Why country-level analysis is not enough for your ASEAN markets

Multinational companies continue to experience enhanced confidence in Southeast Asia’s growth and profitability outlook. In AmCham’s most recent ASEAN Business Outlook Survey, more than 85% of the 591 APAC executives expect to increase investment in the region for the next five years.

The ASEAN region presents a balanced opportunity for MNCs in terms of market size and growth potential. For investors that are more careful or even risk-averse, the markets’ varying economic growth drivers also offer diversified investment portfolio options.

However, the region’s fragmented market landscape and complex business environments pose challenges for multinationals to effectively prioritize investments. Few companies understand the emerging ASEAN-5 markets (Indonesia, Malaysia, Thailand, the Philippines, and Vietnam) thoroughly enough on a subnational level to optimize demand-side opportunity and supply-side support. MNC executives could end up with a lower-than-anticipated ROI if investments are diluted across all subnational markets, given the region’s geographical complexity and market fragmentation.

Here’s why country-level resource allocation is insufficient for MNCs in the region:

  • Out of 205 subnational markets in the ASEAN-5, the largest 20 markets account for 60% of the region’s total GDP
  • ASEAN’s wealth is highly concentrated: 11 major provinces or states hold 60% of the region’s consumption power
  • ASEAN’s manufacturing capacity is heavily clustered: 14 subnational markets take up 57% of the region’s manufacturing output

Because ASEAN’s consumption power and manufacturing capacity tend to be concentrated in a few major subnational regions, companies can effectively get ahead of competition by conducting a province/state-level prioritization exercise. This will help differentiate their local go-to-market plans on the most competitive subnational markets, and successfully drive upward and downward alignment on strategic goals.

With this in mind, FSG has developed a three-step market prioritization framework to help our clients identify risk-adjusted opportunity and evaluate operating environments across 205 ASEAN-5 subnational markets, allowing for more effective, data-driven resource allocation. Stay tuned for our blog post next week for more details.


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

Not a client? You can purchase the 2018 Asia Pacfic Outlook from our online store or contact us to learn more.

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