“Asian companies can’t succeed globally unless they become more Western” neatly encapsulates a series of Western corporate assumptions shaping today’s management thinking and many global strategies. (see The Economist’s well-documented case for this conclusion). Putting aside the fact that “Asian” companies have no uniform nationality, ownership structure or corporate culture, it is difficult to see how this dangerous strain of Western myopia can be eradicated. Only when Asia – predominantly China – becomes the vantage point for viewing market opportunities and seeking the talent needed to capture them are corporate leaders likely to find truly innovative strategies for success in the Asian Century.
Over the past decade, examples of disastrous foreign investments by successful Asian companies abound. TCL’s initial foray into the international arena via Thompson, RCA and Alcatel brands nearly put a global leader in consumer electronics on the ropes. Lenovo’s purchase of IBM’s PC business wound up costing the company millions more than expected until they brought back global management to China. Acer of Taiwan’s hiring of a Western CEO and purchase of Gateway and Packard Bell in the US led to a tumultuous period and a crisis in management before they shifted tack and replaced the top leadership.
In all three cases, the companies pulled back from the abyss only when they returned to their roots by shifting strategy to focus on what they know best –running successful companies focused on Asian markets from a base within Asia.
Pursuing Sutton’s Dictum
Putting primary focus on Asia has traditionally been seen as limiting growth and competitiveness. But today Asian focus offers a distinct source of competitive advantage. Like the infamous Willy Sutton who robbed banks “because that’s where the money is”, local companies are ideally positioned to take advantage of their proximity and depth of insight on the world’s largest, fastest growing and most rapidly integrating regional economy (see our Impact Slides for each point). Concentrating their international investment and focus on markets in Asia pays real dividends for Chinese and Southeast Asian multinationals. While the conventional wisdom on these companies going global is uniformly skeptical, by building upon their strengths and learning from their mistakes, they may in fact be well positioned to successfully enter global markets.
Being in the right place at the right time, however, is not the sole determinant of success. Asian firms have a strategic perspective on Asian markets coupled with the talent needed to exploit the resulting opportunities. These represent major gaps in Western firm’s capabilities.
Insight and Access
Looking at a business through a distinctively Asian lens can drive innovation by identifying fresh ways of configuring resources.
Tencent, China’s largest and most widely used Internet service portal, saw an opportunity where others only saw only a quirky upstart. In 2011, Tencent bought a majority stake in Los Angeles-based Riot Games for more than US$350 million. Riot had little revenue at the time but its online gaming platform, League of Legends, had more than two million monthly active users. Since Tencent acquired its stake in Riot Games, the number of League of Legend players has grown exponentially with 80% of the fan base in Asia.
League of Legends has become a phenomenon both in Korea and China. Korea hosts a nightly League of Legends TV show and Riot Games now holds an annual championship for League of Legends. The fourth annual world championship is being held in Seoul in mid-October with 40,000 fans expected to attend. Last year’s championship attracted an audience of 32 million online viewers.
Tencent saw what others did not and capitalized on its market knowledge to encourage Riot Games to aggressively market in Asia. Via a focus on Asia, the investment paid handsomely. Riot built on a highly successful business model based on “e-sport” to create an entirely new online market leveraging Tencent’s market perspective and IT infrastructure.
Talent for Execution
Corporate culture of China’s largest privately-owned companies may raise eyebrows in the West. Most westerners assume Chinese firms to be hierarchical and highly centralized, making it difficult to attract talent or develop robust decision-making and management capabilities needed for global expansion. Yet the up-and-coming Asian firms most likely to challenge Western global leaders have developed strong cultures that seem to transcend traditional Asian corporate stereotypes.
Universum ranks Huawei, the world’s largest telecom equipment maker, as the most attractive potential employer for IT/Engineering graduates in China. Huawei’s“wolf spirit,” emphasizes hard work and loyalty to the firm. For Huawei employees, individual aspirations are secondary to the needs of the corporation.
At the world’s largest e-commerce provider, Alibaba’s “kung-fu culture” emphasizes open criticism and “family unity”. The culture encourages passion in the workplace and includes rigorous arguments among colleagues and exhortations to attack the competition. In both cases (as well as many other instances in China), their unique corporate culture is viewed as central to the success of the organization.
The growing strength of Chinese and Overseas Chinese firms in their own backyard may provide them a launch pad for renewed forays into non-Asian markets, whether in the emerging markets of Africa and Latin America or the more established markets of North America and Europe. The key to their success lies in whether they learn to adapt to and localize in these markets while maintaining a focus on the advantages that have made them a success larger and faster growing markets closer to home.