PwC’s recent report into doing business with Asia revealed some very interesting statistics.
Few would argue that Asia is an economic powerhouse, and a region Australian business can no longer ignore. Yet PwC’s recent report into doing business with Asia revealed some very interesting statistics. By 2025, Asia will produce half the world’s total economic output. By 2030, Asia’s middle class will reach 3.2 billion people. Australian business invests more in New Zealand, with a population of 4.5 million and GDP growth of 2.5 percent per annum, than it does in ASEAN countries. Just nine percent of Australian businesses are operating in Asia and 65 percent have no intention of changing their stance in the next two years. All of these statistics present a confounding picture. Australian businesses, while looking offshore, appear to be ignoring the world’s fastest growing region and are at risk of letting the opportunity to build an Asia strategy pass by. It seems that Australian businesses are a long way from the level of engagement, investment and commitment necessary to secure a long-term share of Asia’s growth. There are many suggestions as to why they have struggled to execute in Asia: cultural differences, our willingness to deal with change and our ability to manage and operate in an Asian environment. Perhaps this is because our businesses have been able to operate in a relatively sheltered and comfortable competitive environment. With globalisation and technology actively tearing down geographical barriers, it is unlikely that we will remain in such a comfortable position for much longer. Engaging with Asia through greater focus and investment and by building the necessary skills within the business, may be of lesser risk than doing nothing and being exposed to competition from those who seek to “play in our patch”. So what’s the advice for those willing to take on the challenge to successfully do business in Asia? 1. Lead with strategy and take a portfolio approach. Make sure you identify a strategy that takes account of your value proposition, has regard to the competitive landscape and has a focus on how you plan to execute in the market. It is also necessary to address the capability gaps that exist within your workforce that may inhibit the successful execution of the strategy. 2. Invest in learning the culture. We talk about Asia as if it is one place, but it is many countries with multiple languages, governments, histories, religions and traditions. Taking the step into Asia requires your business to address these variances on a country-by-country basis with a keen eye and a deep cultural awareness. 3. Use existing relationships to help build your network. This will assist in understanding the culture and, importantly, how business gets done. 4. Understand ‘uniquely Asian’ market dynamics. Take the time to understand the complexities and challenges of doing business in Asia. Through careful attention and a focus on building key relationships with appropriate partners the risks can be mitigated. 5. Keep timelines realistic and be patient. It is important to understand that achieving success in Asia requires patience and careful planning to get the settings right. Set financial plans with regard to business sensitivities, noting that it will take time. 6. Proceed with caution. The business environment is far more nuanced and complex than most appreciate. As a result investing in Asia requires careful planning and extensive due diligence. 7. Go easy on integration and focus on what’s important. Remember you are going into a new place so don’t be too keen to force your ideas onto your new partners or employees. Go easy and make sure that the focus is on the key risks from the beginning. Australian businesses cannot ignore the opportunity that engaging with Asia offers, however, it requires a strategic approach sensitive to the risks and opportunities. Michael Browne is a Partner at PwC pwc.com.au