Step-by-step Guide For Expanding To Asia

By Mike Alexandrovski

Expanding into foreign markets might sound difficult and scary. It also raises a lot of questions: how do you choose a specific country in the region? How to recruit a local team? How to adapt the product to each and every market? Every founder of a global startup faces these challenges and no one has yet been able to escape them without sacrificing growth. We’ve experienced it ourselves and wanted to share our learnings. 

Choosing the right country to start

If you are planning to expand into the countries of Southeast Asia, it doesn’t make sense to enter just one of those. Without trying to oversimplify things, they’re quite similar and as soon as you build out the playbook for expanding your own business, you should be able to leverage it and apply throughout the entire region. 

But which one should be first? There are strategic reasons. GDP per capita is a magical parameter that can tell you a lot about a society. While cultures might be different, you can almost always look at the countries with similar GDP per capita and your product will likely be in demand there. This parameter gives hints on your future pricing and revenue, consumer habits and the level of infrastructure development. Asian countries also tend to grow much faster than the developed ones. So even if their current GDP might seem low, with time they will catch up the same way Singapore and South Korea did. 

There could also be purely tactical reasons. Maybe you have warm contacts or know professionals in a particular country who could head your expansion there. Then you might be better off by going there first regardless of the strategic reasons. Knowing the people you work with and trusting them is a fantastic foundation to build upon. 

Obviously, you need to study the regulatory landscape. That space could differ quite a lot from what you’re used to, so carefully assess the situation. Some types of businesses could literally be impossible and very hard to build. Some might get that status overnight due to political reasons. In June 2020 India banned a number of Chinese apps, including TikTok, citing national security concerns. That also opened up the market for new global entrants. 

Another key aspect is how consolidated or fragmented your particular industry in this country. If you are building a consumer business, you should target being the top-1 player in all countries of presence, otherwise it’s going to be very difficult. If an Asian country already has giants in this area, most likely they will find a way to keep the new company out of the market. But I think B2B companies have a much easier time. The way we see it, most B2B markets can support at least three players. Also, businesses are more rational than consumers and can be attracted by lower prices of specific product offerings. In fact, the existing player might warm up the audience by educating the market for you. 

It is also important to know when the company has to leave a certain market. For consumer companies, in most cases it only makes sense to fight for the first place. Being the third player on a competitive market isn’t a real opportunity in the long run. The only reason Lyft didn’t die is that Uber blew off because of its internal culture. For B2B, the issue is usually not so acute and it might be enough to be one among the top 3 players in a foreign market.

Recruiting a local team to be your conduit

Even expanding a pure SaaS business overseas without the local team is a heck of a challenge. Most companies tend to hire local sales and marketing teams as these areas require a deep understanding of the market and, ideally, pre-existing connections. If you have any sort of offline component, you will likely need a full-scale team in each country.

We believe we have perfected a process for jumpstarting a local team. We begin by looking for our Country Manager, an entrepreneurial person who will act as a leader tasked with finding the key team members and helping us understand this market. The sources of talent are pretty similar everywhere and LinkedIn is practically ubiquitous, especially among the people we are interested in – professional managers who are interested in working for international companies and speak English. We look for people with relevant experience and background while trying to assess if they might be willing to start from scratch with us. Having a pure startup experience is a great predictor of a successful partnership.

We give everyone the same test task. What if they were starting this business as a founder and needed to raise funding? What we’re looking for is almost an investment deck iterating their own advantages as a founder, their understanding of this business and the overall market, approximate financial plan and growth strategy. Of course, not everyone is willing to spend time to draft all of this, but this is just as a filtering mechanism that highlights motivated people willing to roll their sleeves without an immediate remuneration despite their years of experience and previous positions. 

This process helps the applicant dive into your product and its target market, understand how it works, what services and benefits they can provide to their client, what the price is going to be, how they can reach and most importantly retain their clients for the long-term. On the other hand, we have a chance to witness the way these people think, present themselves, analyze the market and persuade other people with data and conviction. We don’t expect this presentation to be perfect. It’s a sign of commitment, a confirmation of the culture fit and relevant expertise. What they are focusing on and what they are omitting can tell a lot about them. The required set of competencies is typical for startups: the candidate knows how to do everything without deep-diving into specific areas. At the end of this funnel we receive 3-4 presentations for each country and hire one of these people as our Country Manager. 

Adapting your product (or not)

If your business has an offline component you will most likely have to adapt the product for each country in ways you wouldn’t even imagine. Uber struggled with the very size of their app bundle because of all the options they had to include for each of their countries. At the same time, you almost never can completely decentralize it and offload the product development to different countries without sacrificing your speed of iteration. 

We recommend a hybrid approach to product development. At its core, product development should be centralized and developed by a single team, which itself can be traditional or remote. All our updates are released globally and only if necessary are adapted to specific local markets. Our software developers and product managers obviously prioritize the features needed by the majority of our customers. But you need to build a process for collecting feedback and suggestions from the local team and also provide them with an option to review upcoming updates and decide whether they make sense for their country at the moment. They can just switch off a flag if they need more time to prepare the roll-out on the ground. 

Sometimes external reasons would affect your product roadmap. Since this isn’t happening in your home country, it’s important to build a channel between the local teams responsible for the compliance and your central product team, so they’d prioritize the fix and work on it together. Since Asian countries are still developing and often don’t experience the political gridlock we might see in the US, you should be ready for drastic regulatory chances from time to time, especially in novel industries. 

For instance, the topic of gig workers is just as prevalent in Asia as it is in the US and Europe. Therefore, companies that have built their business in the absence of clear regulation should be aware that the requirement for their operations might change and have alternative options prepared in advance. Because the regulator might move very quickly here. And when one of the countries implement new laws, its neighbours tend to move quickly, so try to spread that knowledge across your local teams. 

Be proactive and communicate with the governments, help them when you can. That will allow you to build a connection and educate them on the advantages that your industry provides. When COVID-19, many companies like ours were asked to deliver goods to hospitals and we proudly participated in that. 

Finally, there’s the question of the brand. Earlier marketers would try to adapt the name of your company to each particular country and this is the approach we tried ourselves. But when every consumer-facing business is bound to have an app, you’d better have just one app higher in the AppStore than 10 with different names. Asian consumers are also quite willing to buy from international brands and often consider it a stamp of quality. The only reason to keep separate brands is if you bought a local player well-known on this market. Just think about your brand name and what it might mean in other languages in advance.

The byline is written by Mike Alexandrovski, Founder of Borzo. Mike is a serial entrepreneur with more than 20-years-experience of launching new businesses and management expertise who founded Borzo in 2012.