By Coco Liu on Growth Business – Your gateway to entrepreneurial success
- It’s important to target the right territory within the region relative to your goals.
- Customer expectations, purchasing power, competition, regulation and routes to market differ enormously. So, assessing the political stability of the country, the rule of law and the robustness of its judicial system are all important when considering a new market.
- For some businesses, exporting directly or working through a distributor may be sufficient, but others may find that a local sales team, joint venture, partnership or their own legal entity is a more suitable option.
- It’s essential for businesses to enter into any new growth strategies with an understanding of the financial risks and challenges that could emerge, and strategies in place to mitigate them.
- Accurate forecasts are needed for a range of capital and operational costs, from recruitment and premises to technology and marketing.
According to the IMF, the Asia Pacific Region (APAC) is currently the primary driver of global economic growth, accounting for roughly 60% of total worldwide growth. This is not just thanks to the strengths of established markets like China, Japan and Singapore, but also emerging markets in places like Vietnam and Thailand. Perhaps no surprise then that European businesses are keen for a piece of the APAC action. One survey of multinational companies found that 46% of multinationals identified the region as a market in which they planned to expand operations in 2024.
While there are significant opportunities for European businesses to seek out new customers or a better supply chain through cross-border growth in the APAC region, organisations embarking on growth there are also likely to encounter significant challenges. Here are just a few considerations that they need to be mindful of.
Falling into the trap of treating APAC as one market
The APAC region comprises over 45 countries and a combined population nearing five billion, yet organisations still make the mistake of viewing it as a single market.
Whether a business’ expansion into a new region is driven by a desire to build a more robust, efficient supply chain or to reach new customers, it’s important to target the right territory within the region relative to your goals. That requires a very sharp focus, and an understanding that, for example, what works in Singapore might not work in Vietnam.
Customer expectations, purchasing power, competition, regulation and routes to market differ enormously. So, assessing the political stability of the country, the rule of law and the robustness of its judicial system are all important when considering a new market.
For example, market entry conditions vary substantially across APAC. OECD data shows that foreign investment restrictions remain significantly higher in markets such as the Philippines, Malaysia and Indonesia than in Singapore, meaning European businesses can face very different ownership, approval and operating requirements from one jurisdiction to the next.
Regional differences can become particularly pronounced when it comes to tax, auditing, financial planning and reporting. Every jurisdiction brings different systems, regulations, infrastructure and ways of doing business.
Identifying the right structure for operating in a particular country
While identifying the right territory for expansion is one thing, the next question is ‘what does being “in” that territory actually mean?’
For some businesses, exporting directly or working through a distributor may be sufficient, but others may find that a local sales team, joint venture, partnership or their own legal entity is a more suitable option.
Even the decision to sell directly or through a local partner can have significant consequences. An overseas business importing and selling goods in Singapore under its own name, for example, could trigger local Goods and Services Tax (GST) registration requirements as sales grow. Using a local agent can create a different set of obligations.
Naturally, your choice will have notable ramifications. It will affect how the business employs people, signs contracts, invoices customers, protects intellectual property and pays tax. For example, in Singapore local employees are generally covered by the Employment Act, but the regime is relatively flexible. If an employment contract specifies a notice period, either side can terminate by giving that notice or salary in lieu. Whereas in China, a written labour contract must generally be signed within one month of an employee starting work, and must contain specified terms covering matters such as remuneration, working hours, leave, social insurance and working conditions.
The operating structure will affect auditing and reporting, as well as determining how easy it will be to repatriate profits.
Preparation for future complexity
Increased complexity has been a constant theme across the global business landscape over the past 12 months. Geopolitical conflict, volatile financial markets, new trade tariffs and ever-evolving tax and regulatory frameworks are just a few of the major challenges that businesses continue to face.
As businesses expand into multiple territories, that can multiply the complexity too. Take an Asian manufacturer selling steel or aluminium into Europe, for example. The EU’s Carbon Border Adjustment Mechanism entered its definitive phase in 2026, putting a carbon price on the embedded emissions associated with certain imported goods. A regulatory change in Europe can therefore affect the competitiveness, reporting requirements and ultimately the financial case for a business producing goods in Asia.
It’s therefore essential for businesses to enter into any new growth strategies with an understanding of the financial risks and challenges that could emerge, and strategies in place to mitigate them.
Ensuring the right support is available
It can be tempting for businesses to rush into cross-border expansion, especially if an opportunity suddenly arises, such as a new partnership or large client. But moving too quickly can be problematic.
For example, suppose a UK technology business wins a major Australian contract that requires employees on the ground within weeks. What initially looks like a lucrative sales opportunity can quickly raise questions around payroll, tax, visas and whether a local entity is required. Here, the business in question would need to ensure it involves its advisers early, because commercial decisions and compliance decisions cannot always be separated.
Further, entering a new market can require significant investment before meaningful revenue arrives. Accurate forecasts are needed for a range of capital and operational costs, from recruitment and premises to technology and marketing. The risk of not considering the necessary factors in advance is that what once looked like an attractive deal can suddenly transform into something far more unsightly.
It is unsurprising that many European businesses are eyeing expansion into the APAC region, or looking to deepen their presence there. It’s a region that looks set to continue to contribute heavily to global growth. However, managing that expansion is not straightforward and organisations need to ensure that they do their due diligence and take the necessary advice before taking the plunge.
Coco Liu is chief growth officer at HLB International.
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