2.1%
1.8
trillion
0.1
trillion
0.1
trillion
1.1
trillion
China Hong Kong Taiwan Japan South Korea Singapore Tailand
5.6% 1.9% 7.0% 4.2% 12.9% 3.1% 1.0%
11.3% 2.1% 8.5% 6.1% 16.8% 4.7% 1.6%
0.2
trillion
0.1
trillion
0.1
trillion
0.1
trillion
0.1
trillion
0.1
trillion
0.2
trillion
0.4
trillion
0.2
trillion
0.1
trillion
Malaysia Philippines Vietnam Indonesia India Australia New Zealand
0.7% 0.4% 0.5% 0.4% 0.7% 2.7% 2.4%
1.1% 0.5% 0.9% 0.6% 1.1% 5.6% 3.8%
Share of online
retailing 2013
Share of online
retailing 2018
Retail
market size
2013 in
USD
DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS? | 31
MES as an enabler for digital opportunities
Figure 17: Digital MES framework
Mobile commerce 1
Transaction
Interaction
MES
providers
Customers/
experts/shoppers/
consumers
Clients
New channels,
e.g.
e/m-commerce
1
New ways of
infuencing,
e.g. digital/
social marketing
3
New payment
solution,
e.g. e/m-wallet
2
New sources
for insights,
e.g big data
4
Smart infrastructure 2
Business intelligence 3
1. Sell and distribute
3. Inform and infuence
2. Buy and pay
4. Respond and refer
Trends New opportunities
Digital opportunities – improving the way business
is done
The digital megatrend and the opportunities associated
with it have implications for many business sectors
and processes. Interaction between companies and
customers is becoming increasingly important, and
digitization is reshaping the way in which it is handled,
opening up new opportunities for marketing, advertising
and customer influence. The change in interaction is,
however, not limited to company-customer interaction
alone, but also includes communication with all of a
company's stakeholders.
At the same time, digitization is also reshaping the way
business transactions are conducted. New technology is
giving rise to new sales processes and new sales channels.
Companies are aiming to offer their customers a superior
shopping experience and expand their customer base in
online and offline channels. New payment solutions are
even enabling customers in remote locations to engage
in business transaction in the first place.
Market expansion services providers are positioned all
along the value chain between clients and customers.
This position allows them to fully exploit the potential
of digitization on both the interaction and business
transaction sides. Their integrated approach also allows
them to combine both perspectives and realize synergies
and efficiencies at every link in the value chain.
MARKET EXPANSI ON SERVI CES REPORT 32 |
New sales channels
For most consumers, traditional offline retail stores and
outlets are still the most important places to shop. Online
and mobile shopping is, however, rapidly gaining in
significance. Online sales channels are add-on engagement
points that let customers make purchases while also
increasing convenience. However, not all product
categories are equally popular among online shoppers.
According to eMarketer, computer and consumer
electronics combine with apparel and accessories in
making up nearly 50% of e-commerce sales in the mature
USA market. Conversely, food and beverages, healthcare
and personal care products, and bulky categories such as
furniture command disproportionately low online sales.
A similar pattern can be seen on the Chinese market: The
most popular categories here are apparel, footwear and
bags, electronics, cosmetics and personal care products,
which, according to the China-Britain Business Council,
together account for approximately 55% of total B2C
e-commerce sales.
Companies can enter the online world at relatively low
cost and offer their products to a worldwide customer
pool. To stand out from the crowd of online shopping
opportunities, companies must create a superior
shopping experience for their customers. The customer
interface, for example, must be adapted to the local
needs and cultural idiosyncrasies of a country in order to
make shopping on the website attractive to customers. In
China, websites are generally packed with vibrant red or
yellow colors, whereas simplicity is the dominant design
rule in Western markets.
The greatest revenue effect can be achieved by a smart
combination of online and offline sales. An omni-channel
sales strategy gives customers a wider choice of ways to
buy products. As they become increasingly demanding,
however, customers expect the same quality of service
whichever channel they choose. Synchronizing all
available sales channels to offer the client a superior sales
experience is therefore a key success factor in digital sales
strategies.
Famous Amos – going online with chocolate
chips
Famous Amos, the freshly baked chocolate chip
cookie brand, has around 90 retail outlets at shop-
ping malls and airports around Malaysia and an on-
line shop on its website in Malaysia to effectively
penetrate the market via all channels. Customers
can purchase goods and also have them delivered
to gift recipients nationwide. The company's digital
sales effort is backed by a very strong social media
presence, with over 7,000 followers on Facebook.
Famous Amos leverages this channel to engage with
customers through Facebook promotions, contests,
trivia and games.
DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS? | 33
New payment solutions and shopping procedures
The order-and-pay process is undergoing a similar
transition as e commerce and mobile commerce grow in
popularity. Customers who shop via online stores or by
smartphone tend to be reluctant to make wire transfers or
type in their credit card information. The entire shopping
process is thus becoming a one-click solution, where
a customer can buy a product without any additional
effort. Ideally, the customer data, shipping information
and payment instructions will already be stored in a smart
payment solution such as an e-wallet or data safe (e.g.
Google Wallet, Apple's Passbook, Square Wallet, etc.).
Customers should have to negotiate as few hurdles as
possible that could potentially abort the purchasing
process. The existence of many different online payment
providers presents companies with additional challenges:
They have to find the right combination of payment
partners to keep fixed costs down, but they also have
to leave their customers the flexibility to choose their
preferred partners.
New payment technology can also facilitate offline
business transaction in less developed countries. People
in India and Africa are used to paying their bills by
smartphone, and dongles allow merchants to accept
credit card payments without the need for a physical
infrastructure. In Thailand, customers can select the
"cash via counter" option for online purchases. This
lets them print an invoice with a QR code and pay the
online bill in cash at a local 7–11 or Tesco Lotus store.
New payment technologies can thus help overcome
barriers to purchase such as customers' lack of trust in
online payment systems or a country's low credit card
penetration. Accordingly, companies must adapt their
payment systems to local practices and standards in each
country to allow a broad range of customers to complete
business transactions easily and conveniently.
New ways of influencing and informing clients
and consumers
Every day, more customers are turning to interactive
shopping websites, registering on social platforms
and downloading mobile apps. Digital technology
creates new ways to influence, inform and understand
customers, and the number of touchpoints enabling
companies to interact with their customers has increased
significantly. Social media and digital marketing can be
efficient ways to reach and activate a large customer
base in a short space of time. The customer experience
and brand can be improved by an appealing, interactive
corporate website. And, both customer care and after
sales are enhanced by online manuals, help corners and
live support.
Overall, marketing efforts can be customized, personal-
ized and targeted more efficiently to the relevant
customer groups. This improves the return on marketing
and makes it more transparent.
CH Healthy Family
DKSH launched its chhealthfamily.com platform
to combine all brand and product information for
its consumer health products in China on a single
website. At the same time, the site boasts a direct
link to T-Mall, the B2C e-commerce platform oper-
ated by Alibaba for quality, brand-name products for
customers in China. Interaction with consumers and
brand awareness is flanked by digital campaigns and
promotional activities on social media platforms such
as Weibo. Access to Alipay gives customers a safe
and efficient way to pay their invoices. Consolidating
activities on a single platform has led to increased
sales, greater brand exposure and improved custom-
er service.
MARKET EXPANSI ON SERVI CES REPORT 34 |
New sources for customer and market insights
A few years ago, companies collected data primarily in the
course of their daily business transactions, using the data
to monitor operations and provide management with
sales forecasts. Thanks to digitization, the possibilities of
collecting and exploiting customer-generated data have
exploded.
Digital sales channels, social media platforms and smart
customer devices provide a multitude of detailed data
points in the form of website behavior, social media posts
and search queries. It is possible to follow a customer's
every click on a company's website and summarize the
conversations people have about a product or a brand
on social media platforms around the world. Intelligent
analytical tools enable what is often unstructured data
to be processed, analyzed and filtered effectively and
cost-efficiently. Armed with the resultant information
and insights, companies are able to make fact-based
decisions, improve their product offerings, streamline
their marketing efforts and adjust their brand strategy.
Companies use customers' purchasing history and
individual preferences to make predictions, segment
markets and target them on a far more granular level.
Digitization – a game-changer?
The opportunities arising from digital trends are not free
from certain challenges, however. Some of these match
the risks and challenges already familiar from traditional
business processes, such as the need for a profound
understanding of local markets and the availability of
a local warehouse and capillary distribution network.
Other risks and challenges have emerged with digitization
itself – one prime example being the sensitive issue of
ensuring customer data privacy while screening customer
behavior as closely as possible. Successful companies
must anticipate these risks and manage them accordingly.
Accessing consumers via different channels
While different channels make it easier for companies to
reach out to new and existing customers and shoppers,
it has become more difficult to manage them efficiently.
The combination of different channels and the level of
customization required for each country and channel
add to the complexity of digital marketing. Additionally,
customers and shoppers have become more value-driven
and price-sensitive, as they now have more choices
and market transparency is improving. Shoppers share
their opinions on products, write reviews or blogs and
talk to friends about their favorite brands. Advertising
campaigns may be praised or ridiculed by the community;
rumors spread within seconds.
The biggest risks face inexperienced companies that fail
to grasp how their behavior can have a negative impact
and that do not know how best to combine different
channels. Companies must also be aware of the risk that
digital marketing can potentially damage their brand or
reputation and manage this risk accordingly – preferably
with the advice of an experienced expert.
It is also true that neither digital nor traditional
communication can today be viewed in isolation. To
guarantee a modern customer experience and cutting-
edge interaction, communication via online and offline
channels must be combined in an omni-channel
communication strategy. This adds to the complexity
for companies, as both forms must be aligned and
harmonized with each another, but enhance customers'
positive perceptions.
Social media networks are used differently around
the world; many platforms have deep regional roots.
Networks such as VKontakte in Russia, QZone in China,
Orkut in Brazil and Cyworld in South Korea enjoy huge
popularity and are often regarded more highly than
global, USA-born networks such as Facebook, Twitter
or LinkedIn. And even these international networks are
used differently in different countries. Chinese users, for
example, are three times more likely than their American
counterparts to make purchase decisions based on
user-generated content on social media platforms. In
Japan and South Korea, the most efficient way to reach
customers is via social media games or events. Companies
should actively engage in those local networks in order to
engage with customers and build better brand loyalty.
Other formerly popular networks, such as Myspace, Ping
and Friendster, have sunk into oblivion.
The opportunities created by digital marketing and
customer interaction in no way imply that companies
should divert attention from traditional activities that
DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS? | 35
"I see (businesses) saying, 'Let's talk to
people on Twitter or let's have a Facebook
page or let's advertise.' And these
are good first steps but they are nowhere
close to a social strategy."
Mikolaj Jan Piskorski, Social Media Expert,
Harvard Business School
Figure 18: The world of social platforms (in million users; color indicates prevailing platform in each country)
Sources: Company websites, Roland Berger Strategy Consultants analysis
* Planned to be shut down on September 30, 2014
Facebook
1,300
Youtube
1,000
Linkedin
300
Twitter
250
Instagram
200
QZone
600
VK
250
Mixi
30
CyWorld
30
Friendster
115
Orkut*
110 330
Hi5/Tagged
Popularity of social media platforms varies around the world
have proven successful in the past. Depending on the
targeted customers, their digital readiness and their
cultural habits, traditional marketing via television or
direct mailing may still prove to be the most effective
option. Companies should also remember that the
customer journey passes through various channels, and
that there are multiple touchpoints in an omni-channel
environment. To follow and engage customers on their
journey, companies must combine interaction and
communication across both the digital and traditional
channels. Accordingly, they must aspire to a tailored
combination of both online and offline communication.
MARKET EXPANSI ON SERVI CES REPORT 36 |
Digital opportunities must be fulfilled
To make use of the opportunities arising from digitization,
companies need access to a broad spectrum of
technology. This can range from building web customer
interfaces, online stores and smartphone apps to setting
up data centers, server parks and analytical software.
Smart payment solutions must be integrated in existing
transaction processes, and successfully combining
online and offline retail channels requires a knowledge
of the local market. Also, companies that want to keep
up with ever more demanding service standards have
no alternative to maintaining a strong, local fulfilment
and distribution infrastructure to safeguard product
availability and timely delivery. Back-end fulfilment thus
becomes more important than ever.
For smaller and bigger companies alike, the cost of
investing in both technology and a local capillary
distribution network can be challenging. In many cases,
the risks and sheer complexity of such a global undertaking
are enough to discourage many companies. On the other
hand, companies that conquer markets solely via online
channels certainly need a local distribution partner.
Generating insights with data analysis while
ensuring data security
The use of new technology, customers' permanent
connectedness and improved data collection tools and
analytical software provide companies with many and
varied opportunities. They are in a position to collect,
analyze and make use of massive amounts of customer
and market data. However, companies also run the risk
of being overwhelmed by a flood of irrelevant, non-
compelling data that leaves them unable to identify and
extract genuinely valuable insights and dependencies.
Nor do they have the right capabilities for result-
driven analysis in many cases. At the same time, the
technological landscape is evolving extremely rapidly and
investment in a powerful IT infrastructure is a continuous
process. One good way for companies to mitigate the
risks and costs of data analytics is therefore to cooperate
with a capable partner.
Collecting and using customer data also presents a new
ethical challenge, as companies must strive to preserve
individual privacy and ensure data protection. Building
and maintaining a level of trust between customers
and companies is becoming increasingly important. Yet
beyond the issue of trust, companies today also have to
contend with privacy laws, regulations and standards
that vary from country to country. For example, it
may not even be possible to transfer non-anonymized
customer data from a subsidiary in one country to the
company's headquarters in another country. Such local
differences add further complexity and expense to the
use and analysis of customer data.
DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS? | 37
Summary
Digitization is the vital driving force of the 21st centu-
ry and is moving up the agenda on companies' list of
business priorities. The megatrends associated with
digitization open up opportunities for growth and ef-
ficiency gains. Disruptive innovations are often supe-
rior to the solutions that are already available. They
have the potential to change established business
processes or products. Three key digitization trends
– mobile commerce, business intelligence and smart
infrastructures – will have an immediate and power-
ful impact on companies within the next five years.
These trends will affect the ways business transac-
tions are conducted and how companies interact
with their suppliers, customers and other stakehold-
ers. Opportunities for companies mainly come in the
form of new communication, interaction and sales
channels, access and analysis to market data and in-
telligence, and innovative models to rejuvenate the
sales process.
Though aware of the opportunities associated with
digitization, many companies do not have the re-
sources to leverage this potential by themselves. They
often lack the expertise necessary to build superior
services, combine online and offline sales efficiently
and cope with the burden of relentless investment.
Moreover, if they want to deliver a modern customer
experience and interaction, they would also have to
combine communication and sales via online and of-
fline channels in a coherent omni-channel strategy.
Particularly in markets outside their home turf, com-
panies require an in-depth knowledge of local prefer-
ences, customs and culture in order to successfully
implement a digital strategy. And even then, a pure
digital strategy for market expansion rarely succeeds,
as local distribution and fulfillment is required to sat-
isfy customer demands. For all these reasons, compa-
nies are increasingly turning to experienced partners
who can tap the potential afforded by digitization
more effectively – partners who are well able to com-
bine digital and traditional forms of market expan-
sion and development.
MARKET EXPANSI ON SERVI CES REPORT 38 |
Multi-digital natives
Multi-digital natives are companies with global operations
and an extensive market reach. These types of companies
have been building up their foreign operations from the
beginning of the globalization era and are present in all
major international markets. They have either expanded
with their own, strong brand (e.g. Gillette or LMVH) or
have acquired competitors with a strong foothold in
local markets (e.g. Nestlé). Given their size and multi-
country operations, they were confronted with the
strategic question of digitization early on and part of their
growth was initially enabled through digitization. While
multi-digital natives have in the past invested heavily
in digitization to ensure the global flow of information
and enable international business transactions, their
main focus now is on improving the customer-company
interaction and rending digital operations as efficient
and effective as possible.
Local e-heroes
Local e-heroes have a strong regional focus and are
very advanced in terms of digitization. As they already
have a strong foothold in their regional markets they
Companies in Western markets and Asia see digitization
as a key future megatrend that will have a significant
impact on their current business development and future
strategic decisions. The degree to which companies
are ready to adapt towards digitization and implement
new technology can thereby vary substantially. Some
companies see opportunities in digitization for entering
new markets or reaching out to new customer segments,
while others hope to streamline their operations in their
existing markets. A third type of company mainly feels
threatened by the speed of technological change and the
competition arising from it. Geographical reach further
adds to the different perception and strategic relevance
of digitization within a company.
Hence, the readiness, confidence levels and needs of
companies intending to utilize digitization as a means
of growing or improving their current business can be
diverse. Four types of companies were identified which
share similar characteristics in terms of digital maturity
and strategic priorities. These are referred to as multi-
digital natives, global old schoolers, small town laggards
and local e-heroes.
Companies with four distinct digital profiles
Figure 19: Types of digital companies
Source: Survey data
Level of internationalization
N
a
t
i
v
e
s
International Regional
L
a
g
g
a
r
d
s
Local
e-heroes
Multi-digital
Natives
Global old
schoolers
Small-town
laggards D
i
g
i
t
a
l
r
e
a
d
i
n
e
s
s
Emerging markets
Developed market
C. DI GI TAL MES – SUPPORTI NG COMPANI ES I N
CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 39
focus primarily on reducing operating costs, becoming
more efficient in terms of digitization and making
their operations lean. They are less eager to grow
internationally but intend to increase their regional
market share and maintain their strong market position.
Local e-heroes are willing to adapt to new, innovative
technologies or services as long as these prove to be
more efficient. Their digital knowledge level is very high
and accordingly they are looking for specialized partners.
Global old schoolers
In contrast to local e-heroes, global old schoolers focus
on growing internationally but have lost sight of the
latest technologies and opportunities arising from digital
trends. As their operations have grown profitably in
the past, they had no particular interest in dealing with
opportunities arising from digitization. With fiercer
market environments and stronger competition, global
old schoolers are increasingly considering digitization
as a means of boosting their sales and improving their
customer relationships. This type of company is prepared
to invest amounts into digitization of their business
model to catch up with their key competitors.
Strategic incentives of digitization
Figure 20: Strategic focus of digital market player
Source: Survey data
"Yet we do not have the internal structures
to push digitization actively but we
have recognized the need to deal with the
topic to remain competitive."
General Manager, mid-sized global
consumer goods brand
Multi-digital
natives
Small-town
laggards
Customer
development
focus
Low
High
Low
Growth focus
High
Global old
schoolers
Local
e-heroes
Large Medium Small
Average company size
MARKET EXPANSI ON SERVI CES REPORT 40 |
small-town laggards have to be gradually introduced to
the new opportunities.
Small-town laggards
A strong willingness to grow and international aspirations
drive small-town laggards towards digitization. So far
they have not shown a high affinity to digital trends or
technology but as they are reaching the growth limits of
their traditional home markets, small-town laggards see
opportunities in digital trends to increase their domestic
market share even further or grow internationally in an
efficient and reliable way. As they have been cautious in
the past and are aware of the associated risks, they need
to build up extensive knowledge and require the support
of a capable partner.
