Succeeding at Business in Southeast Asia E-Book

Eric Moraczewski

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 239

Veröffentlichungsjahr: 2020

Beschreibung

Succeeding at Business in Southeast Asia walks readers through the steps necessary to build and execute a market entry strategy into Southeast Asia, similar to what Eric Moraczewski did with his clients at FDI Strategies. Step by step, readers will learn about the top five pitfalls as well as common areas of concern and mistakes that can be avoided. These can be internal or external issues, country-specific or endemic to the region, but they all are issues Moraczewski solved regularly with clients and other businesses around the globe. Where possible, examples based on his own career experience are used to help reveal the bigger picture and affirm that everyone can, and often times will, make mistakes. Written with humanity and conversational clarity, Moraczewski's book delves into critical topics such as relationship-building, power structures, and the role culture plays in economic value and ethical standards. He inspires would-be investors by tapping into universal human behaviors and shows how they can be leveraged to make the right business connections abroad. Additional topics include: * Joint ventures * Franchising strategy * Small businesses breaking into Asia * Lessons to bring back from foreign markets

Leseprobe

Table of Contents

Cover

Introduction

CHAPTER 1: The Importance of Relationships: How to Build and Maintain Them

The Critical Importance of Face Time

Understand the Power Structure

Five Ways to Build Relationships in Southeast Asia

CHAPTER 2: The Role Culture Plays in Determining Economic Value

Negotiation: Price Is Not the Only Consideration

Determining Economic Value

Five Common Economic-Value Mistakes Companies Make in Southeast Asia

Notes

CHAPTER 3: The Role Culture Plays in Determining Values and Ethical Standards and Practices

Caveat Emptor: Meet Before Getting Married

Five Ethical and Values Issues Businesses Encounter in Southeast Asia

Notes

CHAPTER 4: Gauging Market Potential: How to Spot Trends and Avoid Costly Errors

Sleuthing for Indicators of Market Potential

Five Common Mistakes Companies Make When Researching Market Potential

Notes

CHAPTER 5: Understanding the Power Structure: Who’s

Really

in Charge?

Chinese State-Owned Enterprises (SOEs)

Japan’s Keidanren

India’s Benami

Five Common Mistakes Businesses Make When Confronted with the Power Structure of a Southeast Asian Country

Notes

CHAPTER 6: Building Your Strategy: How to Determine Where You Want to Go

Five Issues Many Companies Face When Developing a Strategy for Asia

CHAPTER 7: Designing Your Plan: What to Consider and How to Evaluate Them

Four Issues Businesses Encounter When Building a Plan

CHAPTER 8: Executing Your Strategy and Plan: The Implementation Phase

Managing Your Supply Chain

Five Execution Errors Businesses Tend to Make

People, People, People

Notes

CHAPTER 9: What to Consider When Making the Go/No Go Decision

CHAPTER 10: Joint Ventures and Franchising: The Pros and Cons

Five Common Mistakes and Myths in Joint Ventures and Franchises

CHAPTER 11: An Asian Strategy for Small Businesses

Five Common Mistakes Small Businesses Make When Entering Asia

CHAPTER 12: Utilizing Resources: Where to Find the Information and Connections You’ll Need

City Governments

State Governments

Federal Government

Accounting Firms

Law Firms

World Trade Center

Foreign Trade Consultants

International PEO

International Trade Councils

Five Common Mistakes Businesses Make When Dealing with Trade Organizations

Notes

CHAPTER 13: What You Should Take Home

Five Things that Make You a Better Employee after Working in Asia

End User License Agreement

Guide

Cover

Table of Contents

Begin Reading

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SUCCEEDING AT BUSINESS IN SOUTHEAST ASIA

Common Mistakes Companies Make and How to Avoid Them

Eric Moraczewski

Succeeding at Business in Southeast AsiaCommon Mistakes Companies Make and How To Avoid Them

Copyright © 2016

Published by the Institute of Management Accounts (IMA)

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping, or by any information storage retrieval system without the written permission of the publisher except in the case of brief quotations embodied in critical articles and reviews. For permission requests, write to the publisher, addressed “Attention: Research Coordinator,” at the address below:

