Global Business

Asia-Pacific Dimensions

Erdener Kaynak, Kam-Hon Lee, Erdener Kaynak, Kam-Hon Lee

• Publisher: Routledge
• Year: 2018
• ISBN:
  9780429772290
• Edition: 1
• Topic: Economics
• Subtopic: Exports & Imports
• Index: Economics

This book, first published in 1989, examines the practice of international business in the Asia-Pacific region. It examines the factors which have influenced its growth and dissemination and analyses particular elements in a transnational, cross-cultural and comparative way. By relating its conclusions to research findings from elsewhere, the Asia-Pacific area is placed in the context of the global business scene. By synthesizing the established body of knowledge and offering managerial insights the book has much to offer the researchers and policy makers of today.

Chapter One

ROLE OF THE ASIA-PACIFIC REGION IN GLOBAL BUSINESS: AN INTEGRATIVE STATEMENT

Erdener Kaynak

During the past decade, practising managers, researchers, public policy-makers at all levels and students of international business have increasingly turned their attention to strategic planning aspects of international business. This is not a surprising move, as the majority of private firms and public enterprises on both sides of the equator are increasingly venturing into those global markets with tremendous opportunities in order to attain their profit and growth objectives as well as to maintain and improve their market share. Although a substantial body of research and reading material is now available on the behaviour and practice of global business firms in the international context, strategic planning aspects of international business unfortunately have not been adequately studied. To overcome this, managers of global businesses need to view their operations from a global perspective. They must think and act as though the whole world is their market and identify the most lucrative market niches within accordingly.

In general, it is observed that the US firms show the tendency of moving from local (United States) to regional (Latin America) and then into international operations into those regions and/or countries where the US firms have geographical and/or psychological proximity as well as competitive advantage. Those companies which are either entering or exploring market opportunities in relatively little-known foreign markets are in dire need of resource and reference material related to the countries/regions of interest to the company (Kaynak 1985).

At present, there are many books available on international business, but very few of them are region or area specific. Even the few books that are available in the current international business literature dealing with regiocentric business issues suffer from a lack of conceptual and/or analytical insights which are vital for the necessary impact. In most cases, the books contain substantial amounts of raw data, however, without any guidance and refinements they do not offer much help to readers.

In most cases, international business books dealing with specific regions (i.e. Asia-Pacific) of the world are very scarce indeed. Whatever is available is in the context of a single country, industry or a sector examining specific issues in a descriptive or normative manner. As far as it can be determined, little has so far been accomplished in the way of synthesizing the established body of knowledge and offering managerial and analytical insights to the practising international business manager by providing him with yardsticks to measure his international business performance across nations or in specific regions of the globe. In recent years, a number of conference proceedings have also appeared as a result of international conferences organized in countries like Singapore, Hong Kong, Taiwan, and Malaysia in the Asia-Pacific region. The major problem with these is that they are not integrative, contributions are loosely combined and hence lack much desired contribution to the body of knowledge. A number of international organizations, chambers of trade and commerce of various countries, indigenous governments of the region, as well as Business International and Business Asia did produce reports on Asia-Pacific business, but they all suffer from the same shortcomings which have been discussed above.

All of the books and monographs written so far on Asia-Pacific business and trade are very specialized by country, industry, or sector. As a result, global business practitioners could find very little information to act on in the volumes published so far. The lack of cross-cultural/cross-national and comparative orientations make the existing books of limited value. In the light of these, it was felt that there is definitely a vacuum in the current global business literature which needs to be filled in by (1) relating the Asia-Pacific factor to the global business study and practice, (2) examining the structure as well as characteristics of intra-(among the Asia-Pacific countries) and across/inter -(between the USA and the Asia-Pacific countries) trade patterns, and (3) emphasizing more on an interaction mode the horizontal dimension.

The aim of this book of readings is to increase our understanding of the strategic aspects of international business in the Asia-Pacific Basin. All of the chapters in this book attempt to analyse international business elements within the industrial field, for example marketing, management, organizational development, technology transfer, operations management, banking, and personnel issues. It was hoped that the unique position of the area would provide fascinating material. As such, a conceptual understanding of the Asia-Pacific factor in global business was introduced at the outset of the book. Throughout the book indigenous emphasis of the insiders’ views is given prominence. To be able to meet the above twin objectives, scholars with proven ability and expertise, established track record, and high academic standards were invited. The co-editors solicited original, significant, and analytical contributions written by subject specialists. A priority was given to those submissions which were prepared by authors coming from the Asia-Pacific region. It was felt that these contributors will enrich the content of the book and be able to offer additional insights into the theory and practice of global business in the Asia-Pacific region. The scarcity of scholarly work of this nature in the current international business literature has made this work much more interesting and essential.

