Using the Hong Kong disadvantage to your advantage

Last article I wrote was an introduction into the potential benefits of strategic partnerships in business. Partnerships, if selected, structured and managed well, can provide a company with the necessary tools to expand its market or capabilities without actually needing to physically build up or develop those tools; you just leverage your partner’s complementary capabilities to accelerate and reach your targets.

For small and medium sized companies without prior partnership experience however, creating a partnership can actually be a big and uncertain step.

Hong Kong is a comparatively small economic entity compared to many other regions. Although it has a highly developed market, high GDP/capita, thriving stock exchange and burgeoning retail and real estate sectors due to the influx of 40 million Mainland visitors kindly spending fortunes here, it on the other hand resembles an island, which has natural boundaries preventing it from having the easy flow of people, traffic and goods as is common for my home country Holland. 

Companies with a large home market (USA, Germany, China) have a long way to go before they can be a leader in their home market. But once they reach the summit, they are automatically of such a scale that they are instantly also international leaders in terms of market and turnover.

Hong Kong companies have the disadvantage of a small home market. If they tailor their services to the home market, they can only reach a limited scale. However, due to the scale, it is comparatively easy to become a market leader, and the exposure you can achieve with that is big, as Hong Kong is a closely watched international marketplace.

If companies realise this, and in the meantime develop an international strategy and operation next to their localised HK cash cow, they will be well positioned to grow steadily beyond Hong Kong’s borders, in markets such as China, the US and the EU.

This way, the disadvantage of having a small home market with limited opportunity to grow big, turns into an advantage, as you have ‘easy’ opportunity to make a mark and are forced to think and operate in an international way, while still being relatively small, making it easy to change directions and improve to reach the waters filled with the most fish.

Those large competitors with their big home markets have become used to competing in an environment with which they are familiar, have become complacent in adapting to changes and will have a huge task when they want to carry their trade across borders into new territories.

Concluding, I get back to the topic of strategic partnerships. By the time you have reached a certain level of success in the local market in Hong Kong and are ready for international expansion, strategic partnerships are an attractive solution to make the first steps in internationalisation without having to put in too much investment and efforts.

Important steps to think of are choosing your partner well (perhaps one of the impressively big competitors that could benefit from selling your product or service complimentary to theirs), structuring the partnership and making a clear agreement about split of revenues and how to deal with brand & IP exclusivity. I wish all of you good business in the year of the horse!