Institute of Management Accountants 10 Paragon Drive, Suite 1 Montvale, NJ 07645

www.imanet.org

Because of the dynamic nature of the Internet, any Web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

ISBN Print: 978-0-996-72936-9ISBN ePDF: 978-1-119-73706-3ISBN ePUB: 978-1-119-73705-6

First Edition

A special thanks to my wife, Kathryn, who sticks with me and supports me no matter how busy I get, and to my children, James and Nora, whom Kathryn and I are so very fortunate to have in our lives. Thank you also to my parents, sister, and my in-laws who help us so much as we take on work, school, and everything else that comes up in our lives.

Introduction

Over the course of the last 10 years I have been involved in doing business on four continents, in 20+ countries, and more cities than I can count. My experience has led me to appreciate a lot, understand some, and teach a little bit. I have presented at conferences and seminars, primarily on Asia, and specifically on China, regarding private equity, how Chinese capital is affecting business in the United States, business opportunities in Asia, and human resource practices in Asia. Currently, I run a cross-border growth strategy company called FDI Strategies where we build market entry strategy, put together a plan, and help a company execute these strategies. Truly, it is a lot of fun working with companies from assorted industries, with varying needs and distinctly different opportunities. No two days are alike and every day is exciting. More than anything, I am blessed to work with special people every day of my life, from our board of directors to our interns. This enthusiastic, exceptional team makes me look better than I am and ensures that every day is rewarding.

My background is in finance and accounting; needless to say, I like numbers. When I think about some of our clients who focus solely on the United States, I am mindful of the fact that the United States makes up five percent of the world economy (based upon population). This is a large number for one country, no doubt, but it also shows that there’s immense potential outside of the U.S market. If only there was an extremely large population somewhere in the world with a growing middle class who was beginning to consume more and more. Oh wait, there is—Southeast Asia! Today, Asia makes up roughly 60 percent of the world economy based on population. The Southeast Asian markets have seen immense growth over the last 20 years and continue to evolve every day; perhaps most compelling is the speed at which this demographic is increasing. No longer does it take 50 years for a middle class to evolve. In the last 10 years, while traveling back and forth from China, I have witnessed dramatic change.

My goal in this book is to walk you through the steps necessary to build and execute a market entry strategy into Southeast Asia, similar to what we do with our clients at FDI Strategies. You will learn about the top five pitfalls as well as common areas of concern and mistakes, in a step-by-step manner. These can be internal or external issues, they can be country-specific or endemic to the region, but they all are issues we have regularly seen with clients and other businesses. I have tried, where possible, to use examples—concrete illustrations—based on my own career experience to help reveal the bigger picture and affirm that you are not the only one who makes mistakes. As I’ve learned from hard experience, mistakes are also great opportunities for personal growth and knowledge.

My primary focus is on showing you how to develop a strategy, use that strategy to build a plan, and use that plan to execute and succeed in the market. After all, we all want to succeed. Putting our best foot forward is the first step toward finding success.

I will also examine topics that may apply to some, but not all, companies—joint ventures, franchising strategy, and how small businesses might go about developing their own Asian market entry strategy. In addition, I will also touch on the relationships that most people already have and do not know they have, and how to utilize those relationships. Finally, I will explore the takeaways from your Asian strategy and operations. This is important because, while it is great to grow your business in a foreign country, there are many lessons you can learn from foreign operations and apply to your home market. If you do not do this, you are not maximizing the value that can be derived from your international expansion.

Developing a strategy involves examining several things. To begin with, we look at a firm’s history to understand why a company is where it is currently and to gain an understanding of what brought it to that point, which provides an overall understanding of the firm. From there, we look at the external environment, the factors that exert a force on the firm and then the forces the firm exerts on the external environment. Many times we forget about how much the external environment propels a company in a certain direction, but laws change and companies shift. Consider the Affordable Care Act in the United States: it would be hard to find a company that this legislation did not affect. Finally, we look at the present environment, what is going on within the firm and what effect these internal dynamics may have on the business as a whole.

