A SPECIAL SUPPLEMENT TO THE JULY 2020 ASIA TASKFORCE INTERIM REPORT DECEMBER 2020

WHAT SUCCESSFUL COMPANIES DO WELL Case studies of Australian businesses in Asia

Asia Taskforce is an initiative of Knowledge partners WHAT SUCCESSFUL COMPANIES DO WELL

The Asia Taskforce’s Interim Report Many Australian companies have provided a snapshot of our succeeded in Asia. Understanding thinking on factors and drivers the drivers behind these successes “Growth in much of behind winning strategies and can provide an outline for other developing Asia is not a businesses. Here we marry these companies aspiring to enter and preliminary observations with grow in Asian markets. risk-free proposition. . . more granular details derived from There is no guaranteed several in depth case studies of There are three broad Australian businesses that have rationales for companies formula for success pursued growth in Asia. Specific but there are certain examples have been drawn from to expand into Asia: some of these companies to 1. To drive growth and take features that are illustrate key insights. Detailed advantage of the growing always present.” accounts of four of these showcase economies, and especially the firms (, Cochlear, Seek growing middle class and ResMed) are appended to the chapter. 2. To diversify revenue by adding markets outside the According to the World Bank’s home country Doing Business 2020 Report, Asia is home to the full spectrum 3. To improve operations and of rankings on the ease of doing gain access to new supplies, business from Singapore in lower costs or new ideas. second position to Myanmar at In several cases companies have number 165 (out of 190 countries). leveraged their knowledge of and Similar rankings are also found presence in Asia for revenue as well in Transparency International’s as operational gains. Corruption Perception Index. Studying the history and practices Growth in much of developing of companies that have been Asia is not a risk-free proposition. successful in Asia has led us to Experience shows that companies identify eight success factors. that have done well have been The relative importance of each consistent and persistent in their of these factors depends on strategies, while those that failed the company, the market and changed their plans half-way, the method of market entry. paused or retreated early. There is Successful companies spend no guaranteed formula for success significant time –months and years but there are certain features that – to understand this synergy and are always present. join each element together in an integrated market-entry plan.

What Successful Companies Do Well | 2 The eight factors are: Long term vision Where, when and Understanding local how to compete business practice A common theme is that entry into an The entry strategy In the specific markets Asian country should be a long must identify specifically where the company should understand term strategic play rather than an to compete in terms of which how negotiations proceed, opportunistic move to capitalise on countries and market channels. what role local culture plays in a short term opening. This requires It should also identify how the behaviour and the hierarchy of a compelling business case in company’s capabilities can laws, regulations and market terms of the strategic logic for the be leveraged or what unique practice. The company should entry which allows time for the capability does the company know where the source of this company to learn and develop bring to the market that will knowledge is in its ranks or if it relationships needed for success. support success. need to be acquired. Acquiring this Managing expectations in terms of intelligence requires a presence the time, investment required, and recognised in the target country and/or a level of returns is critical to aligning the importance of managing regional centre like Singapore and stakeholders (especially investors their inventory and supply chain will take years. and the Board) prior to entry. And as seamlessly as possible. They while there needs to be a clear work closely with customers to The approach taken by on-line pathway to profitability, realistic forecast and plan for demand while recruitment firm Seek has been targets and patience are essential. managing stock levels in a way that to become a minority investor protects the brand. They take a in local incumbent recruiting Cochlear has taken a long- city by city approach, investing in website businesses in order to term approach over the last their network of relationships, with gain a detailed understanding of 30 years to its growth in Asian local feet on the ground building the relevant market and business markets, gradually increasing its knowledge of each local market. operation. Once confident of its investments and only recently level of understanding, it has then opening its factory in China , on the other hand, increased the level of ownership to after 20 years of operation in proceeded to develop local gain a controlling stake. that country. products and adapt its branding, product range and packaging Lendlease were quick to recognise Similarly, Lendlease has staged in order to address specific the importance of a government’s its growth in Asia since 1973, requirements and opportunities agenda around workplace safety, establishing its presence in in different markets across Asia: and subsequently benefited by Singapore, building up its trust and “With entry into every market, ‘you investing to transfer its knowledge reputation in these markets before fix, you move, you fix, you move’. and train apprentices locally. expanding into other markets in You can leverage capabilities and the region. relationships from one market to BlueScope Steel has used enter into other country markets partnerships across its Asian For Bluescope Steel, tariff (e.g. leveraging our Korean operations both to establish a arrangements and anti-dumping partnership in Vietnam and China). foothold in each target market actions across Asia have led it It is very hard to plan the sequence and to sharpen its understanding to pursue a long-term growth and you do have to rely a bit on of local business practice, local strategy based on embedded luck and learning as you go.” competitor strength and weakness multi-country production. and growth opportunities in each market.

