Companies looking to enter this treasure trove must devise a feasible plan that tackles the differences in the region.
Southeast Asia (SEA) has over 600 million people in its population, which is nearly twice that of the United States (US).
Looking at how the US built its economy primarily through domestic consumption from its large population, there is vast potential waiting to be captured in SEA.
With rapid globalisation, evident from the phenomenal growth of China in the past two decades, why does this market remain untapped?
The answer lies in the complexity of the cultures filled by a myriad of languages, ethnicities and beliefs that even make difficult for locals to penetrate the neighbouring countries. Foreigners will then find the journey much more arduous.
In recent times, political landscapes are starting to stabilise, and governments are focusing efforts on economic growth rather than internal power struggles.
Southeast Asia is opening up to foreign investments and pushing for more infrastructure developments to foster long-term growth.
With the ongoing US-China trade dispute, SEA countries are reaping the benefits as investment sights set upon SEA alternatives like Vietnam and Thailand. This could be the time for the region’s expansion boom.
How can businesses then tackle the complexities that revolve around the region and succeed?
Timing is arguably an essential factor in creating a successful business, as well as the most significant reason why some companies fail.
While local governments continue to debate on economic development plans, it is essential to be patient for favourable conditions before jumping into SEA.
Indonesia, for example, has a cap on foreign holdings of companies at 40 per cent. Some may be willing to take the risk of having a local partner in name, but it may not work-wise if the business is thriving.
Many governments like Thailand are also concerned with local employment and have strict local-foreign employment ratios of 4:1 to promote local employment.
However, local talent is a significant concern in many of these countries, with demand outweighing the supply.
While measures are being taken by both the public and private sectors to address these issues, companies should continue monitoring the landscape to determine the optimal time to enter and be aware of the risks it will take.
Gaining favour from the local governments will also serve as a huge advantage as it implies faster processing in almost every application.
As addressed earlier, talent is a pressing concern for the private sectors in many SEA countries. Singapore has done well in attracting various foreign companies into its shores to hire local talent, allowing the locals to learn and grow from them.
Technology transfer is a point of contention between foreign companies and governments.
Foreign businesses want to prevent their knowledge from being used against them by locals, whereas the governments want their locals to absorb the knowledge to push for a more developed economy.
Talent retention will be a means to mitigate such an issue. Companies that can succeed in formulating the strategy to retain talent is highly likely to succeed in the region by killing three birds with one stone.
They would save costs on finding new talent, minimise leakage of trade secrets and gain favour from the local governments. With the shifting focus of jobseekers from salary to other factors (e.g. company culture, values), properly structured strategies can be extremely cost-efficient.
Strong talent development programmes will also provide companies with an edge in entering these markets earlier before a fully developed labour market. This may be costly at the beginning, but it can serve as an unfair advantage if carried out successfully alongside a talent retention strategy.
Branding is another big challenge that companies will face entering the SEA. This fragmented region is known for its diverse and rich cultures, resulting in the business landscape that varies widely across countries.
Achieving a balance between the localisation of the brand and the maintenance of core values is tricky yet imperative.
One key direction that companies can look at is their media plans to maximise efficiency and cost-effectiveness.
Media planning focuses on the return on investment (ROI) at a channel level and its relevance to the audience. In SEA, each country has its own culture where different media forms and brands are popular.
For example, WhatsApp is more commonly used in Singapore and Indonesia, while the LINE is more prevalent in Thailand. Companies must understand the various stages in the customer journey and which platform is most relevant in reaching out to them at the different phases.
Community building is one of the aspects of branding that the companies should explore. A community allows the customers to be engaged and gives them a voice to be heard, creating brand loyalty that is deeper than the product.
One success contributor of Chinese tech giant Xiaomi is their Mi community that provides a platform for customers to come together and meet the company on a social level. Creating moments for the members to experience and share can become the building blocks of a community.
With the rapid technological improvements in our world, data is easily accessible and collected. Data is indispensable when a company wants to enhance customer experience effectively.
Machine learning (ML) and artificial intelligence (AI) programs utilise data greatly to develop personalised customer profiles, recommending suitable products and services.
However, making use of AI has its difficulties with the most complicated portion being the building of the infrastructure for the AI to work. It takes a lot of work for big data to be connected before it is sent to the different market technologies.
Data collection can be varied across companies to achieve the qualitative and quantitative requirements to validate decision-making models.
Corporations with larger customer bases can collect first-party data for higher accuracy while SMEs should focus on gathering third party data, from Google or Facebook, due to the limited number of customers. For many corporations, it is also more cost-effective to use teams as ROI is much higher when collecting first-party data on a large scale.
The strategy has always been a differentiating factor between winners and losers in business.
This strategy should incorporate specific plans regarding the four key factors – timing, talent, branding and data.
Seeking external help can also be a useful tool to gain insights from experienced players, be it from experienced investors, consultancy firms or local partners. However, the strategy will prevail and even determine who to approach when seeking external supports.
This article was first published on e27, on August 24, 2019.