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 (Lendlease, 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 Treasury Wine Estates 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 Blackmores, 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.