Pros and cons of exporting to Asia
Key points in this article
- Positives of exporting to Asia
- Negatives of exporting to Asia
Looking for future growth? Whether you’re just starting out in exporting or you’re already well established, Asia’s relatively high growth forecasts make it an alluring market for businesses with expansion plans.
But successfully expanding into a foreign market can be a lot harder than it sounds. Here's a quick list of the pros and cons to help you decide if Asia is the right target market for your business.
Pros of exporting into Asia
- Asia is a large and diverse market with an emerging middle class and strong growth forecasts.
- China is expected to soon displace America as the largest economy in the world, according to the World Bank. The bank predicts India is likely to overtake Japan to become the third largest economy, and expects steady to strong growth from Asian countries including Indonesia, Malaysia, Thailand and Hong Kong.
- While entering a market in a growth phase does not provide an ironclad guarantee of success and profits, it does increase the likelihood. Targeting a market in a growth phase improves your odds.
- Consumer confidence and spending is likely to be higher than in other markets providing demand-driven growth. That’s good news for businesses offering the right products and services.
- Asian businesses are more likely to be profitable in a growth phase. This decreases (but does not eliminate) the risk of payment defaults – especially relative to nations, such as EU-countries, experiencing a much slower recovery.
- Asian currencies are likely to remain strong, making imports from countries with weaker currencies more affordable, and potentially also more profitable.
Positives of exporting to Asia include potential for growth, the size of its economy and the emerging middle class
Cons of exporting into Asia
- Asia is not one large, homogenous market; it has many different cultures, languages, norms and ways of doing business.
- With the notable exception of India, where English is widely spoken by businesspeople, most Asian countries will have both language and cultural barriers to entry.
- There will be hidden costs involved in getting up to speed on import restrictions and requirements, packaging needs, regulatory red tape, country-specific cultural norms and local business etiquette.
- Customer preferences can differ quite markedly from the local Australian market and you'll need to research consumers in each country (and possible in different regions of the same country) to ensure you provide what your Asian customers want to buy.
- You'll probably need a new marketing strategy, complete with brand name and packaging, to suit your target country.
- Local knowledge is indispensable for almost any export venture, but more so for Asian countries. You'll either need to use an agent or distributor or possibly open an office in your target country, employing people with local knowledge and experience – and will probably need to travel to the country several times a year, at least in the early stages.
- As with any export venture, you'll also need sufficient capital to enable you to ramp up production while dealing with longer payment cycles (depending on your terms of trade and shipment methods) and higher transport and delivery costs.
- Some Asian countries can carry a high risk of copycat products emerging, which means you might need to invest in protecting your intellectual property and brand overseas.