Asian multi­na­tion­als should de­velop a global out­look

China Daily (Canada) - - ANALYSIS - By BON­NIE WANG in Hong Kong

For China Daily

In a short pe­riod of time, Asian multi­na­tional cor­po­ra­tions have come a long way and are now in­cluded in the ranks of the world’s elite.

But de­spite this rapid suc­cess, th­ese multi­na­tion­als still have far to go to catch up with Western coun­ter­parts, at least in terms of busi­ness so­phis­ti­ca­tion and im­age.

Many are strug­gling with is­sues such as post-merger in­te­gra­tion and try­ing to gen­er­ate syn­er­gies from dis­parate oper­a­tions.

“Asian com­pa­nies usu­ally op­er­ate in a top-down sys­tem, with a sin­gle per­son mak­ing most of the de­ci­sions,” says Har­sha Bas­nayake, head of trans­ac­tions for Sin­ga­pore and the As­so­ci­a­tion of South­east Asian Nations with global con­sul­tancy EY. “When (Asian com­pa­nies) ac­quire a for­eign one that does not op­er­ate that way, there are con­flicts.”

He warns that if Asian multi­na­tion­als do not ad­just their man­age­ment ap­proach, they risk los­ing the tal­ent of the ac­quired com­pany. “Com­pa­nies should value the team they pur­chase and pre­serve the lo­cal man­age­ment team. How to get busi­ness to­gether re­quires think­ing and plan­ning,” he adds.

Ul­ti­mately, this means com­pa­nies should find ways to plan ahead and be more flex­i­ble, both in terms of how they work in­de­pen­dently and how they work with their part­ners.

Lan Sai, a pro­fes­sor from Peking Univer­sity HSBC Busi­ness School, says: “Com­pa­nies should have an over­all in­te­gra­tion strat­egy and a clear pur­pose in ad­vance. Some­times, we find that China’s state-owned com­pa­nies are a lit­tle bit ir­ra­tional, as they only step out be­cause of gov­ern­ment poli­cies.”

One ex­am­ple is Shougang Group’s op­er­a­tion in re­source-rich Peru. A pi­o­neer of Chi­nese overseas in­vest­ment, Shougang set up shop in South Amer­ica in the 1990s, when the Chi­nese gov­ern­ment started ini­tia­tives to en­cour­age com­pa­nies to ex­pand abroad.

The com­pany has been in Peru for more than two decades and, in that time, has been dogged by la­bor dis­putes and strikes that have re­sulted in a steady stream of losses.

For com­pa­nies in much of Asia, par­tic­u­larly those in South­east Asia, tra­di­tions of fam­ily-owned busi­nesses of­ten con­flict with the needs of suc­cess­ful world-class multi­na­tion­als.

In In­dia, be­tween 70 and 80 per­cent of large busi­nesses are owned and con­trolled by a sin­gle fam­ily. In China, the pro­por­tion is 35 to 45 per­cent.

Else­where in Asia, how­ever, fam­i­lies own be­tween 80 and 90 per­cent of large com­pa­nies, ac­cord­ing to a re­port by global con­sult­ing firm McKin­sey & Co.

The man­age­ment style in th­ese busi­nesses is not al­ways con­ducive to growth. In­stead, a pa­tri­ar­chal style and strong fam­ily cul­ture of­ten make out­siders un­com­fort­able, par­tic­u­larly at the high­est lev­els of man­age­ment.

Amit Nand­ke­ol­yar, as­sis­tant pro­fes­sor of or­ga­ni­za­tional be­hav­ior at the In­dian School of Busi­ness, says the CEO of a fam­ily-run busi­ness should not al­ways be a fam­ily mem­ber.

“The con­cept is that the busi­ness owner started the whole thing, and af­ter it gets big­ger, he or his fam­ily doesn’t need to be the one who runs the busi­ness,” he says. “If you have a global am­bi­tion, you have to hire the best peo­ple to run a busi­ness.

“How­ever, it’s al­ways easier to think it or say it than to do it. The idea of hav­ing non­fam­ily mem­bers as the de­ci­sion-mak­ers is dif­fi­cult to turn into fact, even when the com­pany be­comes a multi­na­tional.”

Cul­tural bar­ri­ers may also hin­der the global growth of Asian multi­na­tion­als. In coun­tries with strong lo­cal cul­tures like Ja­pan and South Korea, some em­ploy­ees see in­ter­na­tional op­por­tu­ni­ties as a pun­ish­ment in­stead of a re­ward. Their main con­cerns are cul­tural clashes and a dis­rup­tion of the work-life bal­ance.

Sta­tis­tics from Wil­lis Tow­ers Wat­son, a risk man­age­ment con­sul­tancy, show that 35 per­cent of Asian com­pa­nies say em­ploy­ees from their home coun­tries are un­will­ing to move to other mar­kets, which is a ma­jor ob­sta­cle for global mo­bil­ity.

Lan at HSBC Busi­ness School cites the chal­lenges faced by work­ers asked to move overseas: “Many staff mem­bers are sent to Africa or the Mid­dle East or Europe as pi­o­neers to ex­pand new mar­kets. In this sit­u­a­tion, they usu­ally have to face se­vere liv­ing con­di­tions, and some young peo­ple worry that they could miss the time and chance to get mar­ried.”

Th­ese cul­tural con­cerns also mean that Asian multi­na­tion­als are of­ten re­luc­tant to hire for­eign work­ers.

At a US multi­na­tional, about one in five ex­ec­u­tives is a for­eigner. How­ever, Chi­nese and In­dian na­tion­als hold all the se­nior man­age­ment roles in the top multi­na­tion­als in their coun­tries, ac­cord­ing to Wil­lis Tow­ers Wat­son.

Nand­ke­ol­yar refers to a na­tional glass ceil­ing. “Em­ploy­ers at In­dian and Chi­nese com­pa­nies pre­fer to hire tal­ent from their home coun­try,” he says. “But as a com­pany ex­pand­ing to an­other mar­ket that you’re not fa­mil­iar with, the first thing to do should be find­ing peo­ple who know the lo­cal mar­ket. The next step is hir­ing glob­ally, aim­ing to be as di­ver­si­fied as pos­si­ble.”


A bill­board ad­ver­tis­ing Huawei smart­phones on the Pi­azza di Spagna in Rome in Italy.

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