Zinnov Center of Excellence for Emerging Markets

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The Rise of Asian Powerhouses
Zinnov Center of Excellence for Emerging Markets
June 2013
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2. 2
We are an 11 year old management consulting company
Globalization strategy for large
technology companies & India
market expansion (ME) strategy
Globalization strategy including
Market Expansion, R&D and shared
services (IT)
Globalization advisory for US based VC
funded companies, R&D center setup for
mid size technology companies
Zinnov center of excellence for
emerging markets
Global Office Locations:
• Santa Clara (US)
• Houston (US)
• Bangalore (India)
• Gurgaon (India)
Expansion Plans
• Singapore
• Shanghai/ Beijing
2005 - 2007
2008 - 2012
Our Customers:
• Global Technology Firms
• Indian IT-BPO Companies
• Government
• Industry Associations
Focus Areas
• Modern IT/ Cloud
• SMB
• Innovation
• Start-ups
• R&D
• Shared Services
IAOP: 2013
World’s best
outsourcing
advisors
120 People
150+ Customers
2002 - 2004
2013
Onwards

3. 3
Market expansion offerings are structured to deliver long term value to our customers
Thought Leadership
Whitepapers
Customer
Satisfaction/ Brand
Perception Survey
CIO Roundtables/
Technology
Conferences
Joint PR/ Media/
Marketing Campaign
Market Opportunity
Assessment
Customer/ Peer
Group Insights
Channel/
Distribution/
Monetization Model
Insights
Start-up Scan/ M&A
Target Identification
Growth Strategy/
Business Plan/ Vision
Statement
Detailed Go-to-
Market Strategy
Financial Planning
Risk Assessment &
Mitigation Plan
SMB
Large
Enterprises
Government
Cloud
Enterprise
Mobility
Data
Digitization
Developer/ IT
Pro Programs

4. 4
Agenda
1 Rise of Asian Powerhouses
2 Unique Characteristics of Asian Powerhouses
3 Appendix (Other Case Studies)

5. 5
The balance of global economic power is shifting in favour of Asian economies
Country Wise Contribution In Global GDP (PPP), 1980-2020E
USA V/S Asian Powerhouses (China, India, Indonesia, Malaysia and Philippines)
1980 1985 1990 1995 2000 2005 2010 2012 2015 2020
%ofGlobalGDP
Asian Powerhouses have already overtaken US
in terms of contribution in the Global GDP
23.1%
18.9%
14.9%
5.6%
2.6%
Asian
Powerhouses
China
US
India
Indonesia,
Malaysia &
Philippines
Source: IMF World Economic Outlook 2013

6. 6
GDP growth in Asian Powerhouses is being driven by increasing government spending,
personal consumption and foreign investments
Growth In Government Spending
CAGR 2008-11
17% 17% 21%
12%12%
United States China India Indonesia PhilippinesMalaysia
3%
Growth In Household Spending
CAGR 2008-11
United States
16%
China
14%
India
14%
Indonesia
9%
Philippines
10%
Malaysia
2%
Growth In Foreign Investments
CAGR 2008-11
United States
9%
China India
25%
Indonesia
9%
Philippines
17%
Malaysia
-8%
-9%
Key sectors for investment :
• Technology led inclusive growth
• Education & healthcare sectors
Rising young population (15-45 years)
driving the household expenditure
Liberalization of key sectors such as
multi-brand retail, aviation etc.
Source: World Bank

7. 7
The focus on technology investments in the Asian economies is on the rise
Share Of IT Spending
USA V/S Asian Powerhouses (China, India, Indonesia and Philippines)
Expanding base of globally
competitive large and mid-
market enterprises
Strong base of growing
domestic SMBs
Growth of enabling IT
infrastructure
A B C
Growth in IT Spending
in Asian Powerhouses
is driven by:
Source: BMI, Zinnov Analysis
86%
14%
Asian Powerhouses
2008
USA
%ITSpending
65% 35%
2020
USA
China
India
IndonesiaPhilippines
Asian Powerhouses
IT spending growth in Asian Powerhouses
will be more than that of the USA Malaysia

8. 8
Asian Powerhouses have an extensive base of globally competitive large & mid market
enterprises A
Large & Mid Market Enterprises
Employing more than 200 employees (2012)
United States
China
India
Indonesia
Philippines
Malaysia
Asian Power
houses
41,000
175,000
95,000
55,000
4,800
15,700
3,500
Total Enterprises in Forbes 2,000 List
United States
China
India
Indonesia
Philippines
Malaysia
Asian
Powerhouses
2020 E2012
543
275
182
56
9
20
8
CAGR
- 4%
17%
23%
11%
2%
6%
26%
378
1,160
938
129
11
32
51
Source: Government Agencies, Forbes

