Analyst: 'Not a time to panic'

KUALA LUMPUR--Chief executives in the Asia-Pacific region should not view the global economic slowdown as a threat, but as an opportunity for growth, according to Frost & Sullivan.

Speaking to the media on the sidelines of Frost & Sullivan's Global Innovation Summit here Wednesday, David Frigstad, chairman of the research firm, said many of the effects from the financial turmoil today are triggered by "fear-based forecasting".

"There is no fundamental reason why the global economy should go through the credit crunch and slowdown," said Frigstad. "[In fact], there is more cash out there than ever before, and there's more wealth out there that's looking for a place to park."

He noted that CEOs who choose to implement cautionary growth strategies would fundamentally cause the global slowdown to worsen.

"This is not the time to panic and cut back on spending," he explained. "Invest wisely and companies should reap the rewards when the economy recovers."

Referring to investors such as [Warren] Buffet, and corporations such as Bank of America (BOA) and Barclays Bank, that have exploited the current economic climate and bought up other companies, Frigstad said such opportunistic moves demonstrated that there are windows of opportunities in the market.

Last month, amid the financial mayhem that hit Wall Street, Buffet took up a US$5 billion stake in investment bank Goldman Sachs while BOA bought Merrill Lynch for US$50 billion. Britain's Barclays purchased Lehman Brothers' North American Banking capital markets and investment banking arm for US$1.75 billion.

"I don't feel that there is a doom and gloom [scenario] because there are smart investors who are buying aggressively," Frigstad said. "Mergers and acquisitions are also happening overnight, as exemplified in the BOA-Merrill Lynch deal, and this represents great opportunities for investors."

Companies need to take advantage of business opportunities and fight their instinct to freeze or cutback their growth plans during these times of uncertainty, the Frost & Sullivan consultant said.

While he acknowledged that the slowdown will require re-evaluation of current business objectives, Frigstad said companies should continue to invest in research and development (R&D), product innovation and prepare to compete when the market rebounds.

Companies, he urged, should also rethink their profit margins and revenue targets.

"In recessionary times, they should consider cutting prices, giving up the profit motive and going after market share instead," he said. "Companies that have done that in the past have gained when the market recovers."

Asia somewhat isolated
Meanwhile, the economic meltdown has been less pronounced in the Asia-Pacific region compared to the U.S. and European markets, said Aroop Zutshi, president and senior partner of Frost & Sullivan.

He noted that many financial institutions in the region benefited from past experiences and restructuring exercises that took place during the Asian financial crisis, which hit the region 10 years ago.

"Because of that crisis, governments in Asia implemented some major restructure of the banking system and began regulating and managing financial markets carefully," Zutshi said.

In fact, he said, Asia-Pacific organizations now have the opportunity to take advantage of the situation experienced in the West.

"Companies based in Asia can not only grow within the region and support some of the global organizations, but also enter the global market and truly become a global player," he noted.

Zutshi added that areas such as shared services and outsourcing (SSO), business process outsourcing (BPO) and knowledge process outsourcing (KPO), are expected to grow in the wake of the economic climate.

Kavan Mukthyar, partner and director of Frost & Sullivan Malaysia, noted that besides taking advantage of the opportunities available, companies should also look at addressing their weaknesses and improving their internal processes and systems.

"By addressing these issues, companies can ensure that they can implement projects with excellence," Mukthyar said. "This will allow them to become leaner and more efficient organizations, and will help them weather tough times."

Edwin Yapp is a freelance IT writer based in Malaysia.