What Successful Companies Do Well | 3 Knowing who At this point, they would typically Empower people and how appoint additional distributors until close to the market a country’s operations reached a Relationships are size that warranted having a direct Successful companies critical to success and identifying customer relationship and local have combined Asia capable which relationships is critical. The operation. Rather than cut the talent from the home market value of these relationships needs distributor out when they entered with strong local talent. In many to be recognised and should be the market directly, they look for cases being represented by locals managed as a strategic asset. ways to protect the relationships improves relationships and the There should be clarity on the and knowledge they have built with understanding of cultural nuances. insights that the company or those local distributors. High levels of trust for local partner brings to the business. management is critical given the Reputation and image speed of change in markets and Lendlease was successful in the importance of relationships. securing the confidence and Know who the company Over-reliance on decision-making trust of prospective Asian clients is dealing with and deliver on by the head office, and lack of local by showcasing their Australian commitments. Promise only what autonomy are unlikely to enable projects and expertise to you can deliver and deliver what the responsiveness needed. senior government officials as a you promise. demonstration of their capability Dr Gordon Perchthold (Singapore and strength of client relationships. Investing in being seen as a Management University) observes ‘local operator’ can also deliver that “the main challenge for Infant milk formula producer significant long-term returns. Australian management, which has A2 has leveraged in-country ANZ recognised the importance been acclimatized to operating in partners to navigate a challenging the context of limited competition regulatory environment, of establishing its retail business in order to attain success for within the Australian market, is choosing to partner with a that they have not yet learned Chinese state-owned distributor its institution bank. To do this it invested in tangible, bricks and how to ‘survive in the jungle’ that to facilitate entry and understand is Asia. Too often the motive is market complexities. mortar assets that gave the market confidence that its presence in Asia to find a quick path to revenue Alliance management was going to be long term. growth, rather than thinking of capability investing in a strategic platform. Treasury Wine Estates has been The timing for returns within the Identify partnerships faced with challenges around initial business case always looks or alliances that close gaps in brand counterfeiting. They work rosier than the reality and does understanding or capability and be closely with local authorities and not cater for things not going to clear on how value is transferred in industry partners to identify and plan, and so expectations are not the alliances. Understand the risks enforce quickly. They also support set appropriately, and patience presented by partners and choose consumers in making more is lacking.” those partners carefully. informed purchasing decisions by providing QR verification labels One underutilised but potentially ResMed and Cochlear adopted across Penfolds releases and highly valuable resource here is the similar approaches for alliances introducing signature bottles large diaspora of highly qualified when expanding into Asian across select wines. Australian university alumni who markets. Both companies would live and work across Asia. look to setup a single local Bluescope Steel invests in distributor for a market. At some localised production facilities point this model would plateau, as in each country, focusing on the single distributor would only becoming a ‘local operator’ with be able to reach so many hospitals in-country relationships as well and providers on their own. as to avoid regulatory and tariff restrictions on transporting products across borders.

