The rise of Asia has created commercial opportunities on a vast scale. The region accounts for 32 percent of the global economy, spends $7 trillion annually on consumer goods and services, and has over 230 cities with populations larger than one million people. These are the types of figures that excite boardrooms and no annual report is complete without an 'Asia story' to rally shareholders.
But the figures also mislead. For even as the region's commercial opportunities are growing, they are also growing in complexity as competition intensifies. Shoppers in Beijing have access to the latest Italian fashions or Australian cheese. Banks from around the world flock to Hong Kong to tap the region's affluent. Food processors in Bangkok produce at a quality comparable to those in the West.
That complexity isn't a reason to delay. Far from it. The opportunities to build scale in the region are too compelling. Consider how Linfox, the Australian trucking firm, has patiently developed its operations in China, India, Malaysia, and Thailand. Today the company generates one quarter of its revenues in the region, adding scale in a way that wouldn't have been possible by remaining at home.
But old assumptions must be ditched in favour of more developed commercial strategies. Trading business cards at trade shows worked in the 1990s, but today's leading Australian firms are adding market studies, focus groups, and competitor surveys to their strategy toolkit much as they might if entering the more developed markets of Europe or the United States.
Take the processed food sector as an example. We recently ran a series of consumer focus groups in Hong Kong. Food safety concerns were a high priority for all and many refused to buy "Made-in-China", preferring imported product. The fact purchasing power has risen steadily over the past decade makes imported product increasingly affordable for the middle-class.
This is the market that Australia food brand owners such as Carmen's, the muesli bar processor, have successfully tapped with the company's products widely distributed across the region. Much the same for Bellamy, the organic baby food company, whose products are similarly available in stores across the region as well as through China’s vast e-commerce channels, such as TMall and Yihaodian.
Yet the competitive gap is also narrowing. Walk down the chilled meat section of any Hong Kong supermarket, for instance, and Betagro's pork products stand out. One of Thailand's largest pork and poultry producers, the company sells high-quality pork, but a QR code allows customers to verify the source of the meat, right back to the farm gate. Not so the Australian products on sale nearby.
How long until Betagro sells to the Australia market? The company after all already sells to Europe and Japan. The company's success is an example of why an Asia strategy is not just about building market share, but also defending existing share at home, as increasingly sophisticated Asian competitors look to Australia's market, often starting by tapping the country's large ethnic-Asian populations.
The example of Betagro is also a timely reminder that the 'Asia opportunity' is about more than 'China'. Sure, China is the region's largest market. But it is also the most fiercely contested as local competitors compete head-on with multinationals; consumers are spoilt for choice by the rapid growth of e-commerce; and regional differences mean having multiple partners and commercial strategies.
That makes Southeast Asia an easier entry point for many. The region's markets have also matured to the extent that sales in Malaysia or Thailand can have a material impact on the performance of an even a large-sized Australian firm. That's doesn't mean overlooking China, but instead opting for a multi-speed strategy, say moving faster in Malaysia and more slowly exploring China.
The critical differentiator for those Australian companies that have successfully entered Asia is the commitment of executive boards and senior management. Take the fact that Aesop's Asia-Pacific manager is based in Hong Kong, rather than Australia. The latter might still be the larger market, but it's in Asia where the real growth opportunities lie.
For mid-sized firms, there is a consistent pattern among the most successful firms of business owners or CEOs actually moving to the region. Take Peoplebank or ResourceCo are good examples. That isn't possible for many, but it does illustrate the importance of senior management taking responsibility for an Asia strategy, rather than delegating responsibility to less empowered staff.
The time is also ripe for mid-sized firms. The last five years has seen a sudden increase in the number of family-owned business, for instance, exploring opportunities in the region. There’s no need to jump into Asia overnight. In fact, slow and steady is a good philosophy. But it is critical to have a long-term plan to both tap new customers and defend against new competitors.
Ben Simpfendorfer is Founder & Managing Director of Silk Road Associate, a Hong Kong-based consultancy. He is also author of the “The Rise of the New East and has worked in Asia and the Middle East for the past 20 years.