Transcript DEVELOPING A SUCCESSFUL BUSINESS IN ASIA

DEVELOPING A SUCCESSFUL
BUSINESS IN ASIA
The Chinese Dragon, The Indian
Elephant and the Asian Tigers all
beckon
DEVELOPING A SUCCESSFUL BUSINESS IN ASIA
• Asia provides tremendous opportunity for
growth and profits
• If you have a unique product or service and
wish to expand outside the US. You should
seriously think about entering Asia
REGIONAL GEOGRAPHY
• Many Multinationals divide the globe into 3 or 4 major
Regions for Management and Reporting purposes. Asia
Pacific is one of these major regions
• Asia Pacific covers the countries in North Asia, South
East Asia ; South Asia as well as Australia and New
Zealand.
• Key countries are China, Japan, Taiwan and Korea in the
North; India ,Pakistan and Bangladesh in the South;
and Thailand, Philippines, Vietnam, Malaysia and
Indonesia in the South East.
• Asia Pacific covers a vast area
MEGA MARKET
• Total Population is 3.8 Billion People…more than
half of the world’s population
• Just India and China have one third of the world’s
population
• Mega Cities…..Beijing and Shanghai each have
populations of 20 million people.
• High Proportion of Young People in China and
India
• Graying Population in Japan and Korea
ECONOMY AND PURCHASING POWER
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GDP of Asia Pacific is larger than that of the US
China has passed Japan with an annual GDP of $5 Trillion
Purchasing Power Parity (PPP)
China has a PPP of $8,000 per yr and India has a PPP of
$4,000 per year
• Asian Tigers are growing at 6%/yr
• Normal growth for China is 11%/yr and for India 8%/yr
• Economies changing from export based to local
consumption based
ECONOMY AND PURCHASING POWER
• Target Market is usually the middle class
• Middle Class in China and India number about
300 million people in each country
• China has passed the USA as the largest
automobile market in the world (14 million
vehicles produced last year)
• Major Opportunity for US products & services
RELIGION
• Major Religions are Hinduism, Buddhism and
Islam
• Hindus…..1 Billion
• Muslims…600 Million
• Buddhists…The Rest (Buddhist based)
CULTURE
• Asian Culture is based on the two oldest cultures
in the world…the Chinese and Indian cultures
• Businessmen of Chinese origin dominate in
Indonesia, Malaysia, Thailand and the Philippines
• Family Unit is all important
• 3 Generation living under one roof
• Education is all important. Enormous dedication
to school and grades
BUSINESS CULTURE
• Generational and Family Owned/Run
• Chaebols in Korea like Samsung, Hyundai,
Lotte and Daewoo
• Conglomerates in India like Tata, Birla, Modi
• Business Management may be Autocratic and
Dictatorial
CULTURAL SENSITIVITY
• Respect for other cultures
• Business Deals are concluded only after the
Asian partner gets to know you. This may take
time and often includes Lavish Dinners
• Golf is now very popular and is an relaxed
way to get to know your Asian business
contacts
CULTURAL SENSITIVITY
• “Face” is very important to all Asians
• “Losing Face” is considered very humiliating and
could lead to termination of a business agreement or
employment
• Touching someone is not liked……. example of Indian
and Thai salutation
• Yes may sometimes mean No..watch for body
language and facial expression
• Eye Contact..looking down is considered respectful
CORPORATE VALUES
• Be clear about your Corporate Values
• Be clear about your Business Ethics
• Draw a solid line on where you stand with
respect to business practices
• Asians will respect your principles
4 BUSINESS MODELS
• Forming a wholly owned subsidiary is the best
structure to establish
• Joint Ventures are common and is mandatory
in some countries/business segments. Avoid a
50:50 Joint Venture
• Using Distributors is another model..however
try and appoint several distributors per
country
• Simple Export sales to buyers in Asia
PLAN THE WORK AND WORK THE PLAN
• Research is critical to success. Do basic research
and get the facts w.r.t the Consumer, the
Customer, the Competition and the Distribution
Channels
• Have a realistic Vision and set realistic Targets
• Build a Robust Strategic Plan. Develop Product
Strategies, Marketing Strategies, Sourcing
Strategies and Distribution Strategies
• Support the Plan with Top Shelf people who will
execute with excellence.
THINK GLOBAL AND ACT LOCAL
• Past practice for many multinationals was to have
autonomous subsidiaries operating in Asia. While not
globally efficient this approach was effective in
developing the local markets with tailor made
products
• Recent practice is to sell identical products in all
Asian countries with the same formulation, the same
label and the same advertising.
• Has the pendulum swung too far?? Local companies
are gaining share as they are more sharply
positioned.
HUMAN RESOURCES
• Executive Quality has improved considerably
• World Class young Asian Executives with
MBA’;s
• Expats are very expensive and generally not
recommended
• Upper Level Execs in China and India may earn
more than their counterparts in the USA
ENTRY STRATEGY FOR CHINA
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160 cities with a population > 1 million
Tier Strategy is recommended
Tier #1: Shanghai, Beijing, Guangzhou and Shenzhen
Tier #2: 13 Cities
Tier #3: 20 Cities
Strong Brand Identity is critical for success in China
(McKinsey Study)
• Environment friendly products will have a Plus
• Consumer communication should focus on functional
attributes .