If you’ve ever read any financial report, you’ll know how commonly the words ‘fastest growing’ and ‘Asia-Pacific’ appear together. Of course, this isn’t a lie. According to an economic commentary by S&P Global, growth in the APAC region strengthened in 2023 and enjoyed a 4.5% y/y growth. The medium-term outlook projects China, India, and Indonesia to see increasing trade with each other in raw materials, intermediate goods, and manufactured products.
If you’re any sort of business that wants to break into their lucrative market, these predictions are important to pay attention to. That said, expanding into APAC isn’t exactly simple. Each country in the region has its own way of doing things, and factoring in the differences between each country is going to be critical. Let’s explore further.
Don’t Rush the First Step
While you may want to jump right into the fray, the entry into the region will likely be your biggest challenge. The fact is that even when companies are expanding domestically, there’s always a bit of caution involved.
Krill Bigai, CEO and Co-founder of Preply, recommends that before committing to a new location, an online branch could help you test demand. Moreover, Bigai notes that it saves you the overhead and operational complexity that comes with managing additional physical stores. How much more careful should you then be when expanding into a new country and culture?
However, if you’re determined, one way to safely enter the market would be via a global Employer of Record service. These platforms take care of all the logistics that come with dealing with another country’s laws around employment, such as payroll, insurance, and more.
You may think those are expensive, and in the past, that would be a rational belief.
According to Remote, a global HR and payroll platform, older EORs used to charge up to $2,000 per employee per month in China. These days, EORs are much more affordable and accessible, and make market entry into APAC easier.
Accept that Statistics Don’t Show the Full Picture
It’s natural to be excited about jumping into the ‘fastest growing market,’ however, the on-the-ground reality for a foreign business can be very different. According to one McKinsey and Company report, income inequality is one factor to watch out for in Asia. This is because consumers in the bottom 50% of income distribution have had a decreasing share of income over the last 30 years. Thus, if your products or services are targeting the middle class and below, this is a major factor to take into account.
Likewise, as Remote points out, in countries like India, the minimum wage is INR 5,340/month, which is about $60.83 according to current conversion rates. While you might feel you can set wages close to that, the real wage expectation would be much higher, depending on your industry.
This is the reality of working in APAC regions. Official figures might say one thing, but given the rate of development, wages, and Purchasing Power Parity (PPP) increase, those changes don’t get reflected officially. Making decisions without real-world context can have serious implications.
Remember, unless you’re collaborating with an existing brand, you’re pretty isolated reputation-wise. Create an impression of being untrustworthy in any form, and you may struggle to be given a second chance by local consumers.
Be Prepared to Slug it Out for Long-Term Survival
Once you break into the region and have a branch of your company operational, well, that’s where your real story begins. You will have to have experts on the ground who can ensure you’re able to make quick decisions based on regional factors. Even with the internet and instant news updates, doing business across borders still has a degree of lag.
Likewise, one challenge that you will have to eventually deal with is employee retention. Many businesses that expand to other countries fail to consider employee growth. They may not value them as much as domestic staff and forget to create pathways for promotions and career growth.
As a result, retention can become a challenge as workers keep leaving after recognizing a lack of growth opportunities. Even a simple growth structure that matches local work practices can help with this.
All things considered, expanding into the APAC region can be very lucrative, but of course, there’s a reason entrepreneurs hesitate. The amount of capital to start the process and follow through can be intensive, and that could mean attention moving away from your local operations.
That said, APAC is the fastest-growing region in many industries, and if you can follow through, the returns are going to be worth it.
