Doing Business in Asia

Gabriele Suder, Terence Tsai, Sumati Varma

• Publisher: SAGE Publications Ltd
• Year: 2020
• ISBN:
  9781529737295
• Edition: 1
• Topic: Business
• Subtopic: International Business
• Index: Business

From the author of Doing Business in Europe (SAGE, 2018), Gabriele Suder has teamed up with Sumati Varma based in India, and Terence Tsai from China to bring this comprehensive solution for Asian business teaching and learning. The book offers a highly productive mix of international business and marketing theory, and is packed with pedagogical tools to engage and develop understanding, including two full-length corporate case studies per chapter. This is a unique volume covering the most relevant topics of Asia-focused business and management practice spanning from cross-cultural management to supply chain resilience to market entry and expansion strategy, and much more. Specifically designed to meet the needs of Postgraduate, MBA and those taking part in Executive Education programmes, this exciting learning experience will prepare Asia?s leaders of the future.

1 An Introduction to Doing Business in Asia

1.1 The Asian Business Environment

Introduction

Asia as a marketplace and business environment is multifaceted and heterogenous in many of its aspects. It is the home to some of the most vibrant economies of the world, and some of the most exciting multinationals (MNEs), such as Samsung, emerging market multinationals (EMNEs) such as Tata, and innovators, such as Alibaba and many others.

China, Japan and India are among the world's top ten economies, placed second, third and sixth respectively (WEF, 2017). The majority of gross domestic product (GDP) is generated outside of the USA and Europe, who used to be seen as the traditional growth engines and economic leaders. Notwithstanding growing domestic strengths in trade and investment capabilities over time, ‘none of these economies has developed in isolation, with production networks across national borders engaging extensively in intermediates trade, often at the regional level’ (Suder et al., 2015: 404)

In this dynamic environment, cross-border market expansion activity of corporations accelerates and extends the momentum to a regional level, and often, globally. Asia as a region is both home and host to intense international business activity.

Asia: Home and host of international (=cross-border) business

• Home to the emergence of regionalized business leader firms (in addition to/versus local or globally active firm strategy).
• Host to a vast range of non-Asian multinationals, eager to keep exploring and utilizing the advantages that the diversity of Asian locations hold as markets, suppliers, or increasingly, partners and owners.

The Asian business environment has proven to be challenging for some MNEs: some of these firms have lost reputation, resources, intellectual property (IP) and more while learning how to best do business in or across Asia. They also struggle with the nuanced economic inequality affecting individuals, societies and organizations.

When firms internationalize, they possess and utilize specific resources, assets and characteristics that provide them with their own rare firm-specific advantage (FSA). This shapes their capability to succeed with their cross-border trade or investment, and their knowledge of how to internationalize effectively.

The internationalization decision is based on various motives, including market, rent and resource-seeking behaviours. The location decision, that is, which country, region and market the firm decides, is determined by the advantages that the location can provide, i.e. through country-specific advantages (CSAs) such as resources, and regionspecific advantages (RSAs) such as market grouping benefits that may be a source of FSA variations:

Country and region-specific advantages (CSAs and RSAs) that firms encounter across borders (are interconnected through) FSAs for successful international business if firms are to leverage on operations and experience in one country for application in another. (Suder et al., 2015: 414)

This combination of advantages leads to immense opportunities when strategically managed. Taken as a whole, Asia provides for a unique diversification bundle. Just one part of it, the Association of Southeast Asian Nations (ASEAN), is set to become the equivalent of the world's fourth largest economy by 2030 (State Government of Victoria, 2018). As a crucial part of the ‘global factory’ (Buckley, 2011), Asia is predicted to become the world's largest economy before 2030 (World Bank, 2019).

This reveals the potential for international business operations in Asia, whether by Asian firms across their region, or non-Asian business doing business in Asia. Asia continues, on a multi-country basis, to consolidate its pre-eminence in attracting production and services activities from internationalizing firms inside and outside the region. Multinationals today opt for the widespread use of diversification strategies across this unique regional business environment.

Locational diversification across Asia

Advantages of locational diversification strategies in Asia: the multi-country strategy:

• reduction of risk and uncertainty impacts
• access to a variety of CSAs (market, talent, innovation, funding, etc.) and to RSAs
• provision and consolidation of international business relevant intelligence and opportunity
• agility across regional trade and foreign direct investment (FDI) options.

Asia offers a fast-paced, rapidly evolving business environment. Much happens in this region that impacts cross-border (international) business strategy. In particular, the progress in the transition of China from a centrally planned command economy to an efficient market economy is a complex process, when at the same time values of liberal bilateral and multilateral trade arrangements are challenged, and when leadership brings political ideology into economic decision-making at all levels. Other countries take very different paths.

We count more than 40 years of China's ‘reform and opening’, providing evidence of a unique path towards adapted gross domestic product, standards of living, income distribution, accompanied by institutional change and technological advancement. Other countries are also undergoing their own reforms to promote trade and investment, for ‘sustainable and inclusive growth’. Trade between the Asia-Pacific Economic Cooperation (APEC) members has been found to be their most important vector of growth in addition to household consumption (APEC, 2018a: 15). India will be one of the most populated countries in the world though struggles with fragmentation of its regulatory environment.

Yet it is China's rise that business sees as pivotal and catalytic to the positioning of Asia as one of the world's leading regions in business, economic and potentially geo-political terms. This goes well beyond the considerations of the flying geese model or the Asian ‘miracle'/Asian ‘tiger’ phenomenon led earlier by Japan.

Challenges in this progress are numerous and similarly influence the way in which corporations determine their Asian internationalization path. These include demographic, social and environmental issues, as well as the impact of the coronavirus pandemic to name only a few. Such challenges also reveal resilience and sometimes opportunities.

Opportunities arising from Asia's challenges

• Sustainability contributions.
• Disaster resilience capacity building.
• Climate change-focused solutions.
• Stimulation of start-up ecosystems and SME growth.
• Investments, for example in health, energy efficiency, innovative waste reduction and water management.
• Reverse innovation (innovation is seen or used first in the less developed markets than applied in developed markets).

Comprehensively, trade and investment linkages flourish for most parts of Asia. The golden triangle of China, Japan and South Korea has improved its connections to account for a quarter of the world's output of goods and services. The APEC region has paid particular attention to inciting a trend in key private sector engagement. The ASEAN's 2017 trade figures between China and the ASEAN's Big Five – Indonesia, Malaysia, the Philippines, Singapore and Thailand – have multiplied by factors of 500 per cent. Market integration without precedent shapes an increasingly stable and prosperous regional marketplace. Yet several locations miss out. In Pakistan, the ‘average tariff on imports is 300% higher than the average tariff prevalent in some countries in Southeast Asia’ (OECD and World Bank Group, 2015: 71). Isolationist policies hinder APEC's connectivity, maintain high prices and limit consumer choice, despite APEC's important capabilities in manufacturing and exporting. This is not an exclusive...