What Successful Companies Do Well | 4 Blackmores recognised the Governance model Seek took an approach of investing need to empower local teams to with a 3-5 year timeframe, never meet the day-to-day challenges The local team will trying to justify multiple or targets of running a business. They need autonomy to that would normally be imposed recognised that it is hard for succeed, but oversight from the by the share market. They saw an ex-pat to run and operate a core leadership, so that risks, the challenge of getting the local business due to their lack of performance and progress are investment level right so that they understanding the local culture, visible. Developing process and were able to balance achieving the language and relationships. structures that build trust and right economies with leveraging During the period 2009 to 2020, understanding while enabling the local team and knowledge. Blackmores built its local Asia team autonomy is critical. Change They did this by acquiring minority from 200 to nearly 1,000 staff. can be required at head office. stakes in local players and then Often companies have a local growing these gradually until they ResMed has invested to build and advisory board. Bringing senior owned the local players outright. acquire local capability and feet on executives and boards into the the ground, then giving its local market to develop understanding The chair of infant nutrition operations freedom to experiment. of the country, relationships and exporter, Bubs, has a strong They have been investing to economic landscape is important. personal knowledge of the Chinese understand and support the entire Head office presence at local business context. pathway for patients of their sleep relationship-building activities apnoea medical device in different sends a signal of commitment markets, which means they have and respect. needed to adapt their digital platforms, build awareness in the All successful companies local market with physicians and demonstrated long term consumers, launch operations and commitment by their Board and identify ways to scale that for the CEO, and which persisted through local market. If one initiative falls any changes of their CEO or Chair. short, ResMed tries something Lendlease took an approach of different, being mindful not to appointing their former CFO overinvest and building confidence to lead their business and be in proving an approach for a responsible for growth in Asia. particular market. This meant that the executive and Similarly, Cochlear uses local Board could provide a ‘light touch’ teams to lead in-country treatment, given that they had operations across Asia, with a an experienced senior executive regional headquarters supporting responsible for Asia, and who country led buseinesses already had the trust of the CEO and Board.

What Successful Companies Do Well | 5 Eight successSuccess factors Factors for Australian in companies Asia Framework entering Asia have been draw from the case study sample

1 Long-term Vision & Alignment • The Journey will be challenging so ensure early alignment around the Vision - & a compelling 'Business Case'... • ...But retain some flexibility about the precise sequence and timing

2 Where, When and How To Compete? • Asia is a Complex Portfolio: Agree screening criteria & Prioritise Options • Implement in Flexible Phases • Identify distinctive, transferable, capabilities & invest in them early

Strategy & 3 Governance Model Governance • Build Asian Capability of Board: Specialist Sub Committee & Advisory Councils have value • Plan Board meetings in the region • Avoid distracting Group leadership by early creation of a high profile, 'silver hair', 'Face to Asia' = e.g. 'Chairman Asia' role to attend the frequent and important 'ceremonial' functions

4 Build Understanding of the "Asian Way" • Distinct local 'flavours' but also some Pan-regional themes e.g., 'Contract may be the beginning of Success negotiations'.... • ...So early HR 'stock-take' of in-house Asia skills Factors • ...And begin tailored hiring, skill building, coaching

5 'Know Who' and 'Know How' • Treat Relationships as strategic assets of the firm & rapidly formalise processes to identify & manage them • Share 'Know How' skills with strategic partners as a 'soft' tool to Execution strengthen relationships

6 Alliance Management Capability • Alliances can be the most flexible way to selectively close capability gaps... • ...So 'audit' - & strengthen - alliance management processes

7 Reputation and Image • While large 'Asian' business networks are tight knit so define 'desired' image - and 'audit' current perceptions among key decision makers/influencers • Mantra: 'Promise only what you can deliver and deliver what you promise...'

