Your Guide to International Expansion into Southeast Asia
Southeast Asia, with a digitally aware consumer base and a fast-growing economy, should be on your list of potential international markets. Here are the best strategies to enter the region.
Businesses are increasingly flocking to Southeast Asia because of the high potential return on investment. The customer base is engaged, the economy is growing, and there’s no shortage of talented workers.
This article will shed light on the advantages of expanding into the region, how to create a long-term business strategy, and the best methods for overcoming any roadblocks you may encounter.
Why Grow and Expand Your Business in Southeast Asia?
Recently, Thailand recently downgraded the covid-19 threat and lifted the emergency decree for good.
This signals to business leaders abroad that things are certainly opening up officially.
South East Asia — also known “SE Asia,” or “SEA” — is a very diversified area in Asia-Pacific with significant potential for business development. Taking your goods and services to new markets in South East Asia provides an appealing prospect to US or EU-based firms (or SEA-based businesses wanting to expand their presence).
- Diversify your portfolio of products and services in a high-growth area
- Access a digitally oriented, hyper-engaged customer base in key markets like Thailand, Singapore, Vietnam, and the Philippines
- Hire the best talent from emerging tech hubs.
The Benefits of Expansion into Southeast Asia
From diverse markets to economic growth to skilled IT talent, let’s take a deeper look at the main advantages of expanding your business into Southeast Asia.
Strong Economic Growth
The Southeast Asian market is booming, with a population of over 650 million and a growing middle class. This region has proven to be very lucrative for foreign investors.
Southeast Asia is booming — it’s one of the fastest-growing economic regions in the world. The Asian Development Bank cites a GDP growth rate of +5.0% in 2022, with Malaysia and Vietnam leading as the strongest markets in Southeast Asia.
Digitally Minded Customer Base
Southeast Asia’s large digital native generation also provides a huge potential for e-commerce and digital services, especially Software as a Service (SaaS) businesses. Internet penetration in the region is over 75%, with almost 440 million internet users.
According to Google’s annual e-commerce SEA report, the internet economy in Southeast Asia is anticipated to grow to $360 billion by 2025!
Revolut, a FinTech startup, is one of the many firms to have seized this opportunity and acquire over 77,000 clients in less than two years after launching in Singapore.
Revolut has its sights set on further expansion into the wider SEA region, taking advantage of Singapore as a springboard. This is one strategy that your company might take.
Growing Tech Talent
Without a reliable and competent workforce, your international expansion will not progress as planned. With a high population of digital-native young people, Southeast Asia’s talent pool is very promising. The Philippines and Vietnam are close behind Singapore in higher education (e.g., MBA) and university rankings
A recent World Economic Forum report indicates that Southeast Asian youth are motivated to learn and grow throughout their careers. In fact, “better opportunities to learn and develop” is the top reason they gave for changing jobs.
This talent pool is also increasingly interested in working for foreign multinational companies, only second to working for themselves. This entrepreneurial spirit and drive for development are exactly what your business needs to thrive in a new market.
How to Expand Your Business into Southeast Asia
As we’ve seen, any expanding business should consider moving into Southeast Asia, particularly those in the tech industry. But how should your firm go about expanding into this market?
Follow our step-by-step guide to learn more.
1. Create an Expansion Strategy
The Skylance leadership has emphasized this point a lot, but every successful business endeavor begins with a well-defined plan, so make careful to spend plenty of time planning your expansion rather than diving into new territory unprepared. In the long run, a strong international growth strategy will save you time, money, and resources.
Before anything else, you need to have a good reason for expanding your business into Southeast Asia. Do some research and see if there’s a potential demand for your product or service in the market.
After identifying these core reasons, do the following:
- Set clear objectives;
- Conduct further desk-based market research;
- Decide on the type of global expansion strategy you want to implement;
- Define your budget; and
- Outline a timeframe for expansion.
