The International Retail Supply Chain Battle

In November 2015, Beijing Century Joyo courier services registered with the US government as a non-vessel operating common carrier (NVOCC). Freight forwarding and the pricing associated with it has been considered opaque and ripe for disruption by providing better technology-enabled transparency and cost advantages. Unless you are in this business or following the news closely, you wouldn’t know this:

Beijing Century Joyo courier services is a subsidiary of Amazon!

According to David Spitz, CEO of Channel Advisor Corp. (a marketplace enabler for Amazon, Walmart, Ebay and other retailers) — products sourced from China will account for the majority of unit volume on Amazon. Also, he states that 20% of Amazon’s sales will be from its own private-label products.

Both these points seem to lend case to the greater need for a robust supply chain to help enable these drivers of growth. As part of a secret project apparently named as “Dragon Boat” and appropriately so given its focus on China, Amazon has unleashed an interesting game plan to start dominating on the logistics side. Incidentally, Amazon’s new hire focus in their Global Sourcing teams is oriented towards recruits joining their Supply Chain Optimization Technologies (SCOT) team — https://www.youtube.com/watch?v=ncwsr1Of6Cw&feature=youtu.bewhere there is a race to build next generation inventory planning platforms and other capabilities.

Amazon is trying to reduce the cost of its Fulfillment by Amazon (FBA) services given that the majority of its products originate from China. Amazon has also begun establishing shipping routes from China to North America, UK and Japan. Amazon logistics intends to create a one-stop E2E ocean freight service to its marketplace sellers. Such initiatives are also targeting the growing cross-border e-commerce trade, which is about 15% of total global e-commerce volumes.

Alibaba, not to be left behind in this race, is investing $16 billion in supply chain initiatives for its Cainiao subsidiary. Cainiao started in 2013 largely to support shipments from China. It has now expanded to 224 countries and regions. Cainiao provides a data-driven logistics platform to about 90 Chinese and international logistics companies. This is however focused on the package delivery for its larger Taobao and T-mall retail operations. Amazon is also promising to deliver small items from China in five days for its prime members.

While these initiatives are working towards the shipment of its parcel products across the globe, the sourcing of import/export products also benefits from the infrastructure advantages being built as part of these global services. Alibaba.com has a separate division Alibaba logistics that determines the shipping needs of importers and provides freight options that the suppliers can then support. Alibaba logistics has built out partnerships with UPS and Fedex for express delivery. They have partnered with Maersk for container shipments and DHL and Kuehne+Nagel for airfreight. In 2016, Alibaba enabled suppliers to reserve space on Maersk container ships through its OneTouch service. This service offers online booking on select routes between 5 Chinese ports and 8 international destination ports. In early 2017, Alibaba announced a cooperation agreement to integrate members of the world’s largest logistics network, WCA Ltd., with the Alibaba platform. In order to continue serving even small and medium enterprises, Alibaba has partnered with more than 100 logistics companies and 1700 freight forwarders.

Building a vast supplier base

Walmart.com roughly had about 2 million items up until 2013 as it revamped its marketplace program. When the marketplace program was accelerated in 2015, there was more than a 200% growth YOY in the number of items offered as more sellers were on-boarded through a seamless portal. As the mechanisms to get more sellers got better, the opportunity to offer more products to the customer increased. This is still way behind the 360 million items that Amazon offers with more than 90% of that mix coming from the roughly 2 million marketplace sellers on its platform.

Alibaba.com through its sourcing platform offering has increased its supplier base massively (although heavily skewed towards Chinese suppliers) and is continuing to offer a suite of services addressing the convenience and trust needs of its stakeholders. It has several challenges to deal with especially with many suppliers being traders or middlemen and the ability to deliver quality products is heavily dependent on the buyer’s importing knowledge and skills. Nevertheless, the platform ecosystem is in place and Alibaba is working hard to remove the outlying challenges in this complicated business.

Building a broader supplier network however helps with the ability to not only add more products exponentially, but also reduce costs across the supply chain through the consolidation of demand and supply. According to the Hackett Group, procurement organizations who work with a diverse supplier base had lower overall operating costs and spent 20% less on their buying operations.

Reducing global shipment costs

There is a cost associated with providing the trust and convenience benefits through a robust platform. This is however optimized when suppliers and retail buyers come together for repeated transactions based on realized benefits that they see. It is an unavoidable reality that trading is becoming more and more global and it is necessary to ship products at lower costs to build a sustainable business.