In dealing with digital trends, companies pursue different
strategies that correspond to their stage of digital
readiness and corporate objectives. Multi-digital natives
and local e-heroes for example demand sophisticated
services and technology while global old schoolers or
Growing from digital laggards to natives
Figure 21: Prevalence of digital types by company size (% of total)
Source: Survey data
Siemens – building on digitization
Siemens, the German engineering conglomerate,
presented its overhaul strategy "Vision 2020" to the
public in spring 2014. The key pillar of the strategy
is to focus externally as well as internally on digitiza-
tion. The focus of products and services for custom-
ers is on electrification, automation and digitization.
Internally, the company enhances growth by gath-
ering and generating data, analyzing content and
drawing conclusions from it.
Multi-digital natives
Local e-heroes
Global old schoolers
Small-town laggards
USD
101 - 1,000 m
over USD
1,000 m
USD
51 - 100 m
USD
10 - 50 m
up to USD
10 m
54%
32%
19%
12%
4%
16%
15%
17%
23%
23%
24%
28%
32%
49%
23%
28%
38%
39%
24%
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 41
Size matters – digitization as a growth driver
Company size has a major impact on the general digital
mindset, and strategic priorities shift as companies grow.
The share of multi-digital natives and local e-heroes
increases significantly as companies become larger.
Three fundamental effects explain this development:
as companies grow, business operations become more
complex and less transparent. To maintain their efficiency
levels, larger companies apply digital technology to
control their operations, consolidate information
and automate processes. Secondly, larger companies
often reach growth limits in their existing markets and
through their traditional channels as they expand. In
order to keep their growth rates high, companies use
digital sales channels to access new customer segments
and boost sales through cross-selling opportunities.
Digitization also requires a certain amount of upfront
investment and maintenance costs in IT infrastructure,
online customer interfaces or data mining solutions. On
average, companies spend around 1% of revenues on
IT costs. For smaller companies, IT related costs have a
much larger impact on bottom-line profitability and are
therefore kept to a minimum.
To summarize, as companies become larger, they
eventually have to take digitization into account in order
to stay competitive.
Leveraging the potential of digitization – a
differentiated view
Regarding digitization, companies have different ideas
about the opportunities it presents. Multi-digital natives
see strong value in new technology to improve their
customer relationships, obtain a better understanding of
customer preferences and collect feedback to improve
their service and product offering. They intend to
continuously improve the interaction with their existing
customers to strengthen their brand, improve the share-
of-wallet and build up stronger loyalty. Local e-heroes
perceive digitization as an opportunity to improve
the efficiency of their operations in existing markets.
Digital technology is applied to achieve a sophisticated
understanding of markets, customers and products.
They expect to improve their marketing and sales efforts
through a granular breakdown of their markets while
simultaneously eliminating inefficiencies.
While all four digital company types see the chance to
boost sales through digitization, it clearly stands out for
global old schoolers and old town laggards. Their primary
motive for addressing digital trends is to increase sales
and improve market share. Global old schoolers focus
on developing new market segments through a strong
interaction with their customers. Old town laggards see
a possibility in digitization to enter new markets quickly
and efficiently.
Finding the right approach to digital market
expansion – a combination of traditional services
and digital expertise
When companies decide to develop existing markets
or expand into new markets through digitization, they
are confronted with a variety of options. Depending
on their digital readiness and capabilities they might
be able to organically grow their digital operations or
transfer their knowledge from home markets to foreign
operations. This approach to digital market expansion is
often unsuccessful as companies neglect to adjust their
digital know-how to foreign markets, align their digital
marketing efforts with local peculiarities and establish a
physical presence in the market. Companies therefore
rely on partners for these processes. Gaining access to
new customers and improving market share through
a capable partner can significantly accelerate digital
market expansion and, at the same time, strengthen the
competitive position.
Traditional partners such as exporters, licensers, joint
ventures or logistics partners are one option for driving
digital market expansion. These somewhat conservative
approaches allow companies to gain fast access to foreign
markets at reduced risk, without high investments in local
infrastructure or analysis of local markets. With an export
partner, companies often have to surrender control about
how their products are being sold in foreign markets
and are not able to tap into the full potential of those
markets. Alternatively, companies make use of licensing
or franchising agreements in order to target foreign
markets more easily and without reduced investments.
On the downside, those companies lose a substantial
amount of control and depend on the partner in the
longterm. Joint ventures are another common method.
MARKET EXPANSI ON SERVI CES REPORT 42 |
This model allows companies to gain market access
through strong local partners without establishing own
subsidiaries. This model also reduces costs and brings
efficiency gains but increases the complexity within the
company and control is shared with the partner. These
traditional partnership models seldom provide specialized
experience or access to digital marketing, e-commerce
platforms or innovative technology.
In the wake of the digital era new forms of partnerships
have advanced. Digital specialists are companies that
have specialized on a certain digital service or product
including social media agencies or digital consulting
firms. Digital specialists are very experienced within their
specific field but normally operate locally. In most cases
they do not have the capabilities for delivering services to
clients on an international scale. Other pure e-commerce
players (e.g. Amazon, eBay or Alibaba) have built up
strong international sales platforms where companies
can sell their products at the cost of a share in their
revenues. While established e-commerce platforms
offer companies a quick and cost efficient approach to
entering international markets, competition on these
platforms can be fierce as entry barriers for competitors
are similarly low. Companies also face the risk of
becoming largely dependent of platforms that have a
dominant market position. While digital specialists and
pure e-commerce players do have very specialized digital
know-how, they have a very narrow view of the entire
value chain.
Digitization offers opportunities for all types of companies
Figure 22: Opportunities by company type
Source: Survey data
Multi-digital natives
Global old schoolers
Local e-heroes
Small-town laggards
Increased market transparency
Cross selling opportunities
Increase of market share
Proximity to customers
Increase in sales
Capturing detailed customer feedback
Stronger customer retention
Improved return on marketing
Customization of products
Increase in sales
Cross selling opportunities
Development of new customer segments
Stronger customer retention
Increased market transparency
Increased market transparency
Proximity to customer
Development of new customer segments
Stronger customer retention
Capturing detailed customer feedback
Increase of market share
Increase in sales
Cross-selling opportunities
Increased market transparency
Proximity to customer
Development of new customer segments
Stronger customer retention
Increase in sales
Increase of market share
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 43
"We have reached our limits with
traditional exports. In order to maintain
the growth momentum in our foreign
markets we have to think
about alternative approaches."
Head of International Sales, European luxury goods brand
Companies expect local fulfillment capabilities for digital market expansion
Figure 23: Expectations of companies towards partners
Source: Survey data
Existing IT infrastructure
Strong physical presence in local market
Access to multiple markets
Strong digital capabilities and expertise
Critical local market size
Reduction of organizational complexity
One-stop solution provider
Strong functional capabilities and expertise
36%
29%
24%
22%
21%
28%
26%
28%
53%
52%
50%
48%
46%
45%
44%
43%
Digital natives Digital laggards
MARKET EXPANSI ON SERVI CES REPORT 44 |
It comes as no surprise that a growing number of
companies are looking for a partnership model that can
fulfill traditional market expansion services and at the
same time provide extensive knowledge about digital
services along the entire value chain. Market expansion
services providers are an increasingly popular solution
as they offer the advantages of traditional partnership
models such as quick market access, mitigation of
risks and reduced upfront investment costs while at
the same time leveraging untapped potential arising
from digitization trends. MES providers reduce the cost
and complexity for companies, increase sales and offer
efficient and value-enhancing services along the entire
primary value chain. Larger MES providers in particular
have an international reach and provide companies with
integrated solutions beyond their traditional regions.
Choosing a suitable partner for digitization
Companies often lack the resources, capabilities and
expertise needed to enter new markets or develop
existing ones through digitization by themselves and
therefore often turn to partners. When selecting a
partner to successfully drive digital market expansion,
companies consider a number of internal and external
factors and demand certain qualifications. They expect
their partners to have both experience with digitization
as well as market expansion.
In terms of digitization, the most important capability
is the availability of a sophisticated IT infrastructure.
Companies turn to partners in order to find a cost-
effective way to digitize and are reluctant to build up
their own data centers or purchase computer hardware
and software. Expertise regarding digital sales channels,
online marketing and automation of business processes
is a must.
Companies entering or developing any market are
currently faced with a variety of challenges along
the value chain. These can include high complexity,
market entry barriers and a lack of local expertise and
infrastructure when interacting with customers. The
importance of local knowledge of customers and
familiarity with cultural peculiarities has increased and
can be met by partners with a strong physical presence
in local markets.
With increasing competition, complexity of business
operations and uncertainties in the global economy,
companies prefer to turn to partners who are able to
handle several steps along the value chain and are big
enough to realize cost savings through economies of
scale.
Going forward with market expansion services –
the prioritized choice for digitization
The different corporate objectives and digital mindsets of
multi-digital natives, global old schoolers, local e-heroes
and small-town laggards lead to differentiated market
expansion strategies (see figure 24). Multi-digital natives
are already advanced in the use of digital technology
and monetization of digital sales trends and rely on
partners who can deliver state-of-the-art digital services
and innovative solutions. They accordingly turn to digital
specialists to refine their existing portfolio, conduct
selective improvements and strengthen their customer
interaction. Global old schoolers and local e-heroes
increasingly rely on market expansion services – for
different reasons. MES providers are able to reduce a
company's operating costs, boost efficiency and reduce
complexity and thus can meet the ambitious targets
of local e-heroes. At the same time, MES providers
help clients to achieve sustainable growth and improve
market share which plays into the hands of global
old schoolers. Small-town laggards take a somewhat
different approach. They also rely on market expansion
services providers and digital specialist but prioritize
logistics partners. They have a short-term perspective
and pursue an aggressive growth strategy. For example,
they can quickly build an international website and
deliver their products internationally through a logistics
provider. In the long run growth from this approach is
limited as markets increasingly demand customization
and adaptation of sales activities to local peculiarities.
With a purely "sales and delivery" approach, small-town
laggards will eventually miss out on leveraging the entire
upside potential of digital market expansion.
Pure e-commerce players are not perceived as a primary
model for digital market expansion. Despite their
technological leadership and market dominance, pure
e-commerce players only focus on a specific part of the
value chain and do not offer an integrated approach of
online and offline services demanded by many companies.
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 45
Figure 24: Qualification of partners for digital market expansion
Source: Survey data
MES providers are highly valued as partners for digital market expansion
Export partners on the other hand might serve as an
instrument for companies to enter new markets quickly
but are less suitable to drive digital strategies.
Companies following a digital market expansion strategy
rely on partners who can deliver superior services in both
digitization and market expansion. Naturally, market
expansion services providers are best suited to fulfill this
demand. With a local presence, they are aware of the
peculiarities in the specific market and combine online
and offline sales in an efficient and reliable way. MES
providers offer companies an integrated approach and
deliver services along the entire value chain; reducing
complexity risks and costs. At the same time, MES
providers are prepared for the latest technological trends,
thereby being able to provide clients with innovative
services and solutions.
Multi-digital natives
Local e-heroes
Global old schoolers
Digital specialist
MES provider
MES provider
Logistic partner
Digital specialist
Logistic partner
MES provider
Joint venture partner
Joint venture partner
Joint venture partner
Logistic partner
Digital specialist
Local franchise
Local franchise
Local franchise
E-commerce provider
Exporter/agency
Exporter/agency
Exporter/agency
E-commerce provider
E-commerce provider
Small-town laggards
Logistic partner
MES provider
Digital specialist
Joint venture partner
Local franchise
E-commerce provider
Exporter/agency
MARKET EXPANSI ON SERVI CES REPORT 46 |
MES succeed in the balancing act of transaction
and interaction competence
To reduce complexity and costs, companies seek partners
who can offer exceptional services along the entire value
chain. An integrated approach includes enhancing the
company's client and customer interaction as well as
improving the business transaction processes. Potential
partners for digital market expansion have their strength
in different application areas. Logistics partners and
exporters are rated as strong partners to drive foreign
transaction processes but lack competence in improving
customer interaction processes. By contrast, the strength
of digital specialists is seen in enhancing customer
relationships. Market expansion services providers
manage to offer their clients superior services across
both dimensions.
MES providers as preferred partners for taking
advantage of new opportunities
The value of market expansion services providers in
delivering superior services and driving digital market
expansion is recognized by all types of companies. MES
providers are well positioned to provide their clients
with the best mix of market expansion and digital
transformation services. 80% of the surveyed companies
would consider an MES provider to drive their digital
market expansion strategy. In our study we examined
the reasons why companies choose market expansion
services providers. The results vary for digitally advanced
and digitally less-advanced types of companies.
One of the key advantages of MES providers is their
physical presence in the markets. They have obtained
specific market knowledge and compiled the skills to
operate successfully in local markets. MES providers
Figure 25: Clients’ perception of service provider competence
Source: Survey data
Balancing act of interaction and transaction competence
Interaction competence
High
Low
Transaction competence Low High
Logistic
partner
Exporter/
agency
Joint
venture
partner
E-
commerce
provider
Local
franchise
Digital
specialist
MES
provider
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 47
C
o
n
s
u
mer e
x
p
e
r
i
e
n
c
e
Digital
channels
Physical
channels
C
o
n
s
u
mer e
x
p
e
r
i
e
n
c
e
C
o
n
s
u
mer e
x
p
e
r
i
e
n
c
e
Single-channel Multi-channel Omni-channel
Figure 26: Channel management approaches
Omni-channel approach – a seamless integration of all channels along the consumer experience
"Shifting budget into digital services is not
about shifting everything online.
Instead it is about merging the best of
online and offline solutions."
Head of Marketing, South East Asian cloth manufacturer
MARKET EXPANSI ON SERVI CES REPORT 48 |
can provide local sales and infrastructure with capillary
distribution network and fulfillment services. With the
increasing popularity of e-commerce among customers
worldwide and as the lines between traditional retail and
e-commerce increasingly diminish; it becomes increasingly
important for companies to have access to both online
and offline sales channels. Being present in only one of
these channels is not sufficient as customers become
increasingly demanding. With their strong physical
presence, MES providers have access to local offline as
well as country-specific online channels and are able to
drive the digital integration of both. The interviewed
companies rated access to multiple sales channels as
one of the major reasons to turn to MES providers.
Multi-channel access and proximity to customers
Figure 27: Reasons for partnering with MES providers by digitally advanced companies (%)
Source: Survey data
Access to multiple sales channels
Access to local retail networks Access to multiple sales channels
Proximity to customers
Reduce operating costs
Mitigation of risks
Local distribution infrastructure
Reduce organizational complexity
51%
42%
54%
37%
30%
28%
24%
44%
43%
37%
36%
34%
25%
25%
Muli-digital natives Local e-heroes
Besides access to multiple sales channels, multi-digital
natives and local e-heroes cite proximity to customers
as one of the top reasons why they would turn to MES
providers. The ability of MES providers to provide support
and services along the entire primary value chain enables
them to be close to the customer and channel useful
feedback to their clients.
Global old schoolers and small-town laggards see possi-
bilities of digitization to grow and improve their custom-
er relationship. At the same time, those companies often
cannot bear the high upfront investments required for
digital market expansion. They avoid high costs for digi-
tal transformation and mitigate the risks associated with
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 49
Multi-channel access and proximity to customers Reduced operating costs, mitigation of risks and access to multiple sales channels
Figure 28: Reasons for partnering with MES providers by digitally less-advanced companies (%)
Source: Survey data
Reduce operating costs
Access to multiple sales channels
Mitigation of risks
Proximity to customers
Access to local retail networks
Local distribution infrastructure
Reduce organizational complexity
51%
33%
43%
25%
36%
23%
20%
43%
38%
33%
32%
32%
25%
24%
Global old schoolers Small-town laggards
building up their own infrastructure or investing in new
but yet unproven technology. MES providers are often
able to reach significant market size and realize valu-
able economies of scale. Investment costs of logistics and
IT infrastructure can be spread among clients and mature
technology is pre-selected. Clients gain access to innova-
tive, digital services and technology at reasonable costs.
MARKET EXPANSI ON SERVI CES REPORT 50 |
MES providers enabling digital customer and
channel management
Different types of companies and their varying strategic
goals translate into different demands for services offered
by market expansion services providers. Depending on
their digital readiness, they either look for an integrated
approach or selected services in marketing, sales,
distribution, logistics, research and analysis as well as
customer service and support.
Companies of all types particularly rate services that
improve interaction with customers and key stakeholders
as highly relevant and that focus on the primary steps of
the value chain. This includes digital marketing strategies,
improving the customer experience in all channels and
handling customer management in overseas countries.
Big data management, customer interaction and channel optimization in high demand
Figure 29: Services demanded by digital company type
Source: Survey data
As multi-digital natives are already technologically
advanced, they are likely to be confronted with a massive
amount of digital data. In order to make valuable use
of this data and to handle the overflow most efficiently,
they turn to MES providers to leverage their experience
and infrastructure in this area. With the analysis of
dependencies and insights into the market, multi-digital
natives want to make their digital marketing activities
more efficient and improve the customer experience.
Local e-heroes also show strong demand for services that
can improve the relationship between their company
and its customers, enhance marketing efforts and
extract insights from customer data. The exchange of
information with suppliers and customers is a key service
for local e-heroes to render their digital operations more
efficient in line with their corporate objectives.
Multi-digital natives
Local e-heroes
Global old schoolers
Small-town laggards
Big data management
Customer relationship
Customer relationship
Online brand building
Ful?llment services
Digital marketing
Sales channel optimization
Digital sales channels
Digital marketing
Sales channel optimization
Digital sales channels
Customer relationship
Market intelligence
B2B interaction
Big data management
Customer experience
Customer experience
Big data management
Customer experience
Big data management
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 51
Global old schoolers and small-town laggards are at the
beginning of digitalizing their operations. They need
MES providers to optimize their digital operations and
enter the digital sales channel. They seek partners able to
support them in the process of building up new channels
and synchronizing them with their traditional ones.
Moreover, they turn to MES providers to improve their
digital marketing and customer experience in order to
boost sales.
Realizing a holistic marketing and engagement
strategy through MES
Digitization has changed the way consumers engage
with brands and companies before, during and after a
purchase. Market expansion services providers support
companies in building up and establishing their digital
communication channels and driving a company's
social marketing strategy. Such services involve more
than purely digital marketing and range from creating
a company's website in foreign markets, setting up
promotional events or establishing company profiles on
social media platforms. They also include monitoring
and tracking of the activities and management of social
media communication. Simultaneously, MES providers
are in a position to use traditional interaction channels
such as TV, billboards or radio to reach customers. This
scope permits a holistic marketing and engagement
strategy where online communication is attuned to
offline market initiatives. Conversations that have been
held with customers through an online help forum could
ideally be continued at the physical customer service of
a sales outlet at a later point and without interruption.
Through its physical presence in many countries, the
MES provider is able to align a global marketing
campaign or branding strategy to local circumstances
and peculiarities. This can include, alongside other
measures, the adjustment of the marketing message, the
analogous translation into a foreign language or the use
of appropriate communication channels. It suggests to
the customer that the company is committed and present
in the respective country. All these alignments to local
conditions and the combination of online and offline
communication tools lead to an improved and smooth
customer journey and increased customer loyalty. This
ultimately enhances the company-customer relationship.