8 "Empower the People Closest to the Market" • "Asia" is ever changing - and 'hard' data is hard to come by so review HR Model on both KPI's - and length of 'time in role' - to build both experience, and authority of local team... • Seek-out- Asian-experienced staff internally • Mantra: 'You don't know Who can play the violin until you ask'

Source: Strategy&, PwC

What Successful Companies Do Well | 6 We studied companies that had We also heard that institutional entered Asia and either withdrawn investors do not support or had significant setbacks. In each the expansion of Australian of the cases we studied at least companies into Asia. Investors one or two of the 8 success factors have responded to this saying that had not been adopted. There they do not support companies are examples of companies that investing where they do not have entered Asia without a knowing a competitive advantage. where and how to compete –the capabilities or market A large market opportunity is not a positions that led to competitive reason on its own to enter an Asian advantage in were not market, a clear strategy supported able to be replicated in Asian by the 8 factors above are needed markets or local competition was to capitalise on a large opportunity. underestimated; some companies Conversely the companies that changed their commitment to have succeeded in Asian countries Asia when Board and executives do have strong investor support changed, sometimes because for expansion in Asia. the original strategy was not seen as compelling; others chose the partners who did not have the same values or standards which inevitably led to conflict, distracting from strategy execution.

What Successful Companies Do Well | 7 Alternative operational Modes of Internationalisation

High

Acquisitions

Direct

Joint Ventures Firm Capital at Risk Firm As well as following the eight success factors, Agent/distributor successful companies Trade-offs depicted not linear have adopted different but representative approaches to entering markets depending on Low Firm Intellectual Property (IP)at Risk High their risk appetite and Source: Adapted from Alternative operational Modes of Internationalisation, the investment needed. Dr Gordon Perchthold, Singapore Management University Where possible, lower upfront investment while A2 Milk Company entered the Joint Ventures relationships and market tightly regulated Chinese baby These have been used to leverage knowledge are developed formula market in 2013, followed local companies’ market positions will minimise the risk and by entry to South Korea in 2018, and knowledge or are required reduce expectations for in both cases using single by local regulations. They are rapid returns. distributors. In China, its chosen often complicated because it is distributor was a government difficult to get complete alignment We have identified four owned enterprise, China State on objectives which can lead to entry models. Farm, which served to facilitate tension and frustration. Agent/distributor ease of access and reduced short‑term risk. Lendlease operates in Asia The lowest cost-entry model using combination of direct with the benefit of the cost being While Infant nutrition producer, subsidiary investments and project largely variable. Selection of the Bubs, has also used partnership specific JVs. It uses JVs with local right distributor(s) is essential. with local distributors to access government connected entities to This approach is sometimes used the Chinese market since 2017, it strategically advance chances of to develop market knowledge has partnered with multiple local winning high-value public interest and presence before building a retail distributors including, most projects as a foreign company. direct presence or proceeding recently, online behemoth Alibaba to acquisition. (which also now has a significant indirect equity interest in Bubs).

What Successful Companies Do Well | 8 With the decline of its domestic JVs (Indonesia) and distributor It has targeted key market players letter-carrying business, Australia partnerships (Vietnam, Kazakhstan facilitating entry to a competitive Post has sought alternative and Pakistan). market and sought to contribute revenue streams in Asian to, rather than control, acquisition As a means of accelerating market manufacturing and e-commerce, targets – empowered those closest development and investment using JVs as its preferred entry to the market and leveraged in Asian markets, ResMed has method in China, where since pre-existing networks. Seek transitioned to a multi-channel 2005 it has partnered with several initially entered China through (online and offline) sales model dominant local entities, including acquisition, purchasing 25% via a mix of direct operations China Post, Alibaba, Aramex and of Zhaopin, China’s No.2 job and distributors. China Direct Stores. Its partnership advertiser, in 2006. This share with the latter business enables Likewise, Cochlear, which first increased to 56% by 2011. Its Chinese shoppers to purchase entered markets in Asia via subsidiary, SEEK Asia, which goods in Australian that Australia distribution agents in the 1990s was launched as a JV in 2010 has Post then ships to China. has subsequently pivoted to direct subsequently become a wholly- investment (via both distributor owned subsidiary. Direct acquisition and subsidiary start- Bluescope Steel’s initial move into Provides the highest level of up) once market presence was Asia in the mid-1960s involved the control but also requires a high established. It now has its own creation of subsidiary operations upfront cost (usually a fixed cost) production facilities under in ASEAN countries. More recently, and long lead times because development in China. its preferred approach in Japan, relationships and understanding Acquisition Malaysia, China and India has been need to be built. a combination of acquisition and High upfront costs but comes with Treasury Estate Wines entered JVs, including JVs with Nippon Steel benefit of an established market the market through a distributor and India’s Tata Steel. position. Understanding the before pivoting to form direct history and any liabilities acquired As the above case examples relationships with Chinese is critical, leading to longer due indicate, these models are not retailers, e-commerce providers diligence process. Loss of key mutually exclusive, and many and wholesalers providing greater personnel in an acquisition can companies start with lower control over operations and damage the business. risk options and increase their how their brands are marketed exposure as their knowledge and priced. Seek used strategic acquisition and experience grows. Some of major market players to Natural health products producer organisations utilise different quickly enter and compete in an Blackmores has used direct models in different markets, and already competitive landscape investment in subsidiaries to sometimes within larger markets. (e.g. acquisition of JobStreet and drive its success in diversifying JobsDB. Its entry approach has and growing its revenue streams focused mainly on acquisitions, across Asia. Under CEO Christine acquiring a minority holding in Holgate (2008-17), it redirected a #1 or #2 player initially to gain its market focus from Australia to local market knowledge before Asia, adding additional subsidiaries increasing its stake to gain more in Singapore, China, Korea and, control and influence. most recently India. However, in other markets, it has also used