9. 9
Strong base of domestic SMBs is increasingly contributing to the growth of Asian
economies B
Number of Small and Medium Businesses
Employing less than 200 employees (Mn) (2012)
United States
China
India
Indonesia
Philippines
Malaysia
Asian Power
houses
23
135
51
48
25
0.6
0.8
China has the largest base of SMBs in
the world
SMBs account for over 20% of the total
GDP for Asian Powerhouses
Indian SMBs contribute to 40% of total
Exports
Philippines’s SMBs contribute to 36% of
Total Manufacturing output
Indonesia’s SMBs contribute 24% to the
country’s total GDP
Source: Government Agencies, World Bank

10. 10
The enabling IT infrastructure is further supporting the growth in Asia (2/2)
Source:Government Agencies
Over 52 Million
Smartphone users;
Smartphone sales expected to
grow by 51% in 2013
7.8 Million Smartphone
Users. Greater than the entire
population of Hong Kong
Over 44 Million
Smartphone users;
5th Largest Smartphone
subscribers in the world
Over 29 Million
Smartphone users
which is comparable to the
entire population of Saudi
Arabia
Over 330 Million Smartphone
users more than the population of US;
Largest Smartphone market in the
world
Accounted for 22% of world’s total
Smartphone shipments in 2012
China
India
Indonesia
Philippines
Malaysia
C

11. 11
Agenda
1 Rise of Asian Powerhouses
2 Unique Characteristics of Asian Powerhouses
3 Appendix (Other Case Studies)

12. 12
Telecom: Apple had to change its global GTM strategy to service the predominant pre-
paid telecom subscriber market in India
75%
25%
Pre-Paid
Subscribers
Post-paid
Subscribers
95%
5%
Asian Powerhouses are
predominantly pre-paid
United States
India
2008
Introduced iPhone in India
and followed its developed
market strategy:
• Offered exclusively by
Telecom Operators
• High priced and long-term
Subscription models only
– 36/48 months contracts
• Discounts and pricing is
highly dependent on the
operator
• iPhone Plans were priced
quite high ~ 50% higher
than other post-paid plans
prevalent in markets
 Failed to generate volumes
 Treated India as low
potential/low priority market
• Shifted from telecom operators
to specialised distribution
companies Redington and
Ingram Micro
• Expanded reach to brick &
mortar technology stores and e-
commerce sites
• Introduced Buyback, Exchange,
EMI & Cash Back schemes in
partnership with banks and
credit card providers
• Introduced unlocked phones to
win over pre-paid segments
Shifted Distribution
Strategy
2012 - 2013
Changed Sales Models
 400% increase in shipments
 Expected to generate $1 Bn
sales in FY 2013
Source: Informa, Economics Times

13. 13
Telecom: This has given a strong push to Mobile Ads ecosystem in Asian Powerhouses
Internet giants have been focusing on the Mobile
advertising space
Acquired mobile advertising
specialist for $750 Mn
Acquired China’s digital advertising
specialist for $ 3.8 Bn including its
internet advertising arm Alleyes
Acquired mobile advertising
specialist for $ 3.8 Bn
Mobile Advertising is growing at a
tremendous pace in Asian powerhouses
The APAC mobile advertising
market is estimated to increase
from $4.3 Bn in 2012 to $9.5 Bn in
2016
India & china are the largest
mobile markets with 864 Mn & 1.1
Bn mobile subscribers respectively
SMBs have started adopting Social,
Local, and Mobile (SoLoMo) model
for advertising
Source: Company Press Releases, Gartner

14. 14
Retail: New models such as e-commerce have been growing rapidly to reach the un-
served markets
Asian Powerhouses’ e-commerce market size is
expected to cross US in 2013
United States
China
India
Indonesia
Philippines
Asian Power
houses
2012 2013YoY Growth
E-Commerce Market ($Mn)
31%
224,621 262,000
36%
217,074 286,000
33%
200,000 265,000
31%
14,000 18,340
115%
1,000 2,150
39%
104 145.5
Gross Merchandise Value, 1997-2012
Amazon V/S eBay V/S Alibaba/Taobao
1997 2005 2012
Ebay Amazon Alibaba / Taobao
~$165 Bn
~$160 Bn
~$75 Bn
China based Alibaba / Taobao
exceeded Amazon and e-Bay in
terms of Gross Merchandise
Value
• Pioneered Cash/Card-on-delivery distribution
model in India
• Expects to touch over $1 Bn sales by 2015
Source: KPCB, Business Today, Zinnov Analysis

