With a diverse range of economies and cultures, the Asian region offers an abundance of possibilities for business growth and innovation, which contributes to it becoming an attractive location for entrepreneurs and established companies alike.
However, setting up or expanding a business in Asia also comes with its own set of challenges, from navigating complex regulatory frameworks to understanding the highly fragmented local market. In this article, we will delve deeper into this topic to determine whether this region makes for a reasonable strategic location for businesses or if its pros outweigh the cons.
What Makes Asia a Future Business Hub?
Asia is rapidly becoming a future business hub due to several factors, namely:
Rapid economic growth. The continent is home to some of the world's fastest-growing economies, such as those of Hong Kong, China, India, Vietnam, and so on. This growth has created a rising middle class, which in turn promotes the development of new opportunities for businesses to sell goods and services.
Tech-savvy consumers. Asia has a large and youthful population, which is increasingly tech-savvy and connected through social media and mobile devices. This gives way for organizations to engage with new customers and markets, particularly in eCommerce and digital services.
Government support. Many Asian governments are making efforts to attract foreign companies, for instance by providing tax incentives and streamlining the regulations. This makes it easier for businesses to establish their presence in the Asia-Pacific market.
Favorable location. Asia's strategic location between Europe and the Americas, along with its well-established logistics networks, makes it an attractive gateway for businesses that wish to expand globally.
All these factors combined make Asia an attractive destination for businesses looking to grow their operations and tap into new markets.
Is Asia a Good Place to Start a Business?
While the Asian continent is a diverse and dynamic environment that offers many opportunities for entrepreneurs, there are both pros and cons to doing business there, just like with any other region.
Below, we take a look at some of the advantages and drawbacks you should keep in mind before deciding to launch operations in Asia.
What Are the Advantages of Doing Business in Asia?
Doing business in Asia can be an exceptionally beneficial venture due to the fact that the region is characterized by such factors as:
Large market. Asia is a large and growing market for many products and services, particularly in tech, education, healthcare, eCommerce, and food and beverage industries.
Low cost of labor. Labor costs in many Asian countries, particularly in Southeast Asia, are lower than in other parts of the world. This can make it more affordable to manufacture products or hire staff.
Access to talent. Many Asian countries have highly educated and skilled workforces, particularly in such areas as engineering, technology, and finance.
Ease of doing business. A growing number of Asian countries are taking steps to make it easier for foreign businesses to start up and operate by designing streamlined organization registration processes and reducing bureaucracy.
Openness to innovation. Asian countries are often among the first adopters of new business models, technologies, and other innovative features, which creates a favorable environment for businesses to thrive.
All of these aspects increase a company’s chances of success when entering the Asian market and trying to expand its operations there.
Main Setbacks of Running a Business in Asia
Despite the variety of advantages listed above, there are still some potential challenges associated with opening and running a company in APAC, namely:
Fragmented landscape. Operating the same type of business in Singapore is likely to be completely different from doing it in the Philippines. This can make it challenging for companies to establish a presence in multiple markets and can drive marketing costs up significantly.
Political instability. Some Asian countries are prone to political instability, which can make it difficult for businesses to operate consistently and predictably.
Infrastructure challenges. Some parts of Asia, particularly the areas located in developing countries, may lack the infrastructure necessary to support certain types of businesses.
Strong competition. Asia is home to many businesses, both domestic and international, which means that competition can be fierce in certain markets.
It is crucial to keep these aspects in mind before making the final decision to set up a firm in Asia. With that said, with proper preparation, it is oftentimes possible to minimize the influence of these factors on your company’s operations - learn more about it below.
Minimizing Business Risks When Entering the Asian Market
Establishing a firm in a new environment is always challenging, and the Asian market can be particularly demanding due to cultural and economic differences. However, there are several steps that businesses can take to minimize risks when entering it:
Conduct thorough market research. Before entering any market, it is essential to conduct extensive market research to understand the target audience, competitors, and local regulations. In the case of the Asian market, it is also important to study cultural norms and customs to avoid offending potential clients.
