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International business in asia workshop - lecture 1
1. INTERNATIONAL
BUSINESS IN ASIA
FOR ASIA eUNIVERSITY
DrJaneMenzies
jane.menzies@deakin.edu.au
DepartmentofManagement,DeakinBusiness School
DeakinUniversity, Australia
http://www.linkedin.com/profile/viewid=9062770&trk=nav_responsive_tab_profile
2. OBJECTIVES OF THE WORKSHOP
ā¢ To:
āUnderstand the Asian context.
āGain a better understanding of the doing business in
the Asian region with a focus on China, India,
Indonesia, and Australia.
āTo develop knowledge/skills around innovation,
entrepreneurship, country analysis and company
strategies in the Asian region.
āAnalyse and develop strategies for the Asian market.
3. MY BACKGROUND
ā¢ Senior Lecturer of International Business for 9 years
ā¢ Publications (journal articles, books, media articles)
on predominantly China but also Malaysia.
ā¢ Study Programs to:
āIndia x 3
āChina x 3
āMalaysia x 3
āIndonesia x 1
4. THE ASIAN REGION
ļ North East Asia
ā¢ China, Japan, Mongolia, North and South Korea and the
Russian Far east
ļ South East Asia
ā¢ 10 members of Association of South East Asian Nations
(ASEAN): Brunei, Cambodia, Laos, Malaysia, Myanmar,
the Philippines, Singapore, Thailand , Vietnam and
Indonesia
ļ East Asia
ā Hong Kong, Taiwan
ļ South Asia
ā¢ India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives,
Bhutan
7. ASIAāS RESURGENCE IN THE WORLD
ECONOMY (GDP PER CAPITA)
Australian Government (2013), Australia in the Asian Century: White Paper,
Australian Government, Canberra.
8. ASIAāS MANUFACTURING OUTPUT
ā SHARE OF WORLD PRODUCTION
Australian Government (2013), Australia in the Asian Century: White Paper,
Australian Government, Canberra.
9. ASIAāS MANUFACTURING OUTPUT
ā SHARE OF WORLD PRODUCTION
Australian Government (2013), Australia in the Asian Century: White Paper,
Australian Government, Canberra.
13. WHAT DOES THE ASIAN REGION OFFER
US?
ā¢ Diverse countries
ā¢ Was some of the worldās fastest growing market-
oriented economies formerly Japan & the Four Tigers
(Hong Kong, Singapore, Korea, Taiwan).
ā¢ Source of both high- & low-quality products & of both
skilled & unskilled labour.
ā¢ Destination for & supplier of foreign investment to
non-Asian countries.
ā¢ Other countries - Malaysia, Indonesia, Thailand and
Vietnam wanted to emulate the Four Tigers.
ā¢ Now see the rise of China and India.
14. DIVERSE REGION
ā¢ Varying population size
āChina 1.34 billion, Singapore 3.4, Thailand 66 million
ā¢ Varying political systems
āAustralia, India, Singapore ā Democracy versus China,
Vietnam and communist regimes.
ā¢ Varying legal systems
āAustralia, India, Singapore using common law, versus China,
Indonesia, Malaysia using civil code.
ā¢ Varying religions
āHindu, Muslim, Confucianism, Buddhism and Catholicism
15. CULTURAL ISSUES
ā¢ Diversity of cultures/language
ā¢ Language of international business is
English.
ā¢ Common cultural trends throughout
the region:
āCollectivism
āHigh on power distance
āHigh on uncertainty avoidance
āRelational approach to doing business
āLoss of face
18. EAST ASIAN MIRACLE
ā¢ Cluster of highly performing economies ā rapid growth
rates, industrial development and quick rise in living
standards in the post war decades.
ā¢ Enhanced role in the world economy, enormous trade and
investment opportunities.
ā¢ Success affected by the Asian Financial Crisis (1997-98)
temporarily
ā¢ Increased influence in the world economy and many new
features and developments.
19. Average real growth of major East Asian Economies %
(Tselichtchev & Debroux, 2009)
Country 1960s 1970s 1980s 1990-97
Developed countries average (Aust,
NZ, N. America, W Europe)
5.2 3.2 3.0 2.2
Japan 10.9 5.0 4.0 1.5
South Korea 8.6 9.5 9.7 7.2
Taiwan 9.2 8.0 8.0 5.2
Hong Kong 10.0 9.3 7.1 5.3
Singapore 8.8 8.5 6.1 8.5
Thailand 8.4 7.2 7.9 7.4
Malaysia 6.5 7.8 5.2 8.6
Indonesia 3.9 7.6 6.0 7.5
Philippines 5.1 6.3 1.0 3.3
China 5.0 6.3 9.4 11.2
20. THE FLYING GEESE
PHENOMENON
After the second World War, āthe flying geeseā phenomenon was
soaring throughout Asia and influencing the Pacific Rim economies.
The formation resembled
flying geese, headed by Japan,
while the rest of the group
followed. Countries toward the
front tend to transfer āolderā
industries to countries at the
back.
ā¢ Source, Kotler, 2007
21. WHY THIS RAPID GROWTH? (1950- MID 1990)?
ā¢ High Saving rates
ā¢ Favourable demographic situation
ā¢ Workers- diligent and quick learners
ā¢ Investment in education
ā¢ Relatively politically stable economies
ā¢ Complementary role of the government
22. EAST ASIAN MODEL OF CAPITALISM
ā¢ Most East Asian economies opted for capitalism,
with role of market competition and
entrepreneurship
ā Exceptions: China, North Korea, Mongolia and Vietnam - opted
socialism- failed
ā China in 1980 and Vietnam in 1990- market reforms-capitalist economy
under a communist party rule ā āsocialist marketā for political and
ideological reasons
ā¢ Capitalism in East Asia ā very different from
Western Capitalism.
