Southeast Asia is fast becoming a popular destination for global businesses - and with good reason. The region offers a lucrative opportunity to tap into a highly engaged customer base, a growing economy, and a promising talent pool.
This guide will shed light on the benefits of expanding into the region, how you can build a strategy for long-term business success, and the best ways to overcome the challenges you may face along the way.
Why Grow Your Business in Southeast Asia?
Southeast Asia - also referred to as “South East Asia,” “South-East Asia,” and “SEA” - is an incredibly diverse region in Asia-Pacific with lots of potential for business growth.
Whether you’re a US or EU-based company (or an SEA-based business ready to expand further into the region), taking your products and services to new markets in Southeast Asia presents an attractive opportunity to:
- Diversify your products and services in a high-growth region
- Tap into a digitally oriented, hyper-engaged customer base in key markets like Singapore, Vietnam, and the Philippines
- Hire the best talent from emerging tech hubs.
The Many Benefits of Expansion into Southeast Asia
From diverse markets to economic growth to skilled IT talent, let’s take a deeper look at the main advantages of expanding your business into Southeast Asia.
Strong Economic Growth
With a population of over 650 million and a rapidly increasing middle class, Southeast Asia has proven to be a lucrative market for foreign investors.
In fact, Southeast Asia is among the fastest-growing economic regions in the world. The Asian Development Bank estimates a GDP growth rate of +3.1% in 2021 and a further +5.0% in 2022, with Malaysia and Vietnam standing out as the fastest-growing markets in the region.
Digitally Minded Customer Base
Southeast Asia’s large digital native population also provides a huge opportunity for e-commerce and digital services - including Software as a Service - businesses. Internet penetration is up to 75% across the region with a total of 440 million internet users. According to Google’s annual e-Conomy SEA report, Southeast Asia’s internet economy is expected to reach $360 billion by 2025!
Fintech company Revolut is just one of the many businesses to have seized this opportunity, gaining over 77,000 customers in less than two years of launching in Singapore. Using Singapore as a springboard, Revolut has its sights set on further expansion into the wider SEA region. This is a strategy your business could potentially replicate.
Growing Tech Talent
Without great talent on the ground, your international expansion is unlikely to go far. With a huge population of digital native young people, Southeast Asia’s talent pool is very promising.
While Singapore leads the way for higher education (e.g., MBA) and university rankings, the Philippines and Vietnam are hot on its heels, fast-becoming key markets for IT and engineering talent.
According to a recent report by World Economic Forum, young people in Southeast Asia show a strong desire for upskilling and lifelong learning. So much so that their number one reason for changing jobs is “for better opportunities to learn and develop.”
This talent pool is also increasingly interested in working for foreign multinational companies, only second to working for themselves. This entrepreneurial spirit and drive for development are exactly what your business needs to thrive in a new market.
How to Expand Your Business into Southeast Asia
As we’ve seen above, expansion into Southeast Asia should be on the agenda for any growing business, particularly for those in the tech sector. But how should your business approach expansion into this region? Follow our step-by-step guide to learn more.
1. Create an Expansion Strategy
Every successful business venture starts with a well-defined strategy, so be sure to spend plenty of time planning your expansion instead of jumping into new territory unprepared. A solid international expansion strategy will help your business save time, money, and resources in the long run.
First, you need to formalize your main reason(s) for expansion. Do you want to enter Southeast Asia because your product would fill a gap in the market, for example?
Once you identify these core reasons, you should:
- Set clear objectives;
- Conduct further desk-based market research;
- Decide on the type of global expansion strategy you want to implement;
- Define your budget; and
- Outline a timeframe for expansion.
For start-ups and small-medium businesses (SMBs), taking a light-footed and agile approach to international expansion is wise. This means testing out the market before you set down permanent roots. Hiring local talent, forming strategic partnerships, and exporting goods or services can be fairly low-effort, low-cost ways of entering a new market.