15. 15
Automotive: Limited budgets is no longer an impediment in car ownership in Asian
Powerhouses as OEMs increase their focus on small car sales
Car Sales By Segment
United States
India
25%
30%
45%
56%
17%
27%
Small Cars
such as hatchbacks
Medium Cars
such as sedans
Large Cars
such as utility vehicles
Small car sales are now
expanding in
developed economies
as well such as US
In India small cars
contribute 56% of car
sales
Small cars dominates sales in
Asian Powerhouses
Asian Powerhouses are
promoting smaller cars through
reduced taxes
India levies half the rate of
excise duty on small cars
Source: Wall Street Journal, Motor Intelligence, Financial Times

16. 16
Energy/ Power: Household electrification rates in Asian Powerhouses markets are low on
account of transmission and distribution losses
• Under investment in infrastructure is a common problem across Asian Powerhouses
Insight
Frequent Power Outages Power Thefts
Household electrification rates in Asian Powerhouses still remain low
United States India PhilippinesIndonesia
~100% 66.3% 64.5% 89.7%
Very high transmission & distribution losses (~ 22%) in countries like India
Solution
Smart Grids
Real time monitoring for
efficient power distribution
Identify and access outages
quickly and offer quick
restoration
Helps consumers monitor their
power usage
Examples of Smart grid adoption in
Asian Powerhouses
North Delhi
Power Limited, India
Major Utility
in Philippines
• Partnered with GE Smart Grid
Technologies to implement an
advanced Outage Management System
• Selected GE to implement smart
meters for their smart grid initiative to
allow consumers to better manage
their energy usage and expenses
Source: IEEE, World Bank, Company Website. Meralco

17. 17
Energy/ Power: Micro grid solutions are now being conceptualized to serve the unmet
needs in Asia
Tackling Un-Electrified Rural Areas and Villages
Micro Grids
A Micro Grid is a localized grouping of
electricity generation, energy storage, and
loads that normally operates connected to a
traditional centralized grid
Electrifying Rural Households
• Weekly cost of just $ 0.5
• Households also get mobile charging
point
Nearly 48% of rural households in India
are un-electrified (2010)
India national electrification
rate stands at ~66.3% with
many rural areas and
villages which are off-grid
Companies like Desi Power, Husk Power Systems, Saran Renewable Energies, Mera Gaon
Micro Grid Power, and Naturetech Infra operate micro grids in commercial basis
Source: IEEE, World Bank, Company Website. Meralco

18. 18
Energy/ Power: Case study on Cummins small DG sets for India market
Source:
Business
Model
Solution
Customer
Insight
1
3
4
Business
Opportunity
2
• ~45% of power consumed by the Indian industry
• Shortage of Fuel & heavy dependence on coal for power production
leads to low electrification rates
• Lack of portable power generating sets in India in the early 1990s
• Lack of natural gas and fuel cells powered gensets
• Started renting model for gensets to gain mindshare/market share
• Energy solutions & consultancy services for industries and individual
businesses
• Cummins manufactures low cost portable DG
sets to serve the Indian market
• Customized manufacturing of gensets for
industrial use with high levels of localization

19. 19
E-governance: Asian government are adopting and driving modern IT models to
accelerate e-governance initiatives
• Governments in Asian Powerhouses have lagged in leveraging IT for governance delivery
Insight
• Governments are leveraging modern IT to roll out G2B – Government to Business Services & G2C – Government to
Citizen Service
Solution
Start of e-Governance plan and IT spend as % of
government Budget
United States China India Indonesia
1998 2002 2006 2006
8-10% 6-7% 4-5% 3-4%
Proposed modern IT spending by governments
China India
2.5 Bn + 700 Mn +
gCloud gCloud, Virtualization
In Malaysia, Google partnered with the Information Ministry, SME Trade body and domain
registrar to help SMEs go online at low costs ~ $ 7
In India, Microsoft signed its largest-ever cloud services deal with the All India Council for Technical
Education to deploy cloud solution to connect some 10,000 technical colleges in the country, covering
7.5 million users
Source: Government Websites, World Bank

