Build an effective subnational prioritization strategy for Southeast Asia

Given ASEAN’s complex maritime geography and concentrated economic activity, MNC executives will find it effective to adopt a province/state-level strategy to examine market opportunity and business environment in the region, so that they can focus investments on the most competitive subnational markets.

By measuring investment opportunity in each subnational region based on market size, growth potential, presence of industry clusters, and market stability, MNCs can create a more targeted approach in prioritizing markets across the ASEAN-5. It will also be of critical importance to assess infrastructure quality, availability of talent, access to finance, and tax burden, all of which are essential operating environment factors for companies to consider in order to conduct successful subnational portfolio allocation in Southeast Asia.

Here’s an example of how a consumer goods company manufacturing locally in Southeast Asia uses the FSG market prioritization framework to evaluate risk-adjusted opportunity and operating environment:


From the Tier 1 markets identified in the analysis above, we can see that for a consumer goods company seeking to capitalize on ASEAN’s growing market demand and local manufacturing capacity, states in West Malaysia and provinces on the Java island have been strong in consumption power and are critical industry clusters to invest in.

In Thailand, consumption power is mainly clustered around Bangkok, Rayong, and their adjacent provinces, as well as the more tourism-focused southern provinces (e.g., Phuket and Krabi), while in the Philippines, the Metro Manila area (NCR) is a highly concentrated market for B2C demand.

In addition, even though Ho Chi Minh and Hanoi in Vietnam are relatively small in economic size, MNCs may also need to evaluate them for industry specialization or investment diversification.

As the example above only demonstrates a general case for subnational market prioritization, FSG has developed two sets of more detailed sample prioritization results for B2B and B2C companies. To conduct a comprehensive province/state-level portfolio allocation analysis in ASEAN and determine the optimal business fit levels, MNC executives will find it useful to incorporate more industry-specific data to examine industry landscape and internal capabilities as well.

After developing a market prioritization model and identifying those subnational regions that promise higher returns in ASEAN, executives should make a few strategic considerations to align investment priorities and strategic planning within the organization. With this in mind, FSG has also developed strategic frameworks and best practices to help our clients in the following areas:

  • Invest in a diversified portfolio of ASEAN countries and tiers of subnational markets
  • Determine the ideal locations for manufacturing by differentiating national and provincial variables of comparison
  • Evaluate channel landscapes on a country-by-country basis and design distribution strategies accordingly
  • Understand country-specific and subnational nuances to manage remarkable regional diversity and the massive Gen Y population

While MNC corporate offices may continue to give China and India large amounts of attention in the Asia-Pacific region, many stakeholders have realized the increasingly attractive profitability outlook that Southeast Asia offers. Multinational executives who proactively manage the ASEAN market prioritization process, especially on a province/state-level, will be able to avoid an opportunistic stance to investing in ASEAN and fully capitalize on the region’s market potential.

For our latest updates and insights, FSG clients can visit the client portal or read Danyi’s full report, ASEAN Subnational Prioritization.

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