New research points to enormous opportunities for Australian businesses in this diverse and vibrant region.
New research into Australian’s preparedness for doing business in Asia brings both good and bad news.
The study, Match Fit, Shaping Asia capable leaders, shows that businesses with leaders who can operate successfully in Asia exceed expectations about their performance. However, few local businesses can boast that they have this important trait.
The study, sponsored by Asialink Business, PwC Australia and the Institute of Managers and Leaders, makes for sobering reading.
Sixty-seven per cent of ASX200 board members don’t have extensive experience operating in Asia. Additionally, 55 per cent show little to no knowledge of Asian markets. The average Asia capability score of an ASX200 board is only 6.42 out of a possible total of 30.
According to the report, 90 per cent of ASX300 companies are not Asia ready. So there’s a lot of work directors can be doing to help their businesses successfully enter Asian markets, especially given the substantial opportunity the region represents for local businesses.
“This report demonstrates that despite the centrality of Asia to Australia’s long-term economic future, many of our nation’s top business leaders are yet to take seriously the need to build knowledge of and skill in doing business with the region,” says Megan Mulia GAICD, director of research and information, Asialink Business.
“There are many practical steps that corporate Australia can take to foster Asia-capable leadership. If we consider that only 10 per cent of the boards and senior executive teams of the ASX200 currently have the skills needed to succeed in Asia, there is clearly a significant opportunity to invest in building these capabilities,” she says.
The time is now
Andrew Parker is PwC’s Asia practice leader. He points to a PwC report, The World in 2050, that looks at the economic development of Asia, as evidence of why local boards need to be engaged in this issue.
The report predicts four of the world’s five largest economies, in purchasing power parity terms, will be in the Asian region by 2030. Those economies are China, India, Japan and Indonesia.
“Around 15 years from today, more than half the world’s GDP will be produced in our region. The number of middle-class consumers is expected to jump to 3.2 billion people in the same timeframe,” says Parker.
“Over the last 25 years Australia has really focused on shipping bulk commodities to Asia. The next 25 years are going to be about consumption and services in the region, as that middle-class booms,” he explains.
As Parker suggests, Australia’s economic future is wed to the Asian growth story. “We’re going to have to significantly invest in skills to do well in that environment.” Directors sometimes tell him they don’t see the need for an Asian strategy if their business is based mainly in Australia. He challenges this view.
“All companies have employees, customers and suppliers from an Asian cultural background. But that’s often not represented at board level. So there’s a real opportunity for them to explore greater diversity at the governance level in their businesses,” says Parker.
As the report notes, the 2016 Census found 12.2 per cent of Australians declare an Asian ancestral background from the top 30 countries put forward in the research.
As such, it’s essential for boards to consider the findings from the Match Fit, Shaping Asia capable leaders research in a holistic sense.
Says Parker: “It’s not a one dimensional issue. Directors would be unwise to think, ‘Well we’re not going to invest in Asia, so we don’t need to worry about this.’ I would suggest you do need to worry about it, regardless of your investment.”
Where to from here
One of the important take-outs from the research is the importance of having people around the boardroom who have a diverse set of skills and experiences.
“Because of the significance of the region, having the right Asian capabilities on the board is very important; it’s not about Asian faces,” Parker says.
Businesses should look for the right skills and experiences, rather than appointing Asian nationals just for their cultural background. For instance someone with an Asian cultural background may have grown up in Sydney and never worked in Asia.
Equally, someone with a Western cultural background may have grown up and worked largely in Asia and may not have experience working in Australia. It’s about the individual’s experience and skills, and not necessarily relying too much on their cultural background.
Parker also notes Asia is far from an homogenous area and many companies operate in multiple Asian jurisdictions.
“We use this term Asia, but it’s a very broad label for a region that spans India to Japan. It comprises just about every possible political and social system, with multiple languages and religions. Cultural norms and nuances are very diverse across the region.
“Even within countries there are significant differences between the people of different regions. For a company that has a footprint in multiple parts of that region, one of the challenges is how to represent all of those people,” he says.
Setting up advisory boards that represent the interests of different stakeholders is one idea to address this challenge.
“An advisory board can be a group of people that represent the markets you’re operating in. Many organisations have a deep pool of people born in the region or from that cultural background. I’m not sure many of our companies are tapping into that resource and that knowledge base,” Parker counters.
The competition for business growth is now a global game and Australian companies need to compete aggressively to succeed in some of the biggest and most dynamic markets in our region.
But it’s incredibly hard to generate strong growth in today’s volatile global economic conditions. As the report notes, “Having a long-term growth strategy is essential. With many of Australia’s larger companies operating in a highly saturated and finite market, it is challenging for organisations in many mature industry sectors to see more than three per cent annual growth.”
Boards must be able to identify and then articulate growth opportunities to investors and other stakeholders, and this includes opportunities in Asia. It’s up to directors to put Asia on the agenda to ensure they are making the most of every potential business opportunity.
All About The Mindset
The research uncovered capabilities required to effectively engage in Asia. Most important is the right mindset, which involves the ability to:
- Adapt to the local culture.
- Respect local business practices and etiquette.
- Build long-term personal relationships.
- Discard cultural biases.
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