20. 20
Healthcare: Unlike the US, out of pocket health expenditure in Asian powerhouses is
significantly higher
• Asian Powerhouses have a low insurance penetration
Insight
• MNCs and local companies have re-engineered their products to serve Asian Powerhouses
Solution
Insurance penetration in Asian Powerhouses
China Indonesia Philippines
3.8% 1.5% 1.1%
Out of pocket health expenditure is high in Asian
Powerhouses
Typical Out-of-pocket
health expenditure in
United States
21%
Typical Out-of-pocket
health expenditure in
Asian Powerhouses
75%-85%
• GE Healthcare reduced the cost of a typical ECG machine (now also sold in developed
markets) by more than 6X for Asian Powerhouses
• Cost was reduced by using commodity components instead of custom-designed
components e.g. printers etc., eliminating screens and using rechargeable batteries
• Result: A Portable, battery-operated, easy-to-use, and easy-to-repair ECG machine
Source: World Bank, AiIA Group

21. 21
Banking & Financial Services: A significant base of Asian population is unbanked, despite
significant investments in the sector
• Asian Powerhouses have a low Banking penetration compared to developed countries
Insight
• Mobile banking is now helping tap rural markets who have limited access to banking branches
Solution
Banking Penetration and Unbanked population (Mn) Brick and mortar branches insufficient to serve the
huge population
Developed world has typically 3X-5X times more
branches / 100,000 population
United States India Indonesia
89% 40% 39%
726 Mn 144 Mn
Philippines
48%
46 MnUn-Banked
Population
India: Resolving the issue of unavailability of identification
documents by the unbanked population and helping them get
bank accounts
Philippines: Launch of mobile banking
service to help penetrate and expand
micro finance services
Indonesia: Launched mobile banking
service specifically for rural areas
Asian Powerhouses are launching mobile banking services & initiatives
China : China Mobile joined with six commercial banks to
provide mobile banking services
Source: Ministry of Cooperatives and SMB’s, Press Article Economic Times, China Mobile

22. 22
Agenda
1 Rise of Asian Powerhouses
2 Unique Characteristics of Asian Powerhouses
3 Appendix (Other Case Studies)

23. 23
Microsoft is leveraging ecosystem partnerships to penetrate the SMB market in
Philippines A
Source: Company Website, Press Releases, Zinnov Analysis
Business
Model
Solution
Customer
Insight
1
3
4
Business
Opportunity
2
• SMB’s lacked technology adoption and were in need of affordable
solutions
• Use of non-genuine software among SMB’s was quite high due to high
cost of genuine software
• Low technology adoption as well as low use of certified solution
among the large base of SMB’s
• NATCO, being the largest federation of co-operatives in Philippines
had a large base of member SMB’s
• Offer genuine Microsoft software to SMB’s using volume licensing
model
• NATCCO provided Microsoft with a huge base of potential customers
• Providing bundled solutions to
SMB’s with considerable
discounts
• Providing training,1.9 million individual members and
500 member cooperatives
Microsoft, NATCCO and Ng-Khai
(Microsoft reseller) forges partnership

24. 24
Square.my has leveraged the social media platform to get SMBs online and enable their
discovery by the consumers C
Business
Model
Solution
Customer
Insight
1
3
4
Business
Opportunity
2
• Businesses are unable to tap into mainstream e-commerce due to
intense competition
• Limited investment by businesses in online media due to high cost of
advertising
• Limited number of e-commerce sites in Malaysia
• ~13.1Mn Facebook users as potential online customers for an e-
commerce website
• Aggregator of products that can be traded over social media
• Social media platform being used
for e-commerce
• Secured payment partnership
through MOLPay
Source: Company Website, Press Releases, Zinnov Analysis

25. 25
Zap Tag combines benefits of daily deal websites, credit card and NFC technology in a
single card based solution E
Business
Model
Solution
Customer
Insight
1
3
4
Business
Opportunity
2
• Lack of real time analysis of consumer behavior and spending patterns
• High expenditure on advertising for products by the retailers
• Limited methods for customer engagement and reward programs
• Philippines Retail industry valued at $32.4Bn in 2012
• Limited offers for retail customers through NFC tags, credit cards
• Zap Tag works on a revenue share model with retailers, daily deal
providers and banking networks
• Connects retail businesses to consumers
• Retail merchants get access to consumer
behavior and spending patterns
• Merchants can track results of various
promotions and hence can lower their
advertising spends
Source: Company Website, Press Releases, Zinnov Analysis

26. Thank You
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