Going where the clients and customers are
Friday, May 25, 2007
THE tag global or international is no longer for Western multinational companies alone.
A growing number of new Asian companies has recently set up operations outside their home countries, with a significant portion exploring distant markets such as the United States, Europe and the Middle East.
InnovAsia's research suggests that companies' chief motivations for this expansion include following their clients and tapping into new customer bases.
In our sample of Asian entrepreneurs, the majority (75.9 per cent) set up pure sales and marketing offices, some (20.7 per cent) outsourced part of their research and development operations and a few (13.8 per cent) have manufacturing operations outside their home countries.
Some of our respondents have opened more than one foreign operation serving multiple purposes. For instance, a Hong Kong-based fashion company has a manufacturing plant in mainland China and a sales office in Singapore targeting customers in Southeast Asia, Japan and Europe.
And although the major function of some foreign offices is product development, they may be serving customers as well.
A Taiwanese information and communications technology company, for example, has an R&D subsidiary in Germany, where the company's key customers are located.
When asked whether they are primarily seeking an opportunity or reacting to pressure, the majority of entrepreneurs (79.3 per cent) gave the first reason, while 17.2 per cent reported a mixture of both.
One entrepreneur said he was forced to open a subsidiary in mainland China because he realised almost all his customers had moved there.
Said an Indian entrepreneur who exports knowledge-management software, predominantly to the US, "Going global was inevitable, because our domestic market is too small for our product."
Another Indian company chose Saudi Arabia, saying: "There are already many Indian firms in the US, and we want to try the relatively untapped markets such as the Middle East."
InnovAsia's survey found a moderate correlation between the location selected for a foreign office and the founding members' experience.
Some 24.1 per cent of our respondents noted that the core team members had either lived or worked in the chosen foreign country, and some did not consider any alternative because they expected their familiarity with the place and existing connections to be of great benefit.
In picking the location for their foreign offices, our respondents factored in considerations other than potential customers and previous living or working experience.
After thoroughly studying various cities and towns in south China's Pearl River Delta region, a Taiwanese entrepreneur chose Dongguan for its social safety and convenience of transportation. While setting up offices in the US, two Indian companies chose Plano in the Dallas-Fort Worth area of Texas for its relatively low costs.
Those setting up R&D functions overseas considered the availability of human talent. Government support came into the picture as well.
A Singapore-based information technology company, for example, decided to locate its product development subsidiary in Technology Park Malaysia in order to gain access to tax rebates and other fiscal incentives offered by the Malaysian government. One of our respondents identified another benefit of internationalisation worth noting.
The respondent, a Chinese software outsourcing company, has since 1998 been sending teams of staff to Japan, where the majority of its customers are located.
The respondent told us that more than seven years of Japanese operations helped the company train several staff who understand Japanese culture, thus contributing invaluable human capital and experience.
A growing number of new Asian companies has recently set up operations outside their home countries, with a significant portion exploring distant markets such as the United States, Europe and the Middle East.
InnovAsia's research suggests that companies' chief motivations for this expansion include following their clients and tapping into new customer bases.
In our sample of Asian entrepreneurs, the majority (75.9 per cent) set up pure sales and marketing offices, some (20.7 per cent) outsourced part of their research and development operations and a few (13.8 per cent) have manufacturing operations outside their home countries.
Some of our respondents have opened more than one foreign operation serving multiple purposes. For instance, a Hong Kong-based fashion company has a manufacturing plant in mainland China and a sales office in Singapore targeting customers in Southeast Asia, Japan and Europe.
And although the major function of some foreign offices is product development, they may be serving customers as well.
A Taiwanese information and communications technology company, for example, has an R&D subsidiary in Germany, where the company's key customers are located.
When asked whether they are primarily seeking an opportunity or reacting to pressure, the majority of entrepreneurs (79.3 per cent) gave the first reason, while 17.2 per cent reported a mixture of both.
One entrepreneur said he was forced to open a subsidiary in mainland China because he realised almost all his customers had moved there.
Said an Indian entrepreneur who exports knowledge-management software, predominantly to the US, "Going global was inevitable, because our domestic market is too small for our product."
Another Indian company chose Saudi Arabia, saying: "There are already many Indian firms in the US, and we want to try the relatively untapped markets such as the Middle East."
InnovAsia's survey found a moderate correlation between the location selected for a foreign office and the founding members' experience.
Some 24.1 per cent of our respondents noted that the core team members had either lived or worked in the chosen foreign country, and some did not consider any alternative because they expected their familiarity with the place and existing connections to be of great benefit.
In picking the location for their foreign offices, our respondents factored in considerations other than potential customers and previous living or working experience.
After thoroughly studying various cities and towns in south China's Pearl River Delta region, a Taiwanese entrepreneur chose Dongguan for its social safety and convenience of transportation. While setting up offices in the US, two Indian companies chose Plano in the Dallas-Fort Worth area of Texas for its relatively low costs.
Those setting up R&D functions overseas considered the availability of human talent. Government support came into the picture as well.
A Singapore-based information technology company, for example, decided to locate its product development subsidiary in Technology Park Malaysia in order to gain access to tax rebates and other fiscal incentives offered by the Malaysian government. One of our respondents identified another benefit of internationalisation worth noting.
The respondent, a Chinese software outsourcing company, has since 1998 been sending teams of staff to Japan, where the majority of its customers are located.
The respondent told us that more than seven years of Japanese operations helped the company train several staff who understand Japanese culture, thus contributing invaluable human capital and experience.
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