With greater competition and slowing economic growth, conglomerates in Southeast Asia need to work harder to continue outperforming their rivals. Jean-Pierre Felenbok, a partner with Bain’s Strategy practice, highlights five things conglomerates can do to keep their competitive edge.
Read the Bain Brief: How Conglomerates in Southeast Asia Can Live Long and Prosper
Read the transcript below.
JEAN-PIERRE FELENBOK: Since 2003, conglomerates in Southeast Asia have done very well. They've outperformed both their peers in developed markets, but also companies in their own market, which are focused on the single sector.
However, things are becoming tougher for conglomerates. No. 1, market growth has slowed down. And No. 2, a lot of conglomerates are heavy on commodities. And commodity prices have softened recently. And finally, markets are becoming more open to competition, eroding some of the legacy, a competitive advantage of conglomerates.
We still feel that conglomerates can do well. But they need to do five things, in our opinion. No. 1, they have to increase the resiliency of their portfolio, which means that they have to focus on areas where they can develop or sustain strong leadership. No. 2, they have to re-examine, in many cases, their ownership structure to optimize a trade-off between control and access to new capital.
No. 3, they have to increase productivity, both at the holding level and at the business level. No. 4, they have to look for new sources of growth, often through M&A or global expansion. Finally, they have to make sure they don't lose, or they renew with what we call Founder's Mentality, which made them great in the first place.
If conglomerates do all those five things well, they can live long and prosper.
Amid tough economics, Southeast Asia’s once-thriving conglomerates need to work harder to remain competitive.