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Five common Asian market expansion mistakes

Five common Asian market expansion mistakes

“Success is a journey not a destination”, and other dynamic sayings, power-up entrepreneurial ambitions of market expansion.

However, what is absolutely vital to ensure a business is roadworthy enough for the journey ahead is to embrace the importance of strategic planning. To plan ahead you need a clear, comprehensive and up-to-date roadmap that covers your intended route, taking into consideration the landscape, potential roadblocks and perhaps a shortcut or two to overtake competitors.

This is certainly true for those businesses looking to expand in Asia, into established markets such as Thailand and Singapore, fast-expanding markets such as Malaysia and recently emerging, yet quickly developing markets such as Vietnam and Myanmar.

Some entrepreneurs believe that the road to international riches doesn’t come without a nail-biting trip into the unknown, with unforeseen risk possible around each corner. However, there is a world of difference between a wild race through unknown lands and smart maneuvering to reach fertile destinations along the way.

Expansion can be a golden opportunity for businesses to accelerate toward greater profits and an open field of market opportunity. However, there can be dangerous obstacles along the way and it is a poor strategist who doesn’t safeguard against these.

Awareness and action are required along with an ability to read the signs up ahead. Whatever the size of the business or type of industry, market and product, an experienced and reliable partner with good navigation tools is necessary to ensure company leaders go in the right direction.

Before setting off on an expansion route in a different country, it’s critical to survival to map out potential international market expansion mistakes and how to avoid them. Here are five common ones to be aware of…

Many businesses perform better when they have access to direct roads into a particular geographical market. However, mindlessly chasing the concept of bigger is better to reap quick rewards can turn out to be an illusion. Intention with purpose and real expectations lead to  sustainable revenue streams.

 

Look realistically at markets and don’t believe the hype, positive or negative, about a territory’s economy or markets. The truth is out there, but a lack of research can lead to a dead end that’s difficult to turn back from.

 

These misconceptions and failure to identify opportunities are apparent in markets where consumers, distribution channels and logistics are changing quickly such as in Southeast Asia. Here we see new trends emerging in FMCG and pharmaceutical industries, for example, big demographic shifts in terms of population profiles, disposable income and rural urbanization. Even those businesses with a presence in these expanding economies need to be able to stay informed and keep pace. Localized support is a beacon, guiding you along new business infrastructure that, in some cases, is only just being built.

 

Part of the “how” is recognizing whether a strategy is strong enough to not only survive, but also to thrive. Weaknesses need to be identified, while financial, operational, managerial and organizational capabilities need to be assessed and, if necessary, outsourced.

 

Focus: What resources and research are available? What support network can you team-up with to ensure smoother market penetration?

Expanding into new markets can cut costs, reduce price-points and raise income and profits. However, adopting a simple financial strategy can result in a big business plan trying to squeeze into an increasingly narrow space.

 

It would be naive to suggest that business success doesn’t ultimately come down to the bottom line. However, during expansion sharp focus has to be 360 degrees, integrated and highly detailed to see the full picture. Relying on financial snapshots alone may create bigger problems in the future, with business owners fixing one problem only to be faced with another, more serious one.

 

A holistic approach is critical to success so that your bottom line is connected to top-line growth too. This means taking into consideration the market-share increase and the level of penetration and coverage achieved. Minimizing complexity of processes, from marketing to logistics, is all part of the maintenance of your business engine; charging up as you expand at full speed.

 

You only have to look at foreign brands in Asia to appreciate that success goes beyond cost and price, with market share, market relationship and brand perception important qualities that are not always instantly understood. It’s not enough to simply understand these markets either since a holistic view needs to forecast what is to come into focus too.

 

Focus: Could going it alone to cut costs at the start cost more in the long-term? Consider  outsourcing to a team of market expansion service specialists who can work with you and support you as you move forward.

In any market it’s essential to identify and target your potential customers. This means understanding demand and having the know-how to reach this market sector and satisfy expectations. All of this is achieved through creating relevant sales channels, the right infrastructure and building relationships with customers as well as partners. Only then can a successful launch into a new space be made.