What Successful Companies Do Well | 9 A comprehensive risk management approach is an important component of any market entry strategy and Asia is no exception. Research by the Taskforce into successful and unsuccessful entries into Asian markets shows six important areas of risk:

Political, legal and regulatory Competition Market dynamics, capabilities and infrastructure Political instability, increasing and What advantages do local or changing regulation and uncertain international competitors have in Markets and preferences can legal processes are characteristics the market - prices, relationships change rapidly, mechanisms for of many markets. As China’s or other factors? How will this delivering after-sales service can recent restrictions on imports change when faced with a be different to home markets and of Australian primary products, new entrant? the capability to deliver these including barley, cotton, wine, coal, services may require development sugar, timber and lobster, attests, Dr Gordon Perchthold (Singapore or re-invention. regulatory whim can pose a Management University) observes major risk. that “the main challenge for Despite its solid success in Australian management, which has accessing market share across Treasury Wines has been faced been acclimatized to operating in Asia, shifting market dynamics with challenges around brand the context of limited competition continue to pose a risk for counterfeiting. They work closely within the Australian market, is Blackmores. Changes in how with local authorities and industry that they have not yet learned how customers shop have seen shifts partners to identify and enforce to ‘survive in the jungle’ that is across e-commerce and in- quickly. They also support Asia. Too often the motive is to find store. While revenues surged in consumers in making more a quick path to revenue growth, 2015 due to significant demand informed purchasing decisions by rather than thinking of investing via the opening of cross border providing QR verification labels in a strategic platform. The initial e-commerce in China, including across Penfolds releases and business case always looks rosier daigou sales, more recent years introducing signature bottles than the reality and does not have seen a slowdown due to a across select wines. cater for things not going to plan, tightening of regulations and and so expectations are not set professionalisation of daigu trade Bribery and corruption appropriately, and patience and overall increased competition Most companies face challenges in is lacking.” as more foreign brands have managing business practices that launched in the market. present serious reputational risks for the organisation. Paying bribes is not only illegal but is also a lazy business practice.

What Successful Companies Do Well | 10 Relationships Companies that have succeeded in Asia have taken country-specific Relationships are critical to success approaches, have identified the in Asia. But relationships are often criteria and requirements for opaque. Companies must seek to success in advance, have fully understand the motivation behind understood and engaged their relationships and be cognisant of stakeholders and built meaningful bribery and corruption risks that relationships with them, and may arise. have managed expectations and Country specific knowledge risks once they have settled on a long-term strategy. They are Success in one Asian country also able to respond quickly and does not necessarily lead to adjust strategy when markets and success in another country. conditions change. A specific country strategy (and in some countries an even A more detailed discussion on how more localised strategy) is anti-bribery and corruption risks needed along with a tailored risk can be managed will be covered in management approach. our Final Report. While Lendlease leverages in- country partnerships to build relationships, this requires robust due diligence regarding both prospective partners and clients.

