Throughout the 19th Century, European powers dominated the world. Then America led in the 20th Century. Now, the 21st Century will be the century of Asia.
Today, in January 2014, Western corporations are still larger and more numerous, and the western approach to global business is still dominate. Bust this is shifting rapidly towards the East … to Asia.
Why is this occuring?
1. In the past decade, GDP in Asia as a region has been growing over 5% annually and will continue over the next many years. In some countries like China, the main economy in Asia, the annual growth has been close to a staggering 10%. At this pace, dozens of millions of Asians move up every year from poverty to the middle class and hence, start consuming more products and services. Also, a few million move from the middle class to join the upper classes or become ultra rich.
2. Government debt levels are low and expenses are under control. New infrastructures are being built, health and education systems are improving and, in some cases, are becoming better in quality than the western ones according to international reviews.
3. Last but not least, people (particularly young people) are excited about the future and are willing to make any personal effort necessary to grab the opportunities they believe lie ahead of them.
In contrast, in the western world:
4. Governments and families are heavily in debt. This is not only bad in itself but it is aggravated because western politicians and citizens behave like nobody will ver pay the immense debt. Their kids and grandchildren will!
5. Accommodated people are accustomed to subsidised living by a welfare state that is not sustainable.
6. No growth, even negative growth in GDP, per capita income and population.
Very importantly, points 1 to 6 are making the shift happen at an incredible fast speed.
In this context, many western companies are looking to Asia, either for growth or even for survival. Many corporations make the move and, unfortunately, most of them fail to enter Asia successfully. There are several reasons for that failure, but one stands above any other. What I call the effect of the “complex of superiority”.
What do I mean by that?
In a unconscious way, western executives assume:
1. That business is business no matter where you are located, and that to start a business in Asia, you should do so the same way you would in Europe and America. This is wrong; businesses are created in a very different way in Asia and even within different Asian countries.
2. That their business model and their operations, marketing and so on can be replicated exactly in Asia. This is not true either, not only because of important differences in the legal or financial frameworks, but because the mindsets of the relevant stakeholders in Asia are different too.
3. That the western executives are better educated, higher performers and, in general better equipped for success. False again. Western executives are just different than local Asian and, if any, they are in an inferior position to lead businesses because they are alien to Asia and do not understand the driving forces that influence a given Asian country and marketplace.
Because of this 3 simple points, corporations fail to enter Asia. It looks simple, but the solution is complex. Those three traits are deeply rooted in the western mentality.
Why so deeply?
I want to believe that it has nothing to do with racism or new post colonialism. What I believe is:
1. The Western people have deeply ingrained in themselves that their main social organisations are best. Western style democracy, the welfare state with high taxes and high debt, its market regulations and so and so. And this “Holy Truth”, does not even allow for a discussion. It is interesting to observe that people holding their democracy as superior do not accept even to discuss any other kind of social and economic organization.
2. Western business schools and universities, multinational corporations and big legal, tax and audit firms set the global “good practices”.
3. A sense of domination of the western culture ranging from the English language, to food, lifestyle, personal values and family organization.
So, what to do to overcome all of this and make Western corporations successful when they enter Asia and at a reasonable cost?.
I have established 5 tips to success:
1. Doing businesses in Asia is not the same as doing businesses in the West. Engrave this is your mind!. There are many differences and one of them is critical, the importance of contacts and personal relations,
2. You are a host in an Asian country. Behave like that. Be humble, be respectful, and be interested in the local culture. Study, analyse, and learn what surround you.
3. Do not get frustrated and take shortcuts. Do not assume that Asian countries do not have regulations as you have in your country of origin, and even worse, do not assume that you are not required to abide by them. Some of these regulations are more business friendly than in your country, some less, but it is what it is, and the same way that you follow them in your country of origin, follow them in the country where you reside.
4. Count on local talent. Local people can be just as good of executives as the ones in your country of origin. To build a company based on expatriates will prove very costly without any important benefits.
5. Don’t act like a “machete man”. Ask for advice, contact local consultants that will hold your hand, will help you strategize and, very importantly, will introduce you to the local key contacts.