This process tells us where a firm is today, how it got there, and what forces are playing on it. We use the same process if we are looking at expansion into foreign countries or looking to help a company build an overall strategy within its current markets. If you do not understand where your company is and where it has come from, how can you ever expect to know where it is headed?

FDI’s director of strategy spent many years in the Air Force as a chief strategist and taught strategy to the Air Force leadership. He likens much of strategy to a ship in the ocean: think Christopher Columbus sailing to the New World and the currents that pushed him toward his destination (and out of Spain). These currents are his history and his present, but they also affect where he will go in the future.

Once you’ve assessed where you came from, you must figure out where you are going. When referring specifically to Southeast Asia, you need to look at who you are as a company and how you can map your strengths to what you are looking to do in those markets. So, if you are selling a new technology that needs a very established infrastructure, you should probably look at the opportunities of Japan, perhaps Singapore, or even Korea; you should probably not look to Malaysia, Myanmar, or Indonesia. Using what you know about your company and your abilities, as well as your interests in the markets, you can select a country, or, perhaps, if you have the resources, several countries.

Once you have decided on your focus market, how are you going to enter this market? Do you need a partner to enter the market? Are you setting up a Wholly Owned Foreign Entity (WOFE) or forming a joint venture or even franchising your business? Do you need to set up a holding company in a foreign market first? In some instances this is still necessary in China, it is still necessary for work in North Korea, and it can be helpful in several other countries. Will you manufacture in the market itself, or import all goods from your home market? Will manufacturing in the market help develop sales opportunities? How do you develop distributor relationships?

Many of these questions will be answered by a consulting team or an in-country manager that you hire. It is important to hire an in-country manager and have some boots on the ground. Without an active presence on the ground, you are typically setting yourself up for failure. But it goes beyond just having an active presence. Are you giving that person/ those people the resources they need to succeed? If you’re not giving them the resources to succeed, you cannot expect success.

Next, it’s time to execute. The previous steps comprise the strategy and planning phase; both are very important, but without execution, those two steps do not mean much. With great execution but no strategy and planning, some businesses nevertheless achieve minimal success. A good company is often good at execution and planning, but if they’re good at developing and evolving their strategy as well, they’re often a very successful business.

So assuming you have your markets and plans in place, putting in continuous checks and balances allows you to make adjustments to your execution. This will ensure you do not stray too far in the wrong direction, or, better still, these continuous checks mean you are maximizing your opportunities and capturing the most market share possible. Properly calibrated, the balance you achieve allows for fluid movement so that your business has enough opportunities to succeed. Most people believe that with a good plan and a leader in place, things should just work out, and we hope they do, but plans need to be retooled with time and education so that you adhere to the lines of your overall strategy.

Think again of Christopher Columbus. Imagine him steering the Niña, the Pinta, and the Santa María across the Atlantic through currents and wind streams. What if he saw a storm in the distance—wouldn’t he look to avoid it, if possible, by shifting course? But if shifting course would not avoid the storm or would move him into a worse part of the storm, no doubt Columbus would have sealed the ships up and protected what he could hoping to get through with as little damage as possible. The same is true of your business. In any market, you will come across issues, and you’ll need to decide whether or not you will forge ahead and move forward into the storm or avoid that path if possible.

Now you have a general idea of our process. In this book, our focus will be on how to do this in relation to Southeast Asia. Full disclosure: A large part of my work in Southeast Asia has been in China. Recently, as I was contemplating the last 10 years of my life during which I lived in Washington, D.C, and Colorado Springs, Colo., it occurred to me that roughly one full year of those 10 years of my life was spent in Asia, roughly 10 percent of my time; and probably 90 percent of that time was spent in China. Obviously, there were times I was there more than others, but it adds up very quickly.

I mention this to give you an idea of the dedication required to build operations in Asia. Do not think that you will be able to fly in and fly out every once in a while. If you want to build sustainable operations, you need to show commitment to it, and part of that commitment is leadership time. There are several clients or potential clients in Asia who, every time I see them, want to know when I’ll be back; I doubt this is just because they want to see me again. It’s a question of commitment—telling them how often I will return and showing them what type of relationship we have the potential to develop if we do business together in the future. There are other commitments, such as in-country operations, which we’ll talk about as we go forward. But it’s important that you know this is a top-to-bottom commitment and decision.