Leveraging big data through MES
Companies have mainly focused on their home markets
to collect customer data and take appropriate measures
from data analysis. As they expand internationally, the
importance of timely and accurate local market research
increases. In order to continue pursuing a global strategy
and competing successfully against local champions,
they need to understand their customers in every
market. In many cases, it is difficult, inefficient and costly
for companies to develop capabilities to conduct and
coordinate research and market intelligence activities in
each individual country.
Instead they leverage the processes of data collection,
processing and analysis through market expansion
services providers. Through their full-service integration
and their end-to-end solutions, MES providers are
already optimally positioned to channel information from
customers back to the client. They can ensure that none
of that valuable information and insights get lost before
they ever find their way back to the client. MES providers
are aware of legal, social and cultural differences in the
respective countries and have a better understanding of
data privacy rules. Protection of personal data is a key
legal issue in many countries as storage of personal
information has exploded and cases of misuse have
become more frequent. Companies with less experience
can not only run in serious legal difficulties but also
compromise their reputation.
MES providers ensure that data collection is done most
efficiently, in accordance with local regulations and that
the comparability of the results is given. MES providers
can add their knowledge of local situations to the data
analysis and draw the correct conclusions from it. Local
understanding is the core pillar to accurate analysis and
meaningful interpretations. Furthermore, MES providers
are able to collect data from various sources and for
different clients and thus reach a level where the data
basis becomes more reliable and meaningful. In addition,
MES providers are able to collect data through online
and offline tools, thereby guaranteeing a comprehensive
information backflow.
MARKET EXPANSI ON SERVI CES REPORT 52 |
Building and fulfilling an omni-channel strategy
through MES
Companies need to find the right balance when
combining online and offline sales as different customers
demand that they sell products through different
channels. The omni-channel consumer expects product
availability through all available channels and that the
overall brand experience is equally satisfying. Many
customers combine channels to support their purchasing
decision: for instance, they inform themselves online
about prices and product attributes but purchase the
product at a local store. Many customers even review
product information on their mobile phone while being
physically present at local stores. Companies must
therefore be prepared to reach a customer through a
variety of channels, while at the same time ensuring the
same level of service across all channels.
MES providers are able to complement existing retail
channels with new digital sales channels, offering their
clients an integrated omni-channel approach. With
their strong foothold in local markets, they are able
to identify optimal combinations and adapt channel
strategies to the needs of individual markets. MES
providers are also able to provide strong local networks
and capillary distribution for their clients and facilitate
quick expansion in the markets. Through this existing
distribution infrastructure, MES providers can handle the
entire fulfillment process and ensure the availability and
timely delivery of products.
Efficient business transaction through MES
Customer credit worthiness and means of payment can
vary considerably from country to country. MES providers
have extensive experience and knowledge about local
customers and their purchasing habits, and can use this
expertise when implementing digital sales strategies.
This includes the selection, implementation and efficient
usage of innovative payment solutions. Depending on
the digital readiness of a country, different means of
payment have to be included in order to allow a broad
spread of customers to purchase goods from a company.
MES providers are able to handle the entire purchasing
process and offer end-to-end solutions, reducing the
complexity and risk for companies.
MES and digitization – combining the best of both
worlds
Digitization creates many new opportunities for com-
panies but also confronts them with real challenges. It
has been shown that various types of companies are at
different stages of digital readiness. Different company
types have distinct priorities with regard to digital
market expansion and follow varying strategic goals.
Consequently, they demand different digital services and
solutions.
To fully exploit the maximum potential while at the
same time mitigating risks, many companies turn to
strategic partners to drive their global digitization
strategy. Integrated, cross-country MES providers are
ideally positioned to drive both traditional and digital
market expansion. With their local presence, expertise
and know-how they are able to offer their clients and
customers superior services along the entire value chain.
MES providers can leverage their capabilities in individual
countries and regions to develop reliable and successful
market strategies together with the companies. Their
local presence allows them to efficiently establish essential
business relationships, deal with local regulations and
provide the required capillary distribution network. With
their existing distribution infrastructure they can act as a
true full-service fulfillment partner for their clients.
MES providers are able to leverage their expertise and
investments into digitization with their clients to reach
economies of scale and provide exceptional knowledge.
With their history and expertise in traditional market
expansion services, they are in the best position to
combine and synchronize online and offline processes in
the best possible way.
MES providers will play a vital role for companies
expanding into new markets or developing their business
in existing markets. They can support companies from
all industries in driving growth, reducing complexity and
realizing efficiency gains in foreign markets. Uncertain
market developments and the consistent focus on core
competencies will further add to the demand for market
expansion services in the years ahead.
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON
MES providers combine digital and traditional market expansion services
Figure 30: Positioning of MES in the global market expansion context
| 53
P
h
ysical chann
e
ls
D
igital channels
MES
providers
Customers/
experts/shoppers/
consumers
Clients
1. Sell and distribute
3. Inform and infuence
2. Buy and pay
4. Respond and refer
MARKET EXPANSI ON SERVI CES REPORT
Digital
advanced
players
Digital
beginners
Are you looking for a strategic partner
to support your global, digital strategy?
Would you like advice on how to
improve your performance in existing
markets through digitization?
Do you need strategic support with
accessing new growth markets through
digitization?
Are you looking for a strategic partnership
to drive your international, digitization
activities?
1
Digital
market
strategy
Digital
advanced
players
Digital
beginners
Do you lack market insights to adapt your
global digital market entry strategy to
local specifics?
Do you need additional market
know-how to improve your
performance in any existing market?
Do you need market know-how to adapt
your products and your marketing
strategy to local customers?
Are you lacking critical customer insights
to grow your local business?
2
Local market
intelligence
Digital
advanced
players
Digital
beginners
Would you like to access new markets
with external resources and specialist
capabilities?
Would you like to improve your efficiency
by outsourcing parts of the value chain
to a partner to focus on your core
competencies?
Do you need to access external financial
resources to successfully enter into a
new market at low cost?
Would you like to grow in existing
markets while reducing costs and
improving efficiency?
3
Skills and
financial
resources
Digital
advanced
players
Digital
beginners
Would you like to access new markets
at low risk with low investment?
Would you like to further develop the
existing market without utilizing own
assets?
Would you like to reduce your risk level
when entering new markets through
digitization?
Would you like to make a critical step
forward in a market and share the risk
with your partner?
4
Risk
transfer
Digital
advanced
players
Digital
beginners
Are you interested in gaining access to an
established local network and market entry
platform?
Do you want to expand your existing network
and infrastructure to aggressively grow
in established markets?
Are you looking for access to proven
local network of customers and contacts
when entering a new market?
Would you like to integrate your
operations into a professional and
efficient local platform?
5
Platform
and
networks
GO into new markets GROW in existing markets Needs
Digital
advanced
players
Digital
beginners
Do you require a strategic partner to realize
efficiency gains when entering new
markets through a combination of digital
and physical channels?
Do you need help in synchronizing your
online and offline activities to improve
the customer experience?
Are you looking for experienced and
proven concepts when entering new
markets through multiple channels?
Would you like to combine online and offline
sales and communication channels to
boost sales and improve customer
interaction?
6
Omni-channel
54 |
ARE YOU READY FOR DI GI TAL
MARKET EXPANSI ON?
METHODOLOGY | 55
METHODOLOGY
Survey
Roland Berger Strategy Consultants conducted an online survey generating more than 380
responses from executives of current or potential clients of market expansion services (MES)
providers in the Asia Pacific region. The survey asked about overall goals and strategies, modes
of market expansion, demand levels for MES and companies' expectations of MES providers.
Interviews
In addition, Roland Berger Strategy Consultants conducted 10 interviews with industry
leaders and experts. The interviewees were executives of current or potential clients of MES
providers. The sample was balanced between industries (consumer goods, specialty chemicals,
pharmaceuticals/healthcare and engineered products), geographical regions and company
size. Case studies are based on publicly available company information.
Market sizing and breakdown
Market sizes were calculated using a detailed market model developed by Roland Berger
Strategy Consultants. Total market sizes are based on industry-specific data (from sources such
as Euromonitor, Espicom Healthcare Intelligence, GIA and SRI) and publicly available reports
from leading institutes (including the IMF, WHO, World Bank and UNCTADstat). Roland Berger
Strategy Consultants first calculated the total size of each market, then estimated the size of
the market for market expansion services in a multistage approach. The input for this step-by-
step market breakdown, initially carried out for our first report in 2011, was a combination of
quantitative market data and qualitative and quantitative expert opinions.
Market projections
Market projections are also based on a detailed market model developed by Roland Berger
Strategy Consultants. They distinguish between market demand forecasts and forecasts
for the penetration rate of market expansion services. All market projections are in current
prices based on fixed exchange rates (base year: 2012). Projections for the demand side and
historical data are derived from market data published by the relevant research institutes.
Limitations
The market breakdown is the result of our analysis of quantitative and qualitative information
from quantitative sources (e.g. market reports) and interviews with experts. A realistic market
breakdown also requires qualitative information. For this reason, estimates were used, and
some figures must therefore be considered "best approximations", and the actual market
sizes may vary. Market forecasts are projections and as such cannot fully take account of
all possible eventualities. Despite these limitations, Roland Berger Strategy Consultants is
convinced that the analysis presented in this study is a true and fair reflection of the markets
in question.
DKSH is the leading Market Expansion Services provider with a focus on Asia. As the term
"Market Expansion Services" suggests, DKSH helps other companies and brands to grow
their business in new or existing markets.
Publicly listed on the SIX Swiss Exchange since March 2012, DKSH is a global company
headquartered in Zurich. With 735 business locations in 35 countries – 710 of them in Asia –
and 27,200 specialized staff, DKSH generated net sales of CHF 9.6 billion in 2013.
The company offers a tailor-made, integrated portfolio of sourcing, marketing, sales,
distribution, and after-sales services. It provides business partners with expertise as well
as on-the-ground logistics based on a comprehensive network of unique size and depth.
Business activities are organized into four specialized Business Units that mirror DKSH fields
of expertise: Consumer Goods, Healthcare, Performance Materials, and Technology.
With strong Swiss heritage, the company has an almost 150-year-long tradition of doing
business in and with Asia, and is deeply rooted in communities and businesses across Asia
Pacific.
www.dksh.com
[email protected]
56 | MARKET EXPANSI ON SERVI CES REPORT
| 57 COMPANY PROFI LES
Roland Berger Strategy Consultants, founded in 1967, is one of the world's leading strategy
consultancies. With around 2,700 employees working in 51 offices in 36 countries worldwide,
we have successful operations in all major international markets.
Roland Berger Strategy Consultants advises major international industry and service companies
as well as public institutions. Our services cover all issues of strategic management – from
strategy alignment and new business models, processes and organizational structures, to
technology strategies.
Roland Berger is an independent partnership owned by around 250 Partners. Its global
Competence Centers specialize in specific industries or functional issues. We handpick
interdisciplinary teams from these Competence Centers to devise tailor-made solutions.
At Roland Berger, we develop customized, creative strategies together with our clients.
Providing support in the implementation phase is particularly important to us, because
that's how we create real value for our clients. Our approach is based on the entrepreneurial
character and individuality of our consultants – "It's character that creates impact".
www.rolandberger.com
[email protected]
58 | MARKET EXPANSI ON SERVI CES REPORT
Disclaimer
The information contained in this report is based on extensive primary and secondary research. Whilst we believe
the information to be reliable and a reflection of the current status we are not in a position to guarantee the results.
Roland Berger Strategy Consultants and DKSH disclaim all warranties with regard to the content, express or implied,
including warranties of merchantability and fitness for a particular purpose, nor assume any legal liability for the
accuracy, completeness, or usefulness of any information contained herein. No one should act on such information
without appropriate professional advice after a thorough examination of the particular situation. This report contains
certain forward-looking statements. By their nature, forward-looking statements involve uncertainties because they
relate to events that may or may not occur in the future. This particularly applies to statements in this report containing
information on future developments, market projections and expectations regarding the market expansion services
business, and general economic and regulatory conditions and other factors that affect market expansion services.
Forward-looking statements in this report are based on current estimates and assumptions that are made to Roland
Berger Strategy Consultants' and DKSH's best knowledge. These forward-looking statements (including those derived
from third-party studies) are subject to risks, uncertainties, and other factors that could cause actual situations and
developments not to occur, and/or to differ materially from and be worse than those Roland Berger Strategy Consultants
and DKSH have expressly or implicitly assumed or described in these forward-looking statements. Neither Roland Berger
Strategy Consultants nor DKSH assume any obligation to update any forward-looking statements or to conform these
forward-looking statements to actual events or developments.
| 59
60 |
For further information, please visit
www.marketexpansion.com
doc_410651438.pdf
The high growth dynamics for the global market for market expansion services have been confirmed with an annual growth rate of 7.4% through 2018. The MES market therefore remains one of the most promising sectors in the outsourcing industry.
| 1
DIGITIZATION AND THE MARKET
EXPANSION SERVICES INDUSTRY:
DRIVING OMNI-CHANNEL
GROWTH
Fourth Global Market Expansion Services Report
2 |
| 3
© Copyright by DKSH Holding Ltd. and Roland Berger AG Strategy Consultants, Zurich, September 2014
All market data and market projections presented in this report are based on a detailed market model independently developed by
Roland Berger Strategy Consultants.
DIGITIZATION AND THE MARKET
EXPANSION SERVICES INDUSTRY:
DRIVING OMNI-CHANNEL
GROWTH
Fourth Global Market Expansion Services Report
2
3
4
Global MES market (USD tn) Global growth driven by…
2018
2013
3.8
2.7
7.4%*
6.4%
Growth driven by change
in MES penetration
Growth driven by change
in consumption
1.0%
4 | MARKET EXPANSI ON SERVI CES REPORT
1
Digitization is enhancing traditional business models but not changing the basic
business logic
Digitization as a megatrend is impacting all areas of corporate business models. Companies are
adapting their strategies and business models to cope with challenges and opportunities arising
from the digital age. While growth in digital commerce has shown tremendous growth figures
in recent years, global penetration is still below 5% of total sales.
Three trends are driving digitization
Three key trends are driving digitization and are likely to have an immediate effect. Mobile
commerce, business intelligence and smart infrastructures are the key topics that have a
significant short- to mid-term impact on companies and customers, and on ways of doing
business.
Digitization is reshaping customer interaction and business transactions
Digitization is reshaping the ways in which customer interaction is handled and is opening new
paths for marketing and customer influence. Social media strategies, digital marketing and big
data analysis are tools for fostering customer-company relationships. With new technology, the
sales process is being redesigned and new channels for sales are becoming available.
STUDY HIGHLIGHTS
Creating value in all channels
Continuous growth in the global market expansion services industry with Asia Pacific
as the biggest market
The high growth dynamics for the global market for market expansion services have been
confirmed with an annual growth rate of 7.4% through 2018. The MES market therefore
remains one of the most promising sectors in the outsourcing industry. Ongoing growth of the
middle classes, intra-regional trade in Asia, Africa and South America, as well as the increasing
trend towards outsourcing, are fueling the demand for market expansion services.
* 7.8% annual growth expected
for Asia (CAGR 2013–2018)
Figure I: Global consumption
market versus global MES market
(CAGR 2013–2018)
Sources: Euromonitor, Espicom
Business Intelligence, Global
Industry Analysts, SRI,
UNCTADstat, Roland Berger
Strategy Consultants analysis
| 5
Clients and customers are at different stages in their digital journey
Clients and customers pursue different strategies reflecting their stage of digital readiness
and objectives. International and digitally advanced players (multi-digital natives) sharply
focus on improving their customer relationships, while local and digital beginners (small-town
laggards) expect to boost growth through digitization. Local and advanced digital companies
(local e-heroes) want to make existing digital operations more efficient, whereas international
digital beginners (global old schoolers) are increasingly considering digitization as a means for
improving both their sales and customer relationships in order to remain globally competitive.
5
7
As companies often lack the key resources and capabilities to drive a digital strategy
through omni-channeling, they are turning to qualified partners
Companies pursuing a digital market expansion strategy are seeking partners that have
experience and capabilities in providing superior services in digitization as well as market
expansion. Partners with existing digital capabilities as well as local expertise and access to
multiple sales channels and digital marketing opportunities are in demand.
MES providers succeed with comprehensive set of services
MES providers are the preferred choice for companies, as they are well positioned to provide
their clients with the best mix of market expansion and digital transformation services. While
digital specialists only serve specific steps of value creation, MES providers offer an integrated
approach to supporting companies along the entire value chain.
MES providers are combining the best of the old and new world
Cross-regional MES providers are in an optimal position to drive omni-channel market expansion.
Due to their local presence, expertise and know-how, they are able to offer their clients superior
services along the entire value chain and combine both online and offline services for market
expansion and market development.
6
8
7
Figure II: Rating of competence along transaction
and interaction processes
P
hysical channels
D
igital channels
MES
providers
Customers/
experts/shoppers/
consumers
Clients
1. Sell and distribute
3. Inform and infuence
2. Buy and pay
4. Respond and refer
6 | MARKET EXPANSI ON SERVI CES REPORT
PREFACE
The market expansion services (MES) industry saw yet another year of promising growth,
despite revised economic prospects and increased uncertainty in emerging markets. The sector
remains one of the most prospering areas in the outsourcing industry, offering further growth
opportunities for MES providers, their clients and customers. Demand from companies for
market expansion services has increased steadily and is fueled by continuous overall economic
growth in emerging markets.
This year's report provides an update on the development and growth expectations of global
market expansion services and focuses specifically on digitization. Digitization is perceived
as the major topic of the 21st century and offers increased opportunities for companies to
enhance growth, improve efficiencies and develop their business operations in new and
existing markets.
Since many companies lack the necessary resources and capabilities needed to drive a digital
strategy, they are turning to experienced and qualified partners. To remain competitive,
reduce complexity and improve cost efficiencies, partners who can offer an integrated
approach while combining traditional and digital market expansion strategies are in high
demand. Consequently, market expansion services providers are valuable partners in driving
digitization and offering an omni-channel approach.
DKSH and Roland Berger Strategy Consultants have once again collaborated to produce the
fourth edition of this report on current trends and developments in the market expansion
services industry. Positive feedback from previous years has shown that these reports are
acknowledged by the market as an industry standard.
This year's report reflects the leading research on digitization and includes the findings from
over 380 survey responses and insights from industry experts and thought leaders. The results
aim to help decision makers gain a better understanding of the impact of digitization on their
business models, and of the digital readiness and mindset of different market participants. It
also highlights how companies can work with market expansion services providers to leverage
the potentials of digitization and drive digital transformation in overseas markets.
We hope you enjoy reading this study and are looking forward to receiving your suggestions,
feedback and comments.
Dr. Joerg Wolle Matthias Hanke
President & CEO DKSH Holding Ltd. Managing Partner Roland Berger
| 7 CONTENTS
CONTENTS
A. The global market expansion services industry – an industry on the rise
Market expansion services – outsourcing on a new level
Market expansion services – a multi-faceted growth driver
Global trends driving the growth of market expansion services
B. Digitization of the business model – a trend without limits?
Digitization as a global phenomenon
Powerful trends are reshaping the industry
Strong growth of digitization in emerging markets
Digital opportunities – improving the way business is done
Digitization – a game-changer?
C. Digital MES – supporting companies in capturing the potential of digitization
Finding the right approach to digital market expansion – a combination of traditional
services and digital expertise
MES providers as preferred partners for taking advantage of new opportunities
MES providers enabling digital customer and channel management
MES and digitization – combining the best of both worlds
Checklist: Are you ready for digital market expansion?