What Successful Companies Do Well | 11 WHAT SUCCESS IN ASIA LOOKS LIKE: SHOWCASE EXAMPLES

Lendlease Success Factors Building brand trust is equally critical to gaining a competitive A Strategy Built on The company has a clear long-term edge. To this end, Lendlease has vision and focuses on developing a sought consistently to be a good Long-term Vision, Core rich understanding of Asian ways, Capabilities and In-country corporate citizen, focus on work while avoiding the trap of treating safety, share IP and training and Partnership the region as a homogeneous make a positive difference in the group. It builds strong in-country host location. Strategy and Execution relationships with partners and Lendlease has been operating stakeholders, including authorities Also vital is having a healthy in Asia since 1973 and has and government officials, and respect for the local competition: been involved in over 41,000 actively manages alliances to “It is also necessary to adjust construction projects in the region. ensure long-term success. your attitude from being the ‘big Its success is based on pursuing gorilla’ in Australia to a ‘little fish’ It recognises that understanding in Asia. You must respect the local long-term growth opportunities differences in markets and arising from demographic shifts competitors in Asia – they can be construction industry value chains very big and fierce.” in Asia, namely the region’s within Asia requires agility and rapid urbanisation and an aging adaptability. Accordingly, it has Challenges and Risks population: “Asia is a 10-15 year targeted telecom infrastructure journey – don’t go in if you are project management in Japan and Competing for nationally not going to commit for the long development of aged care facilities significant development work as haul”. Lendlease has an integrated in China. a foreign enterprise necessarily global business strategy targeting involves political and legal risks. 7 ‘gateway cities’, including Lendlease has also been extremely A related challenge is having to Singapore, Kuala Lumpur, successful at leveraging and demonstrate that the firm has a Shanghai, Beijing and Tokyo. empowering local talent: “Our clear competitive advantage over regional team has seasoned local businesses. Untargeted and The firm uses a mixture of joint locals with experience in relevant ventures and direct investment in broad international expansion has markets (as opposed to ex- also delivered some hard lessons, wholly owned subsidiaries in Asia, pats). It is important to know combined with project specific with Lendlease being forced the business at a regional level, to scale back its international joint ventures. It leverages in- but also at a local level. You need country partnerships to build operations in the wake of the GFC a crisp local perspective to get to focus on key gateway cities in a relationships, an important factor things done.” given the complex political and drive to lift profitability. public interests in large-scale developments. This requires robust due diligence regarding both prospective partners and clients.

What Successful Companies Do Well | 12 Cochlear Government funding is critical to Challenges the growth of cochlear implants Success by helping and so building relationships Each country has different with Government and providing practices and healthcare systems countries develop their so strategies had to be specific treatment for people with information on the benefits of the therapy was needed to expand to each market. Distributor profound hearing loss access and sales. Pricing and relationships are challenging, maintaining a balance of power Strategy and Execution product configurations were also tailored to meet different between distributors and the Cochlear entered Japan in the price points. Giving trusted local company is critical to ensuring late 1980s and then expanded in managers a high level of autonomy effective commercial negotiations Greater China, India, Korea and with a very strict compliance with distributors. South East Asia in the 1990s. Initial framework has enabled local When distributors have too much market entry was by partnering teams to be responsive to local power by “owning” key local with distributors in each country. market requirements, competition relationships they their power In each of these countries Cochlear and customers. Cochlear has increases and they can extract was the first company to offer continued to invest in each of these better pricing. Cochlear is a cochlear implants. Therefore, markets over the last 25 years. This global company and about 16% of the entry strategy was focused accelerated with the construction revenue comes from Asia Pacific. on developing the market by of factory in Chengdu, China It can be challenging to ensure training surgeons, building starting in 2018. enough priority is given to the awareness of the indications and requirements of Asian countries in benefits of Cochlear implants Success Factors developing the corporate strategy. and very importantly educating Cochlear targeted the larger and governments. This approach is more developed Asian countries inherently a long-term approach. first and progressively expanded the path for care, the expertise across the region. Selecting and infrastructure all had to be the right distributor through developed. As markets grew, appropriate due diligence was Cochlear opened offices in important. Cochlear invested countries and slowly built its own alongside distributors in training employee base. These employees and marketing as well as adding worked alongside distributors. Cochlear employees. These The distributors were good employees enabled Cochlear partners to grow the business in to build knowledge of the local the initial stages. However, growth market, ensured Cochlear required reinvesting cash. Once employees held key relationships the business searched a certain and was a check on distributor size some of the distributors performance and practice. preferred to take cash out This approach created strong rather than reinvest. At these local teams with deep market points Cochlear, often replaced knowledge over time. distributors with employee sales teams. These teams were hired locally, as were country managers, ensuring strong knowledge of local market conditions and practices.