Taking a frugal and agile approach to international expansion for start-ups and small-to-medium companies (SMBs) is a good idea. This implies putting down roots slowly rather than quickly. Hiring local staff, establishing strategic partnerships, and exporting items or services are all low-effort, low-cost methods of entering a new market.
While establishing a subsidiary overseas is an effective long-term solution, it’s also quite expensive and time-consuming. This method of expansion should only be used once you’ve confirmed that there’s a demand in the market.
2. Hire Local Talent
Choosing employees from the local area is one of our main suggestions for companies venturing into new territory. This gives you access to people knowledgeable in the language, customs, and regulations of your target market, which is especially vital in Southeast Asia where these things can vary greatly from what you’re used to.
Our next suggestion is to start small. Bring on a staff that is both experienced and fits your market expansion by, for example, hiring a Business Development Representative who has expertise in the area. Additionally, you may want an operations manager or customer support agent local to the new market. In other words, choose those near-term objectives which fit with the people you bring on board.
3. Adapt Your Product or Service for the New Market
Before you release your product or service in a new Southeast Asian market, it might need some adjustments. Here are a few of the many factors you should consider:
- Translation: Is there a high level of fluency in your product’s current language in the target market? If not, you’ll have to think about translating product copy and establishing a translated website.
- Localization: Although language translation is important, localization ensures that your product is culturally and sociologically appropriate for the intended target market. You may need to alter graphics and imagery, modify your tone of voice, and convert prices to local currencies in order to adhere with local customs and expectations.
- Price adjustment: Prices aren’t the only factor you need to consider when doing business internationally; you might have to readjust your entire pricing strategy as well.
- Compliance: Compliance with local laws, regulations, and trade standards is critical for any business. This may involve changing your labeling or product packaging, for example.
4. Launch and Test Your Product in the New Market
It’s time to get your marketing campaigns and sales team prepared — it’s time to make a splash with your product. Keep in mind that this is just the start of something bigger. From here, you’ll have to keep an eye on how the new market is doing. Make sure you collect regular customer feedback, stay abreast of local rules and regulations, and make adjustments as needed.
Overcoming the Challenges of Expansion in Southeast Asia
There are several practical strategies to help your expansion succeed in Southeast Asia’s different marketplaces.
Cultural and Linguistic Barriers
The region of Southeast Asia has many official languages, as well as a large number of unofficially spoken ones. While English is commonly understood, proficiency varies from country to country and region to region. The indigenous cultures and political systems in Southeast Asia are quite varied, so what works for one nation may not work for another.
Forming a team of on-the-ground professionals will help your business learn more about its new market. Team members who are conversant in the local language and familiar with the culture and political landscape can provide invaluable guidance.
Complex Local Laws and Regulations
It is important to remember that each country and jurisdiction in Southeast Asia has its own set of rules concerning foreign business and employment. While one country may be simple to start up in, another may have stringent requirements that you must adhere to. Language issues can also cause difficulties when it comes to comprehending these laws. When entering a new market, always seek local legal and tax advice. This will assist you avoid fines or penalties as a result of non-compliance.
Lack of Business Contacts
Hiring local talent is typically a lot more beneficial (and practical) than relocating your current team. It will also assist you avoid delays in your growth plans as a result of travel limitations. What’s best of all? You don’t even need to establish a local company or subsidiary to hire the finest talent that Southeast Asia has to offer.
But in order to start, you need to build up local business contacts.
Lack of business contacts can make it hard to find reliable partners and suppliers in any new market. This is especially true in Southeast Asia, where businesses have traditionally been run by families or conglomerates. While the younger generation is more international, having someone on your team who knows the local ecosystem and community will give you an advantage over your competitors.
COVID-19 Travel Restrictions & Administrative Delays
The epidemic’s influence on Southeast Asian nations and their foreign business policies has been significant. In some countries, new restrictions to international travel have prevented multinational investors from entering new markets, while entity creation procedures have been held up in others due to administration efforts particular to entities.
This is changing. For example, Thailand recently downgraded covid-19 threat and lifts the emergency decree for good.