Methodology
08
08
11
15
22
23
24
29
31
34
38
41
46
50
52
54
55
8 | MARKET EXPANSI ON SERVI CES REPORT
consumption and reduce the dependency of their
economies on exports. The economic upturn witnessed in
recent years has led to the gradual emergence of strong
and affluent middle classes, increased levels of education
and more disposable income. With Western economies
recovering more slowly than expected from the recent
recession, they have understandably shown increasing
interest in emerging markets as prospering sales
markets, too. Accordingly, Western and Asian companies
alike today see Asia as an important sales market.
Selling products in emerging countries is anything but
straightforward, however. Overcoming language barriers,
navigating local regulations and legal restrictions,
understanding regional and cultural differences, adapting
products and services to local preferences and thereby
gaining access to distribution channels and infrastructure
are only a few of the many challenges new entrants face.
Both aspects – companies' desire to focus more strongly
on their core competencies and the emergence of
prospering but complex sales markets – have led to the
rise of a new type of service industry. Market expansion
services (MES) providers help companies to enter new
Market expansion services – outsourcing on a new
level
Focus on core competencies and growth
opportunities
Companies across all industries and geographic regions are
increasingly shifting their focus to their core competencies
as global competition increases and pressure on earnings
intensifies. In recent years, companies have realized that
they can best serve their customers and make the best
use of their talents by focusing on their core strengths
and outsourcing all other processes. At the same time,
turning to specialized service providers gives companies
access to a broader pool of knowledge, experience and
leading-edge technology.
To reduce their cost base and obtain access to resources
not available on their home markets, companies have
moved production abroad. Asia in particular has long
been considered the "extended workbench of the
West", with companies transferring production here to
take advantage of lower labor costs. This perception has,
however, changed over the past few years. Governments
in emerging markets are now pushing to boost domestic
A. THE GLOBAL MARKET EXPANSI ON SERVI CES
I NDUSTRY – AN I NDUSTRY ON THE RI SE
Market expansion services – outsourcing customer-oriented processes for growth
Figure 1: Market expansion services within the outsourcing landscape
Functional focus Customer-oriented processes
Market
expansion
services
Knowledge
process
outsourcing
Strategic focus
Support-oriented processes
Growth
Cost
Information
technology
outsourcing
Business process
outsourcing
| 9 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
markets or develop existing ones more efficiently and
effectively. They support companies at different links
in the value chain, including marketing, sales and
distribution as well as customer service and support.
Combining local experience with a focus on customer-
oriented processes, market expansion services providers
are able to reduce complexity and costs for both their
clients and their customers as these seek to grow their
business.
Market expansion services differ fundamentally from
traditional outsourcing activities. Traditional outsourcing
generally occurs in three different forms: The out-
sourcing of specific business processes such as payroll
accounting, recruiting and procurement is known as
business process outsourcing (BPO). The outsourcing
of IT-related processes, including the writing of source
code, hardware maintenance and server operations, is
referred to as information technology outsourcing (ITO).
Knowledge-intensive activities such as research and
development, patent management and clinical research
trials are subsumed under the term knowledge process
outsourcing (KPO).
By contrast, market expansion services providers place
more strategic emphasis on activities that add value,
focusing in particular on business growth and front-
end processes such as marketing, field marketing, sales,
customer services and support. As a result, companies
are turning to market expansion services providers not
only to reduce their cost base, but also to increase their
market share, improve market coverage, deepen market
penetration, lower fixed costs and reduce complexity.
Integrated service solutions
MES providers adopt an integrated service approach
and offer a comprehensive set of services covering the
entire value chain. They provide clients with solutions in
areas such as field marketing, key account management,
sales, inventory management, accounts receivable
management and customer services. Since these services
focus heavily on interaction with customers, they clearly
need an in-depth knowledge of the local market, the
skills to identify market opportunities and sufficient
local resources to support sales and capillary distribution
on the ground. Unlike single-service providers (such as
sales agents and market research firms), MES providers
offer their clients and customers end-to-end solutions
Integrated solutions along the entire value chain
Figure 2: Market expansion services along the value chain
Marketing Sales
Distribution and
logistics
Customer service
and support
> Promotion
management
> Public relations
> Product
management
> Brand building
> Field marketing
> B2B and B2C
sales
> Key account
management
> Product training
> Order taking and
processing
> Stock reporting
and planning
> Importation
> Warehousing
> Stock
management
> Invoicing, cash
collection
> Transportation
and delivery
> Product
packaging
> Installation and
commissioning
> Customer
service, technical
support
> Repairs and
maintenance
Strategic support in market entry and development
Research and
analysis
> Market research
> Market entry
studies
> Applications re-
search and support
> Testing
> Product
registration
> Customer insights
Backflow of information from customer to client
C
l
i
e
n
t
C
u
s
t
o
m
e
r
10 | MARKET EXPANSI ON SERVI CES REPORT
SDI
sophistication (see figure 3). While the SDI depicts only
the state of the economies in focus at a certain point
in time, it will, over time, allow the dynamics in their
service development levels to be observed and analyzed.
This year's update to the index reveals various develop-
ments and insights:
• Singapore has defended its position in the "Leaders"
group, having joined Japan there only a year ago
• South Korea has fallen back to the "Chasers" group
and been overtaken by Australia, although its scores
for the level of innovation and integration of
technology are still among the highest
• Compared to last year's figures, Malaysia and
Indonesia have advanced most in terms of their overall
innovation level and readiness to adopt technology.
Thanks to positive economic development in recent
years and large sums of foreign direct investment,
local companies are willing to take new technology
on board in order to remain globally competitive.
• The countries in the "Starters" group" have moved
closer together. Although these countries have
experienced significant economic growth over the
past couple of years, they are still at a stage where
they are seeking basic services and solutions.
These developments indicate that the Asia Pacific region
remains as dynamic as ever, and that the readiness
of countries to accept new services will continue to
increase. Consequently, MES providers must continue
to add innovative services to their portfolio while at the
same time making due provision for different readiness
levels and expectations in the countries they serve. In
doing so, integrated, cross-border and industry MES
providers can build on their local knowledge and
expertise, as they are already accustomed to adapting
existing services to the needs of specific industries and
markets.
Service innovation – leading through innovation
In a competitive environment, it is increasingly impor-
tant to offer clients exceptional services that extend
beyond the standard portfolio. MES providers aiming to
position themselves as leading market players must not
only raise their basic service offerings to excellent levels,
but also continuously improve their services to win
over clients and customers with innovative solutions.
Innovative services in line with what markets want
and need are a key growth driver for the MES industry.
MES providers eager to tailor their service offerings
to local needs must also be mindful of varying levels
of sophistication in the services required by different
countries. The Service Development Index highlights
the differences between the individual countries in
the Asia Pacific region and indicates the extent to
which companies are ready for, or actively demanding,
innovative services.
The Service Development Index
The Service Development Index (SDI) measures the
level of service sophistication of an economy by com-
bining generally established macroeconomic indicators
and market experts' opinions.
This assessment of the level of service sophistication
in different countries is based on the average score
for four equally weighted key parameters – a survey
of executives and market experts (1), the countries'
innovation levels (2), their business sophistication
(3), and their technological readiness (4) scores as
measured by the World Economic Forum. Using this
information, the Service Development Index identifies
each country's overall level of service sophistication.
The resulting scores can be used to identify groups
of countries that share similar levels of service
| 11 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
that significantly reduce both complexity and the work
involved in coordination.
The customized services offered by MES providers
facilitate effective interaction between clients, customers
and even end-consumers on home and foreign markets.
MES providers' ability to provide support along the
entire value chain also enables them to channel valuable
feedback from markets and customers to manufacturers.
They can deliver a seamless flow of information that
bypasses the risks and complexities caused by different
interfaces with different partners. In addition, MES
providers enable efficient business transactions
between clients and customers by leveraging their local
infrastructure, market access and knowledge of local
distribution channels to professionally position clients'
product on the market and efficiently perform fulfillment
services.
Figure 3: The 2014 Service Development Index (SDI) for the Asia Pacific region
Sources: World Economic Forum, survey data, Roland Berger Strategy Consultants analysis
Service sophistication dynamics in Asia Pacific environment
35
40
45
50
55
60
65
70
30
Philippines
Sri Lanka
Myanmar
Laos
Indonesia
India
Vietnam
Tailand
China
Malaysia
New Zealand
Australia South Korea
Hong Kong
Taiwan
Singapore
Japan
Starters
Pursuers
Maturity
SDI
Chasers
Attackers
Leaders
Cambodia
To offer state-of-the-art services, market expansion
services providers must continuously adjust their service
offerings in line with clients' and customer’s rapidly
changing market needs. This requires them not only
to permanently improve their existing services, but also
to anticipate future trends and proactively push new
services onto the market.
Market expansion services – a multi-faceted
growth driver
Differences in the dynamics of growth in the various
industry sectors and geographic regions are more
pronounced than in previous years. This is due to revised
global economic growth rates and higher levels of
uncertainty, particularly in emerging markets. Even so,
overall long-term forecasts for the market expansion
services industry remain promising.
12 | MARKET EXPANSI ON SERVI CES REPORT
Stabilizing consumer markets
Demand for market expansion services is strongest
in industries that require local sales and marketing
platforms and strong capillary distribution networks.
Clients and customers in these industries require
customized services along the value chain and therefore
turn to MES providers. Demand is also influenced by the
level of product complexity (in the case of long-term
projects such as plant engineering, for example) and the
need for technical expertise. As a general rule, the more
standardized a product, the greater the demand for
market expansion services. Given these considerations,
demand for market expansion services can clearly differ
substantially from industry to industry.
As in the preceding reports, the four selected industries
– consumer goods, healthcare, engineered products and
specialty chemicals – therefore once again form the focus
of this report's analysis. Underscoring its importance
to the MES industry, the consumer goods sector again
made up the largest share of the global MES market,
accounting for a total MES market value of USD 1,664
billion in 2013. This sector is followed by healthcare,
with a transaction volume of USD 629 billion, engineered
products, at USD 337 billion, and the specialty chemicals
industry, with a total MES volume of USD 51 billion in
2013.
Consumer goods
In the consumer goods sector, the MES penetration rate
differs significantly between developed and emerging
regions, standing at around 13% in Europe and North
America, while exceeding 20% in Latin America and the
Asia Pacific region.
Figure 4: MES framework: interactions and transactions
Adding value to clients, customers and consumers
Transaction
Interaction
MES
providers
Customers/
experts/shoppers/
consumers
Clients
1. Sell and distribute
3. Inform and infuence
2. Buy and pay
4. Respond and refer
| 13 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
Consumer markets Industrial markets
Total MES
market, 2013
(USD bn)
629 1,664 51 337
MES penetration
rate, 2013
(% of global
consumption market)
24%
15%
16%
27%
7%
11%
28%
33%
7%
17%
11%
19%
18%
10%
32%
6%
15%
25%
21%
4%
36%
10%
4%
17% 45% 8% 10%
Europe incl. CIS
North America
Latin America
Asia Pacific without Japan
Japan
Africa and Middle East
Specialty
chemicals
Engineered
products
Healthcare Consumer
goods
Consumer markets out in front
Figure 5: Global market expansion services market and penetration rates by industry
Sources: Euromonitor, Espicom Business Intelligence, Global Industry Analysts, SRI, UNCTADstat, Roland Berger Strategy Consultants analysis
4%
Stronger demand for market expansion services in
emerging regions is to a large extent due to the coexis-
tence of modern and traditional retail channels. Companies
must effectively and efficiently combine modern and
traditional delivery in their "go-to-market" approaches
while also coping with the complexities of underde-
veloped logistics infrastructures and cultural differences.
To successfully enter or develop emerging markets,
companies are increasingly asking market expansion
services providers to enhance their approach by supplying
customized solutions, integrity of the value chain,
access to a local capillary distribution network, accounts
receivables management, specialized marketing services
and carefully tailored support at the point of sale (POS).
The outlook for market expansion services in the
consumer goods segment remains highly positive over
the next five years, with a growth rate of 8.1% expected.
The overall sector has so far proven relatively immune
to revised economic growth prospects, as drivers such as
growing middle classes and a higher level of disposable
income in emerging markets are still fueling overall
consumption.
Healthcare
The healthcare sector consists of three subsectors:
prescription drugs, over-the-counter (OTC) products
and medical devices. Even though the overall healthcare
market is only 15% of the size of the consumer goods
market, it nevertheless boasted an impressive average
MES penetration rate of 45% in 2013.
For healthcare companies, foreign markets represent
highly complex challenges. The complexity derives
14 | MARKET EXPANSI ON SERVI CES REPORT
Figure 6: Growth of global MES by region (2008–2018)
Sources: Euromonitor, Espicom Business Intelligence, Global Industry Analysts, SRI, UNCTADstat, Roland Berger Strategy Consultants analysis
Market expansion services – continuous growth in emerging markets
Overall, the healthcare market is expected to grow at
a stable rate of 5.4% in the years ahead. At the same
time, however, it is becoming increasingly volatile as
two major but conflicting developments unfold: While
many underserviced emerging economies in particular
offer plenty of scope for continued growth, most
governments are restricting spending in order to contain
rising healthcare costs.
Engineered products
The global MES penetration rate for engineered products
rose from 7.9% in 2012 to 8.1% in 2013. Many industrial
companies have in the past utilized their own resources
or relied on dedicated single-service providers (i.e. local
sales agents) to develop their foreign markets. However,
as they themselves move from offering individual
products to integrated solutions, they find themselves in
need of partners who can offer services along the entire
from higher standards in terms of lead times, strict
corporate governance requirements, rigorous regulatory
environments, local healthcare systems and pharma-
covigilance (or drug safety). In addition, manufacturers
experience more pressure on their margins due to increased
competition from generic brands, pricing difficulties,
rising product development costs and government-
enforced caps on drugs spending. Pharmaceutical
companies therefore are increasingly focusing on their
core competencies. For all these reasons, the healthcare
industry is aiming to outsource most of the links in its
value chain to third-party providers. Demand for market
expansion services in the healthcare segment is therefore
likely to increase further, because MES providers can
offer companies an excellent, integrated approach
thanks to their expertise and specialized knowledge of
local regulations and healthcare systems.
MES
market
(USD bn)
MES penetration rate (% of global consumption market)
1,000
1,100
1,200
1,300
0
22 18 20 16 14 12 10 26 24 30 28
900
800
700
600
500
400
300
200
100
North
America
Africa &
Middle East
Latin America
Europe
incl. CIS
Asia Paci?c excl. Japan
Japan
2008
2008
2008
2018
2008
2008
2013
2013
2013
2013
2013
2013
2018
2018
2018
2018
2018
2008
| 15 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
value chain. Accordingly, demand for market expansion
services is likely to increase further.
By contrast, overall growth forecasts for engineered
products have been adjusted downward in line with
revised economic growth prospects. Uncertainty prevails
in many markets, such as some peripheral European
countries, Greater China and Brazil. In this climate,
companies tend to be reluctant to expand and are
holding back investments in the short term. In the long
term, growth in the engineered products industry is
expected to pick up again as government investment in
infrastructure and transportation projects resumes and
confidence returns to the market.
Specialty chemicals
Specialty chemicals serve a wide range of applications
relating to industrial, consumer and healthcare products.
They can, for example, be found in fertilizers and crop
protection agents for the agricultural sector, in sealants,
coatings and paint for the construction industry, and
in perfumes and detergents in the consumer goods
segment. Since the specialty chemicals sector is a pure
B2B business, it depends heavily on trends in its end-user
industries.
The industry itself is characterized by low turnover
volumes, high unit prices and considerable custom-
ization. Many manufacturers lack the critical mass they
would need to directly manage small and midsized
customers in local markets and therefore ask market
expansion services providers to do it for them. MES
providers can reach the required scale by bundling
volumes from various clients (acting as a single point of
sourcing) while at the same time managing marketing,
sales and distribution processes and providing consulting
in relation to product development and innovation.
The slowdown in industrial production in both developed
and emerging markets has caused demand for specialty
chemical products to drop, although part of this decrease
has been offset by higher demand for innovative
products in consumer industries. Given the current
climate of increased uncertainty about industrial out-
put, the expected five-year growth rate has been revised
downward from 6.2% in the previous report to 5.2%.
Global growth fueled by emerging markets
Besides differing from industry to industry, demand for
market expansion services also varies considerably in
different geographical regions. As predicted in last year's
report, the Asia Pacific region has taken over from Europe
as the largest global MES market and is now worth USD
691 billion. Europe now occupies second place with a
volume of USD 649 billion, followed by North America
(USD 529 billion), Latin America (USD 342 billion); the
remaining countries taken together (USD 256 billion),
with Japan taken in isolation (USD 213 billion).
In the next five years, Asia Pacific’s high MES growth rate
of 10.6% is expected to widen the gap between the Asia
Pacific region and Europe and North America. At the
same time, the other emerging regions, Latin America
and Africa and the Middle East are catching up with the
developed regions, posting projected growth rates of
12.5% and 10.7% respectively. Growth in these regions
is driven by strong overall development in consumption
and in the industrial market, but also by increasing de-
mand for market expansion services.
On average, MES penetration rates and growth expecta-
tions are higher in regions with a large share of emerg-
ing countries – regions whose markets tend to be highly
fragmented and complex. Cultural and language bar-
riers, regulatory restrictions and local peculiarities pose
huge challenges for Western and Asian companies alike.
In addition, local competition in emerging markets is
growing stronger, forcing companies to build up detailed
knowledge if they are to remain competitive. To work
the market with maximum efficiency and effect, compa-
nies are therefore increasingly turning to MES providers
in emerging countries.
Global trends driving the growth of market
expansion services
Despite the recent correction in short-term economic
growth rates in emerging markets, volatile exchange
rates resulting from the US tapering and geopolitical
uncertainty in Latin America, South East Asia and the
Commonwealth of Independent States (primarily Russia
and Ukraine), long-term growth prospects for emerg-
ing markets remain robust. The revival of economies in
16 | MARKET EXPANSI ON SERVI CES REPORT
Europe, North America and Japan has helped to further
stabilize global MES growth at a high level. The overall
MES growth rate for the next five years is estimated at
7.4%, compared to 7.5% in last year's report. It is es-
timated that the worldwide MES market will be worth
USD 3.8 trillion in 2018.
Growth in the MES markets is driven by the overall
change in demand in the consumption market and the
change in MES penetration. Both of these drivers are di-
rectly impacted by three global megatrends.
Growing middle classes
Growth in consumption is being driven by an increasing
population, declining unemployment rates and growing
middle classes that have more disposable income. Accord-
ing to the OECD, the global middle classes are set to double
in size by 2030, by which time a total of 4.9 billion
members will generate demand totaling USD 56 trillion.
In combination with higher levels of education, the trend
toward urbanization and improved health awareness,
this development has led to a trade up from necessities
and standard products to convenient and branded qual-
ity products. The shift is not only boosting the consumer
goods and healthcare markets, but will also, indirectly,
have a positive impact on industrial goods – such as
specialty chemicals and engineered products – that are
needed to locally manufacture these consumer products.
