Friday, November 09, 2012

How to Take Advantage of Asia by guest blogger, Tom Browne

Asia booming
China now has a larger auto market than the US(1). Nearly half of US companies surveyed
saw their China-based businesses outperform the overall company(2). Southeast Asia, including Japan and China, holds almost 30% of the world’s population (and that doesn't count India). So you understand all that, not to mention the GDP growth figures and “consumerization” happening as well. The question is “how to take advantage of it?”

Asia is a tough market for US companies to enter
If you’re going into China, first thing is you’ll need someone who speaks Mandarin, right? Well, it’s a good start, but then you’ll need to address the 600 million people who don’t speak Mandarin. Greater Asia is home to 150 languages. And in addition to the language proliferation there is the cultural diversity within Asian lands and (the big one) the East-West “chasm.”

About that chasm: Western business culture is generally contract-driven. Asian business culture is generally relationship-driven. As you can imagine these worlds often collide: the Western businessman, red-faced and bursting at the seams, waving a contract in front of his Asian counterpart.  The Asian: stoic and disinterested. This cultural divide is the major hurdle to Western companies doing business in Asia and many, many companies have crashed and burned failing to fully grasp this.

Furthermore, the concept of guanxi. You may want to look this one up(3) as it is both vitally important to success in Asia and quite interesting to a Westerner. In brief, it’s an extension of the relationship-driven culture; “it’s not what you know it’s who you know" — a giant quid-pro-quo system, and Westerners enter it with no “quid." The Chinese prefer to know you before they transact with you. But what if you don’t know anybody?

Finally, a big problem facing many Western companies is self-induced: failure to commit. CEOs of thriving companies are torn between missing out on the Asia Opportunity and messing with the status quo. So rather than tell the board "we'll take a pass on China," he'll stick a toe in the Chinese water, playing not-to-lose rather than grabbing the market by its throat. No surprise then when results are very modest and attention is turned elsewhere.

Local partners can help
So operating in Asia is a different deal than we're used to. What to do about it? The first step is to acknowledge that you have a problem (just like that famous 12-step program) and that you are best served getting help; and that help should be from someone local to the market you're interested in.

Local partners can't force you to commit - that's up to you - but once you have committed the benefits are many. With a properly constructed, i.e. win-win agreement in place, local partners can provide a wealth of assistance: speeding up bureaucratic hassles; making connections; navigating the court system; providing dual-language speakers; extending some of their "guanxi"...the list goes on.

1. JD Power
2. US-China Business Council
Tom Browne is Management Consultant at hiSoft.


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  2. Nicely done, Tom! Those in the Asian outsourcing industry really need to realize Asia is not just India. They need to find their niche and focus on developing their capabilities in other geographical areas. This was a very insightful article. I would be very interested to revisit this and see your insights on it in the future. -DVP