ehemmerle@ehemmerle.com
ehemmerle@ehemmerle.com
2025/01/23
Over the past decade, as China’s consumer market surged, most multinational companies dismantled their APAC organizations, breaking them down into smaller units, and elevating China to a standalone region reporting directly to global headquarters to allow for more focused growth support. This shift echoes what happened with Japan a couple of decades ago when it was Asia's dominant consumer market.
Today, maintaining a full APAC organization has become a rarity, particularly in sectors like luxury, beauty, packaged consumer goods, sports, lifestyle, and wines & spirits. Only a few remain, and they face mounting pressure to disband. But with China’s growth normalizing, a new paradigm is emerging that makes a compelling case for multinationals to revisit the advantages of an integrated Asia-level approach. Here are 11 reasons why this approach might make sense again, creating a new competitive advantage:
Intra-Asia tourism is surging, reshaping consumption dynamics across the region. For example, Chinese tourists, alongside their Korean and increasingly Southeast Asian counterparts, are driving luxury and beauty sales in neighboring markets. They account for a significant portion of Japan’s record-breaking international tourism, contributing to a luxury sales boom. Similarly, Southeast Asian markets are experiencing increased consumption fueled by their neighbors, especially Chinese and Korean travelers.
An integrated Asia-level strategy can support these cross-border consumption flows by aligning customer relationship management (CRM), supply chain optimization, brand consistency, and marketing efforts to maximize regional impact.
Consumption habits across East and Southeast Asia are converging. Urban youth in China, Japan, South Korea, and Southeast Asia are increasingly aligned in their tastes for fashion, beauty, luxury goods, and health and wellness trends, which is not surprising given some cultural similarities.
This growing crossover appeal justifies unified product strategies and region-wide campaigns, streamlining operations while catering to shared aspirations.
Markets often operate on differing business cycles; for example, in 2024, Japan and Southeast Asian markets experienced growth in luxury while China faced a slowdown. An Asia-level organization allows multinationals to redistribute resources effectively, adapt strategies quickly, and sustain growth across the region by balancing strengths and weaknesses.
Tapestry’s APAC structure allows the company to pivot very effectively between markets with varying growth rates, managing resources where they're most needed.
An Asia-level organization is better positioned to address regional pricing disparities, control intra-Asia grey markets, and manage travel retail challenges—critical in industries like luxury and beauty where pricing inconsistencies can erode brand equity and profitability.
L'Oreal's Asia-level approach has, for example, enabled it to have superior price and flow management in the region.
An Asia-level organization offers a clear growth pathway for country-level leaders, enabling them to take on broader responsibilities without relocating to global headquarters. For Asian leaders and Western professionals with regional expertise, such roles foster leadership and strategic thinking, preparing them for global assignments.
This structure also helps attract and retain high-caliber talent, fueling sustainable growth while inspiring local teams with upward mobility opportunities, which is crucial in economic slowdowns that limit career advancement.
Regional leadership serves as a vital bridge between local markets and global headquarters, translating market realities into actionable insights and ensuring strategies fit local contexts.
Companies that have dismantled their APAC structures often struggle with coordination, leading to underperformance, particularly in complex markets like China. A strong APAC leader, with deep Asian knowledge, can manage local specificities far more effectively than a distant HQ.
This setup also promotes the strategic sharing of best practices across markets. Successful strategies from China, for example, can inform and accelerate growth in other nations, such as India or Indonesia, further justifying a cohesive APAC framework.
In one case, Deckers (UGG, Hoka) recently set up an APAC structure, intending to transfer the learnings of its success in China to the rest of the region.
In an era of slower, cyclical growth, local markets require greater autonomy to innovate and address specific client needs. An Asia-level organization enables decentralized decision-making while maintaining oversight from regional leadership to ensure accountability, which is critical in industries like luxury, beauty, and sports. A notable example of this approach is Van Cleef & Arpels' Asia organization, which has effectively balanced markets autonomy with a coherent regional strategy.
By driving synergies and leveraging shared resources, an Asia-level organization can achieve cost efficiencies.
A regional leader has better oversight over local practices, ensuring ethical standards are maintained where global HQ might lack the detailed understanding of local nuances. Large Western multinationals in sports, pharmaceuticals, or luxury with broken-down APAC structures have recently faced serious corruption issues in the region, for example, gravely hurting their performance and valuation.
An APAC leader can exert more effective compliance oversight on individual markets.
An Asia-level organization can not only streamline supply-chain efficiencies across a collaborative manufacturing network in the region but also tap into Asia's rising tech innovation capabilities from hubs like Shenzhen, Bangalore, Seoul, Singapore, and Tokyo.
By building on Asia's growing expertise in areas such as AI, blockchain, and IoT, the organization can achieve sophisticated demand forecasting, enhance supply chain transparency, and ensure meticulous logistics management. This integrated system better equips companies to address the Asian market, thereby transforming regional agility into a competitive advantage in the global marketplace.
In today's shifting Asian landscape, making Asia-level organizations great again could be the strategic pivot that drives your company's next wave of growth. However, the transition must be handled carefully. In Part 2 of this series, coming next week, find out the “3 Key Conditions for Success for Asia-Level Organizations” to make the change to an Asia-level organization.
While there are compelling reasons to revive Asia-level organizations, as laid out in my recent article, the transition must be handled carefully.
The pendulum has swung too far from a comprehensive APAC strategy to fragmented structures. A tailored, case-by-case approach is now warranted, taking into account company size and market dynamics.
Here’s a more detailed look at what it takes to make a successful Asia-level organization work:
The scope of an Asia-level organization should be tailored to business needs, considering factors such as company size, strategic priorities, and the level of Asia expertise at headquarters. This scope may range from focusing on Northeast Asia (encompassing Greater China, South Korea, and Japan) to a broader East Asia structure (including Southeast Asia), or even a full APAC framework (incorporating Australia, New Zealand, and India) to maximize synergies. For very large China operations, establishing an independent China leadership may be justified although such a setup still merits thorough debate.
Including the Middle East under an Asia-level structure might also make sense, given its growing economic ties with East Asia and India, making its integration into regional strategies increasingly relevant. And, indeed the Middle East is part of Asia!
The center of this Asia organization can be located in cities such as Shanghai, Beijing, Shenzhen, Hong Kong, or Singapore depending on the industry. For consumer-related companies, Shanghai offers distinct advantages due to its economic significance and regional influence.
For an Asia-level organization to succeed, it must remain lean and agile, avoiding bureaucracy at all costs.
A streamlined structure with minimal overhead fosters rapid decision-making and innovation, positioning APAC as an enabler of local autonomy and entrepreneurship rather than a hindrance.
One of the main challenges multinational corporations (MNCs) face in Asia is their heavy, slow, and risk-averse processes. This is a key factor contributing to the loss of market share to more agile local competitors.
The success of an Asia-level organization hinges on appointing a proven leader with expertise across multiple Asian countries, such as China, and a deep understanding of the region’s complexities to effectively navigate market nuances and capitalize on emerging opportunities.
This leader must be entrepreneurial, a skilled communicator both with global headquarters and local markets, and a champion of market autonomy. They should embrace delegation and empowerment, while also serving as a mentor and coach to market and functional leaders, ensuring the organization remains agile and responsive. They must also be decisive, pushing functions and countries to act quickly, take calculated risks, and embrace innovation.
Last but not least, this leader must exemplify and uphold unwavering integrity and courage across markets, demonstrating these qualities through their responses and actions.
The pendulum has swung too far from holistic APAC strategies to fragmented regional setups. It’s time for a balanced, case-by-case approach that leverages Asia’s potential while keeping operations efficient and focused.
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