Amazon’s shipping costs in 2015 exceeded $5 Billion. This includes the entire domestic as well as international shipping costs that the company incurred. From a shipping standpoint, they had a net loss of $1.85 Billion.

This continuous surge in their shipping costs has prompted Amazon to invest aggressively and experiment in a host of capabilities. It is important to note that while all these investments are geared towards reducing costs to the company, however, these can be interpreted as a suite of services geared to build trust and convenience to continue creating stickiness and attract more buyers and sellers under its fold.

A few of the evolving ‘services’ that Amazon has been offering on the shipping side are:

  • Truck trailers for replacing domestic carrier networks
  • Bicycle couriers
  • Prime air drones (in UK and eventually in US and other countries)
  • Air freight
  • Prime Now delivery
  • Amazon Flex — crowd-sourced package delivery

While the initial and ongoing investments to make this happen are heavy and prone to risks of failure, the benefits are equally high if the layers of costs are peeled off and optimized in the supply chain.

The supply chain space is ripe for a massive digital disruption. Alibaba and Amazon are leading the way in this space and many players in this industry will become not only a beneficiary but a critical part of it. The question is whether you as a retailer, supplier, freight forwarder, shipper etc. are willing to be dominated by these two nimble global players?

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FDA – Can this Regulator Resist Capitalism’s Behemoths

Among several regulatory bodies, if one has to pick the two biggest promoters or inhibitors of capitalist expansion in the US, it is the FDA and SEC. The SEC in recent times has again gained prominence in the media due to the Wall Street disaster and the sudden love people have found for more monitoring of so called “greedy” Wall Street practices through the SEC. In similar lines, the FDA also comes under the radar and mostly misses the hawk eyes of the media because of the nature of its responsibilities. Certain concerns I have with how SEC can truly manage greed at Wall Street also applies to how the FDA can effectively do it.

For starters, the FDA is a government body and probably employs people with an inclination towards working in a government enterprise. Looking at how Americans in general perceive government jobs, I believe applicants to the FDA may also fall into a group that is not so sought after by many. Moreover, the FDA is a regulatory authority with heavy “influential” capabilities. This means the power to dictate the direction in which business establishments move. However, as I often feel, with power comes politics or vice-versa. So, working on these hypothetical assumptions, there are a lot of questions that cross my mind. Questions for which I still seek answers.
The FDA has 9300 employees with a budget of $2.3 Billion (2008) . 30% of that money comes from user fees, charges levied on companies who submit new applications for prescription drugs, medical devices etc. So, in effect, the government is contributing to only 70% of this budget.
The FDA not only regulates new product entrants but also existing products in food, Health and Beauty aids, medical devices and biological products. The companies that were talking about in these areas are not only within the US but also spread around the world. Several among these companies are giant corporations with multi-billion dollar sales and dominant market shares in the world. Even by taking a wild stab, the combined “wealth” of these companies in terms of their market influencing capability (based on their sales) will be about $500 Billion. Assuming that only 50% of their sales is spent on creating products that are monitored or evaluated by the FDA, we arrive at a $250 Billion spend for these companies.

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Amazon Marketplace Program: What if Walmart steals the entire pie?

It has been a while since I posted a blog entry. A new job, a new place, a new home and several other activities has kept me away from blogging. In this article, I want to explore a nagging thought that has been in my mind for a long time. Is Amazon merely profiting from the marketplace/seller program they run or do the retailers selling on Amazon also benefit from it? What if Walmart really takes off with its very modest marketplace program and makes it “competitive” a la Walmart style?

I don’t have the insider view (and won’t use it here for Walmart) and hence can only speculate to a certain extent. I believe, Amazon is making a killing with the marketplace program at the expense of the 3P retail sellers who don’t have any other viable option to access a large customer base for boosting their sales. In today’s e-commerce world strictly limited to the US market, the bottom-line is that there is no healthy competition to Amazon on the marketplace program. While Ebay comes close with its version of a marketplace and there are a few other competitors, including Walmart, fighting in the ring, they do not come anywhere close to the size of Amazon’s program.