However, long-term economic growth rates in larger
emerging countries such as China and India have been
revised, and the lavish monetary policies in which Europe,
North America and Japan are now tailing off. These de-
velopments seem to indicate that further economic de-
velopment in emerging countries and developed nations
alike is becoming more volatile and uncertain – witness
the recent minor economic crises in Brazil, India, South
Africa and Indonesia. On another level, political unrest
Global MES market growth
Figure 7: Global consumption market versus global MES market (CAGR 2013–2018)
Sources: Euromonitor, Espicom Business Intelligence, Global Industry Analysts, SRI, UNCTADstat, Roland Berger Strategy Consultants analysis
Global MES market (USD tn) Global growth driven by…
2018
2013
3.8
2.7
7.4%*
6.4%
Growth driven by change
in MES penetration
Growth driven by change
in consumption
1.0%
* 7.8% annual growth expected
for Asia (CAGR 2013–2018)
| 17 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
Growing emerging market middle classes are driving global demand
Figure 8: People associated to the global middle class and amount of spending
(USD trillion, calculated at fixed 2005 prices and exchange rates)
Sources: OECD, Roland Berger Strategy Consultants analysis
Amount of spending
(USD trillion)
Developed countries
Emerging countries
6.0
16.6
35.4
2010 2015 2020 2025 2030
0
2.0
3.0
4.0
5.0
1.0
13.7 16.2 17.2
in Thailand and smoldering political tensions between
China and Japan, and between China and Vietnam in the
South China Sea have only added to economic instability
in the region. In the eyes of the middle classes, such vola-
tility can pose a significant risk to further growth. Par-
ticularly in emerging countries, the correlation between
GDP growth and poverty reduction is significant. People
who have worked their way up to the middle class during
the years of plenty are at risk of falling back below the
poverty line if economic growth would decelerate. Even
in developed countries, the middle classes are likewise in
danger of shrinking, having borne much of the burden of
the recent economic crisis.
In the short-term, the impact of growing middle classes
on global demand should thus be treated with caution
and in the light of what may happen to economic growth
rates in the near future. In the long-term, however, both
the assumptions and the underlying trend remain intact.
People
associated
to the
middle class
(bn)
18 | MARKET EXPANSI ON SERVI CES REPORT
Increasing intra-regional trade, especially in Asia
Exports between leading emerging markets are another
megatrend that is driving global growth in market ex-
pansion services. According to UNCTAD, what is referred
to as south-south trade has doubled to over 25 percent
of total world exports over the past 20 years. While de-
veloping Asia has hosted the bulk of intra-regional trade,
trade within the developing Americas and developing
Africa has likewise climbed significantly in recent years.
Countries at the forefront of this trend include China,
Vietnam, Egypt, India, Turkey, Peru, Columbia, Brazil,
Mexico and Chile, for example.
Asia has over the years become increasingly integrated
with the rest of the world, its rapid development driven
largely by exports to the United States and the European
Union (EU). In the past, though, even as the world's
"Our company has adjusted to increased
market volatility by reducing internal
complexities and through a continuous
re-evaluation of the value chain."
General Manager, European-based pharmaceutical company
Inter-regional exports (USD bn)
100 500 1,000
Intra-regional exports (USD bn)
50 500 5,000
9.8% p.a.
Growth of intra-regional
exports (2007 – 2013)
% p.a.
India
Greater China
7.2% p.a.
South East Asia
2.1% p.a.
North East Asia
9.1% p.a.
Asia with vibrant growth in intra-regional trade
Figure 9: Inter-regional and intra-regional merchandise exports within Asia
(absolute figures 2013, annual growth rates for intra-regional exports in 2007–2013)
Sources: UNCTADstat, Roland Berger Strategy Consultants analysis
| 19 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
main economic arteries shifted eastward, intra-regional
integration within Asia itself still lagged behind. The last
global financial crisis and the still relatively low growth
rates in Western markets have changed the focus of
emerging companies. The regional Asia Pacific markets
are becoming more attractive for expansion to Asian
manufacturers. Growth in intra-Asian trade will also be
fueled by the establishment of the ASEAN Economic
Community (AEC) in 2015, a project aimed at fostering
economic integration among the South East Asian
nations.
Close geographical proximity to other markets within
a region should not obscure the fact that companies
seeking to operate across borders still face a series of stiff
challenges. A company that is based in China and wants
to sell its products in Thailand, for example, also needs
help in accessing local customers, building up capillary
distribution networks and aligning its marketing activities
to local needs. Hence, intra-regional trade is another key
driver for further growth in market expansion services.
Trend toward outsourcing
Companies today operate in what has aptly been
termed a VUCA world – a world of volatility, uncertainty,
complexity and ambiguity. Confronted by fiercer compe-
tition, constant cost pressures and political uncertainty,
they have begun to focus increasingly on their core
competencies. In the process, they are outsourcing
more and more links in their value chain, which again is
driving demand for integrated MES providers. Moreover,
companies are seeking to mitigate risks as economic
development in emerging countries becomes increasingly
volatile. For many market players, "going it alone" as
they enter or develop foreign markets poses too high a
risk, so trusted partners are increasingly being seen as
the more rational solution. Companies feeling uncertain
about political situations – such as that in Thailand, for
instance – are therefore hedging against potential risks
by relying on a strategic partner with a knowledge of
local conditions and an established local infrastructure.
Indeed, as marketing and distribution systems in
emerging markets also become more complex and
resource-intensive, the need for and the competitive
advantage offered by specialized MES providers is
becoming ever more pronounced.
Summary
As markets become ever more uncertain and vola-
tile, companies are reviewing their current business
model to look for ways to boost further growth and
mitigate risk. Increasingly, this exercise is causing
them to turn to market expansion services providers
as they move to enter new markets or develop exist-
ing ones. An in-depth knowledge of local customs,
practices and cultures, a strong local infrastructure
and proven access to sales channels leaves MES pro-
viders well placed to significantly reduce companies'
risks and costs while at the same time increasing their
sales and market share. The global market for MES is
expected to grow further and offer attractive oppor-
tunities in the years to come. Accordingly, growth ex-
pectations for MES have been revised only slightly, to
7.4%, despite adjusted economic growth forecasts
and increasing uncertainty in the marketplace.
To maintain high growth rates and meet the needs
of their clients, MES providers keep a close watch on
future trends in order to constantly develop and en-
hance the services they offer. As the middle classes
grow in emerging countries, more and more custom-
ers are gaining access to advanced technologies such
as smartphones, which will ultimately impact on how
they shop and interact. This development is flanked
by the demographic shift, as increasing numbers of
users become accustomed to digital technologies in
all walks of life. In contrast to this emerging trend,
the digital market is still on a low level in South East
Asia in particular, where offline interactions and
transactions remain the predominant form.
The trend toward digitization presents tremendous
opportunities to companies wishing to enter new
markets and/or develop existing ones. Yet it also pos-
es significant additional risks. MES providers can be
valuable partners in driving digitization and offering
an omni-channel approach while mitigating the as-
sociated risks.
This report looks at how digitization is changing the
way people and companies do business – and how
MES providers are able to support companies in that
process.
20 | MARKET EXPANSI ON SERVI CES REPORT
Figure 10: Growth of global MES market by industry (2013–2018)
Sources: Euromonitor, Espicom Business Intelligence, Global Industry Analysts, SRI, UNCTADstat, Roland Berger Strategy Consultants analysis
Enhanced growth in consumer markets…
Consumer markets
Healthcare (USD bn) Growth driven by… (annual rate, 2013–2018)
2013
629
+5.4% p.a.
2018
816
+5.4%
+4.9%
Consumer goods (USD bn) Growth driven by… (annual rate, 2013–2018)
Consumption
market growth
MES
growth
premium
MES
market growth
+8.1% p.a.
2013
1,664
2018
2,453
+7.1%
+8.1%
... change in MES
penetration
... change in
consumption
... change in MES
penetration
... change in
consumption
+1.0%
+0.5%
Consumption
market growth
MES
growth
premium
MES
market growth
| 21 THE GLOBAL MARKET EXPANSI ON SERVI CES I NDUSTRY – AN I NDUSTRY ON THE RI SE
…and cautious but stable industrial markets
Engineered products (USD bn) Growth driven by… (annual rate, 2013–2018)
+6.5%
2013 2018
495
+8.0% p.a.
+1.5%
+8.0%
Specialty chemicals (USD bn) Growth driven by… (annual rate, 2013–2018)
2013
51
2018
65
+5.2% p.a.
+1.0%
Consumption
market growth
Industrial markets
+4.2%
+5.2%
336
... change in MES
penetration
... change in
consumption
... change in MES
penetration
... change in
consumption
Consumption
market growth
MES
growth
premium
MES
market growth
MES
growth
premium
MES
market growth
2005 2010 2015 2020
94m
74%
37m
74%
17m
81%
81m
7.1%
38m
27%
48m
72%
48m
67%
68m
34%
Japan
South Korea
Australia
India
Russia
UK
Germany
Brazil
France
41m
66%
If Facebook were a
country…
…it would be home to 1 in 6
of the world's entire population
6
11
40
1 ZB = approx.
1,126,000,000,000,
000,000,000 bytes
2017
2015
2013
2012
2005
2000 300
1,100
1,300
1,500
2,400
600
21
1
Global data Internet users by country B2C e-commerce
Revenue forecast (USD bn) in Zettabyte Millions and percentage of
nation's population
USA
227m
74.7%
China
298m
22.4%
E
-
c
o
m
m
e
r
c
e
C
o
n
n
ectedn
e
s
s
S
o
cial m
e
d
i
a
B
i
g
d
a
t
a
22 | MARKET EXPANSI ON SERVI CES REPORT
Digitization as a global phenomenon
Figure 11: Highlights of the digital era
Sources: UNECE, Facebook, CIA factbook, eMarketer, Internet World Stats, Roland Berger Strategy Consultants
B. DI GI TI ZATI ON OF THE BUSI NESS MODEL –
A TREND WI THOUT LI MI TS?
| 23 DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS?
Digitization as a global phenomenon
By the end of 2013, global smartphone penetration
had increased by 1.3 billion devices in only four years to
approximately 25% of the global population. In the USA,
nearly half of all American adults own either a tablet or an
e-reader. In China, the number of mobile subscribers has
reached 1.2 billion, four times more than in the USA and
two times more than in the whole of Western Europe.
In Germany, Facebook has 25 million active users, of
whom 19 million use the service daily – equivalent to the
audience for the best rated show on German television,
but for the whole year. Google consumes over two
billion kilowatts of energy per annum to run its servers
and data centers, roughly a quarter of the output of a
nuclear power plant.
Books have become e-books. DVDs and VHS movies
have given way to online streaming services. Music is
played from media files. And the best way from A to B
is not seen on a physical map, but is calculated in real
time from a combination of GPS signals and traffic data.
These are just a few of the more prominent examples of
how digitization has changed our world. The growing
presence of digitization in our daily lives and the emer-
gence of new technologies have also led companies to
adapt their business models and anticipate new forms
of consumer behavior. Digitization is a new way of
thinking about business, innovation and opportunity
at corporate level. It allows companies to interact with
their customers more efficiently while at the same time
reducing transaction costs.
A company's digital transformation can take place both
internally and externally. Internal digitization focuses on
shifting from analog to digital business processes. This
includes internal data processing, content management,
financial reporting, order processing and merchandise
management, for example. On the other hand, external
digitization tackles the digitization process at either
end of the value chain. On the supply side, companies
are becoming ever more closely connected to their
suppliers, with processes such as procurement, in-
ventory management and stock replenishment being
increasingly automated. At the other end of the value
chain, consumers are likewise becoming interconnected
with companies' information systems. Customers and
shoppers place orders and handle the purchasing process
via an interface that is integrated in a company's internal
information system and thus allows for real-time stock
information and demand-related price adjustments.
Information about the client or consumer is also collected
and analyzed in real time, which vastly increases upselling
potential.
Digitization has gone through many different phases in
the past few decades (the invention of computers, the
launch of the internet, etc.); and the speed at which new
game changing technologies are being introduced is
growing faster by the year. This phenomenon is leading
to higher overall investment costs combined with greater
uncertainty and complexity as companies address the
issue of digitization.
Tesco – bringing online grocery retailing to the
mass market
Shopping for groceries was long considered unsuit-
able for internet-based retailing. Yet Tesco, the lead-
ing UK grocery and merchandise chain, began look-
ing into opportunities to sell its products online 17
years ago. The road to success has been long and
challenging, with the low point reached during the
dotcom crisis. Thanks to process automation and
warehousing, real-time data availability and intelli-
gent demand forecasts, Tesco has nevertheless been
able to make online grocery retailing a marketable
proposition, enabling same-day delivery and guaran-
teeing the freshness of its products. Today, Tesco is
the world's leading online grocery retailer, with rev-
enues of approximately GBP 2.5 billion. Compared to
a global market size of USD 2.3 trillion for packaged
food in 2013, however, even this impressive digital
sales figure accounts for only a very tiny fraction of
the overall grocery market. ?
24 | MARKET EXPANSI ON SERVI CES REPORT
The speed of innovation is constantly increasing
Figure 12: Conceptual illustration of digital phases
Source: Roland Berger Strategy Consultants analysis
Back to the future – the next generation of
game-changing technologies
New disruptive trends are emerging that will have a
lasting impact in the long term. These technologies
have not yet matured to the point where they are
likely to have a business impact within the next 7–10
years. Further development work and research are
necessary if they are to become both marketable and
cost-efficient. However, companies addressing the is-
sue of digitization today would do well to keep an
eye on the longer-term trends, too, as they will prob-
ably have a massive impact on the business models
of the future.
According to technology research company Gartner,
3D printing is at the heart of the next "digital indus-
trial revolution". 3D printing uses computer-created
Powerful trends are reshaping the industry
Within the wider scope of digitization, we have identified
three megatrends that are likely to have a significant
short- to mid-term impact on companies and customers:
mobile commerce, smart infrastructures and business
intelligence.
Time
Data mining
Cloud computing
Mobile commerce
Social media
Smartphones
E-commerce
Data warehouse
Networks
CRM
Mainframe computer
ERP
Database
I PC II Internet III Big data Technological
innovation/
disruption to
the business
model ?
| 25 DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS?
Powerful trends are reshaping the industry
Within the wider scope of digitization, we have identified
three megatrends that are likely to have a significant
short- to mid-term impact on companies and customers:
mobile commerce, smart infrastructures and business
intelligence.
digital models to create real-life objects. While the
production of individual spare parts is already feasible,
3D printing is one day expected to be able to build
houses from scratch or assemble replacements for
human organs. In manufacturing, 3D printing – also
referred to as additive manufacturing – is set to revo-
lutionize product realization and reduce the cost and
time needed to produce customized components.
Wearable devices are already available in the form
of smartphones, intelligent glasses and highly engi-
neered watches such as the Samsung smartwatch.
However, these devices still largely depend on manual
input by the user. Looking ahead towards the internet
of things, devices will become more sophisticated and
practical, capturing and processing a person's move-
ments automatically. At the same time, more and
more goods are being equipped with digital sen-
sors that can communicate with consumer devices
or with each other. UK-based luxury fashion label
Burberry has woven RFID chips into its dresses at
selected flagship stores. If a customer approaches
an advertising screen, the selected dress is detected
and the corresponding promotional film is played.
An entirely different development trajectory is
emerging in the drone industry. While military
applications are already highly developed, the un-
derlying concepts will sooner or later be transferred
to the commercial sector. Selected companies have
successfully tested the use of drones for same-day
delivery services, although commercialization is
currently being held back by the unclear legal basis.
Disruptive megatrends of the future
Figure 13: Digital megatrends
Source: Roland Berger Strategy Consultants experts
Te next
big thing
beyond 2020
Sensors
Internet of
things/wearable
devices
Drones
Cognitive
intelligence
3D printing
Digital home
environment
26 | MARKET EXPANSI ON SERVI CES REPORT
The success code
In early 2013, DKSH Performance Materials (PM)
introduced a user-friendly, utility-oriented app for
Apple smartphones and tablet devices. The tool was
designed to deliver industry news in real time, pro-
vide a location finder and fact sheet for every DKSH
PM location worldwide and support travelers to and
in Asia with utilities such as a translation tool and an
event planner. The app was developed, coded, test-
ed, approved and launched by DKSH in less than six
months. Backed by a focused awareness campaign,
it has been a huge success in terms of the number of
downloads.
Mobile commerce: connected everywhere
Independent technology research company Forrester
Research predicts that, by 2017, half of all smartphone
users will also be mobile shoppers. This "mobile
commerce" is a subcategory of e-commerce that is
optimized for use on mobile devices. As mobile commerce
solutions deepen their market penetration, a brand new
sales channel is enabling companies to compete with
traditional sales and conventional e-commerce solutions.
Mobile commerce will not only impact on customers'
purchasing behavior, but will also give rise to all kinds
of new solutions, such as mobile marketing and mobile
payment solutions. However, many companies are
not yet prepared to maximize the benefits of mobile
applications. According to market experts, only one
in four companies has so far optimized its online sales
environment for mobile devices. Ever more demanding
customers expect companies to have a mature sales
platform on all available channels. Similarly, the customer
experience is becoming increasingly important to each
purchase decision, with customers less and less willing
to tolerate synchronization issues between mobile, online
and offline sales channels. Omni-channel shopping is
thus becoming the norm, as more and more customers
want to use channels seamlessly. Companies that are
not present in all these channels and fail to combine
online and offline sales in a manner that delivers a
superior customer experience are likely to lose business.
Interestingly, in many emerging countries, people are
skipping fixed broadband connections altogether and
opting straight for mobile connectedness. In Indonesia,
the world's fourth largest cellphone market, eleven
million fixed lines stand against 180 million feature
phones. Companies that do not service the mobile
commerce channel will therefore miss out on large
swathes of the consumer base.
Mobile commerce is gaining ground
Figure 14: Mobile retail buyers as a percentage of mobile internet users
Source: Forrester Research Mobile Commerce Forecasts, 2012–2017
Share of global
mobile commerce
shoppers
2017
50%
2012
20%
| 27 DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS?
China Unicom – reaching for the clouds
The race for a share of the global cloud market has
so far been dominated by Western technology gi-
ants such as Oracle, SAP, Amazon and Apple. China's
state-owned telecommunications company, China
Unicom, has now launched a full-service cloud com-
puting and big data service offering under the Wo-
Cloud brand. Wo-Cloud will focus on Infrastructure-
as-a-Service (IaaS) and Platform-as-a-Service (PaaS)
products. China offers substantial opportunities and
is expected to become one of the major cloud mar-
kets over the next few years.
Smart infrastructures: the digital world
The advancement of smart infrastructure technology
opens up exciting opportunities for consumers and
companies alike. Smart infrastructures improve the
speed, safety and efficiency of the ways people live, work
and do business. Using smart infrastructures correctly can
give companies a clear competitive advantage through
higher efficiencies and superior standards of service – by
letting them reduce inventories and operate just-in-time
strategies, for example, but also by ensuring that the right
products are available via the right channels at the right
time (thanks to data-based automated replenishment
and production planning).
Smart infrastructures comprise any technology that
makes business processes more efficient through
automation, connectivity and decision-making based on
collected information. Smart infrastructure applications
can be found in a variety of industries: Retail companies
use them to manage stock and optimize distribution
while also enabling real-time ordering. Pharmaceutical
companies track the incidence of diseases through a
system that links them to local doctors and hospitals in
order to provide the right amount of sensitive drugs in
the right locations at the right time. Communications
companies are currently working on multimode net-
works – a barrier-free combination of Wi-Fi and cellular
systems – to improve network coverage.
