Expanding into Asia? Look before you leap

Expanding your business into China?

Asian markets are more attractive than ever for small businesses who now have access to the latest technologies and are able to reach growing and increasingly affluent populations in countries like China and India. However, deciding if and when to expand overseas is a tough call. It pays to look before you leap.

Expanding your market reach doesn’t automatically equal expanded profits – it can of course – but you need to ask yourself the right questions and ensure that it’s the right timing for your business, as well as you and your family personally.

So how to tell if it’s the ‘right time’ business-wise? Before you outlay any capital, we suggest some initial research to help you assess whether an overseas venture would be a successful strategy for you. Here are a few places to start.

Consult government organisations
A good place to begin is the Austrade website . Take a look at the country profiles, reporting obligations and market opportunities in the countries you are considering. You can submit your specific questions directly to Austrade representatives via their website. Trade Commissioners based in-country overseas are also valuable sources of information and contacts.

Analyse the market
Study the marketplace you want to enter. The more familiar you are with the country’s local demographics, the easier it will be to determine if the market is a fit for you. How will you adapt to the local culture? Have a look at your local competition. Who’s already there? What are they doing – right or wrong? Do you need to adapt your offerings to meet local tastes? Does your marketing message translate to the local language? Spending time in the target country and speaking to as many potential customers as possible will enable you to get a good understanding of these issues.

Join a business association
Attending programs and sessions offered by overseas associations can be a great way of gaining market insights and contacts overseas. Accru Felsers in Sydney is an active member of the German-Australian Chamber of Commerce, Australia China Business Council, Australian Tamil Chamber of Commerce and Australia Malaysia Singapore Association.  Groups such as these are well worthwhile for building overseas connections, understanding the trends, regulations and idiosyncrasies of specific overseas markets.

Business planning – start small
Identify which of your core competencies make the most sense in a specific country or region, rather than trying to duplicate your entire domestic operation. Expansion is almost always accompanied by increased expenses, so it’s wise to test the waters rather than jump in head first. Start your business planning with one or two key goals for your business in a small Asian niche market so you can evaluate your success before moving to the next step.

Assess your finances,  grants available and consult your bankers
Entering a new market is risky and usually requires a big capital outlay before you start seeing much return. Have you got the required extra funds yourself or will you need investment or loans to support the expansion? Will you qualify for a government grant such as the Export Development Grant or could an export loan be worthwhile? You should also honestly assess whether any funds you have would be better used to develop your local market. Other things to bear in mind are your exposure to exchange rate risk and obtaining reliable credit risk information about new customers to protect yourself. Letters of credit – or other trade financing instruments may provide a solution.

Protect your intellectual property (IP)
Some Asian countries are known for a business environment that carries significant risks for intellectual property (IP),  and IP registration in Asia can be challenging.  Australian businesses are urged to have formal legal protection of IP rights well before entering the Asian market, as in some cases the process of securing IP protection can take up to 24 months. You should also protect your trademark both in English and Chinese.

If the indicators of your market research are all positive, you’ll  need an accountant and business advisor who specialises in both Australian and international business, so please get in touch!

By Jean Zhang, Accru Felsers Sydney