The great race to get in on the growth in Asia is on and, according to Dr Yunxia Zhu, Senior Lecturer in Strategy at UQ Business School, like Black Caviar at Royal Ascot or an 800 metre swim at the London Olympics, the winners will be determined by a nose, by the 0.02 seconds lead they wrestle from the challengers.
The question is: what is it that will give Australian companies the 0.2 second lead over other entrants in the highly competitive Asian market?
The answer may be cultural insight, flexibility and a long-term focus on the business relationship, not a short-term fixation on who is going to win the deal of the day.
“When it comes to product quality, price or financial structure,” says Dr Zhu, “most exporters into Asia differ little. Companies that are successful are the ones that learn to build relationships in the local market so that customers come to them rather than to their competitors.” It is, in part, the concept of guanxi, which describes a network of relationships and influence.
The bulk of Australia’s trading relationships with the Asian market is transactional. We bring our resources to market, find a buyer, get the best price, and then move on to the next deal.
It’s one way of doing business, but it doesn’t build the kind of ties that underpin Confucius-based business cultures found in Japan, Korea and, of course, China.
In transaction-based business, says Dr Zhu, an expert in both cross-cultural management and negotiation, “there’s a winner, and there’s a loser. Transactions like this don’t build ties or deepen cultural understanding.” Dr Zhu describes the coming together of two business interests as a marriage, which will be successful if both parties are in it for the long term, not short term, gains. “In China,” she says, “the most important aspect of a business relationship is its sustainability, and, like any marriage, that occasionally needs intervention.”
Dr Zhu believes that stronger business relationships will be supported by the concept that different parties in a business negotiation are stakeholders, all with something to win from the interaction.
CHINA - A CHANGING MARKET
According to Ben Cavender, Associate Principal of China Market Research Group, based in Beijing, while the concept of guanxi still holds sway, there is a growing focus on what a foreign company can bring to the table in terms of new technology, great marketing and innovative product development.
“Multinationals are learning that to be successful they need to develop products and services directed at the Chinese market. You can’t shoehorn what’s worked in the home market into China. Consumers are more sophisticated. They are familiar with international brands. They have travelled. They have high awareness and high expectations.”
According to Cavender, the opportunity for Australian brands right now lies with cashed up Chinese consumer companies looking to acquire foreign product lines for the local consumer.
“Chinese consumers don’t trust local food production. They perceive foreign food products to be safer, better regulated and more reliable in terms of inputs. Australia is seen as a country with a high standard of agriculture and quality food production.”
The sale of a 75% stake in Australia’s Manassen Foods, in 2011, to China’s Bright Foods, included brands such as Ryvita, Walker’s Shortbread and Margaret River Dairy. Deals like this, says Cavender, are where opportunities lie. “Australia is well positioned to benefit from mergers and acquisitions and joint ventures, marketing Australian food and agricultural products into China.”
Research carried out by China Market Research Group, and published earlier this year, found that the major reasons for failure of exporters into China was not government protectionism, corruption or price sensitive clients, contrary to expectations, but the inability to localise the product for the Chinese market.
PEOPLE POWER
One resource that Australia is sitting on that it might be able to leverage during the Asian century is its sizable population of 2nd and 3rd generation Chinese-Australians, marked clearly with the language skills and stamp of their cultural heritage, yet Australian educated and integrated.
While the ability to speak Mandarin or Cantonese is clearly an advantage, both Dr Zhu and Ben Cavender warn that language skills are only part of the story.
“Speaking the language does not mean you think like a Chinese local,” warns Dr Zhu, whose daughter works in finance in Australia and has an eye ultimately on gaining work experience in mainland China. “True, cultural flexibility comes when you can switch not just from one language to another but from one thought pattern to another.”
Cavender backs this up. Not only are the days of expat managers doing an Asian stint over, he says, but, increasingly, multinationals are looking to recruit mainland Chinese people who have studied and worked overseas and who are looking to return to their native China. “These are the people who best combine an international perspective and the ability to navigate China, not just ethnic Chinese, even from Hong Kong or Singapore.”