Asia’s changing economic landscape

The lure of Asia. Doing business in Asia has never been more accessible, or more burdened with expectation. Less than two decades after the Asian financial crisis, most Asian economies are continuing to expand – albeit at moderated rates than in previous years – offering access to new customers, consumers and clients.

Diverse markets. For companies accustomed to sluggish, or even static, growth elsewhere in the world, the allure of Asia is strong. But as growth in Asian markets attracts more economic activity, the pathways to success are not necessarily paved with gold. Asia is extremely diverse, and its market structures, political and legal systems, populations and resource bases are hugely differentiated. Labor, land and raw material costs, too, are rising, as are consumer retail prices.

Increasingly complex and competitive markets. Defining a route-to-market strategy – whether for a single Asian nation, expansion into a second or third territory, or a larger network criss-crossing the continent – is complicated by myriad economic, social, political and technology-driven factors. But the overriding constant of the new economic landscape is that Asian markets are increasingly complex and competitive.

What challenges does a route-to-market strategy need to master...

…in Malaysia …in Myanmar …in Vietnam
Population of around 30 million Large geographic area that is twice the size of Vietnam Large geographic area, with a population of around 92 million and strong economic growth
Changing channel landscape with the rise of modern trade and e-commerce Population of 53 million people with a growing middle class Complex and ever-changing regulatory environment
High costs of doing business and serving customers An abundance of counterfeit products As infrastructure is still developing, supply chain costs are relatively high
Geographically complex, with highly differentiated markets and infrastructural development in Peninsular Malaysia and East Malaysia Complicated channel-to-market Unique trade channel characteristics with small drop size per outlet in traditional trade
Strict halal certifications for pre-packed products Extremely fragmented point-of-sale network Centrally planned economy struggling to balance protecting local social obligations while opening up to global trade
A slowdown in consumer spending following the implementation of GST, plus sluggish income growth Cash-dominated trading environment A highly cash-dependent trading environment
Government regulations can be cumbersome with strict rules regarding certain sectors
Challenge to attract highly skilled workers

Growing middle class. Although economic performance varies across the region, policy makers in most Asian countries have identified the expansion of domestic demand as a central pillar of future growth. Relatively low interest rates are designed to spur investment in infrastructure, services and consumption – and create new access points to dynamic, fast-changing markets. This is encouraging more firms to enter and expand in sectors that provide access to Asia’s growing urban middle class – and their proven spending power.

Rising intra-Asian trade. Uniquely localized features of demand and supply are evident across most business sectors within Asian nations, however, while cross-border e-commerce is expanding at variable rates. The high-octane growth of smartphone-enabled purchasing in China, Hong Kong, Japan, Korea and Taiwan is challenging brands, retailers, healthcare providers, manufacturers and logistics suppliers to create solutions that satisfy highly demanding buyers. In South East Asia, urban consumers and B2B purchasers are still calibrating their online and offline buying preferences, although strong and sustained growth for internet-based retailing is projected. 

Rise of Asian players. As the product options and access points for customers proliferate across business sectors, a new challenge is the emergence of ambitious Asian firms. Boasting strong resources and proven scale at home, they want to replicate this success elsewhere in the region, and worldwide. Increasingly, Asian firms are entering complementary markets to reach new customer bases, often through a merger, acquisition or joint venture. For example, Korea’s Hyundai and Hotel Shilla have created a duty-free shopping joint venture, ChemChina is acquiring Swiss agribusiness Syngenta and Japan Post purchased Australian logistics company Toll Holdings.

Currency fluctuations. Businesses in Asian markets must also factor currency fluctuations into their route-to-market planning. Unlike trading in the European Union or the United States, where single currencies prevail, Asian trading involves an assortment of currencies, whose values are experiencing volatility in the aftermath of recent devaluations of the Chinese Yuan and the robust performance of the Japanese Yen.

Trend towards outsourcing. Small- and medium-sized firms, however, rarely have either the financial or the human resources needed to establish a presence in testing markets, or transfer a successful model from one country into another. At the same time, multinationals are focusing on their core competencies, such as product development, manufacturing and marketing – and often require an outsourcing partner to handle key tasks, such as sales, warehousing, blanket and capillary distribution, and cash collection.

In-depth local knowledge and insight is indispensable. Partnering with a Market Expansion Services provider can open critical pathways through the trading complexities and bring businesses closer to their customers. In addition, value-added market data and reporting contextualizes the similarities and differences that separate and stitch together Asian markets from Hong Kong to Hanoi, Jakarta to Seoul, and Tokyo to Yangon.

Dr. Joerg Wolle, President & CEO of DKSH