China & America Are Gearing Up For A Showdown Of Tech Titans In Southeast Asia

06-Oct-2017 Intellasia | Forbes | 6:00 AM Print This Post

Forty years ago, Muhammad Ali and George Foreman squared off in a historic boxing match dubbed the world over as “The Rumble in the Jungle,” pitting two of the greatest heavyweight boxers in a fight that defined the sport for a generation.

Today, Southeast Asia is poised to host a new Rumble in the Jungle, but this time, its tech titans from China and the United States that are slugging it out to dominate one of the fastest growing markets in the world.

In one corner, we have Chinese tech giants Tencent, Alibaba and Didi Chuxing, three companies that have come to define Chinese messaging, e-commerce, and transportation, respectively; in the other, we have American household brands Uber and Amazon, which have both long dominated the largest market in the world.

With a market of over 600 million people, accelerating mobile and internet penetration, and a rapidly emerging middle class, today’s Rumble in the Jungle will not simply determine who the biggest tech companies in Southeast Asia will be, but will set the tone for how Chinese and US tech companies successfully expand to new global markets.

Technology partner or competitor?

Chinese tech companies have tended to take on a localised approach to global expansion, providing support and strategic value to local partners by means of investments and financial backing. Very much like real estate investment holding companies, Chinese companies expand through acquisitions rather than aggressive market penetration.

Consider Alibaba’s $2 billion purchase of Southeast Asia’s e-commerce site Lazada. The local brand, management and tech has all stayed in place. Consumers aren’t even aware of the change in ownership. However, their biggest advantage is now being well capitalised.

Tencent’s $1.2 billion investment with Indonesian startup GO-JEK echoes a similar sentiment. Tencent’s first major investment in Indonesia is not to push their WeChat wallet into Indonesian hands, but to buy a significant stake in the local leading wallet, GoPay, already installed on Indonesian smartphones. As of writing, there’s been no change to the consumer app.

American companies, on the other hand, take a far more aggressive tack when it comes to market expansion and growth. Spearheaded by the desire to disrupt and innovate, many American companies are determined to “out-tech” their competitors.

Consider Amazon disrupting Barnes & Noble through online books sales; Netflix overcoming Blockbuster first through mail-in DVDs; and Uber overtaking taxis, hired cars, and private transport through its innovative mobile booking application and vehicle management systems. The most successful American tech companies dominated their respective industries not through local partnerships and financial support, but by grinding their competition away.

And it’s clear they’re attempting to emulate that same strategy here.

Uber entered Singapore in 2013 to tremendous fanfare and anticipation. While Singapore’s fleet of taxicabs were certainly more efficient and safer than their counterparts across Southeast Asia, Singaporean consumers installed the car-booking app in droves, and Uber promised a global-caliber user experience and service that made it a leader back home and would eventually extinguish all competitors, Grab included.

Amazon pursued the same tactics when it launched in Singapore earlier this year. While e-commerce has been and continues to be a tremendously crowded space, Amazon clearly expects its unparalleled logistics efficiency and market-leading prices to win over local consumers and dominate the competition. No local partnerships or investment here: Amazon intends to outcompete and outprice other ecommerce players, especially Lazada, HonestBee, and RedMart.

But these fundamental differences go well beyond mere corporate strategy and innovative technology.

China’s market adaptability in Southeast Asia is partly a manifestation of history repeating itself. Various emerging markets such as Vietnam, Thailand and Malaysia exhibit traits similar to China ten years ago, resulting in consumer landscapes Chinese tech companies are deeply familiar with and thus capable of rapidly exploiting. This is best demonstrated by the speed in which they acquire and partner with valuable startups in the region. In short, they know precisely what to look for.

By contrast, the United States is home to some of the most prolific tech companies in the world like Facebook, Apple, and Amazon. While these companies dominate at home, their technologies and business models are so finely-tuned to their local market that outsourcing those same models to new markets conditions and expecting similar degrees of success can produce mixed results. Indeed, that success could work against them, as they might be blindsided by local behaviors (cash vs card), regional preference for mobile vs web, local regulations, logistics issues, different cultures, or even hostile government regulators.

First Round Advantage: China

Each of the countries’ respective strategies have begun to bear fruit.

With the recent mega-merger of Uber China into Didi Chuxing, China’s ride-hail behemoth continues to plough through markets in Asia, but still takes great care to recognise and reflect local conditions. Early on, Didi-backed Grab focused on developing its cash-on-delivery payment option to help mitigate Southeast Asia’s low penetration of credit cards, a feature that Uber only grudgingly introduced in early 2016. More recently, it announced targeted, aggressive campaigns to woo taxi drivers in local markets and partner with existing taxi fleets. Its tactics appear to be succeeding: to date, Grab superseded Uber in app downloads by almost 80 percent across Southeast Asia.

Meanwhile Tencent’s financial support of GO-JEK and its burgeoning GoPay wallet is helping pave the way for a digital payments revolution in the region’s most populous country. While Tencent is merely an investor, their investment into Indonesia’s universal logistics and payments platform provides insight, reach, and financial connections into a critically important market. Today, GO-JEK, not Uber, is widely considered the logistics and transportation backbone of Indonesia

Even Google is potentially at risk. While Android is as ubiquitous here as it is in the United States, its success is largely dependent on a robust ecosystem of developers, apps, and tools hosted and managed by the wildly successful Google Play Store. But Tencent’s WeChat represents an almost antithetical approach to mobile app usage: a single, universal app that orders food and taxis, directs calls and messages, facilitates on- and offline payments, and more. Google and Tencent have almost diametrically opposite views of how consumers should use their mobile phones, and will be battling for the hearts and minds of users throughout the next decade.

But it’s not all doom and gloom for American latecomers. While China certainly has a head start in Southeast Asia, American companies still possess the technological edge, experience, branding, and enormous financial resources to back it all up. These companies dominated the US market for one simple reason: they were the best in the world at what they did.

In the end, then, the only thing that they really need to change is mindset: success requires American companies to adapt to local markets, not the other way around. This is a paradigm shift, and it will be difficult to accept and even harder to carry out, but it will be necessary if American companies want any hope of succeeding in Southeast Asia.

And just like the Rumble in the Jungle forty years ago, the winner in this showdown will also be decided by one simple criteria: who wants it more?

https://www.forbes.com/sites/vinnielauria/2017/10/04/china-america-are-gearing-up-for-a-showdown-of-tech-titans-in-southeast-asia/

 


Category: China

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