What Successful Companies Do Well | 13 ResMed ResMed’s current preferred model ResMed currently pursues a “two in Asia markets, where, unlike brand” strategy in China and is Successful Transition western markets, consumers investing in new digital tools like from Franchising to are not reimbursed for using mobile apps and e-commerce to Acquisition and B2C its products, is to have a direct reach more patients. (B2C) relationship with the end- Strategy and Execution user: ‘We prefer to control the Underlying ResMed’s success to entire pathway for our patients’. date in Asia has been a willingness Pivoting from solely relying on 3rd Building on this approach, it is now to experiment with commercial party distributor franchising of its also using markets in Asia to trial models and digital technologies, core sleep-disordered breathing product/service diversification and take calculated risks: “Get and ventilation devices to setting and e-commerce innovation something working, then scale up local operations and sometimes (e.g. digital marketing, cloud- it. And remember that success acquiring distributors has allowed connected devices, self-diagnosis, is not always correlated with the ResMed to deepen its penetration data analytics), with the aim of immediate financial investment. of Asian markets. ResMed’s initial creating technology-enabled care If something doesn’t work, success in Asia was in Japan where services. It is also investigating how be flexible.” ResMed successfully partnered to leverage machine learning and Challenges with two large local distributors to AI to personalise care for patients. seed and grow the market. Japan ResMed’s success in Asia hasn’t is now one of ResMed’s largest Success Factors been trouble-free. Local teams are businesses globally. ResMed targeted markets with given considerable autonomy but In other Asian markets, ResMed strong demand due to rising still must be overseen to maintain typically started with a sole middle class and investment alignment with parent entity exclusive distributor then later in healthcare infrastructure, priorities. Thus far, unlike Cochlear, expanded to a multi-distributor developing strong brand ResMed’s medical devices are not model. In order to manage multiple recognition in target medical covered by health insurance or distributors and also protect the device segments, with a focus on government reimbursement in ResMed brand and IP, ResMed superior quality protecting it from most Asian countries (including set up local teams in China, India, threat of IP loss and lower cost Australia). Korea and Singapore (some via local competitors. Further, having operations across a acquisition of local distributors). In China, ResMed acquired a local growing number of Asian countries Around 10 years ago ResMed also medical device company in 2015 to require a nuanced understanding set up its second manufacturing expand into the “value segment” of local cultures national site in Singapore to complement of the market. Its acquisition of healthcare systems and consumer/ its manufacturing local R&D and manufacturing patient behaviour. Replicating operations and be closer to its capabilities in China through strategies from the US and Europe Asian component suppliers. its subsidiary (Curative) has have not necessarily worked for “Once you get to five to ten cemented ResMed’s leadership ResMed in Asia. distributors in a market, then you position in this market by need a local team there as well. We expanding the product range and started with one or two employees, allowing ResMed to compete head- then grew to having five-plus, to-head with local Chinese brands. became a legal entity and set up our own warehouse.”