This unique book of readings is broken down into five major sections, namely (1) global business issues, (2) global management issues, (3) global marketing issues, (4) global trade issues, and (5) the future of global business in the Asia-Pacific region. Each section looks at a particular aspect of global business with reference to the Asia-Pacific region by drawing case examples from countries, sectors, and companies of the region. Every effort is made to examine those aspects of Asia-Pacific business which are of current interest to all parties involved in trade, investment, and market exploration in the region. To this end the following areas of study are examined in detail: (1) functional areas of international business in the Asia-Pacific Basin and comparisons with the practices of those in other regions of the globe, (2) the dynamics that account for the linkage of Asia-Pacific Basin national markets into international markets of the developed world, (3) how to determine the best methods available for marketing goods and services in different economic environments both at regional and national levels, (4) the method by which marketing institutions are linked together into viable and coherent business systems, (5) the type of environmental factors prevailing in different countries of the region which force changes in the business structure of the area countries, (6) how efficiently the business system performs its universal business functions in the countries of the region and how the weaknesses of the business system can be overcome in the region, (7) the various stages of market and business system development in the Asia-Pacific Basin as a working device for generalizing and possibly predicting likely developments in marketing and management in individual countries of the region as well as the general developments going to take place in the region as a whole.

Global Business Issues

In Chapter 2 Kaynak presents a skeleton for setting up the general framework for the whole book. As such, it is an integrative statement examining global business in and with the Asia-Pacific region countries as well as the prevailing business and trade practices among the various countries of the region.

It is stated by Duffy in Chapter 3 that trade within the Asia-Pacific region is growing at a rapid pace with inter-region trade growth rate being greater than trade with nations outside of the region. Past research not only confirms this fact but also indicates that two distinct trading spheres exist world-wide. At the same time, the impact of current research provides global businesses and governments with a variety of tools for more effective market segmentation and selection on a macro or country-by-country basis. Depending upon which country characteristics are selected, there are many differing views as to which nations are members of the Asia-Pacific region. Michael Duffy contends that when selected country characteristics are utilized in relation to trade levels and when nations are viewed purely on the basis of trade patterns, a more appropriate means of grouping nations in the region would be to describe it as the Asia-Pacific-America (APA) sphere. Once nations within this sphere have been identified, this greatly assists businesses in identifying a group of potential trading markets since trading prospects are greatest for nations within each trading sphere. As a general rule, trade will normally be greater between nations in the APA sphere. Once clusters of nations have been identified, country characteristics of individual nations such as socio-cultural, technological, economic and demographic characteristics can be used to further identify and segment potentially lucrative markets. Generally speaking, those nations with greater similarities in characteristics are more likely to be the best prospects for business enterprise success and potential markets can be prioritized based on country characteristics.

Internationalization processes of transnational corporations are found to emerge in a stepwise manner. Companies commit themselves through a gradual learning process. Information and search costs as well as perceived risks are higher in international compared to domestic investments (Caves 1982: 68-72). In general, companies tend to first establish themselves in geographically and culturally proximate markets and increase their commitment more and more, starting with agents and passing through sales companies to manufacturing companies (Johanson and Wiedersheim-Paul 1975).

Casual evidence on other source countries confirms the general impression that the bulk of their foreign investment go where the transactional and information-cost disadvantages are least: Japan to Southeast Asia; Australia to New Zealand; Sweden to neighboring European countries and the United States and France to French-speaking lands and adjacent European countries.

(Caves 1982: 64)

The question is whether this is a general process encompassing the total globalization of the multinational firm. Do investments in geographically and culturally more distant markets follow the same pattern? Hedlund and Kverneland conclude from a study of Swedish investments in Japan that the experience of Swedish firms in Japan suggest that establishment and growth strategies on foreign markets are changing towards more direct and rapid entry modes than those implied by theories of gradual and slow internationalization processes (Hedlund and Kverneland 1983:22). Johanson and Mattsson discuss this process for firms with various degrees of multinationalization and propose that it is mainly valid during the early stages (Johanson and Mattsson 1984). Further globalization of the more experienced company is rather a result of their international strategies and therefore less gradual and slow.

This proposition of a difference in internationalization processes is discussed in Chapter 4 by Jansson from the background of an empirical study of fourteen Swedish transnational corporations in South-East Asia. A detailed presentation is given of the three such processes. Two main conclusions are reached from this investigation. The first is that the proposition seems to be wrong, at least in a South-East Asian context. Indeed, the pace of investments is faster and the mode slightly more direct during later internationalization phases. But the main gradual commitment through a learning process is still there. The reason is that the assumptions for this theory are present also in South-East Asian markets. They have a relative information and transactional disadvantage compared to West European and North American markets at the same time as they are of marginal importance to the Transnational Corporations (TNCs). Traditional studies of the internationalization process are too narrow, since they do not include the organization of such activities. A broader framework is proposed where internationalization is analysed in terms of business strategies and multinational organization structures.