Find local partners. In Asian culture, relationships are crucial in business. Building strong relationships with local stakeholders, such as customers, suppliers, and government officials, can help companies navigate the market.
Invest in language and cultural training. Language and cultural differences can create communication barriers in the Asian market. Investing in language and cultural training for employees can help businesses better understand the local clientele.
Develop a solid risk management plan. To minimize business issues when entering the Asian market, you should develop a comprehensive plan that identifies potential risks, assesses their impact and likelihood, and features relevant mitigation strategies.
While all of these aspects are extremely important, there is yet another critical aspect to focus on to minimize your firm’s exposure to risks when entering the Asian market - local payment methods. Let’s talk about it in more detail.
Why Offering Local Asian Payment Methods Is Important
If you are used to conducting business in the US or Europe, you could be assuming that the majority of clients across the globe prefer to pay through credit cards and e-wallets. However, this is not necessarily true for Asian countries.
Here are some examples of popular local payment methods in several countries in Asia:
China. Alipay and WeChat Pay are two of the most popular mobile payment methods in China, with over
one billion users combined. UnionPay is also a prominent debit and credit card network, which is accepted by more than
27 million merchants and used in over 1.1 million ATMs across the Chinese mainland.
Japan. The most popular local payment method in Japan is Konbini, which is a system that allows customers to pay at convenience stores in person using a payment code provided online. Other popular methods include Rakuten Pay and LINE Pay.
South Korea. KakaoPay and Naver Pay are two of the most popular mobile payment methods in South Korea, with millions of users each.
India. Paytm, PhonePe, and Google Pay are three of the most commonly used payment methods in India. Other popular options include UPI (Unified Payments Interface) and RuPay debit cards.
Indonesia. OVO, GoPay, and Dana are on top of the list of preferred payment options in Indonesia. However, bank transfers and credit card payments are also widespread in the country.
These are just a few examples of the latest payment trends in some Asian countries. However, they make it clear to see that payment preferences vary drastically from one country in the region to another.
Therefore, before entering a new market, businesses need to research the preferences of their target customers in each specific country and offer a range of payment options that cater to them. While this step certainly requires a fair amount of research and preparation, it undoubtedly pays off, as by offering local payment methods in Asia, firms can:
Boost consumer trust. Many consumers in Asia prefer to use local payment methods because they are familiar with them and trust them more than the international ones. Thus, when a firm offers local payment options, it is likely to lead to increased customer satisfaction and loyalty.
Enhance accessibility. Offering local payment methods can expand the customer base by appealing to consumers who may not have access to credit cards or other Western payment methods.
Cut down on payment fees. Local payment options typically reduce payment processing fees, which can be especially hefty when it comes to cross-border transactions.
Simplify payment processing. The availability of local payment methods can simplify payment processing by eliminating the need for currency conversions, reducing the risk of fraud, and ensuring faster transaction times.
Ultimately, offering locally popular payment options is likely to result in increased conversion rates and higher revenues, which makes this practice one of the backbones of any company’s long-term success in the Asian region.
Final Thoughts: Why Expand Business in Asia?
Asia is rapidly evolving to become a future-ready business hub and is expected to continue its growth trajectory powered by emerging economies, such as India, China, and Indonesia. This growth is also likely to be driven by factors such as urbanization, technological advancements, and an expanding middle class.
Even though challenges like political instability, regulatory adjustments, and trade tensions still persist in some parts of the continent and impact its business landscape, exploring opportunities in Asia is still a wise choice for companies looking to expand their reach and tap into new markets.
After all, the various advantages offered by the local environment without a doubt outweigh the drawbacks across the majority of spheres. Thus, with careful planning, a solid strategy, and a willingness to adapt to local conditions, businesses are sure to be able to take advantage of the many opportunities that Asia has to offer.
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