Doing business in Asia
The world is full of guides to `doing business in Asia' that will teach you that business cards are very important in Japan and that all Korean companies run n the basis of seniority. But Asia is changing fast, and those guides might not be s relevant today as they were ten years ago. Andrea Kirby brings us up to date.
I recently looked at what advice one American company gives its expatriates coming to the UK. The English, this company says, drink tea, love cricket and the royal family, are very reserved, and do business at a much slower pace than in the US. Just how useful is that to a business manager in London dealing with thirty-somethings and working in the tech sector? I wonder.
One feature you'll certainly find in Asia is that business and management structures are different from the kinds of organisation you find in the UK or America. For instance, the Korean chaebol or Japanese keiretsu provide a type of organisation that's not quite the same as 'conglomerates' in the UK sense - rather, they are loose consortia, some acting as suppliers or customers of the others, often with cross shareholdings and loans made within the group. That leads to a different style of business - and a very different definition of 'supplier' or 'competitor' from the relatively single-minded western firm.
Dealing with one of these you'll need to consider the impact on the whole association and not just on the firm you're dealing with. You might offer a great deal, but if it affects relationships within the group it's not going to be an easy sell.
But these, while accounting for 25 per cent of the Japanese economy and possibly even more in Korea, represent less than one percent of firms. You'll also run across small family firms and entrepreneurial firms, often with just 25 or 50 people working in them. If you're not a major multinational, then these are the ones you're best dealing with - they are often more flexible, quicker to take decisions, and more likely to become real partners.
In countries where the major firms in some industries are still stateowned, again, the smaller ones are often a better way into the market for foreign companies.
Things are changing fast in the world of corporate management in Asia. In Japan, there's a movement towards US-style business organisations, and Korea also recognises the need for less hierarchical structures and more market-orientation. In Vietnam, `jobs for life' are being replaced by contracts and 'egalitarian' pay structures with performance-related remuneration.
So rather than taking the advice of the `how to' books, first of all you need to work out what kind of firm you're dealing with - and act accordingly.
Watch out for negative influences. Old style companies still often rotate decision-makers through the business every few years, so you will encounter low expertise compared with manager; at a similar level in the UK. You may also find `generational revenge' - old men who see their job mainly as stopping 'youngsters' from progressing.
Also, be aware there are fewer specialist managers in many Asian companies. In the UK there are typically a number of lawyers and accountants in top positions - that's rather less true in Asia, so a strategy that relies on influencing these advisers is less likely to work.
You'll also find that regulation and government influence on industry is far more important than in the UK, though things have opened up somewhat over the last ten years. Most countries still have strong industrial policies and both government patronage and subsidies to domestic companies are still live issues. Mergers have often been driven by government policy and not by the desire to create value for shareholders.
Patents and Intellectual Property Rights are important business assets and if you start doing business in Asia, you'll need to protect them. But this can be an uphill battle - the process is lenghty and the definitions can be very tight. There's certainly a suspicion that the patent offices draft more restrictive definitions of the IPR for foreign companies than they do for domestic ones. Concerns also remain in many Asian countries that even when you've got your patent, protecting it is difficult, though the fight against piracy is beginning to make inroads around the region.
If you do want to protect your IPR assets you will find that the regulatory agencies are often more important than the courts - whereas here in the UK it's the other way round. Although documentation is important, and the Korean government has even gone to the lengths of creating `model contracts' for business use, litigation is not the usual way to solve problems and can take much longer than a less formal approach.
Tariffs of one sort or anothe are frequently applied. Korea, for instance, used `adjustment tariffs' to protect domestic production and stop import surges - these are now on their way out. In several countries there are still currency controls, so you may not be able to repatriate your profits directly.
As the `how to' books will tell you, personal connections are important everywhere in Asia. ut those relationships shouldn't just be with other companies in your a ea. You need strong contacts with anks, academics and regulators. Use hatever existing networks you can - they are often overlooked by wester companies because they don't look like our networking associations. For instance, in Korea, university alumni associations often act as business networks.
Finally, get your marketing right. Obviously, you need to adapt to local culture - but don't believe the stereotypes.
For instance, the `little woman' is disappearing as younger women become better educated. Some American companies in Korea have found that because they offer equal opportunities, they're particularly attractive to female employees who find the lack of promotion prospects in domestic firms frustrating.
We may have ideas of seniority and the Confucian ideal of the `wise old man', but the youth market can be very important. In China, `teen idols' include Deng Xiao-Ping and Chou EnLai (both rated higher than Mao on some polls), as well as Einstein and Bill Gates. It's really only in Japan that there's much of a 'grey' market - the demographics of other countries are biased towards youth.
Even stereotypes are changing - in China, tea is still the favoured drink, but there's now a massive market for `ready-to-drink' tea in a pack.
Learn about local culture directly through 'blogs' web diaries. You'll soon get a feeling for how people live their lives. Or use a good market research firm with local personnel and local research.
When you're dealing with the local media you'll find some differences from the UK. The Internet is massively important - the world's greatest surfers are in Asia which also has 39 of the world's 100 top sites. But many people surf through kiosks and cafes, for instance in Indonesia where young people don't have enough money to buy PCs and use internet cafes at a dollar an hour instead. Mobile phones also have massive penetration - a quarter of mobile homes in the region have three or more.
In some countries the media were tightly regulated until quite recently. In Singapore, for example, new companies have sprung up over the past couple of years as deregulation happened, and these are now the fastest growth companies. There are also some media that just don't exist here - in Singapore, a skyscraper city, bus and taxi tops are an established advertising market.
Segmenting your market may be very different from in the UK as wealth is more unevenly distributed. You may find that both wealth and population is heavily concentrated in the massive cities - Jakarta has a population of 12m. On the other hand the rural population is generally less wealthy and much more spread out - and thus difficult to market to.
Distribution chains are emerging fast. In Thailand and Korea hypermarkets are taking an increasing share of consumer business, and in Hong Kong, own brands are becoming more important (though still well below UK levels).
Remember that no single strategy is guaranteed to win - and that different strategies can work equally well. But whatever you do, there needs to be something in the deal for the locals particularly in China where government is still a very important influence. Coca Cola, for instance, 'gave' two bottling plants to the government in Beijing and Guangzhou but stipulated they must only be used for bottling Coke. On the other hand Danone acquired local food firms, sometimes paying top dollar and accepting conditions on the numbers employed - a 'localised' strategy that has given them good brands and a good reputation.
Finally, remember that Asia isn't a single market. There are massive differences between the countries and you need to assess each market, and manage each country, separately. Some of the differences are quite detailed - Hong Kong consumers are very price driven, Singaporeans aren't. And did you know that Taiwanese customers visit convenience stores twice as often as in Singapore and Hong Kong? That's the kind of micro level of information you need - so go out and get it, and throw the business etiquette book away. |