Succeeding at Business in Southeast Asia

Common Mistakes Companies Make

Eric Moraczewski

• Publisher: Wiley
• Year: 2020
• ISBN:
  9781119737056
• Edition: 1
• Topic: Business
• Subtopic: Business internazionale
• Index: Business

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

CHAPTER 1
The 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.

In addition, make sure that you appropriately recognize the importance of people in the meeting. For example, it is customary to bring a small gift to present to your counterparts; make sure the nicest gift goes to the most important person and so on down the line. Some of this has been eliminated in Asian governments as anticorruption practices move forward, but giving a nice sample of your product, a gift from your home state or country (in Colorado, an aspen leaf is a very common and pretty gift, and several fit in your luggage—a flight consideration), or something that you know might be important to the person (a French wine might work for someone who studied in France) is still acceptable. The cost of these gifts should be minimal, but they should definitely follow Asian custom. The price of a gift is not the point; it is saying thank you for welcoming you into the meeting. Likewise, your hosts may present you with a gift, like a branded bookmark or a book about the firm’s history.

• The takeaway: Do not pressure the relationship. Pushing for a close will not go well in Asia. Ironic, isn’t it? Since when you walk through the underground markets of China, you’re always relentlessly pressured to buy something.

Five Ways to Build Relationships in Southeast Asia

The importance of relationships is addressed in this first chapter because I find it to be the single most significant factor for success in Asia. Relationships tie into many facets of Asian culture, including trust (or lack thereof), quality, and future potential. If you build a strong relationship, there is huge future potential for you to work together for many years to come. I have often seen failure when someone has gone in and tried to dictate terms and conditions to their Asian partner; even a superior product or service cannot save them with this approach.

1. Spend Time in Southeast Asia

There is no other way to grow your relationships in Southeast Asia than spending time there. Meet people while you are there, take time to build a relationship, and focus on the people. But, do not just “go there”; go there and use your connections to help you schedule meetings, network your way through society with introductions.

The first time I went to China, I knew three people. Those three people helped me build a network that is active today, and every time I go there, my goal is to look for new connections. I started in China with two very simple questions: Who should I use as an accountant and who should I use as a lawyer? I worked with an amazing lawyer who made some introductions, but, ended up firing the accountant three months later. The accountant did not do anything wrong, per se, but he did not have the knowledge and experience necessary to operate on an international platform. I recommend finding lawyers and accountants that have clients who may be useful to you. After all, there is a mutual benefit. If your business grows, so does the business of your lawyer and accountant, as well as their other clients’ businesses. I also recommend you push your lawyers and accountants to create introductions for you, whether it is to their clients or friends.

The other contact in the region that I have learned to use is the U.S. government. U.S. Commercial Services has on-the-ground operations in almost every country in the world, and in certain countries, like Japan, China, and India, they have operations in more than one city. For a small fee ($300–1,000), you will gain introductions, market research, and keen insights into the market that you might not otherwise have had, all of which is not only good not only for making new connections but also good for making sure your strategy and planning align. The other benefit is that in Asia, a government introduction elevates your perceived value in the country. While we in the United States may not place a high value on working with the government unless we are selling to them, that is not true in Asia, so maximizing this opportunity is very important.

Finally, use your other relationships, including friends and consultants. Most expatriates in Asia are extremely open to getting together and talking to someone from home. These people are great resources because they have spent years on the ground developing and building relationships. At FDI Strategies, we encourage our clients to push us, as consultants, for introductions. We regularly make introductions for our clients to potential suppliers, potential clients, and the media. It is a vital part of our business. Despite this, sometimes we overlook someone whom we should introduce a client to; for this reason, our clients are encouraged to continually ask and push us. Explaining why one individual is not a good fit for your client sometimes reminds you that you forgot someone who is a good fit. You never know until you ask; so I encourage you to ask and keep asking. Fortunately, there are many ways to keep up, either through applications like LinkedIn (becoming more and more popular in Asia), through your website, or even through generic requests, such as “Whom should we speak to in the media?” While we don’t encourage our clients to make direct requests by going around us, an introduction via email through us can make a world of difference.

2. Do Not Waste Time

Most people in the United States or parts of Europe go to Southeast Asia and do not understand the power structure— meaning, who can make decisions in an organization. In India, although officially illegal, caste, where people are born into their roles in life, is the determining factor. This is true in other parts of Asia as well, also in countries like Myanmar and Pakistan, although sometimes it is not seen as clearly as it is in India.

In one meeting, someone mentioned they had never seen an American (me!) do such a good job of not wasting time with people who had no say over anything. My only thought at the time was to get things done, and I knew that to do that, you had to start at the top. If you are just coming into the Southeast Asian market, you have to find a way to navigate and grow your relationships with decision makers and avoid spending time making meaningless connections with executives who cannot advance your cause. You do not always have to follow the traditional path of lower-level introductions. Whether in the United States, China, Japan, or any other country, it is best to take the approach of knowing the people first before trying to sell them something. They are not just potential clients or networking opportunities; they are people with whom you can build an ongoing relationship. In doing so, you will meet some amazing people, try amazing restaurants, and do some business as well. In most of Asia, this is the right way to go about building business. Personally, I do most of the “getting to know” a person outside the office environment—go to lunch or dinner, get to know each other. Even if you are in the office, continue to focus on getting to know the person as a person.

My focus when visiting Asian countries is to work on building my network and relationships. With numerous trips to Asia over the past decade, I have not taken time to visit the many tourist attractions, such as the Great Wall of China. I have been to the Forbidden City, but only for a client meeting. Shanghai has been a frequent destination and I have seen a few more t...