“Commitment” is an important word when referring to Asia. Of course, it’s important in all markets, but commitment takes on many different meanings in Asia. There is the time and capital commitment that many think of initially. There’s a commitment to your partners, as you show them how you will work together, and that you are someone they want to work with in the future. There’s a commitment to that country’s government that you often make by devising a long-term business plan; a surprise to many from the United States or Europe is how often this is requested when you set up operations. Finally, there’s a commitment to your customers or clients, assuring them that you will not leave tomorrow and that your products and services will be supported in the future.

My background and personal experience in Asia is reflected in stories I recount throughout the book to provide color and offer a better understanding of specific areas that may cause problems. So, to begin, my initial foray into Asia began roughly a decade ago, while working for Gallagher & Associates, a museum planning and design firm. The company was setting up operations in Asia by forming a joint venture in Singapore. This was an easy entry into the Asian markets; I often refer to Singapore as “Asia-lite.” Singapore provides a great jumping off point in a beautiful location (think of Hawaii and New York City blended—this is Singapore), but also a very friendly country in which to work abroad. It was easier for Gallagher & Associates because we formed a joint venture with a company that we had worked with since 1979 (yes, relationships matter above all else in Asia). Over the next couple of years, we grew operations in Singapore and started taking on projects throughout Asia.

Eventually, the company was hired to design the Shanghai Natural History Museum, a project that required our physical presence in China. It was then that I began commuting back and forth to set up our offices, registering us as a Wholly Owned Foreign Enterprise (WOFE), and establishing relationships with lawyers, accountants, banks, and other service providers. As our business grew over the next several years, I continued commuting. After being present from the project’s inception, witnessing all that went into building the museum along with our company’s sustained presence in China, the day the Shanghai Natural History Museum opened was really exciting.

Roughly three years ago, after spending the last seven years working in various international markets and at the request of several investors, I started my own business in Colorado Springs. The business, FDI Strategies, is focused on foreign direct investment into and outside of the U.S. market. Because the large part of my experience was in Asia, we initially focused on Asia, with much of that focus on China. During this time, I traveled to Hong Kong, Taiwan, and Japan, and incorporated meetings with companies from Vietnam, Malaysia, India, and many other countries. We were fortunate enough to work with companies both in the United States and abroad in a wide range of sectors, including construction, data storage, medical devices, food and beverage, consumer goods, and more. During the last three years, there has rarely been a day that I have not learned something new, either about countries, regions, or industries.

In 2015, I was fortunate to be invited to join the Governor of Colorado’s Trade Delegation traveling to Japan and China. Because of my experience in China, I planned that portion of the group’s itinerary. This trip opened my eyes to a different side of doing business in Asia. Because I was traveling with Governor John Hickenlooper, doors opened quickly—much more quickly than when I was traveling on my own on business. It also changed previously established relationships.

The takeaway:

Get to know people, develop relationships, and it will help you continue to grow your company, especially in relationship-driven cultures across Asia, where relationships are fundamental to success.

It’s important to note that while there are many practices in Asia that we are not accustomed to in the United States, there are also some fundamental similarities to which we all can relate. When a Chinese company is setting up operations in the United States and sending over an executive to run the new operation, they want two specific things: First, they want great food (specifically, great food they are used to), and second, they want better for their children than they have, or had, for themselves. These two pieces of information are critical because, at the end of the day, no matter what the culture, we strive for many of the same things. I often tell people that when I travel abroad I love the food I get to try, but eventually, come day six or seven of my trip, I just want a cheeseburger and fries. Take this further and think about moving abroad: Eventually you will want your own comfort food; the same holds true for someone coming to either the United States or Europe from Asia.

The second similarity is perhaps even more fundamental than food, and that is the desire to protect, provide, and improve the lives of our families. My parents and my in-laws worked extremely hard throughout their lives to make sure that their children were not only able to get a walking start in life but hit the ground running. One of the most important lessons I learned in life is that there are two things that lead to success—hard work and intelligence—and you can control only one of those. This is something I learned from my father, not through his words but by his actions. Now, as a father, I want to be able to provide even more for my children. Many Asians have this same mentality, and this is why you see their children coming to study in the United States and Europe, why you see parents driving their children to do and be more.

