international business in asia workshop - lecture 1
TRANSCRIPT
INTERNATIONAL BUSINESS IN ASIA
FOR ASIA eUNIVERSITY
Dr Jane [email protected] Department of Management, Deakin Business SchoolDeakin University, Australiahttp://www.linkedin.com/profile/viewid=9062770&trk=nav_responsive_tab_profile
OBJECTIVES OF THE WORKSHOP
• To:–Understand the Asian context.–Gain a better understanding of the doing business in the Asian region with a focus on China, India, Indonesia, and Australia.
–To develop knowledge/skills around innovation, entrepreneurship, country analysis and company strategies in the Asian region.
–Analyse and develop strategies for the Asian market.
MY BACKGROUND• Senior Lecturer of International Business for 9 years
• Publications (journal articles, books, media articles) on predominantly China but also Malaysia.
• Study Programs to:–India x 3–China x 3–Malaysia x 3–Indonesia x 1
THE ASIAN REGIONNorth East Asia
• China, Japan, Mongolia, North and South Korea and the Russian Far east
South East Asia • 10 members of Association of South East Asian
Nations (ASEAN): Brunei, Cambodia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand , Vietnam and Indonesia
East Asia– Hong Kong, Taiwan
South Asia• India, Pakistan, Bangladesh, Sri Lanka, Nepal,
Maldives, Bhutan
THE ASIAN REGION
ARE WE IN THE ASIAN CENTURY?
ASIA’S RESURGENCE IN THE WORLD ECONOMY (GDP PER CAPITA)
Australian Government (2013), Australia in the Asian Century: White Paper, Australian Government, Canberra.
ASIA’S MANUFACTURING OUTPUT – SHARE OF WORLD PRODUCTION
Australian Government (2013), Australia in the Asian Century: White Paper, Australian Government, Canberra.
ASIA’S MANUFACTURING OUTPUT – SHARE OF WORLD PRODUCTION
Australian Government (2013), Australia in the Asian Century: White Paper, Australian Government, Canberra.
THE ASIAN CENTURY: OR IS IT?
ECONOMIC GROWTH IN THE ASIAN REGION
WHAT DOES THE ASIAN REGION OFFER US?
• Diverse countries• Was some of the world’s fastest growing market-oriented economies formerly Japan & the Four Tigers (Hong Kong, Singapore, Korea, Taiwan).
• Source of both high- & low-quality products & of both skilled & unskilled labour.
• Destination for & supplier of foreign investment to non-Asian countries.
• Other countries - Malaysia, Indonesia, Thailand and Vietnam wanted to emulate the Four Tigers.
• Now see the rise of China and India.
DIVERSE REGION• Varying population size
–China 1.34 billion, Singapore 3.4, Thailand 66 million
• Varying political systems
–Australia, India, Singapore – Democracy versus China,
Vietnam and communist regimes.• Varying legal systems
–Australia, India, Singapore using common law, versus
China, Indonesia, Malaysia using civil code. • Varying religions
–Hindu, Muslim, Confucianism, Buddhism and
Catholicism
CULTURAL ISSUES• Diversity of cultures/language• Language of international business is English.
• Common cultural trends throughout the region:
–Collectivism–High on power distance–High on uncertainty avoidance–Relational approach to doing business–Loss of face
HOFSTEDE’S DIMENSIONS• Similarity across the region (apart from Australia)
TRANSPARENCY CORRUPTION INDEX
• Varying levels of corruption across Asia• ASEAN report to tackle corruption
EAST ASIAN MIRACLE
• Cluster of highly performing economies – rapid growth rates, industrial development and quick rise in living standards in the post war decades.
• Enhanced role in the world economy, enormous trade and investment opportunities.
• Success affected by the Asian Financial Crisis (1997-98) temporarily
• Increased influence in the world economy and many new features and developments.
Average real growth of major East Asian Economies % (Tselichtchev & Debroux, 2009)
Country 1960s 1970s 1980s 1990-97
Developed countries average (Aust, NZ, N. America, W Europe)
5.2 3.2 3.0 2.2
Japan 10.9 5.0 4.0 1.5
South Korea 8.6 9.5 9.7 7.2
Taiwan 9.2 8.0 8.0 5.2
Hong Kong 10.0 9.3 7.1 5.3
Singapore 8.8 8.5 6.1 8.5
Thailand 8.4 7.2 7.9 7.4
Malaysia 6.5 7.8 5.2 8.6
Indonesia 3.9 7.6 6.0 7.5
Philippines 5.1 6.3 1.0 3.3
China 5.0 6.3 9.4 11.2
THE FLYING GEESE PHENOMENON
After the second World War, “the flying geese” phenomenon was soaring throughout Asia and influencing the Pacific Rim economies.
