Success in Asia has become vital for the prosperity of some of the world’s largest companies. The desire to connect with Asia, understand and profit from it has become so strong that some multinationals are even starting to move their global headquarters away from their traditional bases in the United States in Europe.
Standing (from left): Alan Rosling OBE, co-founder and chairman, Kiran Energy and former executive director, Tata Sons Ltd; Takumi Shibata, former group COO, Nomura Holdings and chairman-designate, Nikko Asset Management; Adil Zainulbhai, chairman, McKinsey & Company, India; Dato' Sri Nazir Razak, group chief executive, CIMB Group; Tong Kooi Ong, executive chairman, The Edge Communications Sdn Bhd; Lim Ho Kee, chairman, Singapore Post Limited.
These multinationals, almost all of them western, will find no shortage of advice in the business press or in best-selling books about how to approach emerging Asia, the risks they face and how to minimise those risks.
Often overlooked, however, is the new reality of Asia-based multinationals that are expanding into markets all over the world. Many of them rose to prominence in a very different business culture from that of the US or Europe, and they also risk making mistakes that could hurt their chances of international success.
The challenge facing the new breed of Asian multinationals was the topic of an illuminating panel discussion at the CIMB Annual Asia Pacific Conference in Kuala Lumpur last week.
According to a study by Accenture, Asian companies invested almost US$3 trillion in international expansion from 2003 to 2011. Nevertheless, only 28% said that revenues and profits from international markets had developed in line with their expectations.
On their journey into new markets within the region and around the world, Asian enterprises cannot simply replicate the strategies employed earlier by their business peers from developed countries, speakers on the panel said. China, Japan, Korean, India and Asean need to carve out new paths and operating models to succeed.
“There is nothing wrong with making a choice to remain in the domestic market, particularly if that market is large enough. But some businesses are in industries that must be internationalised, meaning that if you try to remain in domestic market the business will be blown away by multinational competition,” said Alan Rosling, co-founder and chairman of Kiran Energy and former executive director of Tata Sons Ltd.
From his experiences with Tata, he said one of the most significant characteristics that Asian multinationals must have in the future is to be accepted and welcomed in each market in which they are operating.
“You have to have a local face. You must invest in and employ local people, otherwise the risk of ‘deglobalisation’ and the concept of protectionism will be incredibly high. This is the way to go, rather than the traditional model of being controlled from the head office.”
Tong Kooi Ong, executive chairman of the Malaysian media group The Edge Communications Sdn Bhd, said it had been fascinating to witness the transformation process of Asian conglomerates into more internationalised businesses. However, he fears they will not find growth abroad as easy as they did in their home markets.
“Many of the conglomerates that perform well in their home markets do so because they operate in a ‘landscaped’ environment, which to some extent is supported by domestic political institutions,” he said.
“But when they go global, they will be in a more inclusive and non-monopolistic globalised environment. It will be challenging to see how many of these conglomerates can be successful.”
Mr Tong noted as well that Asia is a lot less homogeneous than the US and Europe. Therefore, the need to take account of diversity and local sentiment in each country is much greater. Before they go abroad, it is imperative that Asian companies train their people to be more confident, not only in the sense of competitiveness but also in a sense of engagement and the ability to articulate causes and rationales.
Takumi Shibata, chairman-designate of Nikko Asset Management, stressed the need to have a regional focus.
“The European market is not enough as an individual country. It has to be considered as a regional market,” he said. “What local companies from Asia can do to achieve globalisation is to acquire a small company in France, for example, to use it as a global platform.”
It is also important for Asian companies, he added, to employ some talent from the European markets if they want to be successful there. They have to learn how to benefit from putting diversified people in different management levels, rather than having all the people in senior management roles holding the same passport of the home country, which is usually the case for many Asian enterprises.
Mr Rosling said he wanted to see more foreigners in management levels among Asian multinationals.
“The Koreans and the Japanese have created businesses internationally in terms of sales but run by a small group of people with similar backgrounds. To me that is colonisation,” he added.
“If you look at the LG or Samsung management team, most of them are Korean. I believe that is a very vulnerable model, given that when you move with a true global mindset, you want as international a management team as you could possible get. Diversity will be used to produce innovation.”
Adil Zainulbhai, chairman of McKinsey & Company in India, highlighted the essential ways in which people from different backgrounds choose to communicate. He used answering business e-mails as an example.
When an Asian answers e-mail from a business counterpart, he usually tries to respond as quickly as possible. At times, the first response may cover only half of the questions asked, and he will send the rest in a follow-up e-mail. However, a German will wait until he has all the answers and send a complete e-mail at one time.
“The issue of communication is very important. The fluctuation creates a lot of problems and chaos. Some companies have created a protocol on how the employee should answer e-mail,” said Mr Zainulbhai.
Meanwhile, Mr Shibata further suggested that Asian companies should concentrate on what they have and try to benefit the most from what is already there for them in the region.
“Look at Japan: they have technology, they have the brands, but they don’t have the growing market. So combining the growing market of the Asean region with the brands, technology and capital of Japan, it can only translate into success,” he said.
“If Asian companies can find good business partners with great brands, technology and capital, the success is already theirs.”