How to Expand into Southeast Asia
Startups, scale-ups, large corporations and enterprises alike want to take advantage of the benefits that come with international expansion. Customer base growth, greater scale and efficiency creation, talent accessibility, portfolio diversification, and M&A are just a few examples.
Although it may be difficult, expanding your company into a new market can prove successful. Regulations might present more challenges in the fast-growing countries of Southeast Asia, but that doesn’t mean you should give up. Instead, focus on finding an strategy for entering the market which matches your business goals and needs.
Now that the pandemic is on its way to being endemic, and Southeast Asian economies opening back up again, what should your first steps be?
Here are our current recommendations:
Key Points to Discuss:
- Expanding to Southeast Asia: A Vast Market Entry Opportunity
- Southeast Asia Expansion: Why do it?
- Southeast Asia Expansion Methods: Two Opportunities and the Obstacles
- Expanding to Southeast Asia Faster with Trade Agencies
- Special Economic Expansion Projects and Innovation Corridors
- Some Common Mistake Made By Every Company Trying to Expand into Southeast Asia
- How COVID-19 Affects the Southeast Asia Expansion Options
- Tips for Expanding to Southeast Asia
- Upcoming Events regarding APEC 2022 in Thailand: What you need to know.
Expanding to Southeast Asia: A Vast Market Entry Opportunity
Many economies are emerging from the pandemic which has in turn unlocked vast opportunities across the digital economy, manufacturing, and infrastructure.
Some key advantages of Southeast Asia: it’s a strategic location for market entry expansion, being at the center of a dynamic APAC region that gives companies based there an advantage when expanding into India, China, Taiwan, Japan, Korea Australia and New Zealand.
- An economic powerhouse with combined GDP of USD $3 trillion dollars. Also, it’s the 5th largest economy in the world
- Youthful workforce plus customer base with a population growing beyond 700 million. The median age is estimated below 30
- APEC is an economic cooperation is a key pillar that underpins ASEAN’s success and cohesion. This regional economic forum consists of 21 member economies across Asia-Paciﬁc region. Established in 1989, APEC has its core value on promoting regional economic integration, cooperation, and prosperity.
RCEP: Access to the World’s Largest Trading Bloc
The RCEP is a free trade agreement between 15 nations in the Asia-Pacific region, and has been formalized after 28 rounds of discussion over eight years.
Finally, these three patterns across SE Asia that are definitely prominent are technology sectors that cut across these three domains.
Southeast Asia Expansion: Ask Why
The meaning of expansion varies from business to business. For some, it might mean incorporating the company or hiring their first employee. Others might focus on new partnerships, a new office, or expanding their global brand. However, the objective remains the same — to help foster growth within the company.
For example, we know that companies of all sizes seek better capital options that just aren’t available in their domestic markets.
Southeast Asia Expansion Methods: Opportunities and Obstacles
We’ve identified various ways to scale in Southeast Asia, with some being less known than the others. Knowing the full breadth of options and the opportunities and obstacles of each method, will help choose between your options.
Fly-in, then Fly-out (low/medium risk and cost)
- Better for the early stages of geographic expansion
- Better for early stage scoping the market pipeline building
- Likely involves regular trips
- Can be taxing physically because of long haul flights
- Limited flexibility on meeting times and in-person presence
- Time zone-based communication lag
Relocation and Incorporation (low/medium risk and cost)
- Easier done in some countries with better task rate, less red tape, and low corruption
- Better for legal and compliance
- Allows easier business transactions, esp. locally, with incorporated status
- Incorporation costs vary
- Requires legal and local support
- Variable costs for marketing, administration, and employee relocation
Incorporate & Hire Locally (medium risk and cost)
- Profitable if planned well
- Better in understanding language, culture, and way of doing business
- Networking / relationship advantages
- Start developing “home court” local advantages
- Better business commitment led by local employees
- Lengthy legal and banking processes
- Requires familiarization with tax and regulations
- Your first local team needs vetting and careful consideration
Do Nothing (medium risk, but low cost)
- Allows time to create a strategic plan for entry
- Sunk costs of not pursuing overseas opportunities, even if frugally
Proving through partnering (low risk — medium cost)
- In-market partners to grow channel sales and build pipelines
- Useful in countries with higher language barriers
- Better business commitment pointed by in-market representation
- Can start quickly and prove the market at lower risk
- Must be managed well
2 Major Ways to Break into the Asia-Pacific Market
1. Expanding to Southeast Asia Faster with Trade Agencies
Trade agencies are one of the hidden secrets of market entry expansion. As government-funded bodies, they’re not usually seen with marketing themselves with taxpayer money, which is likely why not too many business leaders know about their function.
