27 Oct The Philippines are a Good Entry to Asian Marketplace
What is the best springboard to Asia? Many companies don’t bother to debate this question. This is one of the biggest strategic decisions a firm can make, and it’s often made quickly, blindly and influenced entirely by emotion. Firms often choose countries on the basis of these variables:
- Someone in the company may have experience in a given area. Perhaps a sales manager may have visited a particular market.
- An employee is a foreign national. It’s like deciding to market to Malaysia because a Malaysian engineer works for you.
- Companies follow their clients. While this may be necessary to keep current clients happy, it’s an unscientific decision, and gives clients control of a vendor’s international strategy.
What happens when clients disappear? Then we have a vendor that has resources in a country it may not otherwise want to invest in.
- Sheer market size. This is tricky; there are different techniques for measuring markets. Are we counting people, money spent or money spent on foreign goods? In some industries, Denmark (5 million population) spends more than China (1.3 billion). Greece eats more cheese per capita than other countries, and outspends Japan on cheese (7 million vs. 135 million people).
- Market potential. “We have to get into China because of the market potential there!” Which market? (Autos, dental supplies, wheat, cooking sherry?) When will that potential be reached? Do we have any reason to believe that while 1 billion people need cooking oil or toilet paper, that these markets could be ours?
- Getting on the bandwagon. Articles in magazines about the wonders of the Indian market alone don’t guarantee success when selling into India. Be careful when you read success stories; firms rarely tell reporters about failures.
- Proximity to home market. Market opportunities in adjacent countries seem more attractive and realistic.
- Language compatibility. This is often the main factor for choosing Singapore as the Asian entry port. The language helps, but Singapore is smaller than Chicago in market size and purchasing power.
However, firms might want to sell “country products” to Singapore (aircraft, banking regulatory software, large-scale engineering projects and government lotteries) that Chicago wouldn’t be able to buy.
When we look at all of these factors in terms of Asian market entry, companies may do best using the Philippines as a toehold in Asia. There are many reasons for this.
- Proximity to other markets. The Philippines is centrally located in Southeast Asia, often referred to as “the Jewel of the Orient.”
- Language compatibility. The official language of the Philippines is English. Certainly, Philippine English will have its inflections and colloquialisms, but it’s relatively easy to communicate, especially when compared to China.
- Population size. In 2006, the population of the Philippines is 89 million, with a per-capita income of about $5,100. It’s a much better market than Chicago. Compare that with China and Singapore.
- Access to other markets. Because the Philippines is an archipelago, one doesn’t drive to other countries. However, market access also can be measured by how well in-country contacts can open up new countries.
It’s no secret that much of the Philippine economy is controlled by Filipino Chinese (Filipinos with Chinese genealogy as well) and Chinese-Chinese (100 percent pure Chinese ethnicity) who may have lived in the PI for generations. The “Chinese connection” can make strategic introductions to other Asian markets. Many Chinese families control pan-Asian marketing companies.
- The PI is not a hated country. Often in global business when one country is picked, another (or several others) is alienated. Companies often must choose between India and Pakistan, Japan or China, Taiwan or China (certainly North Korea or the rest of Asia).
The Philippines offers a somewhat neutral meeting and outbound marketing ground. It doesn’t own China’s controversies, Japan’s history or Cambodia’s politics.
- Infrastructure in the PI is good. The traffic can be horrendous, but the public systems (electricity, water, air conditioning, sewage) work well.
- The Philippines is a Catholic country. While this may not matter to everyone, it matters to a lot of people. Locals there grew up learning the same super story that Westerners learned: the Bible. Hence, there is an instant overlap with Western Judeo-Christian culture.
Filipinos discuss sin, shared worship and doing good deeds, as Westerners do. The religious practices and the place religion occupies in everyday life are much different than the more religious Indonesia or Thailand.
- Last, the PI is a beautiful place to visit. Foreigners are greeted with some of the world’s best cuisine, as well as some of the world’s finest hospitality. Sure, there are large, crowded cities, but there are also stunning islands and lush jungles. Road-weary marketers can take a break from traveling constantly throughout Asia, and thus try to host their Asian clients and partners at home. And most Asians will want to visit you there.
Bill Decker is the managing director of Partners International, which consults with firms on global business and creates partnerships in foreign countries. Reach him at firstname.lastname@example.org.