What Successful Companies Do Well | 14 Seek SEEK Asia then proceeded to Seek’s leadership also took a expand its ownership of its long-term focus on sustainable An Inorganic Approach Asian investments, taking 100% investment through gradual and to Growth in Asia ownership of JobsDB in 2012 and strategic investments with a JobStreet in 2014. Seek gradually 3-5-year timeframe. This helped Strategy and Execution increased its share of SEEK Asia them to manage risk and avoid any between 2010 and 2018, until share market pressure that would After it had established itself as a it eventually acquired 100% otherwise require the delivery of leading employment marketplace ownership in March 2018. quick returns from the complex in Australia, Seek sought growth markets they participated in. internationally by focusing on SEEK now operates in Asia through emerging markets, including its wholly owned subsidiary SEEK Challenges China and South East Asia. It Asia and majority shareholding recognised the favourable market in Zhaopin in China. In FY19 Seek It was always a challenge for Seem dynamics in Asia, with significant drew over 50% of total sales to get the investment level right, regional economic growth, revenue from its Asian operations and then balance priorities around increased internet penetration and investments. achieving economies of scale and rapid urbanisation driving versus leveraging the local team demand in the online employment Success Factors and knowledge. They recognised classifieds sector. that they could not just leave it One of Seek’s main foundations to the local teams to make all the Seek’s Asian expansion strategy that provided them with a key decisions, as this would leave a lot was to focus on gradual, staged success factor in Asia was in their of opportunity on the table. acquisitions of leading ‘jobs board’ relatively simple business model. businesses to gain local market They recognised what they were They also recognised that they knowledge before increasing good at, and then stuck to this, could not just bring the same its stake to gain more control proving their business capabilities approach from Australia as this and influence. in their home market first. This would mean they missed many of then put them in a strong position the market nuances. Seek initially entered China to value other similar businesses. through acquisition, purchasing Another challenge they 25% of Zhaopin, China’s No.2 job Seek’s market entry and growth in increasingly face now is finding the advertiser, in 2006. This share Asia has been to invest in inorganic right balance between autonomy increased to 56% by 2011. Seek pathways as an approach to build to pursue local opportunities also expanded into South East their understanding of a market versus staying aligned with the Asia through acquisition in 2008, Their recognised acquisitions rest of the group and investing purchasing of 23.1% of JobStreet, as investments in relationship in opportunities that have a top job advertiser across building, respecting the locally the potential to bring greater Malaysia, Philippines, Singapore acquired businesses and motivate regional expansion. For example, and Indonesia. them by a common vision for determining which brand should growth rather than pushing for line up with which market to avoid In December 2010, Seek productivity improvements. the potential for channel conflict or established a new subsidiary, SEEK They foster an open leading brand dilution. Also, where there Asia, with SEEK owning 69% and and respectful culture with could be opportunities to invest in Tiger Global, Macquarie Capital management, and recognised it synergies for the back-end to build and Consolidated Media Holdings was important to empower those scale and get a bigger “bang for owning the rest SEEK Asia then who were closest to the market. the buck” on enabling capabilities became a vehicle to acquire 60% or platforms. interest in JobsDB, a Hong Kong- based business that had job ad websites in nine Asian countries, in 2010.

What Successful Companies Do Well | 15 In October 2019, the Business Council of Australia and Asia Society Australia together with knowledge partners PwC Australia and the University of Sydney Business School formed the Asia Taskforce of senior leaders from the business, education and government sectors to examine how Australian companies and organisations can increase their presence and position in Asia to ensure our continued prosperity and deliver progress for future generations.

This report refers to Asia as the countries of South East Asia, South Asia and North East Asia.

This Discussion Paper and other publications by the Taskforce can be found at https://asiasociety.org/australia/asia-business-taskforce

Authors • Dig Howitt Chief Executive Officer, Cochlear • Chris Bartlett Partner, PwC Strategy& • John Shields Professor and Academic Director International, University of Sydney Business School

www.bca.com.au www.asiasociety.org/australia www.pwc.com.au/asia-practice

www.sydney.edu.au/business 12707XXXX