Breaking down Asian cultural barriers to market entry

By Filippo Sarti, Group Chief Operating Officer & CEO Asia Pacific, Regus | Feb 6, 2012

"Being global but acting local" is a commonly used phrase in the marketing industry. But it has real-world implications and is the subject of many MBA courses, particularly those focused on international business.

"The secret of success is to understand the point of view of others," said the US carmaker Henry Ford, a man who knew a few things about corporate growth. Ford's advice is especially worth remembering at a time when businesses are looking for growth opportunities overseas.

Evidence suggests that this strategy of looking for new markets is the right one. Companies operating internationally are generally reporting better results (in terms of revenues, profits, or both) than companies that focus only on domestic markets.²

But while there is evidence of the benefits of expanding into new markets, there is also plenty of evidence of failed expansions overseas. Just look at Vodafone, Carrefour and e-Bay, which all failed to understand Japanese consumers' tastes and buying habits.³

Culture may seem a minor issue when you are considering a new market, with issues like premises, competitors, market size and regulation far higher up the list of priorities. However, never underestimate the importance of cultural insight.

The phrase Asian Century came about in the late 1980s, and is attributed to a 1988 meeting with People's Republic of China (PRC) leader Deng Xiaoping and Indian Prime Minister Rajiv Gandhi.¹ With the ongoing economic turmoil in Europe and the US, the focus of attention for businesses has been turned to Asia with China and India as the emerging centers of economic power - hence the Asian Century.
 
Thus, for businesses (local, regional and international) to succeed in Asia, a strong understanding of the cultural underpinnings of the region and how businesses are done here take on significant importance.

Merger of equals or merger of incompatibles?

Among those who wish they'd had more such insight are the former directors of Daimler and Chrysler. When the two companies merged in 1998, the numbers suggested it would be an ideal fit, a "merger of equals" whose strengths and capabilities would benefit each other.

The reality proved very different, in large part because the American Chrysler and German Daimler had such different cultures: the former "relaxed [and] freewheeling", the latter "more formal and structured".⁴ Employee satisfaction plummeted, especially at Chrysler; predicted synergies did not materialize; and performance suffered.

The Daimler and Chrysler cultural mismatch was on a huge scale, but every business or individual with any experience of crossing frontiers has fallen into cultural potholes at some stage – from conflicting management styles, to cultural faux pas (very often involving table manners or food), or linguistic disasters. Remember a certain soft drink's slogan that it 'gives you zest for life' being translated into Chinese characters as 'brings your ancestors back from the grave,' or the Vauxhall Nova car sounding in Spanish like the 'Vauxhall Doesn't Go'?