What to focus on when expanding into Asia Pacific

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Last week, Equiteq’s Asia Pacific (APAC) team gave their three top tips when considering expanding a consultancy practice into Asia Pacific. This week they’re taking a look at which areas need particular focus, with reference to Equiteq’s Growth Wheel. There are eight levers of equity value, they will be taking a look at the five key areas that they recommend focusing on first in an expansion into APAC.

1. Market proposition

It is unwise to think that just because you’ve had success with a service offering in one part of the world, that you can simply transplant it to APAC and enjoy the same kind of result. Service offerings should be very targeted and adapted to the local business landscape, even to different countries in the area. Firms that have been the most successful concentrate on a niche market and on specific regions; for example the Leighton Group, an engineering consulting firm, has established its presence as the world’s largest mining services provider and derives a significant part of its revenues from APAC.

2. Intellectual property

The key advice here is to invest in creating intellectual property (IP). The more packaged the offer can be, with as much know-how as possible, the more local businesses will value it. Ideally you’d reach a point where the service is so well developed that it’s almost like a tangible product. Failing to develop IP can lead to service becoming commoditized and you will quickly end up in a race to the bottom based simply on price and not value.

3. Consultant loyalty

 As mentioned in the previous APAC post, competition for consultant talent in this area is fierce. We recommend moving away from the locally predominant payroll management system towards a comprehensive human capital development program to encourage consultants to stay. Due to competition for talent, consultants will have to be well remunerated, but it’s also important to keep them engaged with the company through ongoing training, development and recognition.

While we believe the market proposition, intellectual property and consultant loyalty are the most important levers to focus on when expanding into APAC, the following areas are also due careful consideration when setting up in the region.

4. Sales & marketing / Client relationships

Trust is fundamental in Asia, it is often more important than actual capabilities. Because of this sales & marketing and client relationships, two different levers on the Equiteq Growth Wheel, go hand in hand in APAC.  Focus on creating long-term relationships and developing existing accounts. It would be a shame to miss out on contracts for lack of follow-up once you have already done three quarters of the work by establishing trust.

 5. Quality of fee income

The wide variability of political regimes in the region means you should take care not to put all your eggs in one basket when working in APAC. While there are limited ways of predicting black swan events such as Thailand’s coup or Japan’s tsunami, there are ample opportunities to preempt them through diversification.

Bearing in mind the points above while staying open to the revolving regional landscape will help you harness the huge potential of the Asian century. Furthermore, it will increase the value of your business from an investor perspective by demonstrating your local knowledge and adaptability skills.

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Three top tips when considering expanding your consultancy practice into Asia Pacific

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While Asia has long been a key area for consultancies to expand into from other parts of the world, it doesn’t mean that this diverse region is not still full of surprises. For example, McKinsey research stated that by 2025 more than half of the world’s consuming class, i.e. those with an income of more than $10 a day, will live within a five-hour flight of Myanmar. Considering the region’s resilient growth and the industry pressure to globalize, many ambitious consultancy owners or founders will have considered expanding into the region.

For those who are moving beyond just thinking about such a move, here are three tips from Equiteq’s Asia Pacific team on doing business in the region:

1. First of all, there is no such thing as Asia Pacific (APAC). Broadly speaking, we can identify five sub-regions: South-Asia, South East Asia, North-Asia, Australasia and Greater China. Even inside these sub regions there are strong historical, economic, political, linguistic or religious differences which mean that you can’t simply take the same approach to business in one region as you would in another. To take one example, Singapore’s GDP per capita is more than 50 times that of Cambodia or Myanmar, although they are both part of the Association of South East Asian Nations (ASEAN). Applying a one size fits all strategy would mean grossly neglecting the lesson of KFC’s success in Greater China, i.e. the importance of adapting the formula to the local landscape.

2. While no single business culture exists, there are sometimes common challenges in the region around charging for services and solutions, as opposed to charging for a product. The price often matters more than the service and sometimes potential clients want to discuss prices before even going into what services are really being sold. Clients are frequently very interested in lots of discussion without necessarily committing to a contract, so it’s important not to fall into the trap of consulting for free.

3. Talent scarcity is increasingly being highlighted as the main business concern by regional consultancies. This comes partly from the young history of development but also from a political trend toward lower acceptance of immigration, including white-collar immigration and an increasing tendency for people to job hop. This picture is especially stark in Singapore and China, where new resident-favouring legislation makes it harder to employ foreign staff. This means locals are increasingly sought after and tempted to change jobs regularly for better offers. In an industry where a large part of the value of the firm lies in its people, this constitutes a significant issue.

Being aware of these challenges is one thing, but planning on how to address them during an expansion into APAC is quite another. In our next Asia Pacific blog we will look at five ways to maximize the chances of success in this region.

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