Localisation as a strategy for overseas business expansion

There are a number of projects that fail after a few years of overseas expansion, due to a lack of effective strategies that are customised to the local competitive environment. A successful business model in one Asian country may not necessarily work in another country, and it is extremely important for the management of a company to understand the characteristics of each market they are going into. 

Even though the businesses are located in the same Asian region, there are differences in each country in many respects, including demographic structure, tradition, values and beliefs, lifestyle and tastes, and so on. The market in each country has its own rules of the game.

Localised strategies can be considered as a key success factor for those who are exploring business opportunity in a different market place.

In order to formulate the right strategies for overseas business expansion, the following are key elements that need to be considered.

Partnerships – Forming a partnership with local people can be a good option, rather than going into a new territory alone. Local business partners can contribute to the success of the company due to strength in networking, understanding of the domestic market, and so on.

While the requirement of having a local partner can be a restriction in some countries for certain businesses, tying up with the right local partner can reduce the risks associated with having insufficient knowledge of the local market. 

Suppliers – Working with local suppliers for the company’s products and services can be crucial to the success of the business. Understanding of local supplier relationship management, or SRM, is as important as CRM (customer relationship management).

For example, manufacturing companies need to ensure that raw materials ordered for production have been delivered at the right time, in the right quantity and at the expected quality level. Without good support from suppliers, the continuity of the business can be in jeopardy. 

Customers – It is important for a company to introduce the product to a new market with proper understanding of the target market, to ensure that it can satisfy the customers’ needs in terms of price, quality, taste, and so on.

For example, consumers in one country may prefer a different taste of food from those in the selling country. The price point in a new market can also be significantly different from the original market. This also includes the different nature of the pricing structure.

Products – Local customers may need some adjustment to the products to suit their preference, so that they can accept more. In fashion business, the size, pattern and design of the same product category can differ from country to country due to different cultures and traditions, for example.

Rules and regulations – Companies need to understand each market’s laws and regulations that are important to the business. Failing to comply with the law in different countries can result in unintentional huge losses.

In most cases, legal advisory services are used by companies interested in investing in a new country. New business transactions should be checked and confirmed that they are legally correct. There must be sufficient research and study before a company can expand its business into a new market in a new country, in order to avoid unnecessary losses as much as possible.

It is very dangerous for a company to presume that what works in its home country will also work the same way in another country. This applies not only to the product/service selling and marketing, but also to the management system to be introduced.

Expanding business into a new country can be the right initiative for a company to take. 

However, to ensure success, a lot of homework should be done by professional and capable team members so that the investment can be an effective one capable of delivering the expected return to the company.

A well-prepared business plan, coupled with effective execution, is the key success factor for any company looking for overseas business opportunity. 

 

Yanyong Thammatucharee is head of International Finance and Operation at Central Marketing Group. He can be reached at [email protected]