Resource based and Market based : Resource Management
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The signs are there: the Asia Pacific century has already begun. Western fin speed up their development in the region if they want to survive and prospe new global business environment. For companies already established in A challenge is to keep up with regional growth. For newcomers, it is to find and beachhead from which to establish and develop a presence in the region.
This has several practical implications; all companies need:
1. a strategic mandate for the region: rather than the simple addition c country-by-country strategies, it should express an overall corporat ambition for the region, supported by adequate resources; this mandat can be designed by using the framework proposed here;
2. an energetic approach: Asia is part of the global battlefield and mw mobilize all corporate capabilities. The region is no longer marginal;
becomes central to the corporation's strategic effort. ABB expresses this by saying it has to 'Win the Battle of Asia';
3. a special emphasis on developing people: the game is no longer to post a maverick expatriate speaking the local language to the Far East, but to create a many-layered population of managers capable of turning the corporate ambition into results. This involves:
identifying and appointing international managers able to pioneer business development in Asia by building networks, recruiting local talent and generating business opportunities;
rapidly developing local managers who can learn the corporate culture and manage local operations (some of them will later develop into international corporate managers);
that a product manager, plant manager or technician should welcome a posting in Asia and see it as a normal stage in an international career, not a waste of time;
that managers at headquarters should be convinced of the strategic importance of Asia Pacific, and familiar with its business practices and logic: only in this way will they understand and support development in the region. Just as the general manager must understand finance, marketing or leadership, he or she must understand Asian business.
In practice, competitive advantage depends on six major strategic resources: finan people, supplies, information, location, sponsorship. Western firms operating in Pacific are at a relative disadvantage as regards all six, particularly people information. Developing these resources requires continuous efforts: forming links schools and universities, financing scholarships, sponsoring social and cultural e cultivating relationships with journalists, lobbying, compiling and updating intelli reports... All these cost money; the returns are difficult to estimate, but they are su take a long time.
The most salient characteristics of doing business in the region are the following:
It is difficult to get reliable information.
Maintaining smooth and regular contacts with government officials is essential.
China and Vietnam lack a strong legal framework; the region has a general resistance to rely on the legal system to resolve disputes.
S Corruption is a frequent practice in some countries.
Personal relationships, called guanxi in China, play a greater role in Asia than anywhere else in the world.
Business cultures are hard to decode in terms of values, norms, behaviours and operational practices; the firm must invest in cultural understanding and develop a talent for learning.
S Financial profits are usually slow to come; this calls for patience.
Western management approaches must be adapted without losing strengths such as quality, integrity, and technological expertise.
Products or trademarks may be copied - with no legal redress available.
Western firms must then make specific, tailored strategic investment resources, assets and competencies in order to meet the challenges raised b environment and to build capabilities in Asia Pacific
in positioning a business in Asia Pacific, a company must decide whether to adopt a regional or country-by-country strategy. Asia Pacific is so diverse that there are as many differences between Japan and Indonesia as between Germany and Tunisia. The only regional economic group, ASEAN, is a long way from becoming a common market. Differences in habits, religion, government policies and regulations erect solid barriers between countries.
There are, however, several arguments in favour of a regional approach:
Business functions such as strategic intelligence, financial engineering, R&D, training, and specialized services, only achieve economies of scale if they are in a central location from which it is possible to service the whole region.
It is still possible for Western firms to achieve a regional or a subregional coordination of activities, particularly for components, spare parts and semi-finished products.
Certain industries must serve regional customers and compete with regional competitors in order to make a regional strategy worthwhile.
Because the directors of Western multinationals are used to thinking in terms of large regions such as North America or Europe instead of individual countries, managers in Asia Pacific often find it easier to obtain adequate investment resources if they present a regional perspective rather than a collection of country strategies.
Therefore 'strategies for Asia Pacific must combine a regional approach at country-by-country approach.
egrnenting in Asia Pacific is complex because there are many different marketing environments. At one extreme Japan has a very sophisticated and unique segmentation; at the other, Indonesia or the Philippines have largely rural economies and pyramidal markets. In between, the segmentation of the fast-growing economies of the NIEs is 1creasingly similar to Western markets. In China and Vietnam, it is still in its infancy but it evolves rapidly.
