How and Why to Expand to APAC as a European Tech Company in 2022

How and Why to Expand to APAC as a European Tech Company in 2022

The Asia Pacific technology market is expected to grow by 6.2% in 2022 to reach US$675 billion as governments reopen economies, according to Forrester.

Just a few years ago, because of the vast diversity of processes, legal proceedings, success outcomes, differences in culture, language, and stage of economic development, Asia was referred to as the so-called "black box" to European companies.

Jesus Martin, chief strategy at Microsoft Asia, thinks that "because Asia went mobile-first, mobile became the platform that underpinned innovations and new business models." Mobile-first means designing products and experiences for smartphones and tablets. It is the reason why the Asian startup scene is taking off.

The latest CB insights report says that Asia leads the global deal share at 36% in the fourth quarter of 2021, attracting investors and VCs more than ever. Singapore is becoming an Asian Silicon Valley - a global epicenter for innovative tech startups. Its attractive tax system, government support programs, and business-oriented policies attract foreign talent and capital from across the globe. Singapore is first in the investment rankings among 173 countries. It is well-known because of the vast collection of unicorns, like HyalRoute (valued at $3.5B in 2020), Moglix (valued at $2.60B in 2021), Advance Intelligence Group (valued at $2B in 2021), Trax (valued at $1.30B in 2019), and more. All the above encourage entrepreneurs from overseas and investors to consider Singapore as their base for business.

China, India, and South Korea are worth considering for expansion. These countries have entrepreneurs creating unicorns fast. On the 23d of February 2022, during the India-Singapore Technology Summit 2022, India and Singapore signed a memorandum of understanding to deepen their cooperation in science, technology, and innovation. Under the agreement, these countries will collaborate through joint projects in advanced engineering, energy, manufacturing, cleantech sectors, and genome and bioinformatics research development. That includes AI and IoT.

Even though the Asia-Pacific region is gaining recognition in expansion and business growth, companies expanding to APAC should have a flexible approach and stay open-minded to navigate and manage in a more regulated environment.

To be successful in Asia, tech startups must have a flexible strategy and think locally. Any business entering the Asian-Pacific market needs to answer these questions regarding the country of expansion:

1. Does this country support foreign business expansion and open to business in general?
2. Are they willing to invest in tech startups if you look for funding?
3. Are there existing tech networks and communities?
4. Does its government have startup programs and help build new businesses?
5. What are their tax regulations?
6. How much will the set-up cost be?
7. How difficult is it to close the company and exit the country if it doesn't work out?
8. Which other countries can you sell to from that location?
9. How easy is it to facilitate cross-border transactions?
10. What laws are there to consider when hiring talent?

Consider these crucial factors for a successful expansion into the Asia-Pacific listed, but not limited to, below.

Localize your business model

Learn the business market in your Asian country of choice for expansion. Respect its specifics and differences and treat the region as a single market. Localize your business model and approach to hiring local staff – an EU model will not work in APAC. Integrate and respect the country's culture and make sure any foreign staff you relocate go through country-specific inductions.

Have an excellent market approach

To approach a new Asia-Pacific market, you should have a sharp, targeted marketing approach. Study the market thoroughly to know local clients and their preferences perfectly. You have to adjust your offering technique and value proposition effectively. An efficient long-term growth strategy means rapid regional development for those companies looking to develop their business in the APAC region.

Take time to understand the labor laws and taxation

It's important to understand the region's political, economic, social, and regulatory landscape and assess the impact it can have on your business before you make the leap and expand operations.

Today we mix remote, in-office, and hybrid work, so understanding the potential tax implications is an immediate priority for any company adopting these models abroad. There could be an impact on transfer pricing, corporate tax, employment taxes, and those relating to benefits. Increased mobility means a more complex tax profile. Businesses must evaluate permanent establishment risks, employment taxes, and social security requirements overseas.

Research market demand

Market demand and business environment will determine your company’s success. Compare the essential business environment factors to understand product demand in your APAC market. Opportunities emerge fast in Asia. Empower your local managers with the Asian expertise and experience on the ground to make the decisions.

Be compliant

You should make sure you operate compliantly across APAC. As Raja Lahiri says, tech startups need to enhance their global risk and compliance management framework as they expand across the world. The global trends, risks, and opportunities around digital tax, employee regulations, and visa restrictions need to be carefully factored into strategic plans.

Summary

Most of developing Asia will see steady growth this year and in 2023, according to Asian Development Bank. The trade-dependent economies of Southeast Asia are forecast to grow collectively by 4.9% this year and 5.2% in 2023. Pacific economies, which are highly dependent on tourism, are expected to grow 3.9% this year and 5.4% in 2023, following a 0.6% contraction in 2021.

According to the World Economic Forum's prognosis, by 2030, Asia is expected to add approximately 60% to global growth. With sustained economic growth and stability, many business leaders worldwide see Asia as a logical expansion destination. Therefore, it might be the right move today. However, it’s crucial to weigh all the risks, build an excellent expansion strategy, and involve the best local experts in APAC to expand successfully during these promising times.