The formation resembled flying geese, headed by Japan,while the rest of the group followed. Countries toward the front tend to transfer “older” industries to countries at the back.
• Source, Kotler, 2007
WHY THIS RAPID GROWTH? (1950- MID 1990)?
• High Saving rates• Favourable demographic situation• Workers- diligent and quick learners• Investment in education• Relatively politically stable economies• Complementary role of the government
EAST ASIAN MODEL OF CAPITALISM
• Most East Asian economies opted for capitalism, with role of market competition and entrepreneurship
– Exceptions: China, North Korea, Mongolia and Vietnam - opted socialism- failed
– China in 1980 and Vietnam in 1990- market reforms-capitalist economy under a communist party rule – ‘socialist market’ for political and ideological reasons
• Capitalism in East Asia – very different from Western Capitalism.
FEATURES OF EAST ASIAN MODEL OF CAPITALISM
1. Developmental State –Complementary in promoting private sector led growth –Import substitution to export led growth •Financial and other incentives for exporters–Intervening in resource allocation–Deregulation, privatization , foreign investment liberalisation – to create a competitive business environment–Low taxes- self reliance motivation
FEATURES OF EAST ASIAN MODEL OF CAPITALISM
2. Dominant position of the Conglomerates
– Founder – major owner- dominant control– Other shareholders not taken into account– Management not separated from ownership – Corporate governance mechanisms mostly didn’t
apply– Close connection with politicians and bureaucrats – Conglomerate style business –exception China and
Japan
3. Corporate Finance
– Borrowing from banks, debt finance rather than equity finance, connected lending and directed lending.
FEATURES OF EAST ASIAN MODEL OF CAPITALISM
4. Labour relations
– Notion of “company as a family,” focus on loyalty, harmony within the organisation
5. Reliance on inward FDI
– Role of foreign affiliated companies– MNCs provided capital, technologies and
managerial expertise, distribution networks, sales promotion system, brands exception – Japan and South Korea
EAST ASIAN MODEL- HOW IT WORKED FOR GROWTH• Developmental states – promoting industries
• State fixed economic development and worked in strategically important industries
• Conglomerates: bringing dynamism to the private sector• Companies belonging to the same conglomerate and
operating in various business sectors supported each others growth
• Massive bank lending • Played a vital role in the financing of industrial growth • Connected and directed lending reduced risks and helped
lenders to monitor their borrowers
• Labour relations – creating commitment • Enhanced work motivation
• Inward FDI
ASSOCIATION OF SOUTH EAST ASIAN NATIONS (ASEAN) COUNTRIES
• 10 member states:• Brunei, Cambodia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand , Vietnam and Indonesia
• Formed 8th August 1967
• Purpose is to accelerate economic growth, social progress and cultural development in the region.
• Australia-New Zealand with ASEAN (Jan 2010) ($150-200B)
• Will ASEAN be like the European Union?• Currency, Government & Full integration
TRADE PERFORMANCE IN ASEAN 1993-2013
ASSOCIATION OF SOUTH EAST ASIAN NATIONS (ASEAN) COUNTRIES
ASEAN COUNTRIES AT A GLANCECountry Entry
into ASEAN
Population (millions)
GDP(billions)
GDP Growth %
GDP per capita
Principal Export
Brunei 1995 0.406 17.4 5.3 42,329 Natural Gas
Cambodia
1997 15.1 16.9 7.2 1,104 Apparel
Indonesia 1967 248 856.1 5.2 3,404 Petroleum
Laos 1997 6.8 11.7 7.4 4,999 Wood Products
Malaysia 1967 29.9 336.9 5.9 11,062 Electronic Equipment
Myanmar 1997 51.0 65.3 8.5 1,270 Teak Hardwoods
Philippines
1967 97.5 289.7 6.2 2,913 Electronic Equipment
Singapore
1967 5.4 307.1 3.0 56,113 Petroleum
Thailand 1967 68.2 380.5 1.0 5,550 Computer/Related parts
Vietnam 1995 89.7 187.8 5.5 2,073 Crude oil
Total 620 3574 5.52 (ave)
13,082 (ave)
ASEAN–Free trade spearheaded by ASEAN Trade in Goods
Agreement (ATIGA)
–Seek to complete all Free Trade Agreements:
•China, Japan, South Korea, India, Australia and New Zealand
–Establish a common market by 2015
•Free flow of goods, services, investment and skilled labour.
–Single market and production base
–Region of equitable economic development – large gap.
–Region fully integrated into the global economy
–Compete with “Chindia” – or other major economies
around the world or even cooperate with them?
CONCLUSIONS–Context of Asia
–Opportunities but lots of Challenges
–Asian markets have high levels of economic & political
stability
–Similar but different approaches to doing business
–Similar cultural characteristics
–Now we are going to compare:
•The countries of Australia, China, India and Indonesia in more depth