Business expansion is often associated with business growth, and entering a new market is believed to simultaneously expand market share for the company.
However, apart from generating profits and growing your business for market expansion, global companies that have experienced financial stagnation during the global crisis are also considering diversifying their risk by expanding globally.
Why do companies decide to enter a foreign market?
The benefits of global expansion or gaining market share beyond the home country where the company serves its existing customers bring substantial benefits.
Asia Pacific is one of the top preferences for companies looking for international expansion opportunities. Among the region, Southeast Asia has the highest potential to increase market share for global companies. 8 out of 10 people among the 700 million population have at least made one online transaction in the past year. The supply chain industry is investing in regional technology solutions to serve global customers.
Companies decide to enter a foreign market for many reasons, such as increasing their customer base and profits, gaining a competitive advantage in accessing new resources and technologies, expanding their product and service portfolio, diversifying their risk, and earning customer loyalty in the particular country to increase total sales in the long term.
This article will explore the five benefits of expanding into new Asia markets specially prepared for middle-sized companies who aim to scale fast.
1. Large and Growing Consumer Market
The Asia Pacific region has a population of over 4.5 billion people, or 59.7% of the world population living in Asia in 2022, making it the most populous continent in the world.
One of the essential factors for businesses to expand into new markets will be to look into the potential increase in disposable income to determine the possible return on investment, especially in international marketing.
The growth of the middle-class landscape has changed. By 2030, experts anticipate that the world’s middle class will be dominated by Asian residents. The Asian purchasing power will become stronger due to social mobility and the rise of the middle class in the APAC region.
Asian development bank1forecasts that among the 4.8 billion middle-class world population, 70% of Asians will be at least economically secure, and the middle class in Asia has the potential to increase to 25% by 2030.
2. Rapid Economic Growth
According to the International Monetary Fund (IMF), the projected GDP growth from emerging and developing Asia is expected to reach 5.2% in 2024 compared to the whole world’s GDP projection growth rate of 3.1% 2. , while advanced countries such as the US, Germany, and Spain growth rate is only expected to reach an average of 1.4% growth.
One notable growing star in Asia is Vietnam. Vietnam has achieved a compound annual rate of 5% in real terms over the previous 20 years, 1.7 times faster than the world’s average growth rate. Even when the pandemic disrupted the world in 2020, Vietnam’s GDP growth was 2.9% without a decline 3.
Asia Pacific is likely to have a rapid rebound. According to the IMF’s forecast, Vietnam is anticipated to continue to grow by 7%, the Philippines to increase by 6.5%, while Indonesia and Malaysia will also experience growth of at least 5 percent.
3. Business-Friendly Environment
Asia Pacific has provided an attractive investment destination for many foreign companies, the rapidly growing digital native talent pool is one of the appealing factors to compete with China and India. Therefore, the region has experienced an upsurge in foreign direct investment (FDI).
Malaysia has ranked 12th globally, the 3rd country after Singapore and Hong Kong in terms of global countries that are very easy-to-do business with in 2020. The top initiatives the Malaysian government has implemented to attract foreign investments are offering tax incentives, reducing trade barriers, and establishing special economic zones.
Due to Malaysia’s advanced electronic platforms, Kuala Lumpur stands out as the best performer across all cities; the efficiency of the procedures for obtaining a construction permit and transferring property is faster than in other cities in Malaysia.
With an EOR solution provider, your company does NOT need to go through all the hassles in business registration.
4. Lower Labor Costs
Companies that wish to expand globally can reap tremendous benefits from hiring from Asia. According to the KPMG report, the average hourly wage in China is about 3.60 USD compared with 23.50 USD in the United States. By using China employer of record, you can save a lot on the costs.
According to world data, the United States ranked no.7 most expensive country to pay out the monthly salary according to the country’s currency, which is an average monthly income of USD 5,911.
In contrast, hiring the same position with the same experience in Asia saves significant cost advantage. The list below summarizes the average monthly income of these Asian countries:
Apart from cost savings, hiring local employees in the targeted market will enable companies to diversify their customer base, reducing the risk of relying on a single market for profit returns. Hiring from the new targeted country helps to gain loyal customers and build trust from the locals.
From an HR perspective, having employees from different countries with varying cultures, languages, and preferences will help to increase the DEI score in the long term.
5. Access to New Technologies
Several of the top technology centers in the world, including China, Japan, and South Korea, are located in the Asia Pacific area.
WeChat is one example of a technological company that made significant revenues when it expanded into Southeast Asia. Almost 50% of smartphone users in Southeast Asia used WeChat as their primary messaging app when the company decided to expand its service to the region to gain local customers’ loyalty.
According to a recent analysis from Google, Temasek Holdings, and Bain & Company, the Southeast Asian internet economy is expected to hit $200 billion in transactions this year, 3 years earlier than anticipated 4.
We recommend companies who wish to scale fast to focus business expansion in SouthEast Asia. In terms of the gross merchandise value (GMV), Vietnam has the highest growth potential to reach 31% (49 billion) in 2025; followed by the Philippines, with an expected GMV growth of 20% (35 billion) in 2025 5.
Expand internationally with confidence and compliance
Expanding your business into Asia Pacific brings numerous benefits. However, considering the associated risks, you might hesitate at this stage. Working with a global employer of record (EOR) AYP is the best way to mitigate all your risk concerns.
- We have impacted 500,000 lives by improving their hiring processes and employment opportunities with innovative digital solutions.
- We have helped companies expand confidently with a portfolio of building businesses across 17 countries.
- We are equipped with over 100 legal experts from different countries so that you do not need to go through and study all the labor laws, contracts, in-country benefits, and compensations.
- Expand your business WITHOUT an entity now; let AYP share all your legal liabilities and oversees all your compliance issues as your legal employer.
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- Key indicators for Asia and the Pacific. August 2022. Asian Development Bank..
- Latest world economic outlook growth projections. January 2023. IMF.
- The new faces of the Vietnamese consumer. Dec 2021. Mckinsey.
- Southeast Asia’s top digital economies expected to hit $200 billion in 2022, report shows. Oct 2022. CNBC.
- Investing in Southeast Asia: What’s Behind the Boom. Nov 2018. Bain & Co.