As Asia takes over from the West as the driver of global economic growth, will Asian MNEs rise to replace Western MNEs as academic theory suggests? Learn what Western MNEs must do in order to retain and grow competitive relevance in Asia.

1. Strategic Issues Conference
Singapore - June 2013
Western Multinationals in Asia
- Growth or Decline? -
©2013 Managing Across Asia Gordon@ManagingAcross.Asiawww.ManagingAcross.Asia
governance; regional office; cross-cultural management; expatriates; multi-country initiatives

2. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Speaker profile: 30 year career (half in Asia)
developing expertise on MNE management in Asia
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Parent Culture Local Culture
Austrian (parents) Canadian
Canadian Canadian
Quebecois Canadian
American Canadian
British Canadian
French Canadian
American Australian
Australian Australian
South African South African
American American
American Mexican
German American
American Thai
French Thai
ML Chinese ML Chinese
German Korean
American HK Chinese
Canadian HK Chinese
American ML Chinese
Korean Korean
Parent Culture Local Culture
American Korean
Japanese Japanese
American Japanese
Dutch Japanese
Canadian Japanese
French Japanese
British Japanese
German Japanese
Taiwanese Taiwanese
Dutch Taiwanese
German Thai
German ML Chinese
American Indonesian
Canadian Philippine
Canadian HK Chinese
Canadian Indonesian
Dutch Australian
German Indonesian
German Malaysian
British HK Chinese
MNE Client Cross-cultural Mix across 20+ Countries
Canadian-Australian citizen
Unisys - Implemented eftpos in Oz
‣ Project Management & Sales Skills
MBA - Ivey Business School
‣ Strategy & International Business
Deloitte - built practices in
Canada, U.S., Korea, Japan
‣ Managing Business Unit P&Ls
Private consulting practice
‣ Working with MNEs to configure
and manage operations across Asia
40+ MNEs Served - strategy/ops
‣ understand how organisations
work, particularly addressing Asia
Pursue PhD - University of Sydney
‣ mid-career refresh (new ideas)
‣ combine theory with practical

3. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Western multinational enterprises (MNEs)
face an economic and mindset challenge
in this Asian century
“Asia’s growth in population, economic activity, and income results in huge market
opportunities, implying that the future of industry and innovation will be centered in Asia.
Different systems of competition, organization and management are emerging in Asia
and, as they do, they will have global consequences.
Until now, our [business and academic] theories of competition, markets and firms are
decidedly regional and hemispherical, based as they are on what happened in Western
Europe and North America during the nineteenth and twentieth centuries.”
Fruin, M. 2012. The future of industry and innovation in Asia: firms, networks,
institutions and corporate governance. Journal of Asia Business Studies.
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4. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
from 1 to 1800 AD,
China and india alternated
as driver of global economy
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5. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Contrary to Western propositions,
Asia does have a history of innovation
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6. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Only during the past 200 years
have Western MNEs been pre-eminent
the Bounded rationality and ethnocentricity of key leaders in Asia
caused them to focus inward and discount the emergence of the late
18th century industrial revolution of the Western barbarians
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Today, there are many Western MNEs in Asia but they have had widely
varying degrees of success in terms of sustained revenue performance
Concept that decision makers have to work
under three unavoidable constraints:
1. only limited, often unreliable, information is
available regarding possible alternatives and their
consequences,
2. human mind has only limited capacity to
evaluate and process the information that is
available, and
3. only a limited amount of time is available to
make a decision.
Therefore even individuals who intend to make
rational choices are bound to make satisficing
choices (rather than maximizing or optimizing) in
complex situations.
US Nobel-laureate economist Herbert Simon
The belief that one's own culture [and
business practices] are superior to all others and
is the standard by which all other cultures [and
business practices] should be measured.

7. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Only during the past 200 years
have Western MNEs been pre-eminent
the Bounded rationality and ethnocentricity of key leaders in Asia
caused them to focus inward and discount the emergence of the late
18th century industrial revolution of the Western barbarians
7
Today, there are many Western MNEs in Asia but they have had widely
varying degrees of success in terms of sustained revenue performance

8. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
MNEs are home-regional:
few MNEs perform well outside their home region
Alan Rugman et al
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The nine global MNEs where identified as Coca-cola, Canon, Flextronics, IBM, Intel, Moet Hennessy-Louis Vuitton, Nokia, Philips, Sony.
Rugman, A. M., & Verbeke, A. (2004). A perspective on regional and global strategies of multinational enterprises. Journal of
International Business Studies, 35(1), 3-18.

9. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Home-Regionalisation has been proven repeatedly;
“it is likely to be a long lasting phenomenon”
Dunemann wolf
Retail
Banking
Pharmaceutical
Automotive
Cosmetics
Services
American MNEs
European MNEs
British MNEs
Japanese MNEs
Asian MNEs
Rugman et al
Asmussen
Dunning
Ghemawat
Wolf
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Industry Geography Academics

10. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Dilemma for Western MNEs
For the past century, Western MNEs have been prominent as their
home region was in the economies driving global economic growth
As the centre of global economic activity shifts from Western
markets back towards Asia, regionalisation theory implies that
Western MNEs are condemned to slow relative decline
There is an imperative therefore to break historical patterns and
determine:
How can Western MNEs compete more effectively in Asia?
(Why will your MNE be different?)
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11. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Americas-Australian-European commerce
encounters familiar constructs
compared to the cultural distance with “Asia”
Europe and North America draw on shared heritage
Hellenic-latin-germanic-nordic-christian influences
Nation-state constructs
“Asia” is a Western term demarcating the area east of the Bosporus Sea
Buddhism, Hinduism, Confucianism, Shintoism influences (complicated by Islamic
derivative of Abrahamic religion)
Civilization constructs
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Drawing from Hofstede 1997, Sakai 2000, Russell 2000,Acjarua 2010, Duara 2010, Hui 2010,

12. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
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Australia Canada United StatesGreat Britain GermanyNetherlands France
Source: Adapted into spider charts by G. Perchthold based on concepts and data from Cultures and Organization, Geert Hofstede,1991
Advancement / competitiveness
vs work relationships or caring
Masculinity
Individualism
Oriented
Avoiding
Uncertainty
Long-Term
Orientation
Acceptance (and desire) of benevolent power
distributed unequally vs operating as equals
Loose ties between individuals
vs cohesive in-groups
Extent of feeling threatened by
uncertain or unknown situations
Perseverance,
observing order, thrift
Power
Distance
Cultural tendencies
are quite different
from west to east
Japan South Korea Singapore Indonesia ThailandPhilippines India

13. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Typical Job Ad (including unstated):
Global/Regional/Country Executive for Asia
As our home region in the West continues to stagnate and demonstrate
limited prospects for high growth, Asia has become the most strategic
geographic region to sustain competitive relevance. Therefore, we
seek a Western executive with:
Deep technical expertise
Strong leadership presence
Effective management skills
Proven track record within Western markets
little to no experience in Asia
Minimal propensity to draw on those with experience in Asia
Willingness to repeat the mistakes of the past
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A
Master of the Universe!

14. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Academic research1 suggests that
Western MNEs need to address a number of
fundamental questions in adapting to Asia
How is your MNE applying its unique “firm-specific advantages”?
Superior assets or capabilities that are transferable to markets in Asia in order to
overcome its “liabilities of foreignness”
How is your MNE’s “experiential knowledge” captured and applied?
Objective knowledge can be read in a text book while experiential knowledge is
progressively learned by exposure to a market becoming an internal asset
How is your MNE harnessing its “network of relationships?”
“Liability of Outsiderness” takes many years to overcome by developing competitively
differentiated constellations of networks representing a strategic advantage
How is your MNE overcoming “Physic distance” & “institutional voids?”
Western multinationals must adapt their business models (using their experiential
knowledge and networks) to compensate for the immaturity of institutions/agencies
(e.g. audit, actuarial, credit agencies, regulatory, judiciary) in emerging markets
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1. Drawing from Internalisation Theory (Buckley and Casson, Dunning, Rugman, Zaheer), Internationalisation Evolutionary Theory
(Johanson andVahlne), Internationalisation Network Theory (Johanson andVahlne), Physic Distance (Johanson and Widersheim-Paul,
Ghemawat), InstitutionalVoid and Relationship-based Governance Theories (Khanna, Singh)

15. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
30 Years of field experience suggests that
Western MNEs must address multiple levels of their
organization to sustain performance in Asia
Organizational Passion (raison d’etre)
Is ‘Asia’ a number in your company’s spreadsheet at corporate/regional office or are
employees socially committed to the people within the countries in Asia? Example
Does your MNE have an innovation centre based in Asia subject to the competitive
pressure for survival from the developing billions of entrepreneurs in Asia?
Regional and country cross-cultural management teams (silos)
do the different functions of the management team socialize periodically outside of
the office and work towards the common objectives of the CEO or are managers
operating in silos with courteous and tenuous relations with their colleagues?
Expatriates (Short-term self-interests)
Do expatriates manage from the perspective of the long-term to build the people,
process, and technology foundations of the business or do they manage within the
context of the tenure of their posting? (MNEs fail to realise full value from expats)
Corporate Top Management Team (ethnocentricity)
Does the corporate management team unconsciously judge and act based on perceived
superior Western ways of doing business or is the local context understood and
appreciated?
Corporate Board (Bounded rationality)
Does your corporate board have sufficient Asian context for deliberation to make
informed decisions appropriate for Asia (experiential vs objective knowledge)? 15

16. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Do Asian directors provide context
to Western Boards?
A look at Anglo-Saxon FSI MNEs active in Asia
sample frame
Forbes Global 2000
Largest Companies
Anglo-Saxon MNEs
Financial Services MNE
MNEs Committed to Asia
Population of MNEs
106 Annual Reports Reviewed
54 MNEs
30 U.S.
12 U.K.
7 Australian
5 Canadian
Extract of research conducted by Gordon Perchthold during 3Q2012 16

17. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Anglo-Saxon
Financial Services MNEs
active in Asia
Forbes 2012 Edition of Global 2000 Filtered for Anglo-Saxon FSI MNEs with Asia Objective
(sorted by highlighted Asian Nationality Proportion then Asia Financial Proportion then Global Revenue)
Extract of research conducted by Gordon Perchthold during 3Q2012 17

18. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Influence of Asian Directors
How many Asians on Western Corporate Boards?
sample frame
Forbes Global 2000
Largest Companies
Anglo-Saxon MNEs
Financial Services MNE
MNEs Committed to Asia
Population of MNEs
106 Annual Reports Reviewed
54 MNEs
524 (76%) Home Country
81 (12%) Other Anglo-Saxon
34 (5%) Other Western
29 (4%) Asian
Researched
Nationality of 688 Directors
Year Asian Appointed to Western MNE Board
30 U.S.
12 U.K.
7 Australian
5 Canadian
Extract of research conducted by Gordon Perchthold during 3Q2012 18
to 3Q12
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0 1 2 3 4 5 6
‘Global’ Financial Crisis
Number of Asian Directors

19. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Key questions as to how the Asian context is
embedded into deliberations and decision-making
of Western corporate boards
Will the number of Asians on the Western corporate boards increase?
What role do Asian directors play on Western corporate boards?
Do Asian directors help Western MNEs to perform better in Asia?
What other mechanisms, and how effective are they, do corporate
boards use to instill the Asian context:
inclusion of Western nationals who have lived and worked extensively in Asia?
Engaging external advisors with (proven?) Asian experience to provide reports and
presentations to the board?
delegating decision-making to country level boards, where they exist?
establishing an Asian board to parallel the corporate board?
Other (there has been no research in this area)?
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20. ©2013 Managing Across Asia Gordon@ManagingAcross.Asia
Fundamental question for
Western MNEs
Do they recognise that the
challenge even exists?
or will bounded rationality and ethnocentricity among Western leaders
result in history repeating itself?
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21. BUSINESS AT THE SPEED OF ASIA!
Theme of my PhD Research at University of Sydney
How Can Western Multinationals Compete More Effectively in Asia?
(starting with)
The Role of the Corporate Board