Asia’s diversity means different strategies for different places. The first in a six-part series.
A major discussion point last year was whether China had overtaken the United States as the largest economy in the world.
In many ways the conclusion is “no”, although it is “yes” when it comes to gross domestic product (GDP) at purchasing power parity (PPP), the technique used to determine the relative value of different currencies.
Using forecast GDP at PPP figures, it is likely that India will overtake the United States by the year 2050, and Indonesia will overtake Japan just after 2030.
It seems Asia is poised to take centre stage in the world’s economic growth in the next few decades, after recovering from the Asian financial crisis in 1997 and the global financial crisis in 2008.
The Asian continent comprises 48 countries (if you consider that it includes parts of Turkey and Russia). The continent also hosts three of the four largest nations by population and more than 60 per cent of the world’s people.
Economically, Asia is also diverse. Nominal GDP, the GDP evaluated at current market prices, ranges from US$2 billion ($2.73 billion) in Bhutan, to US$9 trillion (China). GDP at PPP per capita also runs from US$1150 (Afghanistan) to US$98,814 (Qatar).
It is clear that countries in Asia vary greatly. So much so that the discussion of a single Asian strategy for any organisation can be deemed ambitious.
Broadly speaking, each country is unique, which tends to make a generic, “vanilla-flavoured” strategy less meaningful.
How many times have we come across organisations that seem to do well in some markets in Asia and do much worse in other markets in the region?
Some things we know. Let’s establish a few basics about Asian markets.
1. Asian markets are different in their institutional environments. There are various rules and requirements individual organisations must conform to in order to receive legitimacy and support. For example, regulations on quality of imports and exports can differ. This is despite the free trade agreements within the region and with other parts of the world.
2. Asian markets differ from a cultural perspective. Even though many countries share the same dominant ethnicities, practices and norms can vary in each region.
3. Some countries pose geographical challenges for foreign companies because of their size. For instance, it takes about seven hours to fly from east China to the far west of China. This means that upon entering the Chinese market, another layer of decisions needs to be made, about where to locate and what the best options are logistically. The same can be said about India and Indonesia.
4. In general, markets in Asia are very competitive. Most are still developing, and the rule of law — which requires an entire nation to follow the same laws — is still in its
This makes it harder to assess the competitive landscape in a systematic way. Market forces may not always
Clearly, most industries in Asian markets are way more competitive than those in New Zealand, where the
rules of engagement are clearer.
Asia is growing and many of its developing countries will absorb the increase in production from other regions. For any organisation seeking to grow, it is hard not to consider Asia as an option.
There is increasing evidence on how a loss of position for some multinational companies in the Asian markets, in particular China, has hurt their bottom line.
Despite the challenges, there is still hope for organisations wanting to enter this region. Be realistic about the potential of these markets, and plan for a “less is more” Asian
Professor Siah Hwee Ang is BNZ Chair in Business in Asia, at Victoria University of Wellington