It is common that many of us talk about “Asia” as a block, but the businessman or woman looking to be successful in the region had better start differentiating between Asian countries and its specific local cultures on 3 levels – politically, socially, and economically.
Here is a quick review of 13 countries that I have worked with in both my corporate and business life. There is so much to share with you, for now, it’s a snapshot of 3 tips that many people have assumed that they can ignore (at their peril) because they have toured or travelled several times into Asia already.
Millions of Westerners seem overwhelmed by the task of learning Asian languages and script so different from the Western Indo-European linguistic framework. It all seems much too “foreign”, challenging and indescribable.
Each economy has its own rules of the game, which collectively are known as a “business system”. Some economies, such as China, Indonesia, Japan and others even have multiple business systems and regulatory rules by provinces or states. Understanding how these business systems work is critical for business owners and managers wanting to be successful in Asia.
From my business and personal experiences in both the Western and Asian business environments, the top killer in international Asian business is what is called ‘cultural differences between the Eastern and Western Cultures’. “That means you don’t truly know how the place works even after you have visited that particular Asia market more than once. As more and more businesses are moving into Asia and trying to take advantage of the fact that the 21st century is Asia – at least economically – if these businesses want to be successful, they have to overcome this ‘Asian Cultural Difference’ or in my own Asian words, it’s the “knowledge and skills of diverse and complex Asian Cultural Intelligence”.
There are five major clusters in Asia:
- post-socialist economies (China, India, Laos and Vietnam),
- advanced city economies (Singapore and Hong Kong),
- emerging Southeast Asian economies (Indonesia, Malaysia, the Philippines and Thailand),
- advanced Northeast Asian economies (Korea and Taiwan), and,
- standing on its own, Japan.
Many researchers have compared education and skills, the role of the state, investment and cultural influence unique to each country. There are lots of obvious differences across the diverse Asian markets and it would impact any investment or marketing plan. For example,
- Literacy rates differ widely in Asian countries, with 61 percent of adults in India able to read and write, compared to 99 percent in Japan.
- Skill training is mostly left up to the individual in most Asia countries with the exception of Japan, where companies provide extensive on the job training. State-owned enterprises in China, India, Laos and Vietnam have the means to offer job training but are reportedly falling short of expectations.”
The first three golden tips to acknowledge and implement for building a trusting and lucrative business relationship with your Asian clients, be it in your local city or in Asia are:
1. It’s “Who” you know, not what you know in that market!
“Many major companies in the region are controlled by governments or prominent families. Governments play a major role especially in the post-socialist economies, but also in economies such as Malaysia and Singapore. A high degree of family influence is evident everywhere, with the notable exception of Japan.
One of the more significant observations is the influence of “social capital” in business relationships. Here, the word “trust” plays a key role. Party officials in China, Japan, Indonesia, Thailand and elsewhere in the region are more inclined to extend control of companies and financing to members of the party, as well as immediate family members whom they trust. One result of low trust in strangers is the formation of myriad of business groups in the region. The “mistrust” leading to the formation of business groups also discourages Asian managers from entering into deals with outsiders.
2. Who holds the power in the Asia economies?
More than 90% of the Asian economies have a top-down management that has highly centralised type of management and in some cases the chairman, who is usually someone who has a very large stake in the company that will be driving the decisions. In Asian economies, the decision-making in firms usually remains in the hands of the primary owner and flows mostly from the top downwards.
From my own corporate and business experience in the Asia region, the main deviation from this would be Japan, where decision-making is based on collective decision-making. Japan economies have many sections of the company including the low levels right up to top management who will be involved in the collective decision-making.
Many Asian governments adopt specific industrial policies and grant state-owned and private companies licences and loans to conduct business. Banks are still the main source of financing for most companies but a parallel network of informal lending institutions has grown out of relationships, especially in the poorer economies of the region. Many conglomerates and business groups have their own banks too such as Ant Financial(part of the Alibaba Group) involving payments, wealth management, lending and other services.
3. The Rule of Law in the East versus the West
This is a common myth that once you have a written contract for both business parties to the contract, we are protected in that business partnership. Whilst the Anglo Saxon people do business based on signed written contracts, it is not necessarily so in many Asian economies. The contract rules may be override by strongly established relationships, local culture and business practices.
If you want the only and one tip when dealing with your Asian clients, be it in your local city or in your selected Asia market, “Please, I beg you not to group Asian economies into one! We, Asians may look alike in our hair and eyes color, skin tone, accent, fashion, but it’s culturally different due to our heritage background in each Asian market or its provinces within that country”.
Business owners and their team leaders must learn the differences between cultures and institutions in the region. I had “many culture shocks” in my varied Asia Pacific regional career roles when I was given the opportunity to champion and look after the Asia Pacific region with 13 key markets. After travelling into each of the Asian markets and conducting my regional management work, I had quickly learned that “a one-size fits all “regional Asia approach to my management strategies and work plans is “a dead end approach” if I want to be successful in my regional Asia Pacific role.
Therefore, I had dedicated extra time and efforts with each country CEO and his leadership team to listen, educate and empower myself to understand their local culture, business practices and law. This revised Asia regional management approach had enabled me to deliver a bespoke strategy that worked best for all the relevant executive leaders and teams to support the Board and its key stakeholders. WHY do I need to have such a commitment and structured strategy in my first 2 years of my Asia regional management setup? It’s simply because each Asian market regardless of its team size and volumn of business varies greatly and also in subtle ways in terms of culture, customs, beliefs, time management, work practices, law and regulatory compliance.
As you are aware, the economic influence of China is felt everywhere in the region and onto the other continents of the world. There are many multinational companies using China as a production or regional Asian market base. For instance, it has historical records that China acts as an assembly base where machines and equipment would be provided by Western nations, the Japanese, the Koreans and then whereby sub-assemblies and components would come mostly from the newly-industrialised economies. As China is becoming more progressive and its labor rates are increasing, this cost management approach has been started in the smaller Asian markets such as Thailand, Vietnam and Malaysia.
Asia will continue to drive global economic growth well into the future for many decades to come. Westerners are compelled to go there if they want to survive or thrive further in the 21st Asian century. Their degree of knowledge in the Asia Pacific region is sure to affect their rate of success or failures. Some medium and large Western conglomerates had wasted millions of dollars in development and marketing in Asia markets without any cultural understanding of that Asia market as they have assumed that their advanced products and services will be readily accepted by the Asia markets.
If you and your leadership team is ready and want to reap a nice percentage of the estimated USD$3.2 billion sales growth in Asia, please do yourself a great favor by checking out our AusAsia 2017 Executives Cultural Business Strategies Mentoring Program. You’ll be very glad that you did!