Asia Pacific Business Development Trends - Field Report Part 2

Asia is a dynamic and fast-changing business playground where participants must monitor the markets closely and?adapt quickly to change.

Last week, I started summarizing a few observations I had made about the trends in regional business development, particularly from the lens of international corporations, and also got confirmed first-hand during my meetings and conversations?with global and regional decision-makers.

You will find the first part of this field report here: https://www.dhirubhai.net/pulse/asia-pacific-business-development-trends-field-report-thomas-zagler-gkh2c/

Here is now the second part:

7) No Way Around China

There are many talks about a "China+1" policy, which refers to overseas businesses adapting their global strategies to expand into?at least one other country?in addition to their outlets in the PRC rather than continuing to put all their eggs into this one massive basket.?

That would seem rational given the rising cost of building brands and doing business in general, and the increasing national pride that is gradually putting more pressure on market shares of foreign products.

While such a strategy shift is undoubtedly beneficial for the economies of India, Southeast Asia, and as far as Mexico and South America, replacing the Chinese markets - whether production-, supply-chain- or marketing-oriented -?is on nobody's mind.

China is apparently too large and, meanwhile, also too sophisticated as a market to miss out on.

8) Hong Kong

Experienced business leaders in the region unanimously agree that Hong Kong has?lost its appeal as a regional hub?or even as a gate to the mainland over recent years.

Entering the Chinese markets now from any other place in the country is apparently just as easy, with the additional benefit of underlining a brand's cultural affinity and staying out of the political crossfire.?

The same applies to Hong Kong as a regional hub or gateway into Asia's Southeast.?

9) Higher Margins in Asia

What may surprise some readers is that many businesses report achieving?higher profit margins?in the Asian markets than in their established home markets.?

Despite still lower sales volumes in most cases, the higher margins are justified by?much higher growth rates.

10) Same Quality, Reduced Functionality

In many, if not most, instances, international companies selling their products in Asia Pacific have learned that?prices do have their ceilings,?and not every feature that is required in Western applications, with perhaps higher complexity, is also needed in the region.

Consequently, many companies have learned to listen more closely to their Asian clients and have started to?modify their products?accordingly.

11) Full Technical Expertise (and Authority) in the Region

The technical know-how built over decades is the pride of Western companies, and most products, when applied correctly, are designed to make some part of life easier in one way or another. Intelligent functionality, safety, and reliability are still the cornerstones of Western manufacturing.

The emphasis lies on?"when applied correctly."?Therefore, technical expertise for both production and sales is paramount. While many have tried to provide it from overseas headquarters "whenever required," most have realized that needing one or two days to deliver support or simple answers due to time zone differences is?often very costly.?

Another new trend becoming increasingly apparent in this respect is that multinationals are now building at least parts of?their R&D in APAC countries?- a clear sign that also Western leadership is nowadays aware that the notion of the West being "the head" and the East "the workbot" of a global organization?is long obsolete.?

12) Numbers

Quite contrary to their Asian counterparts, Western business leaders like to shovel spreadsheets from one corner to the other for several months before making decisions.?

While market numbers from different resources (government or other) were more or less trusted blindly in the past, regional leaders are now?questioning sources?and counting on significant irregularities (occasionally not by percentage but by factor).

Rather than relying on input from outside sources, companies now seem much more focused on?establishing their own sophisticated metrics.

13) Working With Distributors

While often the first step into a new market is to find the perfect importer/distributor as a partner, this approach seems?quite sobering?after a while for most companies.?

For a multitude of reasons (which will fill another article later), almost all regional business leaders report that most promises were poorly fulfilled. In most cases, performance falls far short of expectations, but the effort or cost of working with their distributors also outweighs the benefits.?

Therefore, international companies have decided to?open their own representation,?operating independently or in cooperation with distributors.

14) Salaries

While "everything is cheap in Asia" is still deeply anchored in the minds of many managing directors in Western societies, the compensation packages of local and regional managers and specialists?often surpass those of comparable positions overseas?by a significant margin.

I want to emphasize this point because, when planning and strategizing another market entry with a client, I often notice how many calculators fall into the?"minimum wage trap."?(That is when the minimum wages of a country are researched on the internet and then extrapolated onto other professions' salaries.)

15) Singapore

And last, a word on Singapore, which used to be the entrance gate to the entire Asia Pacific region for many internationals in recent years and decades.?

A massive increase in the already expensive?cost of living?(particularly for expats) combined with an increased acceptance of?remote work arrangements?has caused many newer players on the field to take a?different course.

Nowadays, regional hubs are set up in Shenzhen as well as in Bangkok, Kuala Lumpur, and Ho Chi Minh City. Regional managers now work as remote as Chiang Mai, Danang, or Semarang.?

I'm?Thomas Zagler.?I have built businesses in the Asia Pacific Region for over 27 years. I am passionate about seeing companies strive in this part of the world where?massive wealth is currently being built.

If you feel your team's sales performance in Asia could be better, but you are unsure which string to pull, reach out!?DM me right here on LinkedIn, and we'll get you there.

Otherwise, remember to?subscribe?and get more information directly from the trenches every Sunday.

That said, have another great one!

More soon,

Thomas