From OJEK to GO-JEK: Internationalisation may not be as far-fetched as you think

Home is where the heart is (and it’s also where the opportunities are)

Economies are continuing to boom across Southeast Asia. According to the Asian Development Bank, Indonesia’s economy is expected to grow 5.3% in both 2018 and 2019, due to improvements in investment and household consumption, higher export growth, a further decrease in unemployment levels and a lower inflation rate. Though the infamous traffic jam of Jakarta may spring to mind, the future is bright for this emerging economy; with President Joko Widodo pushing for a number of new road, air, sea and rail infrastructure projects to go ahead in the near future.

According to a recent ranking from the U.S. News and World Report, four of the top five Best Countries to Start a Business, globally, are in Southeast Asia:

Malaysia and Thailand have projected GDP Growth Rates of 5.0 and 4.1% respectively. Malaysia, too, is ambitious with its infrastructure development plans; developing the second phase of its Mass Rapid Transit line as well as planning to embark on a third phase simultaneously. While the country’s economy has seen unprecedented growth, its property market continues to face challenges with the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia, estimating that unsold property is now worth approximately RM35.5 billion.

By and large, thanks to tourism, Thailand’s hotel and restaurant sector is expanding at an accelerated rate, growing by 8.5% during the course of 2017.

…So why aren’t we making the most of it?

Knowing what our region has to offer, it is interesting to note that only 14% of local SMEs intend to internationalise, according to QBE Insurance’s recent survey of Singapore’s SME business leaders.

Funding and familiarity repeatedly come up as the biggest barriers to expanding across borders, as well as regulatory and licensing requirements, the competitive environment and a lack of understanding of consumer sensitivity to a company’s products.

Internationalisation is within reach if you know which foundations to lay

The key foundations of internationalisation are as follow:

1. Know your company

It is important to understand your motivations behind internationalisation. Reasons such as ‘everyone else is doing it, so I should too’, or ‘my product is successful in Singapore, therefore it will succeed anywhere’ do not necessitate the foundations of a successful internationalisation strategy. Rather than reacting to the current market, it is worthwhile taking measured steps to ascertain what would add the most value to your growing business. Do you have a successful business model in at least one existing market, and do you have the time and resources (both capital and manpower) to invest in a new market for up to three years to ensure success?

2. Get to know your customers

Misunderstanding cultural differences such as demographic split, language preferences and religion could make or break your business. Understanding customer preferences and pricing sensitivity as well as the local distribution channels available, will be invaluable for tailoring your products to the local market. To overcome this barrier, in fact, many companies choose to work with a local partner to gain maximum expertise and penetration in new markets.

3. Map out your competition

You may already know who your key competitors are, but are you confident in your competitive edge going into this new market? Finally, is your intended market on a steady growth trajectory? Do you know if economies of scale are accessible?

The ASEAN region offers a sizeable consumer market of more than 600 million people with a combined GDP of US$2.9 trillion. While it is important to factor in sufficient time to conduct a market feasibility study, if you don’t make your move soon, someone else will.

From ojek to GO-JEK

GO-JEK has recently vowed to invest US$500 million into its international expansion strategy, to include Philippines, Singapore, Thailand and Vietnam. Contrary to Uber and Grab; their internationalisation strategy will be to select partners on the ground to found their international operations, while GO-JEK will act more as an advisor by contributing its technical support and expertise to the partnership. As it is likely that its success in Indonesia was born out of the unique traffic situation of the country, GO-JEK will need to rely on the deep and unrivalled knowledge of these local partners to ensure that its products continue to remain relevant.

Starting in 2010 with just 20 ojek drivers, GO-JEK has now raised more than US$2 billion to date. Due to extensive market research, GO-JEK identified that the consumers in these four Southeast Asian countries were not satisfied with the current ride-hailing options available to them. Rather than rushing to expand across the region like some of its counterparts, GO-JEK took time to know itself and establish a successful business model. Hence it has successfully cemented itself as a ride-hailing and multi-services platform market leader. GO-JEK was clearly willing and able to know its customers by adapting to the local market, and there was sufficient funding to be in it for the long run. As for mapping out its competition, we will have to wait and see just how much market share Grab is willing to give up.

It doesn’t matter whether your SME is a start-up or an established multimillion-dollar company. As long as you lay your foundations, internationalisation should no longer be a daunting prospect as you are already more than halfway there.

- Claire Scott, Assistant Manager International Business BDO Consultants Pte Ltd -