In this article by Scott Wingo, CEO of Channel Advisor, a beautiful analysis is done to show the prominence of the marketplace program for Amazon (http://www.amazonstrategies.com/2013/02/part-iiiii-amazons-q4-results-.html). It largely supports a view that I constantly keep sharing with office colleagues at the water cooler; Amazon is nothing once you take the marketplace program out of its business. Amazon is big today because it took several years for the competition to take note of it and initiate any serious action. Even Walmart with its deep pockets and huge resources never ventured into any serious efforts to drastically augment this business stream. Marketplace is a profit making venture. You only realize a percentage commission on the actual GMV or marketplace sale made. But, that percentage commission is pure profit after adjusting for other services you may provide at a cost to the company (for example, fulfillment). In Q3 of 2012, Amazon’s GMV from global marketplace sales was more than the sales generated from their own channel. The difference may be small but  that is also explained by the fact that Amazon’s own network sells more media than EGM. 40% of the units sold are marketplace items and the total 3P revenue (near profit) in Q312 was $2B. What is also interesting in the article is the steady gain that marketplace has had when compared with its own channel (1P) from a GMV standpoint. Amazon sells over 100 million skus largely because of its marketplace program when compared with say, Walmart.com, which sells a relatively modest number of skus.

One needs to note that the benefits accruing to a small retailer selling on Amazon vs selling on any other strong retail competitor site (say Walmart) is very minimal. Amazon provides some add-on-benefits to a retailer selling on Amazon.com when compared to selling on other networks. The biggest and only noteworthy benefit of all is the fulfillment-by-amazon (FBA) program. This helps a retailer publish their product on amazon and let Amazon fulfill customer orders, ship them out and also provide customer service capabilities. This is touted as a major benefit to sellers who want to outsource these capabilities to Amazon rather than take it up on their own. However, none of these services offered by Amazon come for free. In fact, there is a fee associated with every bit of service they provide on behalf of the retailer. Even customer service as an option is burdensome to the 3P marketplace seller as Amazon’s friendly policy towards customers never takes a friendly view on behalf of the sellers towards product returns (check forums on Amazon seller central to read more on some of these pain points). All in all, while Amazon provides these “exceptional” benefits and has worked hard over the years to make their marketplace program superior (kudos to them for this), none of these benefits they provide to the sellers is a strategic core competence, the one that cannot be replicated by the competition, especially if the competitor is someone like Walmart.

While replicating a competitor’s strategy doesn’t necessarily make you the leader or replace the market leader overnight, the beauty of the marketplace program is that you can get to cause serious disruption in a relatively easy manner. 3P sellers are not tied by any means to Amazon’s seller program if they can find an alternative and cheaper channel to sell their wares. Yes, they cannot exit the Amazon relationship completely as they have put their flesh and blood to make Amazon the giant that it is today. That in turn has made Amazon a necessary partner for them to access the huge consumer base that comes first to Amazon to find their favorite items. Similar to Google search that fed on the constant flow of advertisers and consumers reaching their site over the past several years to learn and grow its search engine, Amazon too has benefited from the fact that over the past ten years, every small retailer sold on the seller program to the point where consumers now blindly believe that Amazon has the product they want. The 3P retailer helped spin a huge consumption web for Amazon and now they are stuck to it like a fly.

All that a player like Walmart needs to do is disrupt the pay-by-service model that Amazon is making money on, offer the same items that are sold by the same marketplace partners that Amazon has and utilize the exceptional advantage of the 4000 strong Walmart store network to create a competitive advantage. Adding to that, if you take away the subscription fees of ~$40 that Amazon charges to be a premium marketplace partner, you now have a level playing field. The one thing missing still is the huge consumer base that Amazon has, again much greater than what Walmart.com can boast of. But, that game can be won over by slick marketing and a few “million” dollars spent in the right direction for a couple of years. Amazon, however, is racing towards global marketplace leadership. This is not just an investment of time or money but huge resources to move the needle and become a first mover in countries that Walmart is yet to set foot in.

If the behemoth of Bentonville can take a few longer strides against the scurrying technology rabbit (yeah, it is Amazon) that is racing fast, Walmart has a way to solve the one puzzle that has tripped it in the recent past  – how to become a leader in the e-commerce space and be ready for any other channel disruption in the future? The retail battle of the future can no longer be won alone. You have to take along willing partners and make money out of them, help them make a little on their owen, and overall make it a win-win situation.

