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Go-Jek’s hands-off approach to regional expansion may be a risky gamble – ANITH
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Go-Jek’s hands-off approach to regional expansion may be a risky gamble

Go-Jek’s hands-off approach to regional expansion may be a risky gamble

Photo credit: Go-Jek

Go-Jek’s recent unveiling of its US$500 million regional expansion plan was one of the most anticipated – and least surprising – developments in Southeast Asia’s tech ecosystem. It seemed obvious that Indonesia’s star startup would have to expand beyond its home soil at some point. It was a matter of when, rather than if.

While it appears to be a market leader in Indonesia, Go-Jek will face a far tougher test in the countries it is targeting: Singapore, Thailand, Vietnam, and the Philippines. In all four, Grab dominates the ride-hailing industry, having shored up its position by taking over Uber’s regional business.

But questions are already being raised about Go-Jek’s expansion strategy – particularly with regards to branding and the “autonomy” to be afforded its planned local branches.

Diluted branding

Mevira Munindra, Indonesia head of consulting at research firm IDC, tells Tech in Asia that although Go-Jek will be starting on the back foot in all four countries, being a “second mover” can come with its own advantages.

“Asian markets are dynamic and unique, and Go-Jek has taken some time to understand the markets better and prepare what is needed to expand,” she says. “Go-Jek has been working hard in the domestic market and has successfully increased its brand value.”

But rather than pushing a unified brand to consumers, Go-Jek seems to be opting for an unorthodox strategy.

The company said in a statement that while it will provide technological support and expertise, its operations in new markets will be run by local founding teams.

“The local companies will determine their own brands and identities to ensure good traction in each new market,” the statement said.

We don’t mind if a country owns their own brand and creates… a different brand other than just Go-Jek.

Co-founder and CEO Nadiem Makarim indicated in an interview with Channel NewsAsia that this could mean the Go-Jek brand is supplemented with specific local branding, or could even disappear in new markets altogether. Such decisions will depend on “what the local teams say in terms of what brand will resonate much greater in that local market.”

“I think one of the really unique and interesting things about Go-Jek is that we don’t mind if a country owns their own brand and creates something that is a different brand other than just Go-Jek,” Makarim added.

It wasn’t immediately clear if these “local founding teams” would be new businesses set up from scratch or existing ride-hailing players that Go-Jek will bring on board through strategic investment or acquisition. It wasn’t also certain if Go-Jek was looking at joint ventures, or arrangments like franchising and licensing agreements.

Munindra thinks it unlikely that Go-Jek will allow local units to drop its house brand altogether. The more likely outcome is that the brand will be modified to align with consumer tastes and preferences in each country. This means that payment methods, marketing strategies, user interfaces, and so on could differ from country to country.

However, even if local units do retain the Go-Jek brand, the parent company’s devolution of powers could also lead to increased risks. If a local partner upsets customers in some way, it will be the core Go-Jek brand that takes the hit. The senior management team in Jakarta will need to remain vigilant to avoid such problems.

Photo credit: Go-Jek

Corrine Png, CEO at transport industry analysts Crucial Perspective, tells Tech in Asia that local collaborations can help Go-Jek overcome its lack of experience outside of Indonesia. But there’s a chance that the autonomy could dilute the brand that Go-Jek has fought so hard to build in its home market – and that has won it international recognition.

“By working with local partners, Go-Jek can make up for its lack of knowledge in these new markets,” says Png. “However, this decentralized approach does run the risk of Go-Jek’s local partners seeking to push it out once they no longer need its technological support and expertise.”

Go-Jek will need to ensure its contracts with local players ensure it’s able to bring them into line if necessary.

Ideal markets

Singapore-based Grab has also been aggressively branching out into other services, such as insurance and micro-lending, digital payments, and food delivery. It’s mirroring Go-Jek’s broad diversification strategy in Indonesia.

Over the next few months, Go-Jek will initially bring its ride-hailing service to its four target markets before adding other features.

Munindra says that there is an obvious gap following Uber’s departure, as the Philippines, Thailand, and Vietnam have similar needs as Indonesia. But “it is not going to be easy for Go-Jek.”

She adds, “It will be a challenging journey to tap into these markets and bring in new solutions in payments, microlending, food delivery, and so on. Understanding what’s best to offer in each market will be crucial for Go-Jek in the long term.”

This presents much growth opportunity for Go-Jek’s ride-hailing services as well as… Go-Pay.

Like Indonesia, the Philippines and Vietnam are rapidly growing economies with severe traffic congestion problems. The latter has an established culture of motorbike and moped driving – the mode of transport that Go-Jek cut its teeth on.

What’s more is that around 60 percent of both countries’ adult populations do not have bank accounts. Taken together, this makes them “ideal markets” for Go-Jek’s ride-hailing and digital payments services, says Png.

“Thailand’s financial services are much more developed than the Philippines’ and Vietnam’s,” she says. But Thailand’s economic activity is focused on Bangkok – a sprawling, highly congested metropolis that attract large numbers of migrant workers and entrepreneurs from the country’s poorer regions, many of whom are “underbanked.”

“This presents much growth opportunity for Go-Jek’s ride-hailing services as well as the microlending and remittance services it offers through Go-Pay,” she adds.

Traffic jam on Sukhumvit Road, Bangkok.

Sukhumvit Road, Bangkok / Photo credit: Clay Gilliland

The odd-one-out here is relatively tiny, highly developed Singapore. Go-Jek has already indicated that it will not bring its moto-hailing services to the city-state, where the public transport network is extensive and the number of private vehicles allowed on the road is strictly regulated.

But being in Singapore may come with different benefits for the Jakarta-based company, Png suggests.

“Despite its small size, Singapore is one of the world’s top financial centers and gives Go-Jek much greater visibility among the many private equity and fund management companies based there,” she says. “This will be useful for future fundraising efforts and a possible IPO.”

Tech in Asia contacted Go-Jek but didn’t receive a response at time of publication.

This post Go-Jek’s hands-off approach to regional expansion may be a risky gamble appeared first on Tech in Asia.

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Anith Gopal
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