Cross-border agency expansion: Is the interest mutual?

With our long shared history and cultural heritage, it may seem like cross-border agency expansion across Singapore and Malaysia is a natural progression for independent agencies seeking to grow their footprint in the region.With digital agency Lion & Lion announcing its fourth regional outfit in Singapore and social media firm Yellow Mango, newly minted in the Little Red Dot, will we see more and more Malaysian agencies entering Singapore and vice-versa?In a separate conversation with A+M, Warren Tan, CEO of VLT, also expressed interest in expanding into the Singapore market. Meanwhile, Singapore-based creative shop GOVT has also recently opened in Malaysia, starting with clients such as Tourism Malaysia, Pernod Ricard Malaysia and Airbnb Malaysia.Delving into the topic of cross-border expansion, we spoke to some industry players about what makes such a business move enticing, and if there is mutual love on both sides of the causeway when it comes to revenue opportunities and growth.What’s going in Singapore’s favour? According to Lion & Lion’s managing director Sumit Ramchandani there are three factors that make Singapore an attractive expansion location for the digital agency.“In terms of digital maturity, it is one of the top in the world; behaviour of people in Singapore reveals that they are more willing to go digital.”Also, as a known regional hub of various multi-national corporations, Singapore is an ideal option for the agency to tap into the regional budgets of international firms that have a presence in the country.“Establishing good relations with the right people can potentially open up doors for us. In Singapore we’d have access to a firm’s regional budget, and open doors to other markets as well where the marketing spend might be more country specific,” he saidThird, Singapore’s entrepreneurial environment makes it a friendly test bed location for new businesses. With various government initiatives aimed at supporting start-ups and small and medium enterprises, the country continues to be a fertile spot for agencies to expand and experiment in the market.Launching its fourth office in the region in Singapore, Ramchandani said to expand into a diverse market such as Singapore from a more homogenous one required a high level of maturity in the field.Once an agency ensures its suite of services can match a more sophisticated market’s current business offerings, it should tap on the close proximity of its neighbouring countries when narrowing options for business expansion.Alvin Kok, founder of Yellow Mango Communications, also cited economic prosperity as one of the factors that makes Singapore a business magnet. Furthermore, he said the booming marketing and advertising industry, in spite of its small-market size, translates to more growth and opportunities.“Singapore’s economic growth has a lot more potential as it is also faster and more stable as compared to Malaysia’s,” he said.Cultural similaritiesFor Yellow Mango, it chose Singapore because of the cultural and linguistic similarities between the two countries which allowed for a smooth transition for the agency.Kok said: “Our agency is strong in English and Malay languages so Singapore was the closest to expand. We were offered to expand in Thailand since we have a client in Bangkok, but we weren’t ready for that because language can be a potential barrier for this in the Thai market.”Leon Lai, group managing director of GOVT, also agreed the proximity, language and culture played vital roles in selecting Malaysia as the agency’s first location outside of Singapore.Aside from meeting the requests of his Malaysian clients, Lai said expanding in Malaysia was a natural fit for the agency.“I think the biggest factor was in the culture, the other ASEAN countries are a little bit more different.”On the other hand, Pat Law, founder of Goodstuph, says proximity and culture are the very reasons why the agency feels it’s not necessary to have a local representative or office in Malaysia.“If the cultures were very different then we might consider it. Setting up in Malaysia would also mean looking at a co-partner,” Law said.Challenges for Singapore and Malaysia Economic challenges such as the rapidly falling Malaysian ringgit has led to investors pulling out from the Malaysian market thereby affecting overall business spend.“So it is a risk that business owners need to be willing to take on when expanding into the market,” Leon Lai said.Moreover, there are other internal framework issues to consider before starting up in a different market.“With regards to remuneration, wages are about 20% higher (talking about dollar for dollar value here) than Singapore, so you have to factor that in your business plan,” Lai said.According to Gary Tang, founder of The Media Shop, economic stability and client demand were lacking in Malaysia. As for the media landscape, the huge cultural differences makes the agency hesitant about entering the market.Another challenge for Malaysia is that of talent. Sonya Madeira, founder and managing partner of Rice Communications, says a reason she hasn’t had a direct presence in Malaysia is because of the talent drain the country faces.“Many of Malaysia’s highly sought-after talents are now moving to Singapore,” she said.(Read also: Can Malaysia keep its senior talent?)On the other hand, the key challenge for Malaysian agencies expanding into Singapore is the high operational costs borne by the agencies as compared to their cross-border counterparts. Ramchandani also highlighted that tightening laws on hiring foreign talent can put a damper on an agency that is eager to access and recruit high-quality talent.“Now we don’t have a free hand in hiring anymore, as compared to two years ago.”For Yellow Mango, the agency has had a hard time establishing its brand because Singapore companies are still reluctant to work with a Malaysian agency, citing discrepancies in the transfer of knowledge between the markets.For example, most Singapore brands are not convinced that what has worked in Malaysia could work in the Singapore market as well, Alvin said.“But as with any company starting up in a new locale, we have to work in establishing ourselves and I’m confident that we will adapt accordingly.”To remedy this perceived lack of trust, the company is investing in cross-training of its staff.Possible solutions As for GOVT’s Lai, having a Malaysian partner onboard its team helped to ease the transition into the market.“If you feel you have a unique business offering that you can provide in Malaysia, I think that it should be a valid consideration. After all, the market and therefore, opportunities, are much bigger than Singapore.“Although the current exchange rate is not the most ideal, we shouldn’t forget that the primary aim should not be to convert your earnings into SG dollars.”For Law, she explained that in considering a Malaysian outfit, it would make more business sense to use Malaysia for its production.“For us, even though we service clients in Malaysia, the ideation process comes from Singapore whereas the production is done in Malaysia.”Meanwhile, Tang feels having a partner in the market is a more feasible idea.“We were looking to explore the Malaysia market some time last year and at that point we touched base with several independent media agencies to understand the market. We felt it would be more feasible to partner up with an agency rather than set up completely on our own.“The Malaysian media scene is more relationship-based so it would be much easier to have an on-ground individual who is familiar. As a Singaporean, it was difficult for us to operate in a market which is so relationship-based.”According to Madeira, servicing clients for Rice has been easy enough from here.“When we first started we had clients that were headquartered in KL and we would fly down there every two weeks to have meetings. For us it didn’t make sense to have someone on the ground.“However, if a client, regional or local, is really looking to heavily invest in the Malaysia market then I would try to convince my staff or find an amazing multi-faceted partner there.”Image: Shutterstock