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Book Review: Competing for the Future

Competing for the Future
This book is all about “core competence”, a term coined by the authors (Gary Hamel and C.K. Prahalad) several years before and had become an industry buzz word. I liked the book as it tried to elevate strategy to a different status, a more positive one, in the eyes of companies.

It was however surprising that nothing much has changed the shape and face of what strategy is in companies since the time this book was written. Strategy is still considered a burden in several organizations and consulting firms have taken control and ownership of that function. Strategy in effect has turned out to be a wasteful exercise involving several resources working over time to create nothing for the future.

Hamel and Prahalad come up with a strong viewpoint on how strategy is about what the future could look like from an industry transformation standpoint. This does not take into consideration what you as a company are doing today and how successful or unsuccessful you are today. This foresight is based on core competence and what it can do for a company. 
They then recommend that the company needs to evaluate what it should do today to get to that new World in the future. I think that is the single biggest change in mindset that I believe not may companies are willing to adopt even today. Strategy has definitely been about what we can do in the next 3-5 years, given what we have today as a company. A point that the authors raise in their book and try to change.

This is a good read and has obviously been a top seller since a long time. The point that it hasn’t changed the industry landscape and strategy’s position in general may however make you wonder whether academic dictum really means anything in a corporate world where bureaucracy rules and “change” is always hard to adapt to.
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Is copying Amazon.com the brightest idea for your business?

There are these interesting strategic meetings in companies where I’m pretty sure one of you may have heard this from some corner of the room – Why don’t we copy what Amazon is doing? Why re-invent the wheel? They set the standard anyways.

I’ve heard it before in team meetings or from people I’ve had casual conversations with. After all, there seems to be some truth in what they are saying. Amazon.com is by far the most successful e-commerce retailer in the World. What they did for the website became a standard that others were forced to adopt in the market. For example, until they did something amazing with product recommendations, it wasn’t considered even as a bad idea. A product recommendation engine was merely ignored. It has now become a standard for any e-commerce website. When Amazon prime was launched, the cacophony in the US market was remarkable. Everyone wanted to do a “prime”, but they just couldn’t figure out how to do it even reasonably well for a small loss.

Are Amazon.com’s highly talented bunch of Product Managers responsible for this constant innovation and out-of-the-box thinking that leads to these strong features on the website? It is a tough call to make without knowing the inner workings of the organization. If I had to take a guess, it is due to a coordinated top-down and left-right coordination across all teams in the organization in collectively delivering the desired outcome. The failure of one team is compensated for by the success of another team in getting things done. Product Managers are getting the execution details ironed out, while the business teams are working hard to make the structure work. In organizations where Product Management makes unilateral decisions or decisions are “handed out” to them, things start to fail.

When different stakeholders in a company come together to decide on a certain course of action, trying the tested is an easy remedy to follow. You are after all not introducing something new that a customer needs to learn, you are not surprising them, you can get it out into the market faster and you don’t have to bear the risk of any downfall. Logically speaking, if a website like Amazon is literally attracting more than half the number of internet consumers, it is nearly futile as a competitor to introduce something new as you are depending on a part or whole of those same consumers for your business.

Here is the catch though. Every consumer visits a website for a certain reason. By far, a customer visiting Walmart.com does so as they want to identify products as related to the “Walmart” brand offering. This can be translated from an aspiration standpoint as EDLP on products sold on the web. The reality could be a little dispersed, but the fact is that the Amazon customer is different from a Walmart customer. This customer may be fine seeing the same features or look and feel across both websites, but is looking for something more when they visit them separately. Multi-channel retailing became a very high strategic initiative when I worked at Walmart. It was for a reason very obvious but yet took long to implement. Playing to your strength is what keeps you going. We introduced a program called “Pick Up Today” primarily for that reason. Why wouldn’t you use a store network of 3000+ stores to your advantage, to Amazon.com’s disadvantage and the customer’s benefit. Walmart and for that matter any other retailer with a dual presence in the offline and online world have a strong message for Amazon. However, the challenges these companies are fighting are more to do with internal roadblocks that are not easy to clear. Departments that worked with clockwork precision to deliver results in stores cannot go online or mobile overnight.