23. FEATURES OF EAST ASIAN MODEL OF
CAPITALISM
1. Developmental State
āComplementary in promoting private sector led growth
āImport substitution to export led growth
ā¢ Financial and other incentives for exporters
āIntervening in resource allocation
āDeregulation, privatization , foreign investment
liberalisation ā to create a competitive business
environment
āLow taxes- self reliance motivation
24. FEATURES OF EAST ASIAN MODEL OF
CAPITALISM
2. Dominant position of the Conglomerates
ā Founder ā major owner- dominant control
ā Other shareholders not taken into account
ā Management not separated from ownership
ā Corporate governance mechanisms mostly didnāt apply
ā Close connection with politicians and bureaucrats
ā Conglomerate style business āexception China and Japan
3. Corporate Finance
ā Borrowing from banks, debt finance rather than equity
finance, connected lending and directed lending.
25. FEATURES OF EAST ASIAN MODEL OF CAPITALISM
4. Labour relations
ā Notion of ācompany as a family,ā focus on loyalty,
harmony within the organisation
5. Reliance on inward FDI
ā Role of foreign affiliated companies
ā MNCs provided capital, technologies and managerial
expertise, distribution networks, sales promotion
system, brands exception ā Japan and South Korea
26. EAST ASIAN MODEL-HOWIT WORKEDFORGROWTH
ā¢ Developmental states ā promoting industries
ā¢ State fixed economic development and worked in strategically
important industries
ā¢ Conglomerates: bringing dynamism to the private sector
ā¢ Companies belonging to the same conglomerate and operating in
various business sectors supported each others growth
ā¢ Massive bank lending
ā¢ Played a vital role in the financing of industrial growth
ā¢ Connected and directed lending reduced risks and helped lenders to
monitor their borrowers
ā¢ Labour relations ā creating commitment
ā¢ Enhanced work motivation
ā¢ Inward FDI
27. ASSOCIATION OF SOUTH EAST ASIAN
NATIONS (ASEAN) COUNTRIES
ā¢ 10 member states:
ā¢ Brunei, Cambodia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand , Vietnam and Indonesia
ā¢ Formed 8th August 1967
ā¢ Purpose is to accelerate economic growth, social progress and
cultural development in the region.
ā¢ Australia-New Zealand with ASEAN (Jan 2010) ($150-200B)
ā¢ Will ASEAN be like the European Union?
ā¢ Currency, Government & Full integration
30. ASEAN COUNTRIES AT A GLANCE
Country Entry
into
ASEAN
Population
(millions)
GDP
(billions)
GDP
Growth %
GDP per
capita
Principal Export
Brunei 1995 0.406 17.4 5.3 42,329 Natural Gas
Cambodia 1997 15.1 16.9 7.2 1,104 Apparel
Indonesia 1967 248 856.1 5.2 3,404 Petroleum
Laos 1997 6.8 11.7 7.4 4,999 Wood Products
Malaysia 1967 29.9 336.9 5.9 11,062 Electronic Equipment
Myanmar 1997 51.0 65.3 8.5 1,270 Teak Hardwoods
Philippines 1967 97.5 289.7 6.2 2,913 Electronic Equipment
Singapore 1967 5.4 307.1 3.0 56,113 Petroleum
Thailand 1967 68.2 380.5 1.0 5,550 Computer/Related
parts
Vietnam 1995 89.7 187.8 5.5 2,073 Crude oil
Total 620 3574 5.52 (ave) 13,082 (ave)
31. ASEAN
āFree trade spearheaded by ASEAN Trade in Goods Agreement
(ATIGA)
āSeek to complete all Free Trade Agreements:
ā¢ China, Japan, South Korea, India, Australia and New Zealand
āEstablish a common market by 2015
ā¢ Free flow of goods, services, investment and skilled labour.
āSingle market and production base
āRegion of equitable economic development ā large gap.
āRegion fully integrated into the global economy
āCompete with āChindiaā ā or other major economies around the
world or even cooperate with them?
32. CONCLUSIONS
āContext of Asia
āOpportunities but lots of Challenges
āAsian markets have high levels of economic & political stability
āSimilar but different approaches to doing business
āSimilar cultural characteristics
āNow we are going to compare:
ā¢ The countries of Australia, China, India and Indonesia in more depth
Editor's Notes
Asia in 2025 will contribute more than 60% of growth to the world economy with China and India major contributors
Asia in 2025 will contribute more than 60% of growth to the world economy with China and India major contributors
Asia in 2025 will contribute more than 60% of growth to the world economy with China and India major contributors
Asia in 2025 will contribute more than 60% of growth to the world economy with China and India major contributors
Asia in 2025 will contribute more than 60% of growth to the world economy with China and India major contributors
Asia in 2025 will contribute more than 60% of growth to the world economy with China and India major contributors
Asia in 2025 will contribute more than 60% of growth to the world economy with China and India major contributors
Asia in 2025 will contribute more than 60% of growth to the world economy with China and India major contributors
Asia in 2025 will contribute more than 60% of growth to the world economy with China and India major contributors
Asia in 2025 will contribute more than 60% of growth to the world economy with China and India major contributors
Asia in 2025 will contribute more than 60% of growth to the world economy with China and India major contributors