Expanding in Asia-Pacific: Accelerate Your Path to International Success

Is Australia leveraging its potential in the Asia-Pacific region effectively? The Asia Society in Australia recently sparked a critical discussion about “Extending Australia’s Reach in Asian Business”.

Keith Rodwell, CEO of Alta APAC, distinguishes between merely exporting existing products and customizing products specifically for each market in his article, “Extending Australia’s Reach in Asian Business.” The speed and efficiency of your internationalization strategy will be defined by the extent to which your existing products meet customers’ needs. This is a particularly important topic for equipment finance executives, as theirs is a product that requires precise customization across each market to be successful to the end user.

Australia’s Current Export Landscape

Australia primarily exports minerals and agricultural products to Asia. Many of these exports would be classified as “global” products, as they meet demands of the market without significant modification. Australia is also seeing the rise of service exports, particularly tourism and education. Services perform better when tailored to meet specific needs of the customers. For example, tourism providers that cater for language and tastes differences, or education providers that meet the language and accommodation needs of international students. Products that require customization can be classified as a “local” product and customization may be driven by unique customer needs, infrastructure or regulatory requirements in each market.

Strategizing for Success

It is not surprising that for equipment manufacturers, export success will be based on the extent to which you need to customize products for each market. By definition, a “global” product requires limited customization and export strategies are simpler. Where customization is needed, i.e. a “local” product, a deeper understanding of the market and the adaptations required is more critical. Further, if the equipment sales strategy includes providing finance to customers (whether loans or leases), the export strategy cannot get started before the finance regulations, funding and credit requirements of the export market are understood.

With advisors spread across four global regions—the United States, Asia-Pacific, Latin America and Europe, Middle East and Africa—The Alta Group has the market-specific know-how to help equipment financing companies be successful partners to manufacturers who are entering these various markets.

Common Path to Expansion

Even for “local” products, there will be some sales opportunities in foreign markets without modification. This possibility of export sales with limited customization or investment is appealing to management teams and drives support for export initiatives. However, export sales volumes are a small proportion of domestic sales, and export initiatives receive a commensurately small proportion of investment capacity or management focus.

While it is often clear that this minimalist approach is not going to achieve significant market success, the incremental nature of export sales makes the strategy appealing. Eventually, easy export markets are exhausted, and the export strategy falters.

This approach to export markets is very common and history has shown many companies follow a very similar path on their internationalization journey. This journey can be summarized as follows:

1. 1. Initial Sales Efforts: Start with a salesperson based at headquarters, reporting to the head of sales, to explore new markets.
   2. International Department: Establish an international department within the sales team, relocating the salesperson to the target foreign market.
   3. Regional Leadership: Set up an international business, appoint a senior leader for the foreign region, and hire local sales and marketing professionals. Start to adapt products to meet local standards.
   4. Local Leadership and Customization: Appoint local nationals to senior roles and design products specifically for the market. Invest in local manufacturing or acquire local competitors.

Considerations for Equipment Financing

If equipment finance or leasing is critical to the success of the export strategy, it would typically rise in priority between steps 2 and 3 above. At this point, the balance between the need for the financing product and the level of customization required becomes clear.

As an example, you clearly cannot start an international finance strategy by using U.S. licences, credit models, funding, documentation, etc., in an Asian market. Any equipment finance offering will require an assessment of all of the key factors involved in lending and leasing including:

• Lending and leasing regulations
• Loan vs. lease acceptability
• Local competition and distribution channels
• Market size and overhead investment requirements
• Cultural and religious differences
• Taxation and credit risk variations
• Data availability and historical support for credit models
• Foreign currency risks
• Legal reliability and operational risks
• Asset management and secondary market values
• Funding sources and market reputation

Unique Regional Challenges

If your target market for international expansion is large, with a single regulatory or economic framework (like the U.S.A. or E.U.), the assessment of the entry strategy is more easily justified. However, markets like Southeast Asia comprise small, distinct markets requiring a tailored sales finance strategy.

This creates a significant barrier to entry for foreign players. However, fast-growing regions like Southeast Asia are critical to equipment manufacturers looking to grow and compete with global competitors. There are two clear components to be successful:

1. 1. Work with a partner that has the expertise to navigate these small markets and deliver the customized equipment finance solution.
   2. Work across the region with industry associations and governments to standardize regulations and remove some of the barriers caused by country-specific differences.

Alta APAC: Your Partner in Success

Expanding into Asia Pacific may seem daunting, but addressing the unique challenges of foreign markets can lead to greater success globally and resilience domestically. Alta APAC is uniquely positioned to help equipment manufacturers thrive in Asia Pacific. With over 30 years of combined expertise and regional presence, we offer unmatched support for your internationalisation efforts.

Contact us today to learn how we can accelerate your path to international success.