The main KPI of these trade agencies is to promote the growth of companies in their domestic market and support their scaling into the Southeast Asia region.
Trade agencies have two major roles that are particularly helpful for expanding companies.
First, to attract investment into new markets, and the second is to export commodities into those new markets.
Various trade agencies exist, each with its own benefits and drawbacks. There is a blend of free and premium services. Also, some bigger agencies have branches in multiple countries. If your company is looking to expand globally, simply ask the agency how they can help facilitate the expansion process.
Here are some additional things that trade agencies can do:
- Local introduction
- Funding expansion
- Marketing events
- Market report access
- Lead generation
- Business matching
- Trade missions
- Incorporation advisory
- Association introductions
- Networking events
- Contract signing PR
2. Entry through Special Economic Corridors
How COVID-19 Affects the Southeast Asia Expansion Options
COVID-19 has increased the number of factors that companies need to consider moving forward. Long-haul trips and large events were previously restricted, however this is changing.
Source: CAPA and SIA Group reports
However, such restrictions have generated new areas of invention, connections, and digital transformation and adoption in a few organizations. This may be an excellent time to enlist the help of partners in the new region to represent the company as well as outsource labor to meet business demands without having to relocate employees or fly in-an-out.
One such area for example is Thailand’s Eastern Economic Corridor.
The Eastern Economic Corridor (EEC) is a 13,266 km² mega-development area consisting of 21 Promotional Zones for the purpose of expediting innovation in 12 high-tech industries which include robotics, next-gen automotive, aerospace, and the digital economy. EVs and energy storage are just one dimension.
Some Common Mistakes Made By Every Company Trying to Expand into Southeast Asia
There are plenty of companies that provide market entry services. Some of these services include:
- Market Research and Validation
- Lead generation and Matchmaking
- Legal, Banking, Accounting
And much more. What lots of companies forget is that many of these battles that need to be won, are in the boardroom as you establish local alliances, partnerships, and various points-of-contacts to help you navigate and understand the local business ecosystem.
Good news ahead? On your marks, get set, go?
APEC 2022 is fast approaching. This regional economic forum consists of 21 member economies across Asia-Paciﬁc region.
What makes this different is that this will be the first time the summit convenes in-person for the first time since the pandemic.
Tips for Expanding to Southeast Asia
Don’t treat SEA as a single market
Divide the market into smaller segments based on language, culture, technology maturity, markets, and spending power.
Commit to a physical presence
Southeast Asian consumers want a local presence or, at the very least, a locally based relationship. Local partnerships matter, as it is necessary to have a local distributor in place before submitting an RFP (RFP).
Patience is crucial
In this COVID-19 world, businesses may be a bit more risk-averse, so plan for at least two years to lay groundwork. Actively sell your company’s value propositions and the difficulties it can address to prospective clients.
You need a strategy and also local partners
We know you’re not the only ones thinking about expansion. Your competitors are too. This is about strategic information advantages that can help you get an edge.
Before and during the pandemic, Skylance has been working closely with our network of service providers and partners across Southeast Asia to launch a series of webinars on topics like:
- Adaptation to COVID-19
- Arranging financing high-growth projects
- Hidden business opportunities
- Fast-growth markets
- Market entry strategy
- Opportunities in emerging markets
We’ve also been consulting with clients behind-the-scenes to about special circumstances within certain economic corridors that allow for more seamless easy entry for companies looking to do business.
Reach out to us for more information.