By Mukund Narayanamurti.

There is no question that the competition for business growth is now a global game. 

With world economic weight firmly shifting to Asia, Australian businesses must compete to succeed in some of the biggest and most dynamic markets in our region. 

Asia already accounts for almost 60% of Australian exports and seven of our top 10 trading partners. It’s a similar case for New Zealand, with Asia accounting for six out of the top 10 trading partners.

With new opportunities opening up in industries as diverse as tourism, agriculture, and professional services, Asia is set to become even more central to the economic prosperity of both countries.

China and India are growing at 6% and 7% respectively. The region’s middle class and consumer spending are expanding rapidly. And Australia’s own domestic consumer base is changing, reflecting our multicultural population, with 12% of the population declaring their Asian ancestry in the 2016 Census. 

Quite simply, we cannot ignore the opportunities that Asia presents.

If businesses want to evolve, grow and innovate in the future, they will need to be deeply connected with Asia and Asian consumers. This will require new skills, market insights and an ability to flexibly adapt to diverse cultures and consumer mindsets. 

Given this, it is disappointing that many of our top corporate leaders are yet to develop the skills and understanding needed to do business effectively with Asian customers.

Alarming low levels of Asia capability

Ground-breaking research released in August by Asialink Business, sponsored by PwC and the Institute of Managers and Leaders, found that only 10% of the ASX 200 and just 18% of the top 30 private Australian companies are Asia ready. 

Match Fit:Shaping Asia capable leaders critiqued the Asia capabilities of the boards and senior leadership teams against six individual Asia capabilities.  

The research found that many business leaders understood that a long-term growth strategy and the right mix of Asia capabilities are essential for succeeding in Asia. 

However, they felt hindered by a lack of information, pressure to show short-term results, negative public perceptions about Asian investment and analysts’ aversion to overseas investment.

Yet while the overall low levels of Asia capability in corporate Australia are cause for alarm, the research identified a number of companies that are bucking the trends and leading by example. 

Beacons of success

Coca-Cola Amatil is a major bottler in south-east Asia. Through its operations in Indonesia, most of the company’s workforce is located in Asia, as are most of the customer outlets it supplies.

The Match Fit research assessed Amatil’s board as one of the most Asia-capable of the ASX 200. 

With Indonesia considered one of the company’s major sources of growth, Group Managing Director Alison Watkins explains that Coca-Cola Amatil “[does] place significant weight on the expertise of our Asia-capable directors”.

Amatil asserts that having Asia-capable directors with experiences and an understanding of the region’s culture, policy making, and government priorities helps its decision-making process, investment decisions, people development and overall business success.

Financial services professionals punching above their weight

The research also revealed trends based on industry. Financial services and the energy and resources sector were the best performers, while manufacturing and the healthcare and pharmaceuticals sector were the least match-fit for Asia.

Of the top 30 companies on the ASX 200, ranked by the average level of Asia capability of board members and senior executives, 20 per cent were in the financial services sector. Large-cap financial services companies (namely the ASX 50) were particularly strong performers. 

And the case for investing in these Asia capabilities is clear. Research revealed a strong correlation between Asia-capable leadership and business performance in the region: The more Asia-capable the leadership of a company, the greater the revenue that company derived from Asian markets. 

Getting match fit for Asia: How to develop the right skills

Asia is a competitive playing field. Just as we wouldn’t send our top athletes onto the field without ample training, we shouldn’t expect our business leaders to achieve results until they are match fit.

It is possible to train for success: Both individuals and organisations can develop their Asia capabilities through experience, training and insights.

Take premium Australian seafood producer, Huon Aquaculture. Huon ensures its senior leadership team regularly visits key export markets in Asia, to build their understanding of the company’s diverse Asian customer base in markets like Japan and China.

Huon understands that success in introducing new products to market relies on a team that deeply understands consumers in these markets, as well as understanding other critical operational aspects of exporting. They know this is true both of their traditional export market of Japan and of other Asian markets.

Moreover, building the Asia capabilities of staff across the organisation is an important element of Huon’s longer-term growth strategy, to support the business’ ongoing expansion in these markets.

 

By 2030, some 450,000 Australians will live and work in the region, representing up to one-third of Australia’s total expatriate community

 

A number of practical strategies are available for corporate leaders to enhance their Asia capabilities. 

One option is to establish an Asia-capable advisory board, to help the organisation develop, refine and execute a focused Asia strategy and develop key relationships with suppliers, investors and stakeholders.

Recruiting more Asia-capable talent is another obvious strategy. Australian expatriates returning from Asia offer a wealth of expertise that often goes untapped. By 2030, some 450,000 Australians will live and work in the region, representing up to one-third of Australia’s total expatriate community.

More broadly, Asia capabilities can be built at all stages in the career cycle, by accessing customised training and market and consumer insights. 

Shifting mindsets and de-risking Asia

These practical initiatives must also be supported by shifting the business mindset on Asia.

While goods and services trade with Asia has increased rapidly, Australian and New Zealand investment in the region remains minimal. In 2015, the largest destinations for direct investment by Australian entities were the US (19.4%) the UK (15%) and New Zealand (11.2%).

Quick returns in Asia are rare, and investment in the region requires long-term commitment. A shift in industry mindset towards pursuing long-term growth instead of short- term returns is long overdue and will help address this shortfall. 

Equally critical is the need to more thoroughly understand the risks involved in investing in individual Asian markets. Anecdotal evidence, assumptions and generalisations may lead to inaccurate business decisions, particularly as they relate to risk, returns and time.

More research is needed to better understand and demystify the risks of investing in Asia. 

What is certain is that the pace at which markets in the Asian region are changing requires urgent and immediate action to foster Asia-capable leaders. Our largest companies have an essential role to play in leading the way.

Hong Kong, Singapore and Malaysia outperform some G20 nations on economics, but not on personal freedoms, a new paper by CA ANZ finds.

Mukund Narayanamurti is the Chief Executive Officer of Asialink Business.