By Dr. Wilson Chew
This is an opportune time for Singapore-global enterprises (“SGEs”) to deepen their presence in Southeast Asia.
A natural question that follows is how SGEs can capitalise on growth opportunities across the region.
ASEAN has a highly diverse landscape.
A one-size-fits-all approach is not feasible. SGEs need to make choices, and hence trade-offs.
Once choices are made, SGEs need to decide how and when to execute them.
This is an opportune time for Singapore-global enterprises (“SGEs”) to deepen their presence in Southeast Asia. Over the next couple of years, the region is expected to be a bright spot amid global uncertainties as growth returns close to pre-pandemic trends – unlike other major economies.
Over the longer term, ASEAN’s prospects are underpinned by the continued rise of the middle class; greater digital adoption; a boost to manufacturing from global supply chain diversification; and stronger intra-ASEAN economic integration.
The interest in ASEAN appears to have increased in tandem. In a PwC pulse poll last September that asked enterprises for their key markets of interest, 70 per cent of respondents expressed interest in ASEAN, up from 55 per cent from a similar poll last March.
A natural question that follows is how SGEs can capitalise on growth opportunities across the region. Principally, they must have a deep understanding of their customers and competition; only then can they make informed choices on their playing field and corresponding competitive advantages.
ASEAN has a highly diverse landscape. Countries within the bloc differ not just in their stages of development, but also economic activities, cultures, preferences, regulatory environment and operating conditions. A one-size-fits-all approach is not feasible, and SGEs need to make choices – and hence trade-offs – in order to achieve their aspirations.
Specifically, they will need to decide where to compete, across five dimensions: markets, customer segments, product and/or service categories, distribution channels, and which part of the industry value chain. An optimal choice is one in which these five dimensions complement each other and meet real customer needs.
Once SGEs have decided where to play, the next step is to design strategies to create competitive advantages in foreign markets. This could take the form of scaling, differentiation, or a hybrid of both.
Scaling refers to creating economies of scale, such that the business can raise its profit margin by increasing revenue at a faster rate than the associated costs. By scaling, SGEs can create a competitive advantage by offering their products at more competitive prices and/or reinvesting profit into areas such as digitalisation to achieve even greater cost efficiency.
Once choices are made, SGEs need to decide how and when to execute them. There is a myriad of options to consider – an organic, greenfield method is not the only way to enter markets.
Other modes include exports, mergers and acquisitions (M&A), or partnerships. As the feasibility of each option differs by market and market segment, SGEs need to keep an open mind and have a deep understanding of the market, their customers and competition.To overcome challenges of limited resources, SGEs venturing abroad can tap an array of government assistance schemes that have been expanded and enhanced over the years.
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Note: This article first appeared in The Business Times on 8 September 2022.
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