Australia has long been reliant on its exports, with the balance of trade dominated by the export of mineral wealth. As that shifts, leaders and the organisations across a broad range of industries - all industries, perhaps - must look to international markets.
In 2012 the Federal Government White Paper ‘The Asian Century’ identified a need for a better educated, Asia-savvy workforce, specifically: “Our leaders will be more Asia literate, with one-third of board members of Australia's top 200 publicly listed companies and Commonwealth bodies having deep experience in and knowledge of Asia.”
But what does ‘Asia literate’ and ‘deep experience’ mean in terms of specific capabilities that organisations must build? What could Australian companies do better and what was holding businesses back from effectively operating in the region?
In 2012, The Asialink Taskforce for an Asia Capable Workforce identified 11 capabilities that are critical for organisations and individuals to build to crack the Asian market and do business successfully.
According to Megan Mulia, Director of Research and Information at Asialink Business, language skills matter, but “the biggest gaps were around trusted relationships, knowledge and understanding, especially in small to medium sized organisations which don’t have the time or budgets to look at the market.”
6 critical capabilities for individuals
- Sophisticated knowledge of Asian markets/environments
- Extensive experience operating in Asia
- Long-term trusted Asian relationships
- Ability to adapt behaviour to Asian cultural contexts
- Capacity to deal with government
- Useful level of language proficiency
How do you make your business Asia-capable?
Understanding the critical capabilities is an important first step. Closing the capability gaps is a question of hiring the right talent, engaging in the appropriate market research (see our article this month on trade missions into Asia, for example) and investing in targeted education and training that addresses gaps in the critical capabilities within your organisation.
Hiring the right people includes finding executives who have spent time in the region and understand how it operates. Which raises the question, are Australian businesses taking advantage of our multicultural workforce? In 2014 the Diversity Council of Australia suggested not. Their report ‘Cracking the cultural ceiling: future proofing your business in the Asian century’ found that while 9.3% of the Australian labour force is Asian-born, only 4.9% make it to senior executive level. And, in a survey, only 15% of Asian-background talent strongly agreed that their organisation used its workforce's cultural diversity to better service clients.
5 critical capabilities for organisations
- Leadership committed to an Asia-focused strategy
- Customised Asian talent management
- Customised offering / value proposition based on customer insights
- Tailored organisational design with tendency to local autonomy
- Supportive processes to share Asian learnings
For Asialink Business, the next step is to benchmark Australia’s leading businesses against the 11 critical capabilities. They are currently developing a report into ASX 200 board members and senior leadership, examining their profiles and measuring them on relevant criteria, including knowledge of the market, time in the region, and longer term relationships with regional clients and governments. “This will create a more in-depth reflective position of where Australian business stands,” says Mulia, and make improvements in capabilities visible and measurable. It will also inform Asialink Business’s ability to provide access to relevant information and targeted training and development, as they seek to support Australian businesses to advocate for themselves in region.
Country starter packs
Asialink Business has already developed eleven ‘Country Starter Packs’, designed, says Mulia, to “make practical, applied information available on how a business leader can start looking at a market, as well as drilling down through a range of issues: how do I establish a business in this country? What Free Trade Agreements exist to take advantage of? The packs drill right down to where to take a client for lunch, or what apps are available in the market that can support understanding of that particular country. The starter packs are available, online and as a smartphone app."
Does Australian business see the Asian market as too risky?
In an address to the American Chamber of Commerce in 2015, Mike Wilkins, Managing Director and Chief Executive Officer, Insurance Australia Group, said that Australian businesses risk missing out on the Asian opportunity because of a lack of appetite for risk. Only 9% of Australian businesses are currently operating in Asia and just 12% of Australian companies in the survey of 1000 Australian businesses have any experience of doing business in Asia at all (PwC).
When it comes to small and medium sized businesses, Mulia says, “There is a natural hesitation about moving into a market and how it might effect operations in Australia. Success in a domestic market doesn’t always translate internationally. We encourage businesses to have a detailed and considered strategy about entering into a market and to understand what their niche experience is, as a starting point.”
International focus is the key to success
Those who do succeed in doing business in or with Asia have a more prosperous outlook. This week, Austrade reported that China has surpassed the United States as Australia’s most valuable wine export market. Just a decade ago, Australian wine exports to China were valued at $27 million. In 2016 they are valued at $474 million.
The ANZ Opportunity Asia report found that of the 1000 businesses surveyed, 47% said Asian profit margins were higher than domestic profit margins and that 38% of small businesses achieved ROI within 12 months.