Intercultural Management. Case study:Eldora Company in Asia
...ny of the other risks would be minimized COMPETING IN ASIA PACIFIC: Understanding the Rules of the Game According with the INSEAD-Euro-Asia Centre there are some important topics that westerns should be consider before making business with Asia Pacific countries, like government relations, business rules, social, customers, financial Issues, etc. Government Relations: “Government” can mean different things in different countries, in some countries bureaucracy is more powerful than the government-Japan would be an example- while in others the government and the bureaucracy are hardly distinguishable, whatever the theoretical distinction may be –Vietnam and China-fall into this category. The countries where government interference is perceived to be particularly strong are Vietnam, Korea, China, Indonesia and India (Fig 1). Most countries are perceived to discriminate against foreign investors in some way (Fig 2), In China, observers note more advantages for local firms: the result perhaps of the withdrawal of various import duty incentives and preferential tax rates for foreign businesses, while at the same time the government remains reluctant- or unable- to reform the state owned enterprise sector. Corruption plays a major role in countries like Indonesia, India, Vietnam, Thailand, Korea, China, Philippines, Malaysia and Taiwan (Fig 3). The extent of petty and sometimes aggressive bribe-taking means that companies determined to behave honestly must resign themselves to slower progress on their projects and to the potential loss of business. Business Rules (Fig4): There is general agreement that European or American rules of business cannot simply be transposed to the Asian regions. In countries like Korea Thailand and Vietnam, business methods seem altogether unclear. Questioned about local managerial styles, western executives tended to encounter more difficulty in Korea and Japan. Expatriate managers also have difficulty in finding reliable sources of information. The fluid investment environment makes Vietnam, China and India long-term propositions for get successful results. Korea and Japan are known for the loyalty of the population to domestic, well-established companies. If an idea catches consumers’ imaginations local firms will rapidly bring to market competing offers and some may not infringe the original company’s intellectual property rights. Customers: The quality versus price debate is not uniform across Asia. In Japan, quality is paramount; the packaging has to be perfect as well as the product inside. In China, price is perceived to be more important than quality. There is throughout Asia a strong association between higher price and higher quality. Once a customer has developed a good relationship with a supplier he tends to be loyal to him even if the price is higher than other suppliers specially in Japan, but in the other hand in countries like China and Taiwan greater opportunities of choice are also precipitating a readiness for change. Financial Issues: The role of a business venture in promoting national development is strong in some countries like Vietnam, Korea, Japan and China. The financial and business risks as well as return on investment are generally perceived to be higher in Asia than in Europe (Fig 5) (Fig 6). What strategy adopt to take advantage of Asian market while minimizing All potential risks? EDC should internationalize its business in Asia while preserving its fundamental strength adapted locally. To this end, EDC may implement manufacturing facilities in Asia with marketing and engineering departments on the same site. Indeed, a local plant will help to minimize the market risks- specially trade barriers and exchange rates- but will also benefit of low labor cost. While thinking to implement a plant location, EDC may first send a marketing team to learn on the local field. This way, they will measure -with the help of Asian market consultants- the consumer customs and needs, the speed of changes they have to face and the competitor’s strengths and weaknesses. This will allow EDC to evaluate the type of plant they have to implement and what are the issues they have first to consider: labor cost, shipping cost, infrastructure, etc. EDC have to consider the option to create a joint venture with an Asian partner who should have a bicycle background The risk of moving by its own to Asia is very high, first ED has no international experience of implementing production abroad and second, on terms of time this solution will take years while EDC needs a quick results to its market saturation in U.S.A. EDC will take advantage of its partner expertise on Asian markets: distribution network, management skill for local employees and government relations. Where could EDC locate ...