Improving your Asian literacy
These days, start-ups are just as likely to find a supplier, or even a customer base, in Asia as they are in Australia. The exploding Asian marketplace has seen Australian businesses flock there in huge numbers, often with an ABN gained just weeks previously.
However, while the opportunity in the continent may be huge, many Australian start-ups are failing to connect properly with it.
According to recent research by the Australian Industry Group and Asialink, although 74% of Aussie companies are keen to expand to Asia at some point, many are deterred by fears over the language, business culture and legal issues.
Australian businesses, the report claims, need to improve their ‘Asian literacy.’ But what, exactly, should you expect if you do business in Asia? What are the common hurdles and how should you overcome them? Here are some of the key ways to become Asian literate.
Find a trustworthy on-the-ground presence
Indian-born Ruchir Punjabi immigrated to Australia six years ago to study at the University of Sydney and having completed his degree and established a successful software design business, he now calls Australia home.
Founder of Sydney-based Langoor.net, a web-based application which allows anyone to easily create their own website or mobile application, he is now attempting to tap into the huge economic opportunity offered by his homeland.
The business already utilises a development team in Bangalore but is looking to expand its customer base there.
Despite his Indian heritage and connections he still experienced the same difficulties as Western businesses trying to set up in India.
The most important resource is to have a trustworthy contact to represent his business on the ground, he says.
“I think having a local partner is perhaps the most important thing you want to do in India for your business,” Mr Punjabi says.
“The importance of a local partner is for them to share your business values and help you apply them in the local context, relevant to the market.”
They will ensure that things get delivered on time and manage the bureaucracy and red tape that India is famous for, he says, and these middlemen can be located through forums such as the Australia India Business Council.
Treat relationships with respect
Once this box has been ticked then businesses can get down to the main challenge of recruiting the right staff to represent your business overseas, a task that was underestimated by Punjabi.
“Having someone advise you on your recruitment strategy is critical in a market you haven't had much exposure to before,” he says.
“Businesses have to factor this in as a major threat when evaluating opportunities.”
He overestimated the talent pool available and said it was hard to find quality people in a country where “people treat job-hunting as a sport”.
They would leverage a job offer for a better position with another firm which meant he always needed to be prepared with a counter offer.
He also offered bonuses for staff that stayed with the business over longer periods of time.
This last measure was also utilised by Matt Barrie, founder of Freelancer.com, which has a huge overseas presence. Barrie says it’s critical to use tangible outcomes to manage expectations.
“Put a contract in place if necessary,” he says. “Set expectations upfront. Use milestone or progressive payments as deliverables come in to protect yourself rather than pay upfront.”
Barrie also stresses the power of word-of-mouth, which has driven the popularity of the Freelancer.com online outsourcing marketplace in Asia.
“Enabling entrepreneurs and skilled freelancers around the world creates a win/win situation for both sides of the equation, which generates buzz and hype about us," he says.
Negotiations should be win-win
Achieving a win/win outcome is the key to success in Asia, according to Ruslan Kogan, founder and CEO of technology manufacturer Kogan Technologies.
“One manufacturing partner once told us they were creating our product for us at ‘below cost price’ to try and convince us to choose them,” he says.
“I told them I didn’t want to enter a partnership that wasn’t win/win.”
“If they are selling things at below cost, that means they are a very silly business that won’t be around for long, or they are liars.”
Be aware of piracy
The idea of win/win can sometimes seem impossible when there is a clash between the Western way of doing business and the habits and expectations of Eastern consumers.
One such cultural conflict is the proliferation and general acceptance of piracy in China, which for any Western business trying to sell IP into the country, for example software, can present serious challenges.
This was the reality encountered by local electronics design software company Altium when it attempted to establish a presence in the world’s biggest electronics manufacturing market.
In 2004, it found that there was a high take up of its software – used to design electronic technology and the end-to-end production process – however it owed this success to the huge numbers of pirated copies of its software in use.
The traditional licence-based selling approach would not work and instead it shifted to a model that promoted value-add services for customers such as local training and support, and bundled software with this.
The operation was headed up by then-chief operating officer and president Emma Lo Russo, who says that by focusing on providing additional value to Chinese customers, revenues grew from hundreds of thousands of dollars to millions over five years .
“The discussion isn't around piracy, it’s about how you can help their organisation grow and solve the challenges they're having,” Ms Lo Russo says.
“What's of value to them? Training their people, the latest technology, communications, opening local support.”
“If you tie your discussions around that area they pay for that and you can bundle it as part of your licensing.”
The move has obviously paid dividends and weeks ago ASX-listed Altium announced it would move its global headquarters from Sydney, Australia to Shanghai, China.
Lo Russo is chasing the fortunes of Asia with her new start-up social media monitoring service Digivizer, which has already developed a Chinese language version.
Where is the opportunity?
With Asia accounting for the majority of the world’s population, it’s hard to know which is the best country to target.
Kogan says China is “hard to ignore” whatever your start-up is, as it recently overtook America as the world’s second biggest market of luxury consumer goods.
“There are millions of people hooking up to the internet every day and increasingly more consumers of both fast moving and luxury goods and services.”
Barrie identifies the Philippines, India and China as the three growth countries in the region. However, depending on the nature of your business and its requirements, other countries may be more suitable. Make sure you do your research to discover any niches before following the herd to a particular market.
Five top tips to doing business in Asia:
Don’t treat Asia like one marketplace – Asia isn’t, as you’re well aware, a single country. There are crucial differences in doing business in China compared to Singapore or Malaysia, for example. Focus on one or two countries and learn as much as you can about the culture and business landscape.
Get an insider – you may think you understand the intricacies of the Japanese or Thai markets, but you don’t. Get an expert who can show you the ropes.
Be prepared – you need to do your homework rigorously, not only to identify the right opportunity for your start-up, but also in order to secure that opportunity. Failure to provide a thorough, comprehensive presentation will be frowned upon. You can’t afford to think you can wing it in Asia.
Be respectful – by the standards of Asian business culture, Western companies talk a lot and throw their weight around maybe a little too much. Watch, listen, learn and, above all, be polite.
Don’t be impatient – it may take many trips to form an effective bond with a supplier or business partner. In China, there is a saying that you don’t talk business “until the third cup of tea.” These relationships aren’t formed overnight.
Sahil Merchant founded Mag Nation, a retail chain specialising in mainstream and niche magazines, in 2005. Prior to this, he worked for management consultancy McKinsey & Company and spent a year working at the World Economic Forum. He recently exited Mag Nation and now advises companies on how to embed 'consumer-centricity' into the way they work. He writes about entrepreneurship here and Tweets here.