Literature on strategic management usually advocates an 'either/or' competitive strategy: e#ber a company positions itself as the cost leader in its industry by offering lower prices, or it tries to differentiate itself through better technology, quality or services. In Asia Pacific this approach is inadequate: Western firms must offer low prices and good quality, and good service, and a short response time, and appropriate financing. The expectations of Asian customers usually range far wider than Western firms are used to. In Japan, customers are very exigent in terms of product and service quality. Elsewhere in Asia, consumers want the best of both worlds: great price and great performance. In other countries still, the decisive factor is relationships and indirect services. This variety calls for flexibffity and sensitivity from the Western manager.
Before a company decides to enter a new market, it must decide what type operation it needs there. Once it has become established, further decisions must made in order to develop and consolidate. These decisions must be based on company's experience and capabilities, as well as on the strategic appeal of differ industrial sectors or countries.
An important decision is whether to enter a market alone, by setting up a ni operation or acquiring an existing business, or through a partnership (joint ventu licensing or franchising agreement).
Countries in Asia Pacific command different entry strategies:
Platform countries such as Singapore or Hong Kong can be used as bases at the entry stage for gathering inteffigence and initiating contacts; later they can be regional hubs. Medium-sized companies new to the region can establish listening posts in these cities.
In emerging countries such as Vietnam, Myanmar or Cambodia, it may be a good idea to set up a presence through a local distributor and a representative office; these wifi build the relationships needed to set up either a direct local operation or a joint venture.
In growth countries such as China and the ASEAN 5, Western companies should expand quickly to take advantage of the opportunities offered by rapid economic development.
In maturing and established countries such as Korea, Taiwan and Japan, a significant economic infrastructure is already in place; so are local and international competitors. The challenge is to build the operational capabilities needed to catch up with these competitors through either a joint venture, an acquisition or a large investment.
Western firms should consider several factors when deciding how to enter a market in Asia Pacific: its overall attractiveness; costs; their own ability to enter and develop the resources, assets and competencies needed in good time; government requirements; the competitive situation; political and operational risks. A firm will choose its country (or countries) of operations based on the attractiveness of:
its market: in terms of size, growth rate, segmentation, sophistication of demand, intensity and nature of competition;
its resources: the availability, quality and cost of raw materials; the costs, productivity and attitude of labour; supplier networks; quality of information; financing; infrastructure; logistics;
political and monetary stability, regulations, price and exchange controls.
While political and economic developments make some countries more popul with Western firms, conditions should obviously be assessed industry by industry. Ea company must design its own criteria. This assessment is frequently made in two stel first an evaluation of the political and regulatory climate (this is known as country-ri; analysis); then a business analysis covering both market and resources for sped projects.
If the Western company's primary strategy is access to resources, it will target countries with the best and cheapest sources of supply, setting up sourcing offices or production plants in areas that have cheap labour (south China) or which specialize in processing raw materials (Sumatra, Kalimantan). There is a danger, however, in focusing exclusively on resources and neglecting Asia's potential in terms of markets, learning and competitiveness, as some US companies learned in the 1960s and 1970s. Their strategy of setting up assembly plants in export processing zones backfired as conditions in terms of labour costs and government policies towards foreign business can change quickly in the region.
A company with a marketbased strategy will set up marketing, maybe manufacturing activities, either wholly-owned or with local partners. Its choice will depend on market potential, the competitive climate, government policies and its own capabilities.
Far from having to choose 'either resources or markets', Western firms should adopt an appropriate mix of the two so that the search for resources and markets form a mosaic of activities across the entire region.
positioning consists in a set of choices: does the company want access to resources, or markets, or both? Which countries does it want to operate in? Which entry mode will it choose - wholly owned subsidiaries, or partnerships such as joint ventures, licensing and franchising agreements? Which activities will it establish? Which segments will it compete in? Should it integrate its activities across the region, or country by country?