It is important to remember to pay attention to the differences in cultures between the United States and Europe and Asia. Not recognizing them can be the difference between success and failure. But it is our similarities that bring us together, and in a relationship-driven culture, building on those similarities can result in a tightly bound friendship. It can be what differentiates you from your competition.

CHAPTER 1The Importance of Relationships: How to Build and Maintain Them

A relationship-based sales approach will maximize the future value of an opportunity. A transactional-based sales approach will maximize only today’s value.

Asian culture is a culture based upon relationships. These relationships mean more to Asian businesspeople than any other business skill set. Their premise is that if I can trust the person I am working with, together we can figure out how to do something. It also has a lot to do with “saving face” in a business environment. If you are responsible for hiring someone and six months later they get caught stealing from the company, this reflects as poorly on you as it does on the person actually stealing. Why should someone trust your judgment in the future if you were willing to bring this person into the business? Similarly, if this is a person you would associate with, are you the person I should associate with my business? The other focus here is that a relationship is not short-term; it is a long-term view that says we will work together for years and years to come. Oftentimes during this process, personal and professional relationships intersect.

I recently took on a client for U.S. expansion after becoming acquainted with the spouse of one of the company’s vice presidents years ago. Any time I am in China, I get together with this person because he has become a friend. We have explored some business opportunities together but never done business together. When his wife’s company had a need, I was the first, and only, person they called for their growth. This is actually a common phenomenon that I did not foresee years ago when our friendship first began.

The Critical Importance of Face Time

Far too often we see people in the United States trying to form or build a relationship, meaning they either reach out directly, or they try to build relationships through social media websites like WeChat and Weibo; some have also started to utilize U.S. websites like LinkedIn. This type of relationship building may work well in the United States and yield results eventually, but this is not the best way to build relationships with Asian businesses.

A problem that often arises is that agreements need to be signed by high-ranking officials in the company, senior leadership, who are not always in the market and available to sign agreements. Figuring out a way to manage this is critical. Among the factors to be considered are the size and value of a client, the potential of the client, and what other opportunities await beyond the signing ceremony. If the potential across all of these factors is low, a company may choose to have a local market leader sign the document. If it is big enough, it may be a country or regional leader, and if it is really big, someone from headquarters may come over to sign the agreement. Reading the appropriate nature of the ceremony is key to knowing who should attend it.

There are various ways to build relationships in Asia. A few of the better ones are:

Meet people face-to-face using your current network

. Having someone introduce and vouch for you allows the person you are trying to build a relationship with not to question your value.

Attend trade shows and conferences

. While this seems very similar to a blind email, it tends to yield better results. By attending conferences where key prospective clients are present, you maximize your opportunities. A better way to go about this, if possible, is to speak at conferences in Asia attended by key prospective clients. Letting the conference “vouch” for your capability is a great way to enhance your status.

Travel with a trade delegation

. This can also be a great way to build new relationships—if the delegation is going to meet with the “right” people—otherwise you may find yourself making relationships that are not useful to you. The United States-Vietnam Chamber of Commerce regularly travels to Vietnam as part of a delegation. When doing so, high-ranking officials from Vietnam show up to meet the trade delegation and encourage business through tax incentives, location incentives, and other opportunities that might not be readily identifiable from abroad. There are similar organizations for almost every country, and they each have unique contacts that can be very beneficial to your country.

The takeaway:

None of these efforts are done from your office or home. If you are building a relationship without meeting the person, 99 percent of the time, it will fall apart or, worse yet, there will be more negative aspects to the relationship than positives where you waste time, energy, and money and have no chance of success.

Understand the Power Structure

In Asia, more often than not, there is only one decision maker at a company, usually the CEO, president, or chairman of the board, but occasionally that’s not the case. Pay attention to subtle cues in a meeting, such as seating placement, who walks into the room first and last, and how your counterparts interact with each other. Usually who can and will make the decisions in a meeting is obvious, but not always.