Companies in ASEAN could easily earn more money. With a marginal two
percent increase in prices, the top five economies in the region would
achieve an additional profit of USD nine billion, the Simon-Kucher
Pricing Stress Test shows.
SINGAPORE–(BUSINESS WIRE)–In light of the recent establishment of the ASEAN economic community
(AEC), it is becoming essential for companies to look for fresh avenues
to maximize profits. Currently, the ASEAN-5 countries (Singapore,
Malaysia, Thailand, Indonesia, and Philippines) leave more than USD nine
billion untapped because they hesitate to implement even small price
increases. This is the result of the ASEAN
Pricing Stress Test 2016 conducted by Simon-Kucher
& Partners. The global strategy and marketing consultancy
analyzed approximately 1,200 publicly traded companies in the region,
focusing on the consumer and retail, manufacturing, oil and gas,
construction, and chemical industries. “Companies completely
underestimate the huge potential of small price increases,” says Dr.
Jochen Krauss, Managing Partner of the Simon-Kucher & Partners
office in Singapore.
Potential to more than double profits
Assuming a price increase of two percent, 80 percent of the investigated
companies can expect profit growth potential in the double digits. That
means 14 percent of the currently unprofitable companies could
(re-)enter the profitable zone. But what’s more is that 11 percent of
the analyzed companies could more than double their current profits.
“Even small adjustments of two percent have an incredible profit
impact,” states Krauss. “That’s especially true for companies with a
lower profit margin.”
Strongest profit prospects for Singapore and Thailand
A look at country performance shows that Singapore and Thailand are
leading with an average potential profit growth of 45 percent, while
Philippines forms the tail light with around 30 percent. That means
growth potential of 42 percent on average for all ASEAN-5 countries.
“That’s too much money left on the table,” says Simone Lambrich, Senior
Consultant at Simon-Kucher. “Companies often strive for cost
optimization. But they should be aware that, by nature, this has its
limits and jeopardizes growth and innovation alike. Price increases
raise profits much more than cost reductions.”
The industry perspective underlines how much all companies could benefit
from a marginal price increase. The strongest profit lever was
determined for chemicals (45 percent), followed by construction (44
percent) and consumer and retail (43 percent). “It’s time that C-levels
recognize pricing as the biggest profit lever and systematically
approach and strengthen their company’s topline power,” recommends
Krauss. “Companies can already start optimizing their margins by
reaching for low-hanging fruits. Simon-Kucher supports companies in
identifying and implementing suitable pricing and sales measures.”
Dr. Jochen Krauss is the Managing Partner of the Simon-Kucher
& Partners office in Singapore. Simone Lambrich is a Senior
Consultant at Simon-Kucher.