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Last Updated: Tuesday, 24 January 2006, 23:37 GMT
Outsourcing firms eye new markets
By Tim Weber
Business editor, BBC News website, in Davos

Shoppers pass a statue in Shanghai
Companies are keen to attract shoppers in countries such as China

Company bosses say cost cutting is not the main reason for outsourcing anymore.

Instead they are focusing on winning new customers in emerging markets like Brazil, Russia, India and China, a survey by consulting firm PricewaterhouseCoopers suggests.

China is seen as the most promising market, with nearly four fifths of all companies planning to sell their products there.

And nearly two-thirds of chief executives believe that globalisation is not just unstoppable, but also good for their company.

"Globalisation is widely viewed as an (attempt) to take advantage of low costs, but chief executives tells us that now it is more about accessing markets and getting new customers," said Samuel DiPiazza, the chief executive of PricewaterhouseCoopers International.

Just 12% of the executives interviewed believe that globalisation will have a 'somewhat negative' or 'very negative' impact on their organisation.

Regulation and corruption

Even bosses in developing countries are upbeat about globalisation.

"They are unanimous that it's not a threat but an opportunity; they worry less about multinationals coming into their market, but look forward to getting better access to new markets," Mr DiPiazza said.

It is the burden on business where the bosses in the developed and developing nations differ.

In industrialised nations, too much regulation and trade barriers top the list of complaints.

Corruption and poor education and health systems are the biggest worries of chief executives in developing countries.

China first

Much of global investment has been focused on the so-called BRIC countries - Brazil, Russia, India and China - a term first coined by investment bank Goldman Sachs.

But the survey's findings shatter several widely held assumptions about the motives.

While nearly half of all firms say that lower costs is one of the factors driving their decision to do business in these countries, about three quarters hope to get access to new customers.

Among the BRIC countries, unsurprisingly most corporate attention is focused on China.

Nearly four fifths of companies have a strategy to enter the Chinese market, while 55% hope to sell there within the next three years.

India came second, with 64% of companies seeing "significant market opportunities", while less than half identify such opportunities in Brazil and Russia .

"Until recently, when people thought about China it was about making things cheaply and sell them to the West," says Kieran Poynter, the chairman of PwC UK. "Today they see a billion people that are getting richer and who represent a consumer market."

India, meanwhile, is rated highly for its highly skilled workforce.

PricewaterhouseCoopers interviewed for the survey 1,410 chief executives in 45 countries during the last three months of 2005.

Of the chief executives surveyed, 25% worked for companies with a turnover of $1bn a year and more, while half were leading firms that had a turnover of less than $500m.


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