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

• 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• 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 .