Organisations in a Global Context
To Grow in ASEAN, Go “Glocal”
It seems unlikely that putting meat floss on top of a simple white-bread bun could help drive a company’s expansion to 17 international markets. But that is what has happened at BreadTalk, the high-growth food and beverage group that sprouted from a single outlet in Singapore’s Bugis Junction selling its signature floss buns. Today, it spans 11 food brands, has close to 7,000 employees, with almost 1,000 outlets in ASEAN and around the world.
The BreadTalk story offers lessons for other businesses looking to succeed in Southeast Asia as the region continues its meteoric rise. The 10 nations that makeup ASEAN are already home to more than 650 million people and have a combined gross domestic product (GDP) of about US$3 trillion. If these nations were one country, they would be the fifth-largest economy in the world. The ASEAN middle class is expected to boast over US$300 billion in disposable income in the next few years, and there are a few key trends that unite this growing middle class.
Global yet local
ASEAN is not a uniform entity but a diverse collection of nations, each with its own rich history and culture. Successful companies understand this diversity and that the region’s increasingly affluent consumers want the best of both global offerings and their own unique culture. For a company like BreadTalk, this means providing a local delicacy in clean, modern and air-conditioned stores, and adapting its menu to suit different markets in the region. It also means creating sophisticated and large-scale regional business systems and supply chains to match local conditions across the diverse ASEAN region and beyond.
However, BreadTalk is not the only company making global goods and services meet local needs. Mimpikita, which means “our dreams” in Malay, is a fashion label established by a trio of sisters from Malaysia that focuses on high-end “modest” fashion. Their brand made it to the London Fashion Week and has since garnered a large following among the region’s population.
This approach is known as “glocalisation”, and holds the key to success for any business looking to benefit from the expanding Asian middle class. Therefore, it is important for firms to really understand what it means to “go glocal” in ASEAN today.
Urbanisation and emergence of the middle class
There is a close association between rising incomes and urbanisation in Southeast Asia. The region’s largest cities are the primary drivers of economic growth and are home to most middle-class citizens. Another 90 million people are expected to move to the region’s major cities by 2030, and it is estimated that nearly 70 per cent of ASEAN’s population will live in urban areas by 2050.
However, businesses should not overlook the rapid growth that is occurring in smaller cities. Research has shown that more than 200 such cities in Southeast Asia are growing faster than high-profile capitals such as Bangkok and Hanoi. Furthermore, these smaller cities are expected to drive about 40 per cent of the region’s economic growth from now to 2030. For example, the Indonesian cities of Bandung, Makassar and Surabaya are all growing faster than Jakarta.
diverse identities
The emerging ASEAN middle class will be embedded in a cultural clash and is enabled by the digital ecosystem. In other words, Southeast Asians will not be a one-dimensional middle-class.For example, the digital economy enables them to juggle their identities as family members and as micro-entrepreneurs. One can be a full-time parent whilst making money by working as an app-hailing driver with Grab or Gojek or be a student whilst managing home-based businesses.
Southeast Asia also sits at the crossroads between a traditionally Western-dominated Internet, a growing Chinese Internet culture, and its own emerging native online spaces.
Subcultures like those of K-Pop, Japanese anime and even American-led green culture are also influential. People might listen to American pop music on Spotify, use TikTok for both leisure and business, and watch local films on Viddsee. The gaming industry is also exploding in Southeast Asia, with related sales reaching US$4.4 billion in 2019. Moreover, the toys, hobbies and DIY segment saw the fastest growth in online consumer expenditure after groceries, surpassing US$3.6 billion in 2018.
The result is that the ASEAN middle-class consumers are defining and negotiating rich, multi-layered identities that traverse their home and working lives, drawing on cultures from both the physical and virtual worlds.
An exceptional place for innovation and business
The growth of the ASEAN middle class presents a significant opportunity for local and global businesses. It would not be surprising to see successful commercial partnerships between global companies and innovative ASEAN businesses like Grab, Gojek and Lazada to develop new business models and platforms for the region and for global markets.
This tendency for innovation is one more reason why markets in Southeast Asia with fast-growing middle classes are not just good places to do business today but they are also places that will transform how business gets done tomorrow.
1a. From the article, identify one particular consumer group for businesses in the region to target.
1b. Explain two characteristics that make this consumer group an important one for businesses.
2. From the article, which four components in the PESTEL analysis can be applied? You may quote specific evidence or examples from the article.
3. You are the CEO of BreadTalk and must decide on two locations in Thailand to expand the business. Would you choose Bangkok or the island resort of Phuket? Explain why.
4. In your opinion, do you think ASEAN as a regional grouping is successful? Why or why not?
