This article is a collaboration with Makan For Hope, a non-profit initiative by Asia Startup Network. The Makan For Hope Festival brings notable mentors and aspiring entrepreneurs in 30 meaningful virtual conversations over food to raise S$125,000 for Fei-Yue to support the children and seniors from low-income families.
I want to share some of my thoughts after multiple discussions with executives who have led different market launches and of course, after the virtual session at the Makan for Hope festival with Henry Chan, Co-Founder and CEO at Shopback and other participants of the roundtable discussion.
Chan led his team, expanding throughout most of Asia Pacific and is definitely one of the most impressive entrepreneurs in the region, having led the company to expand to nine countries in years. In our conversation and sharing during the roundtable, I have learnt a lot about how Shopback thinks about market expansion. I hope in sharing some of the learnings, you will as well.
Key takeaways from the session
- Expand by market size and what’s winnable and not because it’s always easy and convenient
- Look for synergies in growth as opposed to satisfying ego
- Market Launcher’s role is to replicate culture
- Locals will intuitively know nuances of the land
- Leverage each country’s strength for regional functions
- Expand as slow as the market and competition allows you to
- Be on the ground, often
Choose big and winnable markets
China and Indonesia are very large markets that get investors and entrepreneurs salivating. They are large and fast-growing.
If one can only take one per cent of the market, they would be minted. Of course, things never work out that way. Target markets where you have a strategic advantage, and where the competitive and market dynamics are in your favour.
Also Read: In brief: ‘Makan For Hope’ to raise US$125K for SG’s vulnerable communities
What you should do
- Analyse what made your product successful
- Do the market dynamics in the new market allow you to replicate that success?
- How crowded is the space in the new market? Are there dominant competitors? Why will you win?
The Shopback case
The TAM (target markets) has not only been large but the market dynamics and competition dynamics have been conducive for them too. In the Shopback case, it means operating in a landscape with multiple retailers across different categories such as e-commerce, travel, services and more
Look for synergies in expansion
You expand out of your own home market because you need to grow, but at the same time, if you’re able to strengthen your moat because you’re growing, you can defend by attacking.
One example is that a company such as Airbnb increases its supply of homes when it expands and increases its value because short vacation stays inherently have a cross border element where the value increases, the more countries that you’re in
What you should do
Evaluate which portion of your business would benefit from
- Network effects
- Economies of scale
- Access to new supply/demand
The Shopback case
As ShopBack expands, its ability to serve multiple markets across the Asia Pacific gives it more relevance to global brands who seek regional reach. This gives Shopback an advantage over global brands, versus single-market competitors.
Launcher’s role is to replicate culture
This works by choosing the right person to lead the expansion, hiring the first three to five people that will fit the company’s culture and training them to replicate the company’s culture.
Also Read: Online booking startup Chope acquires Indonesian counterpart MakanLuar
Some companies choose to hire a local country manager and let that person build out the team. What tends to happen in this case, is that a separate culture forms and is left to develop on its own. When the local team is not thinking the same way as HQ, the differences will inevitably tear the company apart.
What you should do
- Pick a launcher that is culturally immersed with the company
- Set the KPI for this launcher to hire and train the new country manager and functional leads on HQ’s practises
- Ensure the launcher doesn’t get caught up in the nuts and bolts of the operations unless absolutely necessary, point 2 is the priority
The Shopback case
Shopback’s launch team consists of their founding Singapore GM and the two founders who ensure that they have the best team possible to replicate the culture in their new markets
Locals intuitively know the nuances
Two advantages that startups have over large companies is focus and speed. Focus means that you can customise your product to your customer as much as possible without having to worry about conflicting priorities within a large global organisation and speed meaning that you can move faster than a large company that has to go through multiple layers.
To take advantage of this during market expansion, your local team is going to need full autonomy to operate. Any additional layer, communication and approval process is a reduction in speed. The local team will intuitively understand what is needed to customise in the market without too much discussion or compromise.
What you should do
- Hire the right people
- Set the direction and give them autonomy to reach their goals
- Get out of the way
The Shopback case
As Henry puts it, they see themselves as ‘more of an operating VC’, where HQ/senior management provides oversight and gives the local team full autonomy and ownership. They even give early employees in the new market co-founder titles
Leverage each country’s strength for regional functions
The advantage of being regional is that you have access to talent in multiple countries. Given that each country tends to have specialised talent and comparative advantages, in our remote and distributed world, it would make sense to explore placing different functions in different countries.
Also Read: Here are 5 reasons to expand your business to the Philippines
What you should do
- Identify which countries you are expanding into and where you can shift functions to
- Weigh out if it’s core for your company to keep that function in HQ
The Shopback case
Their regional team is spread out by function in different countries.
Expand slow
This is probably highly dependent on your industry, but in short, if your competitors are not fast-growing companies that are raising large amounts of capital to capture market share globally, it might be worth considering expanding in a more sustainable manner.
What that means is that you don’t raise a ton of cash and hire so fast and make market entry decisions that you need to make compromises.
The benefit of expanding at a pace that’s sustainable is that you are able to hire the team right and control your cash burn.
What you should do
- Resist the urge to expand fast for the sake of doing it
- Ensure the market and competitive dynamics are right before you enter a market
Be on the ground often
Not for the sake of micromanaging, but for the opportunity to inculcate the company’s culture and values to the local team. The best way to do this is through osmosis and being there to create an environment that is in line with the company culture.
Strong culture, be it the military, schools or companies aren’t formed in a virtual environment.
What you should do
- Be on the ground often
- Communicate with the local team and make sure they are the right cultural fit before handing over full reigns
The Shopback case
Henry, Joel and Josi each flew more than 100x a year when they were expanding.
Makan for Hope will be on till July 30, join us for many similar sessions where you can learn from the leaders of the startup and technology industry. Click here for more info and use promo code Partner_MFH2021 for 33 per cent discount.
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