Incremental innovation 'key to competitiveness'
London, May 7, 2011
Companies have grown their portfolio of products in order to exploit the market potential of their current customers, reflecting the fact that incremental innovation has become a main competitive tool, said a study by Ernst & Young.
Despite the global recession, 87 per cent of companies have grown their product portfolio over the last three years, the E&Y stated in its report entitled "Competing for growth."
Jay Nibbe, Ernst & Young’s markets leader for Europe, Middle East, India and Africa, said, “It’s really interesting to see that successful companies have actually expanded their product offering over recent years, to help them weather the recession. This is why we’ve seen an explosion of product development.”
According to him, the increase in speed is dramatic. "Seventy-two percent of respondents report that they are faster in developing products and services than three years ago."
"Today some 75 per cent of product sales are generated from products that have not been created for rapid-growth markets. However this is set to change, with companies increasingly dedicating R&D investment to rapid-growth markets," he pointed out.
India and China dominated the sales focus of high performing global companies, with 47 per cent stating that India was the most important market for sales and 44 per cent naming China.
The importance of India and China remain the same, regardless of where the companies are headquartered. Outside the top two, it becomes apparent that priority markets vary by region.
Brazil continues to emerge as a favorite destination for investment, while Russia’s relative importance has declined. While it retains fifth position for European companies’ sales, it has declined for Asia-Pacific and fallen out of the top ten for companies based in North America.
“The term ‘BRIC’ has been superseded by a new dynamic. Post-‘Bric’ we’re seeing that companies are adopting a more regional approach and a number of countries, including Poland, Mexico and Argentina are increasing in importance,” Nibbe observed.
The top markets for production are China (30 per cent), India (28 per cent), Brazil 12 per cent) and Mexico (12 per cent). High performers have a much greater focus on India (43 per cent) and China (41 per cent), which almost exactly mirrors their sales focus.
Nibbe pointed out that there were some differences by region. "Companies from North America state that China is the top destination for production, whilst those from Asia-Pacific and Western Europe favour India," the expert noted.
Working with a local distributor was recognized by all respondents as the fastest way of entering a market.
High performers, however, are both significantly more likely to focus on working with a sales agent and less likely to establish a joint venture partnership or make an acquisition than low performers. In this way, they are speeding access to market but with the least capital or contractual exposure.
“The growth agenda has become a global one for companies of all sizes and from most sectors, but not all companies are well equipped for the many challenges that this implies,” Nibbe added-TradeArabia News Service