As Asia becomes the new growth engine for the world economy, most companies are looking to the region for business. It would, however, be inappropriate to treat Asia as one homogeneous region. A broad segmentation by ASEAN countries, Japan, India and China might help understand similarities and the diversity in the region and this will help plan execution of business strategies that have the best fit with a particular market.
What makes Asia interesting and different is the coexistence of extremes, both within a country and across countries. For example, unequal distribution of wealth in India creates a big gap between the rich and the poor. And while India remains a very young nation, China and Japan have growing concerns about having an aging population.
This diversity in Asia is driven by namely, consumer demographics, different rates of growth, history, culture, religion, regulation and policy,urbanization and consumer ethics.
Consumer demographics like age, income, race, marital status are bases of segments in a country and may sometimes cut across national boundaries.
While Asia continues to be the most populous continent, primarily because of India and China, different regions within Asia will see varying degrees of growth. While Japan and China will witness aging population, the rest of Asia will be young. This will have direct impact on categories such as food, healthcare education and entertainment. Foreign brands that are eyeing Asia, will have to think of different strategies rather than treat Asia as a whole. Japan, since it joined the league of developed nations in the 70s, has always been an exception in Asia. However, Chinese housewives have to be treated differently from the rest of their counterparts in the rest of Asia because almost all of them are working mothers with just one child because of the single child policy. This brings up a whole new approach to parenting and the pressures that go with it.
The diversity in Asia is most pronounced when it comes to income. India is a classic example with income segments from the super rich, to rich, middle class and poor. And the gap between the top and the bottom of the income pyramid is very large. Although the super rich are small as a proportion, because of the large population base even that is a large market for a brand like LVMH, BMW or Rolex in supposedly poor countries. Similarly, for products like shampoos and soft drinks, marketers have discovered that consumption can be driven through smaller packs and sachets. Across the region, Japan, Singapore and Korea are part of the developed countries club (per capita GNP being USD10000) while China and India have a per capita GNP that is approximately one tenth and one twentieth of these countries.
Despite growing urbanization in Asia, the population remains predominantly rural. But there are varying rates of urbanization with China and India bringing up the rear. This means that large parts of the population lack education, have no infrastructure, are media black and are very poor. In large parts of Asia, a large rural population will slow growth And this will probably be the single most important factor in delaying modern trade getting established. In Indonesia, China, Vietnam and India, traditional trade channels made up of family grocery stores are predominant and In India government policy too has played a role in not allowing entry of foreign retail into the country.
However, in urban China and India there is a fast growing middle class that most companies and mega retailers are aiming at. Asia is thus a heterogenous market with consumers at the mass end and with megabrands like Rolex at the prestige end.
While Asia has had to do a lot of catching up, they have leapfrogged where technology is concerned. China, and India are emerging as the biggest cell phone markets and Korea is at the forefront of Internet usage. Across the region, however there are different levels of tech sophistication. In some countries and in some demographic segments, consumers can be well informed through the Internet and online shopping is beginning to pick up. However, more importantly, the rural markets can now be reached and are getting connected to the rest of the world. Farmers today can check on the best prices and raw ingredients on mobile phones and the Internet and save money that would have been paid to intermediaries. There are other ways in which technology is helping to build a consumption base – microfinancing by Grameen Bank has changed the lives of many in Bangladesh and similarly ICICI in India has provided livelihood to many villagers. And leading companies are finding ways and means to tap into this consumer market – Kodak has found a big market in rural India where a photographer goes from village to village taking pictures at weddings, and other occasions for a fee and uses a Polaroid style camera for prints.
Despite the differences, there are cultural factors that bind all of Asia together. For example these are collective societies with strong allegiance to family, extended family and community. There is almost always a hierarchy in every relationship (parent-child, teacher-student, boss-subordinate and so on). There is a lot of emphasis on long term orientation while seeking harmony with nature. So companies looking at Asia would do well to tap into the similarities while building strategies that take into account the variations.
In many ways the point of entry into Asia will be decided by the product, price, available distribution channels and regulation related to the industry.