Entering the Asia-Pacific (APAC) market as a non-APAC company comes with a variety of unique challenges. In this five-part series, Peter Hum, Managing Director of StrateValue Pte Ltd outlines some of the key elements to be aware of when establishing a direct presence in the APAC region. Hum, who lives in Singapore, has nearly two decades of experience effectively entering American companies into Asia. Drawing on his years of expertise, Hum has compiled this series of best practices to help businesses who wish to expand into APAC. Read on to learn about the people, patience, and relationships that are necessary to launch a successful entry into the APAC marketplace.
As a business professional who has successfully performed multiple market entry projects for numerous American companies into Asia over the last 17 years, I thought I would write this brief article to highlight some key elements to be aware of when non-Asian multinationals are considering establishing a direct presence into the Asian region.
A trigger which prompted me to write this article was because a close friend of mine who was performing a market entry project for a foreign multinational recently had his contract cancelled because his client cited their lack of patience in establishing a sustainable business model in the region.
Let’s be honest, Asia market entry is not easy. It really isn’t. It takes:
- The right people
- Enduring patience
- A focused but highly curated long-term strategy
- A committed and realistic budget to make things work
If the client isn’t prepared to make a commitment to each of these items above to enter Asia, then they should consider saving their money and not waste their resources until they are ready to commit to each of these key elements to drive success.
I’ve seen many companies come and go because they thought they could conquer the region by sending a key executive from their headquarters to Asia and that individual would grow the business right out of the gate. Not only is this a myth but it clearly shows a common misunderstanding of many foreign companies who have never had any exposure or have had very superficial exposure to Asia.
Let’s consider the first point of ‘Time’:
Patience for Time
I’ve performed Asia market entry for foreign companies that:
- Have had an indirect channel in Asia with an established sales pipeline
- Started off with a complete blank sheet of paper in region.
In both instances, the key to ensuring success is to manage the expectation for committed deliverables by educating the client on the importance of time when building long-term relationships. This fundamental understanding of developing and nurturing business trust is a key first step to sales. As a result, longer revenue cycles are realized as compared to the usual (quicker) sales timelines in the client’s home country. This is a fundamental element to consider in Asia. Western cultures with their sales engagements see sales as transactional while Asia sees sales as rooted in relationship. Granted, any long-term business partnership is grounded in relationships but in Asia, the process for qualifying a partner starts with relationships from the moment they step in the door. Establishing trust takes time and thus, sales cycles in Asia typically take 30% to 50% longer than sales cycles in those of Western countries.
Bottom line, unless you already have a strong pipeline in region with strong channel partners or localized staff who knows how to drive regional sales grounded in relationships, you will need to set expectations based on the following if you are considering entering Asia with no business foundation:
- Consumer goods / short sales cycle products: 6 – 9 months to drive initial volume sales
- Enterprise sales / long sales cycle products or services: 9 – 12 months to close your first beachhead win.
- Service Provider / OEM partnership cycles: 12 – 18 months to close a partnership agreement.
These timelines are rough guidelines and results for many companies may differ somewhat but the differences will not stray too far from my stated figures above.
That’s it for now.
In my next article, I’ll discuss about point number two which is ‘The right people’.