Asean firms' profit potential untapped: study
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Companies in the top five Asean economies are losing US$15 billion (nearly Bt470 billion) a year in profit as they are locked in a price war, according to Simon-Kucher.
The consultant’s Asean Pricing Stress Test 2013, which analyses firms in Singapore, Malaysia, Indonesia, Thailand and the Philippines, showed that the companies’ profits could rise if they would just allow for small price increases.
In a statement, the consultant said that increasing price pressure from competitors, rising raw-material costs and inflation rates worry company managers. The top five economies in the region could earn added profits of approximately $15 billion if companies would implement a marginal price increase of 2 per cent.
The consultancy analysed approximately 1,400 companies listed on the stock exchanges in the countries and calculated the impact of small price increases on a company’s profit.
“Companies in Asean are losing out by focusing solely on cost-cutting,” explains Dr Jochen Krauss, managing director of Simon-Kucher’s office in Singapore. “They have to look at the real profit driver – their prices.” Krauss recommends professional price management to companies.
The study reveals that the highest average profit growth potential lies in companies in the consumer/retail sector (+48 per cent), followed by manufacturing (+41 per cent), construction (+32 per cent) and telecommunications (+27 per cent) enterprises.
“Companies with low returns have the biggest potential,” said Jan Weiser, director at Simon-Kucher. “That’s why just small price increases can have the largest profit impact here.” This statement also reflects the ranking of the top 10 Asean companies with the greatest potential to increase profits by raising their prices by 2 per cent.
Synnex Thailand has the largest potential impact with a possible profit increase of 265 per cent, followed by three other Thai players.
