Seizing the chance
Nick Henderson - Director China Practice for Asialink Business
Realising growth opportunities in Asia will be central to supporting long-term recovery from what is a profoundly challenging period for Australian businesses.
Through the pandemic, many Asian economies continue to outperform the global growth rate and ANZ’s Opportunity Asia report underscores the region’s long-term potential for new opportunities with 40 per cent of global consumption and 52 per cent of global GDP anticipated to come from Asia by 2040.
One common misconception about doing business in Asia is that the cost and complexity of market entry outweigh the ability to generate acceptable returns in a reasonable time. The findings of the report challenge this assumption by showing businesses surveyed, on average, took five years to achieve a positive return on investment (ROI) from Asian expansion while 45 per cent in fact achieved this in three years or less.
These findings are instructive and confirm many Australian businesses are adopting the business models and strategies required to achieve returns on their Asian investments in relatively short time. Building a strong understanding of the market is critical to success as well as recognising the importance of tailoring products and services to the distinct needs of that market. Having trusted offshore partners is another essential ingredient.
Research also consistently shows those businesses that have ‘Asia-capable’ talent at their disposal are better equipped to navigate Asian markets, understand and adapt to cultural differences and implement effective financial and risk management strategies.
Both the Greater China and ASEAN markets have substantial populations with a rising middle class as well as proven demand for key Australian exports such as agricultural products, consumer goods, and services. They also have vast digital economies with high levels of internet penetration, both fixed and mobile. Developing business models that incorporate digital elements, such as ecommerce, payment systems, social media and marketing, while tailoring offerings to the diverse needs of online consumers, is another key to unlocking opportunity.
It is clear China is Australia’s number one export market by value, accounting for 33 per cent of Australia’s total export of goods and services in 2018-2019. This concentration on a key market can pose a risk, due to economic or geopolitical factors – and we have seen that risk realised in recent times. It is important to consider if other markets are a suitable fit.
Still, the Chinese market provides significant opportunities for many Australian goods and services exporters. Diversifying beyond China’s more developed Tier 1 markets to Tier 2 and 3 cities offers new growth opportunities, serving new emerging middle class consumer markets.
But it is also prudent for businesses to investigate additional growth market opportunities elsewhere in Asia, all of which are different, and many of which can provide a unique appetite for products or services. Investigating more of these may be the best way for Australian companies to balance risks that may be experienced in an individual market.
The Opportunity Asia Report also examines a range of other important strategic considerations associated with doing business in the region but above all else, it is clear from the report the markets of Asia will remain crucial to our prospects as we chart a path to sustainable recovery from COVID-19. Australian businesses are pivotal to this proposition.
Nick Henderson is Director China Practice for Asialink Business