Raymond Daly is an Australian management consultant who shares with Joe Lizzerd’s Australian readers, his insight into some of the experiences and lessons he learned from more than 20 years operating in a variety of senior roles throughout the Asian region.
He was instrumental in the setup and management of a manufacturing company in Thailand over a period of 4 years. His success in developing export markets was recognised with the AEEMA Australian Exporter of the Year Award in 2002.
In Part One of this two-part series Daly looks at the requirements of successful business investment in Asia, understanding the target market, and evaluating and selecting a partner or investment.
Business in Asia is not a science. There are few exacts as are often understood in western business practices. A successful operator in Asian markets needs to develop a feel or touch and an appreciation for the subtle aspects of the Asian business environment (this is not gained overnight). Often a direction / opportunity to take is not immediately obvious – the trick is to consider what has been mentioned and discussed, even the less emphasised, and evaluate the potential. Be open to the feel, imagination and sense of the potential of an opportunity. Business in Asia is a mix of science with art.
Doing it well can and does take businesses to a new level. Significant growth and opportunity can be found which brings long term expansion, returns, viability and strength to a company.
Investing in a business venture overseas is an activity which should be undertaken only after a clear and defined objective is identified, the market opportunity assessed and a full understanding of the resource in human and financial terms is understood and established.
International business is not something to take lightly however it is an exciting and potentially very rewarding enterprise and one that can bring significant benefit to a company in several ways. These include company growth, personnel / product / service development and financial return.
Understanding the Target Market
Many companies head into export markets without fully understanding the differences in business and local culture. Sounds like a cliché and it is. However it is important to want to learn, appreciate and embrace the values, beliefs, society and customs of your target market. Your best people at home, while imbued with good business capabilities and work ethics may not be the best people to operate overseas.
Like any good venture the planning and execution must be carefully prepared. A clear vision of what the end destination is, how to get there, the expense, resource and what it will take to achieve success must be recognised. Once this has been determined, especially if you are embarking on your first ventures into export markets, three important factors must be recognised – Firstly your plans will need to be modified and changed to meet actual circumstances as you progress.
Secondly it will often take more time, effort and cost than you project (the same as the majority of business investments). And thirdly ‘Know that you do not know’.
On more occasions than I care to admit I recall sitting in meetings thinking ‘this is going so well, I’ll be heading home a hero’.
Only to be (figuratively) banging my head on the table a short time later thinking ‘how did that just happen?’ I realised that what I understood and presumed as the ‘systems’ and ‘methods’ of how business is done, so ingrained at home, do not always apply in Asia. This is not to indicate unethical behaviour (although that is not altogether uncommon) rather it is the use of different and unfamiliar techniques to achieve a business outcome.
Understanding and realising that you do not know how ‘it’ is done, all the time, is an important part of navigating through the Asian business environment. Many new venturers underestimate the capabilities of their overseas counterparts.
As an example, up until recently, China had a reputation as a communist state with less than structured business practices and capabilities. Many are surprised at how in a very short period it went from the chaos of the Cultural Revolution to the world’s second largest economy. They forget that China has been a leading proponent of capitalism for over 10,000 years and China has an incredibly developed legacy and tradition of passing knowledge and experience through generations.
If you find yourself in a position during the process of negotiations or dealings that seem above expectations listen to that little bell ringing in the back of your head. Take a break (make an excuse) and assess the proceedings. Get someone in your party (or yourself if alone) to play Devil’s Advocate. Determine if you are feeling good because things are going well or because you are being made to feel good.
Partner Evaluation and Selection
Most companies engaging in new markets initially rely on distributors, agents, partners, etc to develop and drive the business forward. In this circumstance you are only as strong as your partner – be careful how you choose.
When determining potential partners do your due diligence. Check out their history, reputation, record, associates, etc. Talk to potential customers, suppliers, Chambers of Commerce, Austrade, industry and business groups, etc. Be cautious – like a marriage a good partner is the best of things and a bad one is the worst.
If there is a major investment in an overseas company, either by way of JV, partnership, manufacture under licence, purchase, etc. it is crucial to perform both financial and legal due diligence. When performing due diligence do not utilise companies proposed by your potential partner or their associates. Independence is critical.
Perform your own diligence assessment of the products and or services offered by the potential partner. Get someone independent in your company to benchmark and then evaluate the partner offerings and capabilities.
In Part Two Daly looks at the need to know about local regulations when doing business in Thailand, developing relationships, if relevant, engaging your staff in the new business venture, avoiding ‘lobbying’, and some concluding reminders.