Asian companies, particularly those from China, have a significant edge over their peers from other regions in capturing the global market.

• A significant advantage for Chinese brands expanding globally is the presence of a substantial ethnic Chinese diaspora.
• According to David Zehner, senior partner at Bain, the large ethnic Chinese population overseas presents a disproportionate opportunity for Chinese companies to target ethnic Chinese populations in other markets.
• A recent study by Bain revealed that Chinese consumer businesses have not expanded as rapidly into international markets compared to their Japanese and South Korean counterparts.

Chinese companies expanding overseas have a significant advantage over early Asian businesses that internationalized: a substantial Chinese diaspora population.

A study by U.S. consulting firm Bain and Company examined data for 150 publicly traded consumer goods companies in the Asia-Pacific region through 2023, and their analysis revealed several trends.

According to David Zehner, senior partner at Bain, the large ethnic Chinese population overseas presents a disproportionate opportunity for Chinese companies to target ethnic Chinese populations in other markets.

Chinese companies are "seeing some of the success stories that have been possible, particularly in Japan and Korea, and they're looking to emulate that success," Zehner said. He noted that many of the companies have started their global expansion by focusing on Asia before expanding to Europe and North America.

According to the United Nations, approximately 60 million ethnic Chinese reside outside mainland China.

In the U.S., there were approximately 5.2 million people of Chinese descent as of 2023, while in Singapore, ethnic Chinese made up 74% of the total population as of end-June 2023.

Chinese companies possess ambitious global mindsets and are capable of taking entrepreneurial, fast-innovation capabilities to create new positions overseas, according to Zehner, who leads Bain's consumer practice in the Asia-Pacific region from Sydney.

"While South Korean and Japanese companies may consider similar strategies, I believe Chinese companies have a unique advantage in certain aspects."

Untapped potential

In recent years, Chinese companies in the home appliance and robotics industries have increased their global expansion efforts, particularly as domestic consumption has been slow since the pandemic.

The company generates more than 40% of its revenue from overseas markets, and its overseas e-commerce business has experienced double-digit growth in the last three quarters, making it the second-largest business segment behind domestic e-commerce.

While South Korean and Japanese companies have generated significant revenue from overseas markets, China-based consumer businesses have not yet achieved the same level of success, according to Bain's study. The study examined four subsectors: consumer electronics, consumer health, apparel, and fast-moving consumer goods, which are sold quickly and at low costs.

In the fast-moving consumer goods segment, all 16 Japanese companies generated at least 10% of their revenue from international markets, with five companies earning more than half of their sales overseas. Meanwhile, the four South Korean companies in the segment made between 10% and 50% of their revenue abroad.

While Greater China had 16 companies in fast-moving consumer goods, five were solely focused on the domestic market. Out of these nine companies, only two made between 10% to 50% of their revenue from sales abroad.

Zehner predicted that Chinese companies will have numerous opportunities to establish new categories in various parts of the world where they are currently underdeveloped.

In many Western markets, the impact of Asian culture and brands is increasingly prominent.

On Aug. 31, the Chinese retailer opened its largest store in Jakarta, Indonesia, and recorded a record first-day sales of 1.18 million yuan ($166,000). Additionally, the company opened its 200th store in the U.S. on Aug. 24.

During the quarter ended June 30, Mainland China revenue grew by 18% to $347.5 million, while overseas revenue increased by 35.5% to $207.8 million.

Cultural challenges

The path to success for Chinese tea brand Chagee in Singapore is not a straight one. After five years of attempting to enter the market through a local partner, the company has decided to change its strategy by directly owning the stores. Similarly, other Chinese brands are using Singapore as a cultural testbed to reach consumers in the West.

"Companies that can quickly learn and adapt, and not assume that what works domestically will work equally well overseas, will receive the prize," Zehner stated.

"He advised that international growth requires a long-term perspective, not a short-term approach, and companies should not anticipate immediate returns on their marketing investments."