Even though it is called Asia, the situation in each country’s business is greatly different. Therefore, this time, let’s classify each country first with the index “price”. Comparing the per capita nominal GDP (according to JETRO / 2016), countries in Asia have high prices (Singapore, Japan etc.), middle (Malaysia, China etc.), countries with low prices (Cambodia, Myanmar Etc.) and can be roughly divided into three. Let’s say you start a small startup with your own funds. So, what strategies are best for each type of these three countries? Therefore, this time, I would like to consider how to fight when doing business in Asia from the viewpoint of “breakeven point” which is often used in MBA accounting.
Let’s first imagine the breakeven point of a country with moderate prices in Asia such as China and Malaysia. Therefore, as a point to consider first, we want to organize the cost from two perspectives. One is “fixed cost” such as rent of office, utility fee · communication cost, and the other is “variable expenses” which increases in proportion to sales such as materials and operating costs. Fixed cost takes a certain amount even if sales are zero, so it is in the “LOSS” state until sales increase to some extent. The point where despite desperately continuing marketing activities, sales exceed the sum of fixed cost and variable cost is called “breakeven point”. Of course, beyond that breakeven point, the profit (Profit) will accumulate each time Leva, sales quantity increases.
However, what is the case when doing business in Japan or Singapore where this is the same capital and prices are high? Of course it is natural in countries with high prices, but both fixed costs and variable costs are expensive. In other words, if the premise fund does not change, the period over which LOSS can be overlapped becomes shorter. Therefore, if you do not launch the product quickly, funds will bottom out and the game will be over soon. That is why it is easy to create a structure that makes it impossible to fail once. It may be caused by such structure that the Japanese fear excessive risks. However, as a positive aspect, consumers’ purchasing power is correspondingly high, so high-priced products such as cars are considered to be goods in Japan, soils such as stocks have also developed in Singapore.
Then, conversely what will happen if the price is low in countries such as Vietnam and Cambodia?
In countries with low prices, both fixed costs and variable expenses are kept low, so the first reduction in funds will be delayed accordingly. In other words, you can continue to challenge even if you fail more even among the same capital. Is not this a great merit in venture? Of course, if the number that can be challenged increases, the probability of success increases. Of course, as a disadvantage, because the breakeven point is kept low, there is a possibility that competition will not occur as much as it is difficult to eliminate, and the quality of service will not be polished and satisfied at a low place.
Also, the fact that prices are low means that consumers’ buying power is also low, which means that they tend to stay at low-priced products such as restaurants and miscellaneous goods.
These viewpoints of price etc. are “relative” to the last. For example, from the Japanese perspective, prices in Singapore, UK, USA etc are too high, so they will feel like medium prices. So, for example, do not Japanese ventures dare to have a choice to start up in a country that feels that prices are somewhat cheap such as Malaysia and Vietnam? Of course, it is also true that entrepreneurs in foreign countries have difficulty levels such as differences in languages and cultures. On the other hand, however, products and services that are too common in Japan and hard to differ will be of great value in foreign countries. Also being polished in diversity may create great value. Actually, prices such as Malaysia are gradually approaching developed countries, and the period of taking advantage of these advantages is also getting shorter. Based on these perspectives, it may be only now if it challenges.
In this way, I looked at prices and break-even points from the viewpoint of this point, but this is my opinion to the last, of course there are other ways of thinking. I would very much like to hear your opinion.