 

Listening to customers who may speak a different language, quite literally, is not always straightforward. When scaling-up, consumer insights and behavior act as a bridge to link your business to new markets. Millennials in Southeast Asia are a new breed of consumer, with far more disposable income than their parents had at the same age. Many countries in the region, such as Thailand, have experienced a significant increase in economic status, with a middle-class that was virtually non-existent not so long ago. Meanwhile, as top social-media and eCommerce users, globally, the way in which these new Asian markets are being reached is changing too.

 

Before looking out to future horizons, look at what economic drivers make your business work right now. Overestimate or miscalculate this data before you begin to expand and you could easily hit a brick wall by investing in the wrong industry, market or product. Another danger could be a sudden drop financially through overspending; whereby investments are wasted in a fast and furious attempt to penetrate new markets so hard that the efforts backfire.

 

Focus: Localized knowledge and a clearly marked system of scaling-up need to be a priority. Beliefs about products and markets need to be understood in connection with what customers really want. Investigating culture and market dynamics, trends and the way that your target customers behave lays out a more even road to success in the future.

While there are economies of scale in expansionist strategies there is also a need to boost manpower at various, if not every, part of the supply-chain and value-chain journey. The issue here is not just about numbers but of skills and structure too. Departments that may not have been necessary in the past can become valuable hubs in the future, such as IT or HR, for example.

 

Other factors, such as streamlining and automating may come into focus too. Before you or your business enter a new market, it’s essential to work out how to effectively implement your expansion plan with the right support.

 

New local hires in what could be an extremely different cultural climate have to fit with established corporate culture. The perspectives of those already part of the machinery of a company need to be open and flexible enough to accept change and adapt.

 

In Southeast Asia, production values are historically high, yet certain skills may be lacking, with training potentially required for local employees. Educational values are not the same in different countries and the same is true for experience. This does not necessarily equal a negative, however. For example, a high level of IT skill maybe in greater shortage in say Thailand compared to the US, yet mid-level skills could be far more obtainable and financially attractive too.

 

Focus: Not everyone is comfortable with change and an objective supporter can make the transition less challenging. Think about how this strategic partner could help change how you do things and who does them. You need to be able to connect to local sources as you begin implementing expansion. A brand message is delivered clearly when everyone involved is united in what they are saying and how.

When expansion plans are aimed at an international destination, strategies to reach customers need to be set that can be followed in the future. These ideas should identify optimal distribution channels, marketing and product deliverables, covering any offline outlets and online platforms with a working route-to-market plan.

 

Resources need to be put into ensuring that from production to the end-consumer, products are moving in the right direction to be repeatedly delivered to another market in another country with ease. There is also a skill required in connecting with viable distribution networks, with access to chain retail outlets, for example, based on strong, existing relationships.

 

Urban areas are developing beyond the major cities in countries such as Malaysia and Vietnam At the same time, Bangkok in Thailand has expanded as more suburbs surrounding the city are connected with the capital. In Myanmar, the infrastructure gap – once a real obstacle to economic development and business opportunity – is starting to take shape, particularly in terms of telecom connectivity.

 

Expansion logistics also involves making marketing moves. End-user engagement tactics differ from territory to territory. For example, integrated digital marketing is common in countries such as Thailand and Southeast Asia as a whole. Because of this, marketing messages need to grab attention rather than being viewed as passing traffic on the digital information highway.

 

Focus: Do you know what market entry options are available and which ones suit your business best? Do you know how to connect with these opportunities, engage successfully with your new market and deliver efficiently to meet demand? What specialist advice and practical support do you need?

What next? Start planning your route

It is a risk-taker rather than a brave adventurer who ventures out to conquer an international market without the right guidance and support along the way. Expansion, as rewarding as it can be, can also be overwhelming for any size of business. For those eager to explore an Asian market, there are specific tools, information, challenges and benefits that you need to be aware of every step of the way.

An experienced and knowledgeable partner on the ground within Asia, such as DKSH, can prove invaluable for outsourcing specific services or in handling every aspect of expansion. This can include sourcing materials to pinpointing revenue opportunities, providing market insights, as well as distribution, sales and marketing and after-sales support.