The chapter by Wang and Shen (Ch. 5) mainly deals with retrospecting and prospecting the Sino-US economic relations with respect to trade and investment. It is composed of three parts. The first part is concentrated on the development of the Sino-US trade, giving some historical background and increased emphasis on the commodity structure in their bilateral trade. The second part is devoted to the US investment in China, in this part the authors discuss the US direct investment in way of equity joint venture, contractual joint venture, wholly foreign-owned joint venture, compensation trade, and offshore oil exploitation in China. Complaints of the US investors while conducting business in China are touched upon, and efforts China is making to improve the business environment for foreign investment are discussed. In the last section of the chapter the authors present their own personal point of view about the problems remaining to be resolved in the Sino-US trade and economic relations, such as the trade balance between two countries and how the two sides should make joint concerted efforts for improvements of the trade policy and how one should look at the protectionism and the issue of restrictions related to transfer of technologies from the United States to China.

Global Management Issues

Strategic management is an important aspect of Asia-Pacific region business. The chapter by McKern outlines the relationship between the choices in industrial strategy open to a country and shifts in its international comparative advantage. Specific reference is made to the problems confronting Australia in the late 1980s, as an example of a country richly endowed with natural resources but small in population and with an historically protected manufacturing sector.

The problem of developing an internationally competitive manufacturing sector in a country whose major source of comparative advantage is its strong natural resource endowment, takes on a greater urgency in the light of pessimistic views of the future of commodity prices. The chapter argues that a shift in the basis of comparative advantage for such a country is akin to the process of shifting the strategy of a firm. It is given effect by the behaviour of firms in responding to government policies. The Porter framework for the analysis of industries and the competitive positioning of firms is applied to the international context, followed by a discussion of alternative national approaches to industrial strategy. National policies can range from a policy of ‘industrial targeting’ to one of ‘industrial context’, roughly paralleled by the degree of government sector intervention. The chapter contrasts the approach of Japan with that of the United States and argues that in a more dynamic global environment, an ‘industrial context’ approach is more appropriate. The author considers the strategic options available to Australia and concludes with implications for firm strategy and government policy.

In Chapter 7 Schwind discusses the major issues associated with staffing overseas positions with Parent-Country Nationals (PCN) or Third-Country Nationals (TCN) by using the Asia-Pacific region as a case example. Personnel problems of multinational corporations related to selection, training and re-entry of personnel in Japan, China, and Malaysia are analysed, and recommendations are made for implementation of effective personnel policies in the said countries as well as in the region as a whole.

Past studies reveal that management of international enterprises pay little attention to the staffing process for positions abroad. The same holds true for preparatory training for candidates for the said positions. For instance, only 33 per cent of larger multinational companies offer some kind of pre-departure training, but only a fraction goes beyond basic language training to include topics like living conditions, spouse problems, economic environment, customs, business law, government and political structure, geography and re-entry problems. As a result of this situation, approximately 30 per cent of all overseas assignments fail. However, it is possible to make better selection decisions and to provide appropriate pre-departure training.

Staffing the overseas operation with host country nationals can also be a problem. To name a few: government interference (China), quota systems (Malaysia), the status of foreign companies (Japan), lack of skilled labour (Indonesia, Thailand), labour costs (Hong Kong, Singapore, Taiwan) which put obstacles in the way of attempts to staff a subsidiary or a joint venture with home country nationals. Careful selection and training of expatriate employees and managers, and careful planning of the location of overseas operations and familiarity with country-specific problems, can help to keep negative experiences to a minimum.

The implementation of the Chinese open-door policy has taken several forms. First, it was reflected in the expanding import and export trade performance of China. According to China’s trade records, the total value of that foreign trade has increased dramatically. Second, China’s economic and trade departments as well as various provinces, municipalities, and autonomous regions have set up numerous joint ventures since 1979, the year when the message of the open door policy was publicized.

Current as well as future success in China trade depends on success in recruiting/hiring the ‘right’ kind of China trade executives. The collective wisdom of the business community must be reflected in their recruitment advertisements. Hong Kong has been regarded as a staging-point to China. Multinational corporations frequently recruit their China trade executives there.

To cope with the great growth in foreign trade and foreign investment, more China trade executives are needed to realize the immense business potential, and to bring benefits both to China and to foreign investors. In order to review the demand for manpower from a longitudinal perspective, a content analysis was conducted in which...