Many companies have understood the vast potential
afforded by cloud computing, which is essentially the
virtualization of computer resources and systems – and
is the newest form of IT outsourcing. Cloud computing
lets companies purchase IT hardware and software as a
service rather than a physical, on-site solution. This in
turn lets them slash their investments in IT infrastructures
and flexibly adjust demand in line with changing
requirements. There is much more to the concept than
the potential to reduce infrastructure costs, however: It
can also "virtualize" collaboration between the people in
an organization, allowing them to share information in
real time and improve working efficiencies.
Monetary transaction systems are another form of smart
infrastructure. Many start-ups have invested in building
solutions that enable credit card payments by combining
mobile devices with credit card dongles. Other solutions
provide a more secure or convenient way for companies
and customers to finalize transactions.
28 | MARKET EXPANSI ON SERVI CES REPORT
Figure 15: Development of data volumes
Source: Roland Berger Strategy Consultants analysis
Exponential data growth in all areas leads to information overload
Business intelligence: predicting behavior
In a world where markets are becoming increasingly
transparent – thanks to the emergence of price
comparison websites, customer review features and
smart search engine algorithms, for example – under-
standing the customer becomes ever more crucial to
business success. A range of new technologies now
allows customer data to be collected, processed and
analyzed more efficiently and at lower cost. At the same
time, consumers are increasingly getting used to sharing
information, seeing customized advertising and receiving
personalized offers. The copious data volumes collected
in the process often exceed the capabilities of commonly
used software. Companies are therefore advised to invest
in tools that can manage and process such data within a
reasonable time frame and at affordable cost. Examples
include analytical software and predictive models,
whose effective and smart analysis of the data reveals
dependencies and new insights. These insights in turn
enable a company to identify new revenue potentials (by
increasing their share-of-wallet or improving customer
loyalty) and/or cost saving opportunities (by reducing
marketing expenditure).
Aware of its associations with massive data volumes,
frantic velocities and huge varieties, many companies
are wary of the perceived complexity and resource-
intensive nature of big data and business intelligence.
And there is indeed a real danger that companies could
be overloaded with irrelevant data and spend most of
their resources and time on the wrong analysis. Data
is often collected from a variety of different sources,
which makes comparison difficult and can leave data
analysis unstructured. On the other hand, if they want
to remain competitive and meet the exacting demands
of international customers, companies must at some
point come to terms with advanced business intelligence
from big data, either by investing in new technology
themselves or by outsourcing the entire process of
collection, analysis and interpretation of customer and
market data to third-party providers.
D
a
t
a
v
o
l
u
m
e
s
Information overload
Today In the future
Relevant data
videos are
currently watched
each month on
youtube
6 bn
30+
Petabyte
450
bn
of user generated
data is being stored
and analyzed by
in 2013
Estimated number
of B2B and B2C
daily business
transactions on the
internet in 2020
| 29 DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS?
Metro Group – eating healthily thanks to
historic information
Metro Group, the global cash-and-carry group, in-
troduced a digital shopping list in 2009. Optimized
for mobile devices, the list provides customers with
individual dietary plans and suggests products for
purchase based on detailed analysis of previous pur-
chases. At the same time, analysis of sales receipts
allows Metro to make precise predictions about
future demand for individual products.
Strong growth of digitization in emerging markets
The impact of digitization differs depending on the
developmental stage of the economy in which a company
operates. Emerging markets stand to make significant
employment gains from digitization, but will reap fewer
rewards in terms of output and productivity. In developed
economies, digitization adds more to GDP growth than it
does to employment. The rapid adoption of new digital
technology in emerging markets is evident in global
connectivity trends such as mobile phone penetration,
access to the internet and network expansion. The latest
statistics from the International Telecommunication
Union (ITU) estimate that there are about 5.3 billion
mobile subscribers in the world, of whom roughly 73%
(3.8 billion) are in the developing countries. China and
India are fueling most of the growth, having added 300
million new mobile users in 2010 alone – a figure larger
than the entire mobile subscription base of the USA.
The number of web users currently stands at 642 million
in the BRIC nations, compared with only 409 million
in the four top developed economies (the USA, Japan,
Germany and France).
Euromonitor forecasts that, as of 2018, consumers in the
Asia Pacific region will spend USD 500 billion on online
retailing, roughly 8% of the region's entire retail market.
This figure singles out Asia Pacific as the region with the
busiest e-commerce activities and transactions in the
world. In China, e-commerce has become very popular
and is growing at a tremendous pace. China's biggest
online retailer announced sales of USD 5.75 billion on
Singles' Day, two and a half times more than online sales
on the equivalent occasion known as Cyber Monday
in the USA. The leading product categories are apparel
and accessories, electronics and books. As highlighted in
figure 16, the share of online retailing is growing strongly,
albeit from what is still a very low baseline. In terms of
volume, traditional retail will remain the dominant form
of shopping, especially in emerging markets.
On the other hand, companies in developed markets
still find themselves hampered by legacy systems in the
shape of physical networks, software, and support and
maintenance contracts. Emerging economies can often
bypass these aging technologies and advance directly
to new, innovative systems. Additionally, companies
in emerging markets appear more willing than their
counterparts in industrialized nations to adapt to
disruptive digital technologies. They generally show
a greater willingness to change established business
practices, try new technologies and take greater risks.
"Data is becoming the new raw
material in business."
Rollin Ford, Executive Vice President, Walmart
MARKET EXPANSI ON SERVI CES REPORT 30 |
Experts suggest that a combination of both scenarios is
the most likely outcome. As emerging markets outstrip
the developed markets in terms of digitization, the
developed countries would come under increasing
pressure to remain competitive, and would therefore
have to invest heavily to regain their dominant position.
The developments taking place in emerging and
developed countries could potentially lead to two
different outcomes: In one scenario, emerging countries
would close the gap on developed countries and then
stabilize at around the same level. The current fast pace of
digital development in emerging countries would in the
future slow down as it approached the level of developed
countries. In a second scenario, emerging nations could
surpass developed countries as digitization is advancing
much more dynamically in these regions. In this scenario,
emerging countries would lay a firmer foundation for
the years ahead, as they are not encumbered by legacy
systems and are more willing to adapt to new, innovative
technologies. Developed countries, however, have
already missed out on the opportunity to invest early in
new technology.
Share of online retailing is growing from a low base
Figure 16: Share of online retail as of total retail
Sources: Euromonitor
13.9
trillion
4.3
trillion
3.1
trillion
3.3
trillion
1.1
trillion
World Asia North America Western Europe Latin America
7.1% 7.6% 10.7% 8.4% 3.4%
4.6% 4.3% 6.8% 5.4% 2.1%
1.8
trillion
0.1
trillion
0.1
trillion
1.1
trillion
China Hong Kong Taiwan Japan South Korea Singapore Tailand
5.6% 1.9% 7.0% 4.2% 12.9% 3.1% 1.0%
11.3% 2.1% 8.5% 6.1% 16.8% 4.7% 1.6%
0.2
trillion
0.1
trillion
0.1
trillion
0.1
trillion
0.1
trillion
0.1
trillion
0.2
trillion
0.4
trillion
0.2
trillion
0.1
trillion
Malaysia Philippines Vietnam Indonesia India Australia New Zealand
0.7% 0.4% 0.5% 0.4% 0.7% 2.7% 2.4%
1.1% 0.5% 0.9% 0.6% 1.1% 5.6% 3.8%
Share of online
retailing 2013
Share of online
retailing 2018
Retail
market size
2013 in
USD
DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS? | 31
MES as an enabler for digital opportunities
Figure 17: Digital MES framework
Mobile commerce 1
Transaction
Interaction
MES
providers
Customers/
experts/shoppers/
consumers
Clients
New channels,
e.g.
e/m-commerce
1
New ways of
infuencing,
e.g. digital/
social marketing
3
New payment
solution,
e.g. e/m-wallet
2
New sources
for insights,
e.g big data
4
Smart infrastructure 2
Business intelligence 3
1. Sell and distribute
3. Inform and infuence
2. Buy and pay
4. Respond and refer
Trends New opportunities
Digital opportunities – improving the way business
is done
The digital megatrend and the opportunities associated
with it have implications for many business sectors
and processes. Interaction between companies and
customers is becoming increasingly important, and
digitization is reshaping the way in which it is handled,
opening up new opportunities for marketing, advertising
and customer influence. The change in interaction is,
however, not limited to company-customer interaction
alone, but also includes communication with all of a
company's stakeholders.
At the same time, digitization is also reshaping the way
business transactions are conducted. New technology is
giving rise to new sales processes and new sales channels.
Companies are aiming to offer their customers a superior
shopping experience and expand their customer base in
online and offline channels. New payment solutions are
even enabling customers in remote locations to engage
in business transaction in the first place.
Market expansion services providers are positioned all
along the value chain between clients and customers.
This position allows them to fully exploit the potential
of digitization on both the interaction and business
transaction sides. Their integrated approach also allows
them to combine both perspectives and realize synergies
and efficiencies at every link in the value chain.
MARKET EXPANSI ON SERVI CES REPORT 32 |
New sales channels
For most consumers, traditional offline retail stores and
outlets are still the most important places to shop. Online
and mobile shopping is, however, rapidly gaining in
significance. Online sales channels are add-on engagement
points that let customers make purchases while also
increasing convenience. However, not all product
categories are equally popular among online shoppers.
According to eMarketer, computer and consumer
electronics combine with apparel and accessories in
making up nearly 50% of e-commerce sales in the mature
USA market. Conversely, food and beverages, healthcare
and personal care products, and bulky categories such as
furniture command disproportionately low online sales.
A similar pattern can be seen on the Chinese market: The
most popular categories here are apparel, footwear and
bags, electronics, cosmetics and personal care products,
which, according to the China-Britain Business Council,
together account for approximately 55% of total B2C
e-commerce sales.
Companies can enter the online world at relatively low
cost and offer their products to a worldwide customer
pool. To stand out from the crowd of online shopping
opportunities, companies must create a superior
shopping experience for their customers. The customer
interface, for example, must be adapted to the local
needs and cultural idiosyncrasies of a country in order to
make shopping on the website attractive to customers. In
China, websites are generally packed with vibrant red or
yellow colors, whereas simplicity is the dominant design
rule in Western markets.
The greatest revenue effect can be achieved by a smart
combination of online and offline sales. An omni-channel
sales strategy gives customers a wider choice of ways to
buy products. As they become increasingly demanding,
however, customers expect the same quality of service
whichever channel they choose. Synchronizing all
available sales channels to offer the client a superior sales
experience is therefore a key success factor in digital sales
strategies.
Famous Amos – going online with chocolate
chips
Famous Amos, the freshly baked chocolate chip
cookie brand, has around 90 retail outlets at shop-
ping malls and airports around Malaysia and an on-
line shop on its website in Malaysia to effectively
penetrate the market via all channels. Customers
can purchase goods and also have them delivered
to gift recipients nationwide. The company's digital
sales effort is backed by a very strong social media
presence, with over 7,000 followers on Facebook.
Famous Amos leverages this channel to engage with
customers through Facebook promotions, contests,
trivia and games.
DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS? | 33
New payment solutions and shopping procedures
The order-and-pay process is undergoing a similar
transition as e commerce and mobile commerce grow in
popularity. Customers who shop via online stores or by
smartphone tend to be reluctant to make wire transfers or
type in their credit card information. The entire shopping
process is thus becoming a one-click solution, where
a customer can buy a product without any additional
effort. Ideally, the customer data, shipping information
and payment instructions will already be stored in a smart
payment solution such as an e-wallet or data safe (e.g.
Google Wallet, Apple's Passbook, Square Wallet, etc.).
Customers should have to negotiate as few hurdles as
possible that could potentially abort the purchasing
process. The existence of many different online payment
providers presents companies with additional challenges:
They have to find the right combination of payment
partners to keep fixed costs down, but they also have
to leave their customers the flexibility to choose their
preferred partners.
New payment technology can also facilitate offline
business transaction in less developed countries. People
in India and Africa are used to paying their bills by
smartphone, and dongles allow merchants to accept
credit card payments without the need for a physical
infrastructure. In Thailand, customers can select the
"cash via counter" option for online purchases. This
lets them print an invoice with a QR code and pay the
online bill in cash at a local 7–11 or Tesco Lotus store.
New payment technologies can thus help overcome
barriers to purchase such as customers' lack of trust in
online payment systems or a country's low credit card
penetration. Accordingly, companies must adapt their
payment systems to local practices and standards in each
country to allow a broad range of customers to complete
business transactions easily and conveniently.
New ways of influencing and informing clients
and consumers
Every day, more customers are turning to interactive
shopping websites, registering on social platforms
and downloading mobile apps. Digital technology
creates new ways to influence, inform and understand
customers, and the number of touchpoints enabling
companies to interact with their customers has increased
significantly. Social media and digital marketing can be
efficient ways to reach and activate a large customer
base in a short space of time. The customer experience
and brand can be improved by an appealing, interactive
corporate website. And, both customer care and after
sales are enhanced by online manuals, help corners and
live support.
Overall, marketing efforts can be customized, personal-
ized and targeted more efficiently to the relevant
customer groups. This improves the return on marketing
and makes it more transparent.
CH Healthy Family
DKSH launched its chhealthfamily.com platform
to combine all brand and product information for
its consumer health products in China on a single
website. At the same time, the site boasts a direct
link to T-Mall, the B2C e-commerce platform oper-
ated by Alibaba for quality, brand-name products for
customers in China. Interaction with consumers and
brand awareness is flanked by digital campaigns and
promotional activities on social media platforms such
as Weibo. Access to Alipay gives customers a safe
and efficient way to pay their invoices. Consolidating
activities on a single platform has led to increased
sales, greater brand exposure and improved custom-
er service.
MARKET EXPANSI ON SERVI CES REPORT 34 |
New sources for customer and market insights
A few years ago, companies collected data primarily in the
course of their daily business transactions, using the data
to monitor operations and provide management with
sales forecasts. Thanks to digitization, the possibilities of
collecting and exploiting customer-generated data have
exploded.
Digital sales channels, social media platforms and smart
customer devices provide a multitude of detailed data
points in the form of website behavior, social media posts
and search queries. It is possible to follow a customer's
every click on a company's website and summarize the
conversations people have about a product or a brand
on social media platforms around the world. Intelligent
analytical tools enable what is often unstructured data
to be processed, analyzed and filtered effectively and
cost-efficiently. Armed with the resultant information
and insights, companies are able to make fact-based
decisions, improve their product offerings, streamline
their marketing efforts and adjust their brand strategy.
Companies use customers' purchasing history and
individual preferences to make predictions, segment
markets and target them on a far more granular level.
Digitization – a game-changer?
The opportunities arising from digital trends are not free
from certain challenges, however. Some of these match
the risks and challenges already familiar from traditional
business processes, such as the need for a profound
understanding of local markets and the availability of
a local warehouse and capillary distribution network.
Other risks and challenges have emerged with digitization
itself – one prime example being the sensitive issue of
ensuring customer data privacy while screening customer
behavior as closely as possible. Successful companies
must anticipate these risks and manage them accordingly.
Accessing consumers via different channels
While different channels make it easier for companies to
reach out to new and existing customers and shoppers,
it has become more difficult to manage them efficiently.
The combination of different channels and the level of
customization required for each country and channel
add to the complexity of digital marketing. Additionally,
customers and shoppers have become more value-driven
and price-sensitive, as they now have more choices
and market transparency is improving. Shoppers share
their opinions on products, write reviews or blogs and
talk to friends about their favorite brands. Advertising
campaigns may be praised or ridiculed by the community;
rumors spread within seconds.
The biggest risks face inexperienced companies that fail
to grasp how their behavior can have a negative impact
and that do not know how best to combine different
channels. Companies must also be aware of the risk that
digital marketing can potentially damage their brand or
reputation and manage this risk accordingly – preferably
with the advice of an experienced expert.
It is also true that neither digital nor traditional
communication can today be viewed in isolation. To
guarantee a modern customer experience and cutting-
edge interaction, communication via online and offline
channels must be combined in an omni-channel
communication strategy. This adds to the complexity
for companies, as both forms must be aligned and
harmonized with each another, but enhance customers'
positive perceptions.
Social media networks are used differently around
the world; many platforms have deep regional roots.
Networks such as VKontakte in Russia, QZone in China,
Orkut in Brazil and Cyworld in South Korea enjoy huge
popularity and are often regarded more highly than
global, USA-born networks such as Facebook, Twitter
or LinkedIn. And even these international networks are
used differently in different countries. Chinese users, for
example, are three times more likely than their American
counterparts to make purchase decisions based on
user-generated content on social media platforms. In
Japan and South Korea, the most efficient way to reach
customers is via social media games or events. Companies
should actively engage in those local networks in order to
engage with customers and build better brand loyalty.
Other formerly popular networks, such as Myspace, Ping
and Friendster, have sunk into oblivion.
The opportunities created by digital marketing and
customer interaction in no way imply that companies
should divert attention from traditional activities that
DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS? | 35
"I see (businesses) saying, 'Let's talk to
people on Twitter or let's have a Facebook
page or let's advertise.' And these
are good first steps but they are nowhere
close to a social strategy."
Mikolaj Jan Piskorski, Social Media Expert,
Harvard Business School
Figure 18: The world of social platforms (in million users; color indicates prevailing platform in each country)
Sources: Company websites, Roland Berger Strategy Consultants analysis
* Planned to be shut down on September 30, 2014
1,300
Youtube
1,000
300
250
200
QZone
600
VK
250
Mixi
30
CyWorld
30
Friendster
115
Orkut*
110 330
Hi5/Tagged
Popularity of social media platforms varies around the world
have proven successful in the past. Depending on the
targeted customers, their digital readiness and their
cultural habits, traditional marketing via television or
direct mailing may still prove to be the most effective
option. Companies should also remember that the
customer journey passes through various channels, and
that there are multiple touchpoints in an omni-channel
environment. To follow and engage customers on their
journey, companies must combine interaction and
communication across both the digital and traditional
channels. Accordingly, they must aspire to a tailored
combination of both online and offline communication.
MARKET EXPANSI ON SERVI CES REPORT 36 |
Digital opportunities must be fulfilled
To make use of the opportunities arising from digitization,
companies need access to a broad spectrum of
technology. This can range from building web customer
interfaces, online stores and smartphone apps to setting
up data centers, server parks and analytical software.
Smart payment solutions must be integrated in existing
transaction processes, and successfully combining
online and offline retail channels requires a knowledge
of the local market. Also, companies that want to keep
up with ever more demanding service standards have
no alternative to maintaining a strong, local fulfilment
and distribution infrastructure to safeguard product
availability and timely delivery. Back-end fulfilment thus
becomes more important than ever.
For smaller and bigger companies alike, the cost of
investing in both technology and a local capillary
distribution network can be challenging. In many cases,
the risks and sheer complexity of such a global undertaking
are enough to discourage many companies. On the other
hand, companies that conquer markets solely via online
channels certainly need a local distribution partner.
