Historically, Asia Pacific has been viewed by outsiders as a single region, much as North America or Europe. However, the reality is that APAC is a fusion of culturally dynamic countries composed of strongly embraced religions, personalities, different market maturities and countless languages and dialects—all with deep-rooted ways of conducting business.
Australia is as different from China as Japan is from India. In addition, micro-market complexities in Indonesia, Malaysia, Thailand and Vietnam, among other countries, further challenge any overbroad generalizations.
That being said, we’re often asked about the overarching lessons we’ve learned—too often the hard way—during our time operating in the region. Knowing these might be the start, but definitely not the end, of wisdom.
Here are five firsthand lessons from Western immigrants to APAC:
1. Consider each market separately
When planning revenues and setting targets for the Asian market, doing bottom-up analysis in each country and then consolidating into an overall APAC target number is better than creating a top-down target for the region.
What looks logical from far away becomes less obvious on the ground. For example, Japan is the second-biggest market in Asia and has the highest per capita spending. But those numbers do not translate into the biggest revenue potential for a brand doing business in Japan. Adjusting strategy and products/services to the complex Japan market is difficult and time-consuming; more rapid, initial growth may come from markets like Hong Kong or Singapore.
The cost of managing Asia’s diversity is high. Diversity requires a focus on country-level operations and strategies; these tend to have low economies of scale, and moving staff within APAC is hard and costly. Asia often has low prices for products, high costs of running a business, and the fastest growth is often for good-enough products and solutions. For Western consultants looking to build groundbreaking, but expensive solutions, this environment can be difficult. Selling value propositions is tough, and salaries and rents are similar to the West and rising. All those factors need to be taken into account when planning your expansion and setting expectations for growth and profitability.
2. The “extreme” importance of relationships
Immerse yourself in each market (country or micromarket) in which you plan to operate, and gain a local point of view. Cultural differences in communication and leadership between Asians and their Western peers are significant. For example, to generalize, Asian culture stresses respect toward elders, age-based hierarchy and the importance of consensus, traits rarely seen in Western management styles.
Establishing deep personal relationships with your clients is paramount to be successful in Asia—much more than is typical for Western companies. For instance, Chinese business people prefer to conduct business in informal settings like over dinners or lounges, so you should have a good liver and a concrete stomach. Australian and New Zealanders prefer the negotiation table, similar to how business is conducted in North America. In Japan, the most important concept to grasp is that of the overwhelming importance of personal relationships within the business cycle. Of all the business cultures of the world, Japan is one of those most strongly rooted in the concept that relationships should come before business, rather than business being more important than personal considerations.
Trust building is key to being successful in APAC. Business is built on trust and not legal contracts as is typical in the West. It takes time to build relationships, build trust and gain honour; however only days to lose it.
3. Expect to negotiate
Negotiating contracts and terms in Asia is usually a very different experience than in the West—with the exception of Australia, whose business culture, unsurprisingly, most closely resembles the United Kingdom.
In general, the concept of “saving face” is important in all Asian markets and determines the way you communicate: less direct and outspoken than you are probably used to. China (including Hong Kong) and Japan are probably the toughest markets in which to negotiate. Although culturally different, they share many similar negotiation techniques. Business partners often push for further concessions after agreements are made. Also, China and Japan are relationship oriented rather than contract oriented, meaning that you have to live up to the relationship and high expectations of quality and service level regardless of what the contract says.
While this characteristic can have adverse effects on your margins initially, it also allows for compromises that serve both parties without sticking to the contract details and getting the lawyers involved. Negotiating teams in Asia are often bigger than in the West, and you will have to figure out quickly who plays what role and who the decision-makers really are.
In China in particular, products are valued above services, and it is often hard to negotiate a good price for intangible assets you offer (consulting, innovation) as the market is not used to paying for that (yet). It helps to package your offer to look and feel like a product with clear costs and a measurable value proposition.
4. Plan to adopt before you adapt
As large companies continue to invest in digital marketing platforms (DMPs) to scale brands, the reliance on them for growth into APAC and specifically China is growing exponentially.
What marketers need to remember is that technology isn’t the only adjustment needed to expand into the region. A combination of providing an education on what technology can offer—for both the brand and consumer—and discussing what it takes to implement, as well as building relationships and face-to-face time are all critical criteria to the successful adaptation of your DMP.
There are major differences in user behaviours, code base, governmental policies and regulations compared to North America, and in most cases European Union. The differences amount to much more than the translation of content and assets.
Working with established partners with customer platforms that locally integrate with social, commerce, payment gateways and analytics is a much more efficient way to leverage efficiency, especially in China. In China, all social platforms are under constant development; working with local partners who have relationships, established development processes, and at times proprietary access to information is a must.
Given how important time-to-market is in Asia, working with local social players accustomed to the small differences in each market, as well as being able to scale to support user adoption, is a much quicker approach than building from scratch.
5. Plan for the long term
It is easy to set expectations too high when entering a new, large market like China. Companies which have operated in the region for years are still relatively new arrivals by Asian standards. Business in Asia Pacific is a marathon, not a sprint. You need to commit to the long term, make mistakes and learn from them, be prepared for surprises and unexpected turns of events every step of the way and stick it out—otherwise you had better stay home and invest elsewhere.
While it will probably take longer for your company to grow a sustainable and profitable business in APAC than in North America or Europe, it is worth the time. Recognize that there is an obligation to see things through and be committed for the long haul. This includes senior management who should be committed for at least three to five years on the ground to have an impact. Asian business partners are turned off quickly if their counterpart is on a one-year expat contract to “learn about Asia.” Consequently, Asian business partners will not be motivated to invest into building a relationship.
Companies expanding in the APAC region need to focus on addressing the complexities and differences within APAC supported by immersion, appreciation, acceptance and respect of each culture. One last point: Find a local partner within each market who understands how to navigate and articulate the cultural nuances. APAC is a lovely place to expand, and it’s ready with open arms for expansion. However, you need to work with the markets as partners and work within their ways with your guidance and experience and, most importantly, with respect to their cultures.
Jeff Blais is director of experience design, SapientNitro Singapore. Christian Oversohl is senior vice president and managing director, Asia Pacific, SapientNitro