Opportunities abound in the water industry amidst changing conditions, says Frost & Sullivan
~ Frost & Sullivan identifies several key success factors in troubled times for water companies~
SINGAPORE, Jan. 22, 2014 /PRNewswire/ -- The water industry has always been resilient in the rough economic conditions, with it being a matter of national interest and international importance, with one of its key functions being to support socioeconomic activities. With the water industry landscape rapidly changing with globalisation of economies and technologies, companies need to constantly reinvent themselves to stay ahead in the fragmented water market place.
2014: Forget about SWOT and PESTLE analysis for now
In Asia, the emergence of economic powerhouses such as China, India, and Indonesia has increased their demand for water, which is essential for societal and industrial development. However, truly successful water companies look beyond just finances and technologies to encompass a holistic view of the water business environment.
"Water companies are facing multi-dimensional challenges since the new millennium as competition becomes saturated with numerous market participants offering similar products and services, compounded by the fluctuating global economy," explains Melvin Leong, Research Manager, Energy & Environment Practice, Frost & Sullivan Asia Pacific.
Firstly, municipal and industrial end-users have become more selective and careful with their expenditure on infrastructures and treatment systems. Secondly, cost of energy is rising and this affects energy intensive treatment options such as desalination and wastewater reclamation. Finally, environmental regulations and policies are continuously evolving, especially in Asia.
"A sustainable and successful company needs to identify its core competency in the marketplace where offerings of water products and solutions are aplenty. However, it is insufficient to have niche solutions without targeting the right group of customers concurrently," he added.
In addition, the water industry seems to respond well to partnerships and alliances among water companies or stakeholders in the water market value chain. In the ever competitive market, such practice becomes necessary as a strategy to gain new customers and entry into country markets.
There must also be continuous innovation in products and services while taking into consideration the expanding customer reach and satisfaction. Companies need to recognise the changing demographics and customer segmentations, such as evolution of mega cities and emergence of the middle-income group.
From a business perspective, while it is only logical to explore the various segments in the water industry, companies will need to understand, prioritise, and realign their business objectives. It is not uncommon that water companies become too ambitious in taking up projects that do not match their core competencies, and this may lead to unnecessary financial damages and divestments.
Last but not least, industry convergence is inevitable. Recent trends points to a convergence of companies from different industries. This could be seen in the water industry, in which desalination companies are combining their competencies with renewable energy companies to create new innovative platforms such as solar desalination plants.
Convergence with information and communications technology (ICT) is not new, but the potential benefits of this convergence are still largely untapped outside the U.S. and Europe. In Asia, potential markets for smart water meters and smart water grids include developed nations such as Japan, Australia and also developing nations such as China.
2014: Perceptions: Facts or Fads?
There are three common perceptions that shape the water industry and its competitive evolution.
Water is the New Oil
By 2025, freshwater availability will drop by 11.3 percent from 2011. At the same time, population growth is imminent and industrial activities are expected to increase. Thailand, Malaysia, and China are the top three Asian countries to experience the fastest growing manufacturing entities between 2008 and 2015.
However, water should not be commoditised the way oil is due to multi-faceted issues, mainly because water cannot be substituted, unlike oil. Furthermore, water consumption per capita is already decreasing in many Asia Pacific countries such as Malaysia, Australia, and Korea.
"The possibility of water minimisation technologies and smart water metering is expected to reduce the stress on freshwater availability. Frost & Sullivan believes that water scarcity can be mitigated by innovative water management and by developing unconventional supply sources," noted Leong.
Membrane is the Best Treatment Solution
The world has embraced membrane treatment as the most reliable and proven technology for providing safe and high quality water. New treatment systems are predominately moving to an all-membrane approach, as membrane systems bring operating savings, combined with reduced water and energy footprints, with the benefits of water reclamation.
However, membrane may not be suitable for all countries or certain municipal and industrial end-users. For instance, although membrane costs are reducing, membranes may not suit some municipal end-users where conventional treatments are more economically feasible. It is evident that membrane systems are unlikely to become viable for directly supplying irrigation water for agriculture. Agriculture remains on top for water consumption in Asia Pacific.
China and India Offer the Best Opportunities
It has become common knowledge that both China and India offer a vast spectrum of international business opportunities. China and India, besides Japan, are the two largest economies in the world, are the most populous nations, and possess the fastest growing urbanisation rates. One of the macro implications would be the need for water infrastructure. The micro implications bring business and development opportunities for various local and international water companies and technologists.
While China and India seems attractive to many water companies, mega opportunities present mega risks. It may be also wise to delve into other country markets. Frontier Asian markets such as Cambodia, Laos, Myanmar, and Vietnam bring promising (and equally challenging) prospects for water companies. Expenditures on municipal and industrial water and wastewater treatment in these countries are increasing between 6.9 to 10.3 percent in CAGR between 2012 and 2017.
About Frost & Sullivan
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