How Singapore-global enterprises can seize opportunities in South-east Asia
This is an opportune time for Singapore-global enterprises (SGEs) to deepen their presence in South-east 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 this 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 in 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.
Choosing the right playing field
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 5 dimensions: markets, customer segments, products and/or services categories, distribution channels, and which part of the industry value chain. An optimal choice is one in which these 5 dimensions complement one another and meet real consumer needs.
Creating competitive advantages
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.
Differentiation is the ability to command a premium by creating offerings that are perceived to be more valuable, even if they are produced with a similar cost structure.
For instance, some food services companies have differentiated themselves overseas by marketing well-known Singapore cuisines. Companies in other sectors have differentiated themselves by creating products in niche spaces, such as gaming chairs, or coming up with unique designs in areas such as fashion.
These 2 approaches are by no means mutually exclusive. SGEs can consider a hybrid mode: focusing on scaling in certain markets, and on differentiating in others.
Execution and assistance
Once choices are made, SGEs need to decide how and when to execute them. There are a myriad of options to consider – an organic, greenfield method is not the only way to enter markets.
Other modes include exports, merger and acquisition (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.
For those exploring new markets, the Market Readiness Grant provides support in areas such as market promotion, business development and market setup. For SGEs at more advanced stages of implementation, the Enterprise Development Grant offers support in areas such as strategy formulation and M&A. SGEs with strong growth potential and global ambitions can also look forward to more bespoke assistance under the Singapore Global Enterprise Initiative introduced in Budget 2022.
Applying this framework and leveraging government schemes could help companies to succeed in any potential regionalisation initiative. Given the depth of research required, enterprises may also seek help from external, independent parties to assist them in a thorough analysis of these factors, and to challenge the robustness of their plans.
The writer is partner for entrepreneurial and private business (strategy) at PwC Singapore.
