Start of menu
Close Menu

Eight challenges of doing business in Asia (and how to meet them)

From hurdling cultural barriers to negotiating risks, entering the Asian marketplace can be tricky business. Here’s what you should keep in mind before making the leap.

Expanding into Asia can bring many rewards for Australian businesses, but relatively few are capitalising on the so-called ‘Asian Century’. Here are the most common challenges for businesses wishing to make the transition – and how they can be overcome.


1. Cultural barriers and etiquette


Expanding businesses can find themselves blindsided by cultural differences. Customs and traditions vary wildly across Asia, so make sure you do your due diligence ahead of time. Aside from simple etiquette, like how to present a business card, it’s important to manage expectations. Forming partnerships in Asia can take months, with the process more involved than in Western business culture, so be prepared for the long haul.


2. Battling the regulatory landscape


Many Asian countries impose strict limitations on foreign-owned businesses. Australia has signed ten free-trade agreements within the Asian region. These agreements not only offer significant benefits for Australian exporters, like lower tariffs and reduced regulatory barriers, but also provide a clearer outline of a business’s regulatory obligations. Having reliable access to specialist legal advice in this area can help immensely.


3. Negotiating language


Crucial communications can sometimes get lost in translation – figuratively and literally. Hiring a reputable local translator can make negotiating contracts a smoother process, and can ensure legal and financial matters are dealt with appropriately.


4. Acquiring in-country knowledge


Teaming up with a local partner makes the process of Asian expansion much less daunting. Local associates possess invaluable market insights as well as knowledge of traditions, customs and preferred methods of conducting business. They may also shed light on the best way to navigate unwieldy bureaucracies, and provide help when building networks.


5. Accessing finance


Small to medium-sized enterprises need access to working capital to fund their operational costs, pursue growth and plan for long-term investments. A working paper from the United Nations Economic and Social Commission for the Asia Pacific (UNESCAP) outlines some of the different financing paths SMEs can take, such as debt financing, equity financing and SME-focused banking. Each option has a unique set of benefits and risks, and each country in the region will have a different financing landscape. Many Australian banks also offer financing options for small businesses looking to expand in Asia.


6. Balancing local and global objectives


When a company broadens its regional footprint, it can benefit from economies of scale, particularly in services, infrastructure and joint R&D efforts. But tensions may also arise between global and local needs – if the majority of management resides offshore, they may be out of touch with the state of operations on the ground. Furthermore, complying with rigorous global standards may make a company less competitive in its local market.


7. Talent acquisition


Hiring the best local talent can be a challenge for foreign firms. Businesses need to develop country-specific HR policies that respect local cultures and desires, and provide paths for career advancement and mobility. According to Deloitte: “Companies attempting to impose existing talent strategies and HR programs that don’t match the context of the local workforce may find themselves at an increasing disadvantage.” At the same time, companies must ensure they retain some advantage over their competitors in the race for talent.


8. Managing risks


The ease of doing business in Asia is complicated by certain risks. These can range from political risks, institutional weaknesses and energy price shocks to economic prospects (including asset bubbles and inflation) and social stability. For instance, companies can hedge against certain types of currency risk to prevent the destabilisation of their operations; diversifying corporate portfolios can also mitigate against other market risks.


Political risks also require prudent management. Using China as an example, the Harvard Business Review recommends businesses develop robust corporate social responsibility frameworks, protect intellectual property rights, diversify production and supply chains, and formulate exit strategies if needed.


Above all else, awareness is key. Before entering the Asian marketplace, educate your SME on everything from cultural quirks to foreign regulation – it could be the difference between failure and success.