On the other hand, establishing a subsidiary abroad is a time-consuming and expensive method of expansion. It’s generally best reserved as a long-term solution once you’ve validated the market.
2. Hire Local Talent
Hiring local talent is one of our top tips for businesses expanding internationally. Tapping into the local talent pool gives you access to the linguistic, cultural, and regulatory expertise you need to thrive in an unfamiliar market. This is particularly true in Southeast Asia where the languages, cultures, and laws may differ significantly from those in your home country.
That leads us on to our next tip: start lean. Begin your market expansion by hiring a small but experienced team on the ground to meet your particular expansion needs; perhaps you would benefit from a local Business Development Representative, an operations manager, or a customer support agent, for example. Choose the people who will best help you achieve your near-term objectives.
To hire international talent compliantly without your own subsidiary, you’ll want to work with an Employer of Record (EOR), like Omnipresent.
3. Adapt Your Product for the New Market
Your product or service may need some tweaks before you launch it in your new Southeast Asian market. Here are a few of the many factors you should consider:
- Translation: Does your target market have high levels of fluency in your product’s current language? If not, you need to consider translating product copy and launching a translated version of your website.
- Localization: Translation covers language, but localization ensures that your product is also culturally and socially appropriate for the target market. To align with local norms and expectations, you may need to modify graphics and imagery, adapt your tone of voice, and convert prices to local currencies, for example.
- Price adjustment: Converting your prices is just the first step; you may need to adjust your entire pricing structure to suit local expectations too.
- Compliance: Always be sure to check that your product or service complies with local laws, regulations, and trade standards. This could mean altering your labeling, for example.
4. Launch and Test Your Product in the New Market
Get your marketing campaigns and sales team ready - it’s time to make a splash and launch your product!
Remember, this is just the beginning. From here, you’ll have to continually monitor how the new market is performing. Be sure to request regular customer feedback, stay on top of local compliance and regulations, and adjust as necessary.
Overcoming the Challenges of Expansion in Southeast Asia
Southeast Asia isn’t a single market; it’s made up of many, each with its own unique hurdles. But there are practical ways you can overcome these challenges to help your market expansion succeed.
Cultural and Linguistic Barriers
There are dozens of official languages spoken in Southeast Asia, and even more unofficial. While English is widely understood, fluency varies from country to country and region to region. The cultures and politics in SEA aren’t homogenous either, so what works for one country may not work for another.
By building a team of local experts, your business will gain a much deeper insight into your new market. You can hire people who speak the local language and understand the cultural and sociopolitical landscape.
Complex Local Laws and Regulations
Every country and jurisdiction in Southeast Asia has its own laws and regulations related to foreign business and employment. While it may be fairly simple to set up shop in one country, another may have strict rules you need to follow. Language may also pose a barrier to understanding these laws.
You should always seek local legal and tax advice when entering a new market. This will help you to avoid non-compliance and any consequent fines or penalties.
Lack of Business Contacts
As you enter a new market, you may lack valuable business contacts. This can make it hard to find trusted partners and suppliers, which could delay your expansion plans and waste money.
While this can be true for any new market, it’s even more pertinent in Southeast Asia where business has traditionally been done via family ties and conglomerates. While new generations are much more international, having an insider as part of your team who can provide access to local ecosystems and communities will give you an edge over the competition.
COVID-19 Travel Restrictions & Administrative Delays
The pandemic has had a significant impact on Southeast Asian countries and their approach to foreign business. New restrictions to international travel have prevented foreign investors from visiting new markets, while administration efforts specific to entity setup have been significantly delayed in some countries.
Hiring local talent is typically much more effective (and convenient) than relocating your existing staff. It’ll help you avoid delaying your expansion plans due to travel restrictions too. Best of all? You don’t even need to set up a local entity or subsidiary to hire the best talent that Southeast Asia has to offer. There’s a much simpler solution - and that’s Omnipresent.