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Expanding in Asia – People Matter

Coming from Asia and working in Europe, I’ve had the occasional discussions where companies look to expand in the east. Most of them are companies doing well in UK with a portfolio of international clients also looking to expand in Asia. Some are opportunistic especially when the recruitment market in Europe has slowed and others find it necessary to retain an international brand.

Whatever the reasons, the growth of China is a great carrot stick even at a slower annual GDP growth of 8.2%. Other than that, there is ease of doing business in Singapore and Hong Kong, English as a widely spoken 1st or 2nd language and relaxed labour laws that promotes mobility and thus recruitment. Other positive indicators include the persistent trend of offshoring and outsourcing to Asia.

The basic questions of expansion are “where” and “how”? Yet the answers are not so straightforward. After much analysis (see below for additional considerations), I am still convinced that finding the right person comes first before any other considerations.

Finding the right person is difficult
While globalisation is a continuous trend, recruitment is largely local with senior level recruitment less sensitive to geography. The fact remains that you serve a local market in recruitment and thus local knowledge and network is important.

In a service industry where profits rise and fall is tied entirely to the productivity of the people, finding the right person to launch your business in Asia is key. With the right person, he/she can also bring in a team that can start up quickly.

Pairing Sales & Operations
If you try to find someone who is strong in business development and tenacious in setting up a new business, you’ll hit a brick wall very quickly and setting yourself up for disappointment while time flies past. It is rare to find a good operator who is also a good sales person and vice versa. Working on combinations can be a workable solution.

With a strong base of clients who have operations in Asia, you can prepare an existing hire to relocate to Asia. Pair this person with a local person who is familiar with set up to split up the work. Typically, a finance or legal person is a great choice although not evident. A finance manager with business acumen will have the tenacity to work with administration not to mention the knowledge in keeping finances in check and prudence in risk taking.

Alternatively, a local strong sales person with established clients can be paired with an operator who is already familiar with your system and processes. A good consultant with desire to move can be a good choice.

Buying may not be the best option
For companies with cash (a rarity in this economy), buying may be on the table. The logic is, a profitable company will bring immediate returns while keeping the efforts of starting in a new market minimal. It may be true for other industries; this is a potential trap for service industries where human capital is key. Most boutique firms up for sale are made up of free agents. A cultural change mismanaged can mean huge turnover and worse, people leaving to set up on their own with the client base you had bought.

Unless there is strong legal binding and strong leadership and conviction to the new management and parent company, you can see your investment walk straight out the door before your logo is on the wall.

To pick the right place to start looking for the right person, a quick list of considerations.

Work from strengths
Without over simplifying the matter with generalisation, there are key characteristics in each market. For example, Hong Kong is a big financial center while Philippines is home to contract manufacturing; Singapore is an international hub with a small local market while Malaysia has a large local market next door.

If you already have strong expertise in a sector or function, you can choose the geographies to enter based on your expertise and potential for knowledge transfer and clients cross selling.

Each market can also be rated based on the following:
• Ease of entry – cost of entering and administration required.
• Licensing – complexity of labour laws and the types of licences required.
• Strength of currency – while cost of hire is low in some geography, it also meant that their profits when converted are lower. Contrary to product industry, in service industry there is no cost advantage.
• Availability of talents – in tight talent markets, training and mentoring will be required.
• Professionalism – there is a wide range in the level of professional ethics in Asia.
• Saturation of market – eg. In Hong Kong, while financial services is dominant, there is also highly competitive.

Sometimes, the most obvious choice may not be the best choice. To avoid entering into a red sea of competition, pair your top strength with secondary markets and your secondary strength in primary markets for example.

Build on your leverage
If you are already in business, you have leverage – your clients. While your clients may or may not have strong influence or ties with their Asian operations, they are still connected. They can point you to the right person and make introductions.

Your clients’ presence in Asia also meant that they had already tested the market. Based on their industries, their presence can also give you immediate business intelligence on the viability of a certain market based on your own expertise. Note: It will not however, tell you the saturation of the market in terms of competitors.

Partnering with a client
Some of your clients may also be considering entering into a new market. You can sound out your clients with your intentions and smoke out potential partners. A large recruitment project is the best way to enter a market with some assurance while allowing you to build up a database of candidates.

For an analysis of the criteria by country, write to me.