Generating insights with data analysis while
ensuring data security
The use of new technology, customers' permanent
connectedness and improved data collection tools and
analytical software provide companies with many and
varied opportunities. They are in a position to collect,
analyze and make use of massive amounts of customer
and market data. However, companies also run the risk
of being overwhelmed by a flood of irrelevant, non-
compelling data that leaves them unable to identify and
extract genuinely valuable insights and dependencies.
Nor do they have the right capabilities for result-
driven analysis in many cases. At the same time, the
technological landscape is evolving extremely rapidly and
investment in a powerful IT infrastructure is a continuous
process. One good way for companies to mitigate the
risks and costs of data analytics is therefore to cooperate
with a capable partner.
Collecting and using customer data also presents a new
ethical challenge, as companies must strive to preserve
individual privacy and ensure data protection. Building
and maintaining a level of trust between customers
and companies is becoming increasingly important. Yet
beyond the issue of trust, companies today also have to
contend with privacy laws, regulations and standards
that vary from country to country. For example, it
may not even be possible to transfer non-anonymized
customer data from a subsidiary in one country to the
company's headquarters in another country. Such local
differences add further complexity and expense to the
use and analysis of customer data.
DI GI TI ZATI ON OF THE BUSI NESS MODEL – A TREND WI THOUT LI MI TS? | 37
Summary
Digitization is the vital driving force of the 21st centu-
ry and is moving up the agenda on companies' list of
business priorities. The megatrends associated with
digitization open up opportunities for growth and ef-
ficiency gains. Disruptive innovations are often supe-
rior to the solutions that are already available. They
have the potential to change established business
processes or products. Three key digitization trends
– mobile commerce, business intelligence and smart
infrastructures – will have an immediate and power-
ful impact on companies within the next five years.
These trends will affect the ways business transac-
tions are conducted and how companies interact
with their suppliers, customers and other stakehold-
ers. Opportunities for companies mainly come in the
form of new communication, interaction and sales
channels, access and analysis to market data and in-
telligence, and innovative models to rejuvenate the
sales process.
Though aware of the opportunities associated with
digitization, many companies do not have the re-
sources to leverage this potential by themselves. They
often lack the expertise necessary to build superior
services, combine online and offline sales efficiently
and cope with the burden of relentless investment.
Moreover, if they want to deliver a modern customer
experience and interaction, they would also have to
combine communication and sales via online and of-
fline channels in a coherent omni-channel strategy.
Particularly in markets outside their home turf, com-
panies require an in-depth knowledge of local prefer-
ences, customs and culture in order to successfully
implement a digital strategy. And even then, a pure
digital strategy for market expansion rarely succeeds,
as local distribution and fulfillment is required to sat-
isfy customer demands. For all these reasons, compa-
nies are increasingly turning to experienced partners
who can tap the potential afforded by digitization
more effectively – partners who are well able to com-
bine digital and traditional forms of market expan-
sion and development.
MARKET EXPANSI ON SERVI CES REPORT 38 |
Multi-digital natives
Multi-digital natives are companies with global operations
and an extensive market reach. These types of companies
have been building up their foreign operations from the
beginning of the globalization era and are present in all
major international markets. They have either expanded
with their own, strong brand (e.g. Gillette or LMVH) or
have acquired competitors with a strong foothold in
local markets (e.g. Nestlé). Given their size and multi-
country operations, they were confronted with the
strategic question of digitization early on and part of their
growth was initially enabled through digitization. While
multi-digital natives have in the past invested heavily
in digitization to ensure the global flow of information
and enable international business transactions, their
main focus now is on improving the customer-company
interaction and rending digital operations as efficient
and effective as possible.
Local e-heroes
Local e-heroes have a strong regional focus and are
very advanced in terms of digitization. As they already
have a strong foothold in their regional markets they
Companies in Western markets and Asia see digitization
as a key future megatrend that will have a significant
impact on their current business development and future
strategic decisions. The degree to which companies
are ready to adapt towards digitization and implement
new technology can thereby vary substantially. Some
companies see opportunities in digitization for entering
new markets or reaching out to new customer segments,
while others hope to streamline their operations in their
existing markets. A third type of company mainly feels
threatened by the speed of technological change and the
competition arising from it. Geographical reach further
adds to the different perception and strategic relevance
of digitization within a company.
Hence, the readiness, confidence levels and needs of
companies intending to utilize digitization as a means
of growing or improving their current business can be
diverse. Four types of companies were identified which
share similar characteristics in terms of digital maturity
and strategic priorities. These are referred to as multi-
digital natives, global old schoolers, small town laggards
and local e-heroes.
Companies with four distinct digital profiles
Figure 19: Types of digital companies
Source: Survey data
Level of internationalization
N
a
t
i
v
e
s
International Regional
L
a
g
g
a
r
d
s
Local
e-heroes
Multi-digital
Natives
Global old
schoolers
Small-town
laggards D
i
g
i
t
a
l
r
e
a
d
i
n
e
s
s
Emerging markets
Developed market
C. DI GI TAL MES – SUPPORTI NG COMPANI ES I N
CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 39
focus primarily on reducing operating costs, becoming
more efficient in terms of digitization and making
their operations lean. They are less eager to grow
internationally but intend to increase their regional
market share and maintain their strong market position.
Local e-heroes are willing to adapt to new, innovative
technologies or services as long as these prove to be
more efficient. Their digital knowledge level is very high
and accordingly they are looking for specialized partners.
Global old schoolers
In contrast to local e-heroes, global old schoolers focus
on growing internationally but have lost sight of the
latest technologies and opportunities arising from digital
trends. As their operations have grown profitably in
the past, they had no particular interest in dealing with
opportunities arising from digitization. With fiercer
market environments and stronger competition, global
old schoolers are increasingly considering digitization
as a means of boosting their sales and improving their
customer relationships. This type of company is prepared
to invest amounts into digitization of their business
model to catch up with their key competitors.
Strategic incentives of digitization
Figure 20: Strategic focus of digital market player
Source: Survey data
"Yet we do not have the internal structures
to push digitization actively but we
have recognized the need to deal with the
topic to remain competitive."
General Manager, mid-sized global
consumer goods brand
Multi-digital
natives
Small-town
laggards
Customer
development
focus
Low
High
Low
Growth focus
High
Global old
schoolers
Local
e-heroes
Large Medium Small
Average company size
MARKET EXPANSI ON SERVI CES REPORT 40 |
small-town laggards have to be gradually introduced to
the new opportunities.
Small-town laggards
A strong willingness to grow and international aspirations
drive small-town laggards towards digitization. So far
they have not shown a high affinity to digital trends or
technology but as they are reaching the growth limits of
their traditional home markets, small-town laggards see
opportunities in digital trends to increase their domestic
market share even further or grow internationally in an
efficient and reliable way. As they have been cautious in
the past and are aware of the associated risks, they need
to build up extensive knowledge and require the support
of a capable partner.
In dealing with digital trends, companies pursue different
strategies that correspond to their stage of digital
readiness and corporate objectives. Multi-digital natives
and local e-heroes for example demand sophisticated
services and technology while global old schoolers or
Growing from digital laggards to natives
Figure 21: Prevalence of digital types by company size (% of total)
Source: Survey data
Siemens – building on digitization
Siemens, the German engineering conglomerate,
presented its overhaul strategy "Vision 2020" to the
public in spring 2014. The key pillar of the strategy
is to focus externally as well as internally on digitiza-
tion. The focus of products and services for custom-
ers is on electrification, automation and digitization.
Internally, the company enhances growth by gath-
ering and generating data, analyzing content and
drawing conclusions from it.
Multi-digital natives
Local e-heroes
Global old schoolers
Small-town laggards
USD
101 - 1,000 m
over USD
1,000 m
USD
51 - 100 m
USD
10 - 50 m
up to USD
10 m
54%
32%
19%
12%
4%
16%
15%
17%
23%
23%
24%
28%
32%
49%
23%
28%
38%
39%
24%
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 41
Size matters – digitization as a growth driver
Company size has a major impact on the general digital
mindset, and strategic priorities shift as companies grow.
The share of multi-digital natives and local e-heroes
increases significantly as companies become larger.
Three fundamental effects explain this development:
as companies grow, business operations become more
complex and less transparent. To maintain their efficiency
levels, larger companies apply digital technology to
control their operations, consolidate information
and automate processes. Secondly, larger companies
often reach growth limits in their existing markets and
through their traditional channels as they expand. In
order to keep their growth rates high, companies use
digital sales channels to access new customer segments
and boost sales through cross-selling opportunities.
Digitization also requires a certain amount of upfront
investment and maintenance costs in IT infrastructure,
online customer interfaces or data mining solutions. On
average, companies spend around 1% of revenues on
IT costs. For smaller companies, IT related costs have a
much larger impact on bottom-line profitability and are
therefore kept to a minimum.
To summarize, as companies become larger, they
eventually have to take digitization into account in order
to stay competitive.
Leveraging the potential of digitization – a
differentiated view
Regarding digitization, companies have different ideas
about the opportunities it presents. Multi-digital natives
see strong value in new technology to improve their
customer relationships, obtain a better understanding of
customer preferences and collect feedback to improve
their service and product offering. They intend to
continuously improve the interaction with their existing
customers to strengthen their brand, improve the share-
of-wallet and build up stronger loyalty. Local e-heroes
perceive digitization as an opportunity to improve
the efficiency of their operations in existing markets.
Digital technology is applied to achieve a sophisticated
understanding of markets, customers and products.
They expect to improve their marketing and sales efforts
through a granular breakdown of their markets while
simultaneously eliminating inefficiencies.
While all four digital company types see the chance to
boost sales through digitization, it clearly stands out for
global old schoolers and old town laggards. Their primary
motive for addressing digital trends is to increase sales
and improve market share. Global old schoolers focus
on developing new market segments through a strong
interaction with their customers. Old town laggards see
a possibility in digitization to enter new markets quickly
and efficiently.
Finding the right approach to digital market
expansion – a combination of traditional services
and digital expertise
When companies decide to develop existing markets
or expand into new markets through digitization, they
are confronted with a variety of options. Depending
on their digital readiness and capabilities they might
be able to organically grow their digital operations or
transfer their knowledge from home markets to foreign
operations. This approach to digital market expansion is
often unsuccessful as companies neglect to adjust their
digital know-how to foreign markets, align their digital
marketing efforts with local peculiarities and establish a
physical presence in the market. Companies therefore
rely on partners for these processes. Gaining access to
new customers and improving market share through
a capable partner can significantly accelerate digital
market expansion and, at the same time, strengthen the
competitive position.
Traditional partners such as exporters, licensers, joint
ventures or logistics partners are one option for driving
digital market expansion. These somewhat conservative
approaches allow companies to gain fast access to foreign
markets at reduced risk, without high investments in local
infrastructure or analysis of local markets. With an export
partner, companies often have to surrender control about
how their products are being sold in foreign markets
and are not able to tap into the full potential of those
markets. Alternatively, companies make use of licensing
or franchising agreements in order to target foreign
markets more easily and without reduced investments.
On the downside, those companies lose a substantial
amount of control and depend on the partner in the
longterm. Joint ventures are another common method.
MARKET EXPANSI ON SERVI CES REPORT 42 |
This model allows companies to gain market access
through strong local partners without establishing own
subsidiaries. This model also reduces costs and brings
efficiency gains but increases the complexity within the
company and control is shared with the partner. These
traditional partnership models seldom provide specialized
experience or access to digital marketing, e-commerce
platforms or innovative technology.
In the wake of the digital era new forms of partnerships
have advanced. Digital specialists are companies that
have specialized on a certain digital service or product
including social media agencies or digital consulting
firms. Digital specialists are very experienced within their
specific field but normally operate locally. In most cases
they do not have the capabilities for delivering services to
clients on an international scale. Other pure e-commerce
players (e.g. Amazon, eBay or Alibaba) have built up
strong international sales platforms where companies
can sell their products at the cost of a share in their
revenues. While established e-commerce platforms
offer companies a quick and cost efficient approach to
entering international markets, competition on these
platforms can be fierce as entry barriers for competitors
are similarly low. Companies also face the risk of
becoming largely dependent of platforms that have a
dominant market position. While digital specialists and
pure e-commerce players do have very specialized digital
know-how, they have a very narrow view of the entire
value chain.
Digitization offers opportunities for all types of companies
Figure 22: Opportunities by company type
Source: Survey data
Multi-digital natives
Global old schoolers
Local e-heroes
Small-town laggards
Increased market transparency
Cross selling opportunities
Increase of market share
Proximity to customers
Increase in sales
Capturing detailed customer feedback
Stronger customer retention
Improved return on marketing
Customization of products
Increase in sales
Cross selling opportunities
Development of new customer segments
Stronger customer retention
Increased market transparency
Increased market transparency
Proximity to customer
Development of new customer segments
Stronger customer retention
Capturing detailed customer feedback
Increase of market share
Increase in sales
Cross-selling opportunities
Increased market transparency
Proximity to customer
Development of new customer segments
Stronger customer retention
Increase in sales
Increase of market share
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 43
"We have reached our limits with
traditional exports. In order to maintain
the growth momentum in our foreign
markets we have to think
about alternative approaches."
Head of International Sales, European luxury goods brand
Companies expect local fulfillment capabilities for digital market expansion
Figure 23: Expectations of companies towards partners
Source: Survey data
Existing IT infrastructure
Strong physical presence in local market
Access to multiple markets
Strong digital capabilities and expertise
Critical local market size
Reduction of organizational complexity
One-stop solution provider
Strong functional capabilities and expertise
36%
29%
24%
22%
21%
28%
26%
28%
53%
52%
50%
48%
46%
45%
44%
43%
Digital natives Digital laggards
MARKET EXPANSI ON SERVI CES REPORT 44 |
It comes as no surprise that a growing number of
companies are looking for a partnership model that can
fulfill traditional market expansion services and at the
same time provide extensive knowledge about digital
services along the entire value chain. Market expansion
services providers are an increasingly popular solution
as they offer the advantages of traditional partnership
models such as quick market access, mitigation of
risks and reduced upfront investment costs while at
the same time leveraging untapped potential arising
from digitization trends. MES providers reduce the cost
and complexity for companies, increase sales and offer
efficient and value-enhancing services along the entire
primary value chain. Larger MES providers in particular
have an international reach and provide companies with
integrated solutions beyond their traditional regions.
Choosing a suitable partner for digitization
Companies often lack the resources, capabilities and
expertise needed to enter new markets or develop
existing ones through digitization by themselves and
therefore often turn to partners. When selecting a
partner to successfully drive digital market expansion,
companies consider a number of internal and external
factors and demand certain qualifications. They expect
their partners to have both experience with digitization
as well as market expansion.
In terms of digitization, the most important capability
is the availability of a sophisticated IT infrastructure.
Companies turn to partners in order to find a cost-
effective way to digitize and are reluctant to build up
their own data centers or purchase computer hardware
and software. Expertise regarding digital sales channels,
online marketing and automation of business processes
is a must.
Companies entering or developing any market are
currently faced with a variety of challenges along
the value chain. These can include high complexity,
market entry barriers and a lack of local expertise and
infrastructure when interacting with customers. The
importance of local knowledge of customers and
familiarity with cultural peculiarities has increased and
can be met by partners with a strong physical presence
in local markets.
With increasing competition, complexity of business
operations and uncertainties in the global economy,
companies prefer to turn to partners who are able to
handle several steps along the value chain and are big
enough to realize cost savings through economies of
scale.
Going forward with market expansion services –
the prioritized choice for digitization
The different corporate objectives and digital mindsets of
multi-digital natives, global old schoolers, local e-heroes
and small-town laggards lead to differentiated market
expansion strategies (see figure 24). Multi-digital natives
are already advanced in the use of digital technology
and monetization of digital sales trends and rely on
partners who can deliver state-of-the-art digital services
and innovative solutions. They accordingly turn to digital
specialists to refine their existing portfolio, conduct
selective improvements and strengthen their customer
interaction. Global old schoolers and local e-heroes
increasingly rely on market expansion services – for
different reasons. MES providers are able to reduce a
company's operating costs, boost efficiency and reduce
complexity and thus can meet the ambitious targets
of local e-heroes. At the same time, MES providers
help clients to achieve sustainable growth and improve
market share which plays into the hands of global
old schoolers. Small-town laggards take a somewhat
different approach. They also rely on market expansion
services providers and digital specialist but prioritize
logistics partners. They have a short-term perspective
and pursue an aggressive growth strategy. For example,
they can quickly build an international website and
deliver their products internationally through a logistics
provider. In the long run growth from this approach is
limited as markets increasingly demand customization
and adaptation of sales activities to local peculiarities.
With a purely "sales and delivery" approach, small-town
laggards will eventually miss out on leveraging the entire
upside potential of digital market expansion.
Pure e-commerce players are not perceived as a primary
model for digital market expansion. Despite their
technological leadership and market dominance, pure
e-commerce players only focus on a specific part of the
value chain and do not offer an integrated approach of
online and offline services demanded by many companies.
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 45
Figure 24: Qualification of partners for digital market expansion
Source: Survey data
MES providers are highly valued as partners for digital market expansion
Export partners on the other hand might serve as an
instrument for companies to enter new markets quickly
but are less suitable to drive digital strategies.
Companies following a digital market expansion strategy
rely on partners who can deliver superior services in both
digitization and market expansion. Naturally, market
expansion services providers are best suited to fulfill this
demand. With a local presence, they are aware of the
peculiarities in the specific market and combine online
and offline sales in an efficient and reliable way. MES
providers offer companies an integrated approach and
deliver services along the entire value chain; reducing
complexity risks and costs. At the same time, MES
providers are prepared for the latest technological trends,
thereby being able to provide clients with innovative
services and solutions.
Multi-digital natives
Local e-heroes
Global old schoolers
Digital specialist
MES provider
MES provider
Logistic partner
Digital specialist
Logistic partner
MES provider
Joint venture partner
Joint venture partner
Joint venture partner
Logistic partner
Digital specialist
Local franchise
Local franchise
Local franchise
E-commerce provider
Exporter/agency
Exporter/agency
Exporter/agency
E-commerce provider
E-commerce provider
Small-town laggards
Logistic partner
MES provider
Digital specialist
Joint venture partner
Local franchise
E-commerce provider
Exporter/agency
MARKET EXPANSI ON SERVI CES REPORT 46 |
MES succeed in the balancing act of transaction
and interaction competence
To reduce complexity and costs, companies seek partners
who can offer exceptional services along the entire value
chain. An integrated approach includes enhancing the
company's client and customer interaction as well as
improving the business transaction processes. Potential
partners for digital market expansion have their strength
in different application areas. Logistics partners and
exporters are rated as strong partners to drive foreign
transaction processes but lack competence in improving
customer interaction processes. By contrast, the strength
of digital specialists is seen in enhancing customer
relationships. Market expansion services providers
manage to offer their clients superior services across
both dimensions.
MES providers as preferred partners for taking
advantage of new opportunities
The value of market expansion services providers in
delivering superior services and driving digital market
expansion is recognized by all types of companies. MES
providers are well positioned to provide their clients
with the best mix of market expansion and digital
transformation services. 80% of the surveyed companies
would consider an MES provider to drive their digital
market expansion strategy. In our study we examined
the reasons why companies choose market expansion
services providers. The results vary for digitally advanced
and digitally less-advanced types of companies.
