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Expanding Business Markets: A Closer Look at China and Asia

Strategy

Recently, there’s been a sizeable amount of talk surrounding Asia and China and their importance for many businesses, both large and small. Companies are expanding their horizons and trying to tap Asian markets to supplement slow sales at home, and for good reason.

Simon Kahn, who serves as chairman of the American Chamber of Commerce in Singapore and Google’s chief Asia-Pacific marketing officer, is another person keen on Asia’s potential. Kahn explains, “The U.S. is serious about its commitment to Asia and sees Asia as the future in terms of economic growth in the 21st century.”

A Game of Numbers

First off, let’s talk about Asia as a region. It covers about 30% of Earth’s landmass, and consists of approximately 50 countries. These countries make up roughly 60% of the world’s population, or about 4 billion people. From 2010 to 2025, it is projected that 1/3 of all global economic growth will come from Asia.

The 5 largest Asian economies by GDP are China, Japan, Russia, India, and South Korea. These 5 countries alone make up about 3 billion people.

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Asia’s size and immense population are nothing new, but recent technological advances, especially in internet and mobile, have catapulted hundreds of millions of people into new consumer positions.

The e-commerce markets of Asia are budding, as almost 30% of the Asian population now has internet access, compared to about 60% of Europe and 80% of North America. Even at 30%, that equals over a billion internet users. And, over 60% of these Asian internet users have made a purchase online.

Expanding Business Markets: A Closer Look at China and Asia image Asia by the numbers21

Asia Internet and Mobile Usage

This means that as fast as the Asian population is gaining internet access, the future only holds more growth as internet penetration levels chase European and North American levels. It is worth noting that some well-developed Asian nations such as Japan and South Korea already have internet usage statistics similar to those in North America.

Although a sleeper of sorts for many years, parts of Asia are now becoming very tech-friendly. A recent The Next Web (TNW) article suggests that Southeast Asia will be the best place for startups and tech in 2013.

Companies Having Success

Struggling companies in North America like Research In Motion (RIM), the producer of Blackberry, have focused heavily on Asian markets as their products are no longer at the top of domestic demands. The Blackberry was amongst the most popular smartphones over the past few years in many Asian countries, and these markets will continue to play an important role in the company’s future.

Unilever, the household company that produces items such as Dove soap, Popsicles, and Lipton tea, was seeing slow growth and expansion prior to taking special interest in Asia and other developing nations. Bloomberg BusinessWeek reports that “in the third quarter, Unilever’s emerging-market sales rose 12.1 percent, its sixth consecutive quarter of double-digit gains.” These gains have propelled Unilever to sales growth rates twice that of competitor Proctor & Gamble. The company reports that 55% of its sales now come from emerging markets such as Indonesia and The Philippines.

Even Starbucks is scheduled to open its first store in Vietnam next month, as the company has enjoyed success in other Asian nations like Thailand, Singapore, and Malaysia.

China: A Trade Monster

Although China’s growth has slowed the last few years, it is still growing at a monstrous rate and will continue to grow in the future. In the past decade, China has surpassed the US as the major trading partner for many countries such as South Korea and Australia.

The Associated Press reports that as recently as 2006, the US was the largest trading partner for 127 countries, versus 70 for China. However, by last year, the numbers were 124 for China versus only 76 for the US.  Furthermore, China’s stake of world output and trade is expected to rise even further, with growth forecast at nearly 8 percent a year over the next decade, far beyond expected US and European levels.

According to officials of the Ministry of Commerce, China is expected to become the world’s biggest online retail market in 2013. However this isn’t too surprising, as the China Internet Network Information Centre reports that nearly 40% of the country is online, totaling over 500 million people.

China has also been increasing their foreign investments of late. Research firm Rhodium Group reports China’s outbound investment totaled $67.6 billion in 2012, barely 1/6 of America’s nearly $400 billion investment. However, China’s investments are expected to increase to about $2 trillion by 2020.

How can Your Business Take Advantage?

Like any new market your company approaches, success in Asia will depend on solid strategy, planning, and personnel. Having the correct people on the ground will be of paramount importance; hiring local partners and consultants can help you get acquainted with the local people or population.

Understanding how cultural differences affect business is also extremely important. Simple yet glaring cultural differences can doom a company before it gets a chance at success. Cultural competence is definitely a prerequisite. Remember to be polite, take time to develop personal relationships with business partners, and avoid cultural faux-pas.

It’s also important that senior-level employees actually spend time in their new markets, to gain a stronger understanding of the country and culture. Most companies that are successful in Asia send their CEOs, CFOs, CMOs, and other C-level executives to the region multiple times a year. Some businesses are even permanently transferring executives because of the enormous growth potential.

Also deserving of special attention are government practices and policies. Due to policy and government intervention, certain business sectors are harder to gain access to, such as energy, telecom services, and construction. Other sectors, such as consumer and retail sectors, welcome foreign competition and are much easier to penetrate.

The bottom line? Do the research and figure out if expanding in Asia is right for you and your business.

Comments on this Article: 1

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  1. Clear and compelling points for doing business in Asia. I would echo the fact that its vital for companies and businesses to find the right “strategic” partner when doing business in Asia. Also, SME`s don`t necessarily have the same resources as larger companies and must properly vett product and service vendors prior to engaging in Asia Business. Countries in Asia are in close proximity but are entirely different in language, culture and business practices.

    The highest barrier I see for companies is selecting the right channels and partners to make their Asia Entry model successful. Clients need to realize that ROI can take more than a few years to realize, my recommendations are to 1) have a commitment to Asia 2) be patient in terms of expectations on any ROI and 3) select the right people to represent and grow your presence in Asia.

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