Asia is the growth story of this century, but it’s not waiting for anyone.
Christine Holgate, Blackmores CEO and Managing Director, shares secrets of the company’s success in Asia: her fears about Australia being behind the times after losing our ‘have a go’ culture and why promoting gender equality and diversity is a number one consideration.
Asia is the growth story of this century, but it’s not waiting for anyone. If Australia wants a part, we need to get serious about developing Asia-specific strategies and making those strategies work.
Businesses aiming to succeed in the region face a number of challenges. Three key challenges stand out: The impact of ‘behind the border’ regulation; leveraging digital technology to better understand and serve customers, and finding the right talent.
Our recent APEC CEO Survey shows ‘the impact of the regulatory environment’ and ‘having access to a skilled talent pool’ and ‘access to innovative technologies’ are among the top three factors affecting business decisions.
But while uncertainty still clouds business sentiment, the majority of APEC’s chief executives are still planning to increase investment in the region.
Australian businesses need to act now if they want to have a share in the region’s growth.
Free trade is not a free pass into Asia.
Despite the wave of new trade agreements - China, Japan, Korea, and Singapore – we know that the impact of regulation remains a real headache for foreign businesses. Just making it through the front door does not guarantee a profit.
Because trade deals, while opening up new markets by removing tariffs, often don’t change what’s required for goods and services to move behind the border.
Companies still must deal with a complex patchwork of customs laws, product approvals and registrations, import licenses and country-specific rules. This ‘behind the border’ red tape is the new frontier of trade agreements.
If you’re exporting to multiple markets, then country-specific regulation represents a significant cost and disruption to your business. Every market in Asia has its nuance, and in places like China, each Provence has its nuance.
Australian CEOs we talk with say these local complexities and uncertainties are one of the biggest barriers to doing business in Asia.
“Will we be treated unfairly because we’re foreigners?” and “Do local businesses have an advantage because they know the local authorities?” are questions we hear regularly.
But if companies are serious about entering markets in Asia, there are some very practical steps companies can take to minimise these risks and navigate regulation behind the border:
Australian businesses also need to realise that each market requires its own nuanced approach. You simply can’t ‘lift and shift’ what you’re doing here and expect it to work in a different country automatically.
Over the longer term, we expect to see an increased harmonisation of behind the border rules, regulations and standards across the region. But this will take time and require lots of heavy lifting on the part of both business and Government.
There’s a role for Australian businesses to step up and invest more time working with the Australian Government to help our policy leaders understand the business case for, and detail of regulatory reform across the region.
We’ve got to be part of the conversation if we want to benefit from it.
If you think Australians are big adopters of mobile technology and social media, then you haven’t taken a good look at markets across Asia recently.
In China alone, almost 90% of the country’s 688 million Internet users do so via their mobile phones. It is also the world’s largest social media market, with more than 300 million active users.
This kind of connected consumer power can make or break a business or a reputation in Asia.
Take what happened to Blackmores, for example. In 2015 the well-known actress, Fan Bingbing, was at an event when a tube of the company’s vitamin E cream accidentally fell out of her bag. Photographers captured the moment and demand for the Australian-made hand lotion, propelled by the image being shared on news sites and social media, exploded.
Blackmores went from selling three thousand tubes a month to over a million.
The fact is that China and other Asian markets want what we’ve got. But we have to learn to deliver it in a culturally sensitive way. In other words, we need a much deeper understanding of customer behaviours, preferences, and buying habits.
But because so much consumer trade and social engagement in Asia is now conducted online, companies also need a robust and dynamic digital strategy if they want to get into the heads of the Asian consumer.
And it’s not just online shopping: the growing adoption of digitally connected wearable, operational and mobile devices – known as the Internet of Things, or IoT – is already having a big impact on business in the region.
Almost one-third of APEC CEOs say that in three years their businesses will use devices that track customer behaviour including consumer preferences, service experience, shopping activities, and geolocation. The same proportion will also gather data via registers, POS equipment, and devices that track transactions and payments.
It’s not surprising this is where the fastest growth in IoT usage will be, considering consumers are more digitally savvy than organisations and are meshing together the next wave of digital innovation to suit their everyday lives.
Australian companies are in fact ideally placed to succeed in this environment. We have a depth of experience in deploying digital technologies in customer-facing sectors such as retail and education, and we have strong capabilities in service industries.
And as China’s economy matures and shifts from export-led growth to domestic-led growth, demand also shifts towards the kinds of services that we do well: education, tourism, financial and professional services, to name a few.
It’s this complementarity that many Australian businesses are struggling to get their head around. But those that ‘get it’ and can offer their products or services in a way that meets the needs of the Asian consumer, will find significant market opportunity in the region.
Businesses serious about the Asia opportunity should:
Think finding domestic talent is hard? Try finding skilled talent when looking to Asia.
Six out of ten Australian CEOs say it’s the thing that matters most when making decisions to invest in APEC economies other than their own. You can understand why - getting the right people is key to overcoming many of the other challenges businesses face.
But contrary to popular belief, we do in fact have the talent to succeed in Asia. We just aren’t doing enough to foster, prepare and deploy it in the region.
The Diversity Council estimates that 17% of people living and working in Australia claim Asian origin. That’s about 4 million people who potentially have the cultural and language skills, business acumen, and contacts, to operate effectively in the region.
Nevertheless, they are underrepresented in the boardrooms and executive ranks of Australia’s major companies: just under 2% of senior executives of ASX 200 companies and just over 4% of directors hail from Asian countries.
And of the Australian’s that do have the right skills for Asia, many simply don’t work for Australian companies; only a small percentage of Australian firms have a presence in the region and the percentage of companies considering expanding into fast-growing Asian markets is low.
But it’s this ‘forgotten army’ of Australian expatriates that could provide the talent Australian firms say they need.
PwC modelling predicts that by 2030 there will be 450,000 Australians living and working abroad in Asia, representing one-third of our total expatriate community, up from approximately one-fifth of the total today.
These globally connected professionals, who understand both life in Australia and the way business is done in the region, are a significant asset to Australian businesses that has been underutilised to date.
Asian countries are seen as dynamic and entrepreneurial. Isn’t that what the Australian business culture used to be known for? So instead of lamenting the lack of talent, it’s time we reconnected with our adventurous spirit and our willingness to have a go.
The people who can help are right in front of us.
Companies can build a strong talent base for doing business in Asia by:
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