One of the key advantages of MES providers is their
physical presence in the markets. They have obtained
specific market knowledge and compiled the skills to
operate successfully in local markets. MES providers
Figure 25: Clients’ perception of service provider competence
Source: Survey data
Balancing act of interaction and transaction competence
Interaction competence
High
Low
Transaction competence Low High
Logistic
partner
Exporter/
agency
Joint
venture
partner
E-
commerce
provider
Local
franchise
Digital
specialist
MES
provider
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 47
C
o
n
s
u
mer e
x
p
e
r
i
e
n
c
e
Digital
channels
Physical
channels
C
o
n
s
u
mer e
x
p
e
r
i
e
n
c
e
C
o
n
s
u
mer e
x
p
e
r
i
e
n
c
e
Single-channel Multi-channel Omni-channel
Figure 26: Channel management approaches
Omni-channel approach – a seamless integration of all channels along the consumer experience
"Shifting budget into digital services is not
about shifting everything online.
Instead it is about merging the best of
online and offline solutions."
Head of Marketing, South East Asian cloth manufacturer
MARKET EXPANSI ON SERVI CES REPORT 48 |
can provide local sales and infrastructure with capillary
distribution network and fulfillment services. With the
increasing popularity of e-commerce among customers
worldwide and as the lines between traditional retail and
e-commerce increasingly diminish; it becomes increasingly
important for companies to have access to both online
and offline sales channels. Being present in only one of
these channels is not sufficient as customers become
increasingly demanding. With their strong physical
presence, MES providers have access to local offline as
well as country-specific online channels and are able to
drive the digital integration of both. The interviewed
companies rated access to multiple sales channels as
one of the major reasons to turn to MES providers.
Multi-channel access and proximity to customers
Figure 27: Reasons for partnering with MES providers by digitally advanced companies (%)
Source: Survey data
Access to multiple sales channels
Access to local retail networks Access to multiple sales channels
Proximity to customers
Reduce operating costs
Mitigation of risks
Local distribution infrastructure
Reduce organizational complexity
51%
42%
54%
37%
30%
28%
24%
44%
43%
37%
36%
34%
25%
25%
Muli-digital natives Local e-heroes
Besides access to multiple sales channels, multi-digital
natives and local e-heroes cite proximity to customers
as one of the top reasons why they would turn to MES
providers. The ability of MES providers to provide support
and services along the entire primary value chain enables
them to be close to the customer and channel useful
feedback to their clients.
Global old schoolers and small-town laggards see possi-
bilities of digitization to grow and improve their custom-
er relationship. At the same time, those companies often
cannot bear the high upfront investments required for
digital market expansion. They avoid high costs for digi-
tal transformation and mitigate the risks associated with
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 49
Multi-channel access and proximity to customers Reduced operating costs, mitigation of risks and access to multiple sales channels
Figure 28: Reasons for partnering with MES providers by digitally less-advanced companies (%)
Source: Survey data
Reduce operating costs
Access to multiple sales channels
Mitigation of risks
Proximity to customers
Access to local retail networks
Local distribution infrastructure
Reduce organizational complexity
51%
33%
43%
25%
36%
23%
20%
43%
38%
33%
32%
32%
25%
24%
Global old schoolers Small-town laggards
building up their own infrastructure or investing in new
but yet unproven technology. MES providers are often
able to reach significant market size and realize valu-
able economies of scale. Investment costs of logistics and
IT infrastructure can be spread among clients and mature
technology is pre-selected. Clients gain access to innova-
tive, digital services and technology at reasonable costs.
MARKET EXPANSI ON SERVI CES REPORT 50 |
MES providers enabling digital customer and
channel management
Different types of companies and their varying strategic
goals translate into different demands for services offered
by market expansion services providers. Depending on
their digital readiness, they either look for an integrated
approach or selected services in marketing, sales,
distribution, logistics, research and analysis as well as
customer service and support.
Companies of all types particularly rate services that
improve interaction with customers and key stakeholders
as highly relevant and that focus on the primary steps of
the value chain. This includes digital marketing strategies,
improving the customer experience in all channels and
handling customer management in overseas countries.
Big data management, customer interaction and channel optimization in high demand
Figure 29: Services demanded by digital company type
Source: Survey data
As multi-digital natives are already technologically
advanced, they are likely to be confronted with a massive
amount of digital data. In order to make valuable use
of this data and to handle the overflow most efficiently,
they turn to MES providers to leverage their experience
and infrastructure in this area. With the analysis of
dependencies and insights into the market, multi-digital
natives want to make their digital marketing activities
more efficient and improve the customer experience.
Local e-heroes also show strong demand for services that
can improve the relationship between their company
and its customers, enhance marketing efforts and
extract insights from customer data. The exchange of
information with suppliers and customers is a key service
for local e-heroes to render their digital operations more
efficient in line with their corporate objectives.
Multi-digital natives
Local e-heroes
Global old schoolers
Small-town laggards
Big data management
Customer relationship
Customer relationship
Online brand building
Ful?llment services
Digital marketing
Sales channel optimization
Digital sales channels
Digital marketing
Sales channel optimization
Digital sales channels
Customer relationship
Market intelligence
B2B interaction
Big data management
Customer experience
Customer experience
Big data management
Customer experience
Big data management
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON | 51
Global old schoolers and small-town laggards are at the
beginning of digitalizing their operations. They need
MES providers to optimize their digital operations and
enter the digital sales channel. They seek partners able to
support them in the process of building up new channels
and synchronizing them with their traditional ones.
Moreover, they turn to MES providers to improve their
digital marketing and customer experience in order to
boost sales.
Realizing a holistic marketing and engagement
strategy through MES
Digitization has changed the way consumers engage
with brands and companies before, during and after a
purchase. Market expansion services providers support
companies in building up and establishing their digital
communication channels and driving a company's
social marketing strategy. Such services involve more
than purely digital marketing and range from creating
a company's website in foreign markets, setting up
promotional events or establishing company profiles on
social media platforms. They also include monitoring
and tracking of the activities and management of social
media communication. Simultaneously, MES providers
are in a position to use traditional interaction channels
such as TV, billboards or radio to reach customers. This
scope permits a holistic marketing and engagement
strategy where online communication is attuned to
offline market initiatives. Conversations that have been
held with customers through an online help forum could
ideally be continued at the physical customer service of
a sales outlet at a later point and without interruption.
Through its physical presence in many countries, the
MES provider is able to align a global marketing
campaign or branding strategy to local circumstances
and peculiarities. This can include, alongside other
measures, the adjustment of the marketing message, the
analogous translation into a foreign language or the use
of appropriate communication channels. It suggests to
the customer that the company is committed and present
in the respective country. All these alignments to local
conditions and the combination of online and offline
communication tools lead to an improved and smooth
customer journey and increased customer loyalty. This
ultimately enhances the company-customer relationship.
Leveraging big data through MES
Companies have mainly focused on their home markets
to collect customer data and take appropriate measures
from data analysis. As they expand internationally, the
importance of timely and accurate local market research
increases. In order to continue pursuing a global strategy
and competing successfully against local champions,
they need to understand their customers in every
market. In many cases, it is difficult, inefficient and costly
for companies to develop capabilities to conduct and
coordinate research and market intelligence activities in
each individual country.
Instead they leverage the processes of data collection,
processing and analysis through market expansion
services providers. Through their full-service integration
and their end-to-end solutions, MES providers are
already optimally positioned to channel information from
customers back to the client. They can ensure that none
of that valuable information and insights get lost before
they ever find their way back to the client. MES providers
are aware of legal, social and cultural differences in the
respective countries and have a better understanding of
data privacy rules. Protection of personal data is a key
legal issue in many countries as storage of personal
information has exploded and cases of misuse have
become more frequent. Companies with less experience
can not only run in serious legal difficulties but also
compromise their reputation.
MES providers ensure that data collection is done most
efficiently, in accordance with local regulations and that
the comparability of the results is given. MES providers
can add their knowledge of local situations to the data
analysis and draw the correct conclusions from it. Local
understanding is the core pillar to accurate analysis and
meaningful interpretations. Furthermore, MES providers
are able to collect data from various sources and for
different clients and thus reach a level where the data
basis becomes more reliable and meaningful. In addition,
MES providers are able to collect data through online
and offline tools, thereby guaranteeing a comprehensive
information backflow.
MARKET EXPANSI ON SERVI CES REPORT 52 |
Building and fulfilling an omni-channel strategy
through MES
Companies need to find the right balance when
combining online and offline sales as different customers
demand that they sell products through different
channels. The omni-channel consumer expects product
availability through all available channels and that the
overall brand experience is equally satisfying. Many
customers combine channels to support their purchasing
decision: for instance, they inform themselves online
about prices and product attributes but purchase the
product at a local store. Many customers even review
product information on their mobile phone while being
physically present at local stores. Companies must
therefore be prepared to reach a customer through a
variety of channels, while at the same time ensuring the
same level of service across all channels.
MES providers are able to complement existing retail
channels with new digital sales channels, offering their
clients an integrated omni-channel approach. With
their strong foothold in local markets, they are able
to identify optimal combinations and adapt channel
strategies to the needs of individual markets. MES
providers are also able to provide strong local networks
and capillary distribution for their clients and facilitate
quick expansion in the markets. Through this existing
distribution infrastructure, MES providers can handle the
entire fulfillment process and ensure the availability and
timely delivery of products.
Efficient business transaction through MES
Customer credit worthiness and means of payment can
vary considerably from country to country. MES providers
have extensive experience and knowledge about local
customers and their purchasing habits, and can use this
expertise when implementing digital sales strategies.
This includes the selection, implementation and efficient
usage of innovative payment solutions. Depending on
the digital readiness of a country, different means of
payment have to be included in order to allow a broad
spread of customers to purchase goods from a company.
MES providers are able to handle the entire purchasing
process and offer end-to-end solutions, reducing the
complexity and risk for companies.
MES and digitization – combining the best of both
worlds
Digitization creates many new opportunities for com-
panies but also confronts them with real challenges. It
has been shown that various types of companies are at
different stages of digital readiness. Different company
types have distinct priorities with regard to digital
market expansion and follow varying strategic goals.
Consequently, they demand different digital services and
solutions.
To fully exploit the maximum potential while at the
same time mitigating risks, many companies turn to
strategic partners to drive their global digitization
strategy. Integrated, cross-country MES providers are
ideally positioned to drive both traditional and digital
market expansion. With their local presence, expertise
and know-how they are able to offer their clients and
customers superior services along the entire value chain.
MES providers can leverage their capabilities in individual
countries and regions to develop reliable and successful
market strategies together with the companies. Their
local presence allows them to efficiently establish essential
business relationships, deal with local regulations and
provide the required capillary distribution network. With
their existing distribution infrastructure they can act as a
true full-service fulfillment partner for their clients.
MES providers are able to leverage their expertise and
investments into digitization with their clients to reach
economies of scale and provide exceptional knowledge.
With their history and expertise in traditional market
expansion services, they are in the best position to
combine and synchronize online and offline processes in
the best possible way.
MES providers will play a vital role for companies
expanding into new markets or developing their business
in existing markets. They can support companies from
all industries in driving growth, reducing complexity and
realizing efficiency gains in foreign markets. Uncertain
market developments and the consistent focus on core
competencies will further add to the demand for market
expansion services in the years ahead.
DI GI TAL MES – SUPPORTI NG COMPANI ES I N CAPTURI NG THE POTENTI AL OF DI GI TI ZATI ON
MES providers combine digital and traditional market expansion services
Figure 30: Positioning of MES in the global market expansion context
| 53
P
h
ysical chann
e
ls
D
igital channels
MES
providers
Customers/
experts/shoppers/
consumers
Clients
1. Sell and distribute
3. Inform and infuence
2. Buy and pay
4. Respond and refer
MARKET EXPANSI ON SERVI CES REPORT
Digital
advanced
players
Digital
beginners
Are you looking for a strategic partner
to support your global, digital strategy?
Would you like advice on how to
improve your performance in existing
markets through digitization?
Do you need strategic support with
accessing new growth markets through
digitization?
Are you looking for a strategic partnership
to drive your international, digitization
activities?
1
Digital
market
strategy
Digital
advanced
players
Digital
beginners
Do you lack market insights to adapt your
global digital market entry strategy to
local specifics?
Do you need additional market
know-how to improve your
performance in any existing market?
Do you need market know-how to adapt
your products and your marketing
strategy to local customers?
Are you lacking critical customer insights
to grow your local business?
2
Local market
intelligence
Digital
advanced
players
Digital
beginners
Would you like to access new markets
with external resources and specialist
capabilities?
Would you like to improve your efficiency
by outsourcing parts of the value chain
to a partner to focus on your core
competencies?
Do you need to access external financial
resources to successfully enter into a
new market at low cost?
Would you like to grow in existing
markets while reducing costs and
improving efficiency?
3
Skills and
financial
resources
Digital
advanced
players
Digital
beginners
Would you like to access new markets
at low risk with low investment?
Would you like to further develop the
existing market without utilizing own
assets?
Would you like to reduce your risk level
when entering new markets through
digitization?
Would you like to make a critical step
forward in a market and share the risk
with your partner?
4
Risk
transfer
Digital
advanced
players
Digital
beginners
Are you interested in gaining access to an
established local network and market entry
platform?
Do you want to expand your existing network
and infrastructure to aggressively grow
in established markets?
Are you looking for access to proven
local network of customers and contacts
when entering a new market?
Would you like to integrate your
operations into a professional and
efficient local platform?
5
Platform
and
networks
GO into new markets GROW in existing markets Needs
Digital
advanced
players
Digital
beginners
Do you require a strategic partner to realize
efficiency gains when entering new
markets through a combination of digital
and physical channels?
Do you need help in synchronizing your
online and offline activities to improve
the customer experience?
Are you looking for experienced and
proven concepts when entering new
markets through multiple channels?
Would you like to combine online and offline
sales and communication channels to
boost sales and improve customer
interaction?
6
Omni-channel
54 |
ARE YOU READY FOR DI GI TAL
MARKET EXPANSI ON?
METHODOLOGY | 55
METHODOLOGY
Survey
Roland Berger Strategy Consultants conducted an online survey generating more than 380
responses from executives of current or potential clients of market expansion services (MES)
providers in the Asia Pacific region. The survey asked about overall goals and strategies, modes
of market expansion, demand levels for MES and companies' expectations of MES providers.
Interviews
In addition, Roland Berger Strategy Consultants conducted 10 interviews with industry
leaders and experts. The interviewees were executives of current or potential clients of MES
providers. The sample was balanced between industries (consumer goods, specialty chemicals,
pharmaceuticals/healthcare and engineered products), geographical regions and company
size. Case studies are based on publicly available company information.
Market sizing and breakdown
Market sizes were calculated using a detailed market model developed by Roland Berger
Strategy Consultants. Total market sizes are based on industry-specific data (from sources such
as Euromonitor, Espicom Healthcare Intelligence, GIA and SRI) and publicly available reports
from leading institutes (including the IMF, WHO, World Bank and UNCTADstat). Roland Berger
Strategy Consultants first calculated the total size of each market, then estimated the size of
the market for market expansion services in a multistage approach. The input for this step-by-
step market breakdown, initially carried out for our first report in 2011, was a combination of
quantitative market data and qualitative and quantitative expert opinions.
Market projections
Market projections are also based on a detailed market model developed by Roland Berger
Strategy Consultants. They distinguish between market demand forecasts and forecasts
for the penetration rate of market expansion services. All market projections are in current
prices based on fixed exchange rates (base year: 2012). Projections for the demand side and
historical data are derived from market data published by the relevant research institutes.
Limitations
The market breakdown is the result of our analysis of quantitative and qualitative information
from quantitative sources (e.g. market reports) and interviews with experts. A realistic market
breakdown also requires qualitative information. For this reason, estimates were used, and
some figures must therefore be considered "best approximations", and the actual market
sizes may vary. Market forecasts are projections and as such cannot fully take account of
all possible eventualities. Despite these limitations, Roland Berger Strategy Consultants is
convinced that the analysis presented in this study is a true and fair reflection of the markets
in question.
DKSH is the leading Market Expansion Services provider with a focus on Asia. As the term
"Market Expansion Services" suggests, DKSH helps other companies and brands to grow
their business in new or existing markets.
Publicly listed on the SIX Swiss Exchange since March 2012, DKSH is a global company
headquartered in Zurich. With 735 business locations in 35 countries – 710 of them in Asia –
and 27,200 specialized staff, DKSH generated net sales of CHF 9.6 billion in 2013.
The company offers a tailor-made, integrated portfolio of sourcing, marketing, sales,
distribution, and after-sales services. It provides business partners with expertise as well
as on-the-ground logistics based on a comprehensive network of unique size and depth.
Business activities are organized into four specialized Business Units that mirror DKSH fields
of expertise: Consumer Goods, Healthcare, Performance Materials, and Technology.
With strong Swiss heritage, the company has an almost 150-year-long tradition of doing
business in and with Asia, and is deeply rooted in communities and businesses across Asia
Pacific.
www.dksh.com
[email protected]
56 | MARKET EXPANSI ON SERVI CES REPORT
| 57 COMPANY PROFI LES
Roland Berger Strategy Consultants, founded in 1967, is one of the world's leading strategy
consultancies. With around 2,700 employees working in 51 offices in 36 countries worldwide,
we have successful operations in all major international markets.
Roland Berger Strategy Consultants advises major international industry and service companies
as well as public institutions. Our services cover all issues of strategic management – from
strategy alignment and new business models, processes and organizational structures, to
technology strategies.
Roland Berger is an independent partnership owned by around 250 Partners. Its global
Competence Centers specialize in specific industries or functional issues. We handpick
interdisciplinary teams from these Competence Centers to devise tailor-made solutions.
At Roland Berger, we develop customized, creative strategies together with our clients.
Providing support in the implementation phase is particularly important to us, because
that's how we create real value for our clients. Our approach is based on the entrepreneurial
character and individuality of our consultants – "It's character that creates impact".
www.rolandberger.com
[email protected]
58 | MARKET EXPANSI ON SERVI CES REPORT
Disclaimer
The information contained in this report is based on extensive primary and secondary research. Whilst we believe
the information to be reliable and a reflection of the current status we are not in a position to guarantee the results.
Roland Berger Strategy Consultants and DKSH disclaim all warranties with regard to the content, express or implied,
including warranties of merchantability and fitness for a particular purpose, nor assume any legal liability for the
accuracy, completeness, or usefulness of any information contained herein. No one should act on such information
without appropriate professional advice after a thorough examination of the particular situation. This report contains
certain forward-looking statements. By their nature, forward-looking statements involve uncertainties because they
relate to events that may or may not occur in the future. This particularly applies to statements in this report containing
information on future developments, market projections and expectations regarding the market expansion services
business, and general economic and regulatory conditions and other factors that affect market expansion services.
Forward-looking statements in this report are based on current estimates and assumptions that are made to Roland
Berger Strategy Consultants' and DKSH's best knowledge. These forward-looking statements (including those derived
from third-party studies) are subject to risks, uncertainties, and other factors that could cause actual situations and
developments not to occur, and/or to differ materially from and be worse than those Roland Berger Strategy Consultants
and DKSH have expressly or implicitly assumed or described in these forward-looking statements. Neither Roland Berger
Strategy Consultants nor DKSH assume any obligation to update any forward-looking statements or to conform these
forward-looking statements to actual events or developments.
| 59
60 |
For further information, please visit
www.marketexpansion.com
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