So, if blindly copying features is a bad idea, then how about copying the look and feel of the website. Amazon.com is probably the most cluttered website one can ever find. Nothing in the website talks beautifully well about the user interface or design applied. It screams out loud the question, “do we really need a beautiful, well designed website to make money?”. However, it has worked beautifully well for its customers. Jeff Bezos never seems to be worried about how beautiful his web store looks. Very similar to the way Sam Walton never cared about the beauty of the Walmart store, but cared about what it sold within it. Both leaders seem to have a similar viewpoint on one shopping aspect of the customer- if you give the customer what she wants, she will forget about how she got it. This is similar to how passengers get very impatient and fidgety while waiting for their flights in beautiful, well serviced airports. They don’t care about how the airport is. They care about getting on to that delayed flight and going home early. It is not the airport that they care about. It is the flight that they are concerned about. They are paying  money for the flight, not for the stay in the airport. But yet, we see millions of dollars being spent on creating huge, luxurious airports for the comfort of the passenger. I have seen people look at Amazon’s checkout process and say, “let’s do this. It looks perfect”. Now, while there is nothing imperfect about Amazon’s checkout, it does bother you with a lot of information to digest. Things like detailed delivery timelines, benefits of using an Amazon credit card or benefits of using prime are all additional snippets of information generously sprayed everywhere. Only a seasoned shopper at Amazon can navigate that mess without being distracted and still make a purchase. Luckily for Amazon, they have plenty of such shoppers. You and I don’t have that luxury with our shoppers.

So, if the look and feel is also something that is not worth copying, then what else should we do? isn’t the shortest path to product management or business success centered around getting workable things out the door faster. If so, isn’t copying the best the easy way out? Yes, it is still true that copying (or let’s say being inspired by) the best player in the market helps your business in turn. The reason is not necessarily because we have copied it well, it is because we are looking at our competition, figuring out where the majority of our target customers shop, see what they are shopping, see how they are shopping and provide the same tools more or less to help them out. All this is being done ignorantly by us while we copy the market leader and its offerings.

If we indeed need to copy Amazon.com, or be inspired by it, we should look at the way they are looking at their shoppers. Understand if these shoppers intersect with our business. If they do, we look at what our internal strengths are and see if we can build something better (or at worst similar) to Amazon.com. Doing that will help us realize where we truly stand in the market and how many customers are truly loyal to our brand. It also sets you apart as a Product Manager and as a person seriously in the business of making product work.

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Business in Asia – People and Power

Here is a write-up that I submitted for one of my course assignments in Business School. Obviously trying to bring in a different opinion, but not that well received…

The Many “Faces” of Asia

Asia is a unique continent in several ways – political governments, freedom, ethnicity, race, religion, society and culture. The most striking difference in my opinion is the people. Asia struggles with a non-homogeneous mix of people. This lack of homogeneity is pronounced not only in the continent, but also within each Asian country. This is probably the single biggest differentiator or impediment when it comes to economic or social prosperity. India is an example of such diversity with 22 official languages, 6 major religions, 35 festivals and myriad cultures within a single geographic space. In exceptions like Japan, we do observe that economic progress has been aided by homogeneity. This is also one major difference between the “East” and the “West”. Anglo-American business practices are mere implementation of capitalistic economics with the base assumption that it affects homogeneous entities. This is by far the only difference between Anglo-American and Asian management models.

Coming to the question of modifications to Anglo-American business practices for Asia, the answer is not exactly a change in the business practice as much as an effort to gain knowledge of an Asian country. Any business practice obviously needs to adjust to different business environments, but their key to success lies in addressing the needs of the customers. In this light, I believe there is nothing as distinct as an “Asian” management model, except for the fact that such business models adjust to politics and people. I shall mention some of these aspects that businesses need to be aware of to make better and informed decisions in regional business.

The Politics of Asia

Diversity in Asia just doesn’t stop with people, but is in its political system too. The political systems in Asia have adapted from the past through dynastic kingdoms (Indian provinces, China, Japan, Thailand) and have been heavily influenced later by Anglo-American ideals through colonialism (India, Philippines) and growing trade. The past has also defined the level of risk that people are willing to take and this is in turn reflected in the political system.

Countries with multi-party democracies and regular change of government are an example of how a political system has been formed based on the risk-averse nature (trust) of its people. India (1947), Philippines (1986) and Indonesia (1998) are examples of such behavior. Countries that gained freedom from colonial or imperialistic rulers have adopted a more socially oriented system based on protecting people’s interest. Such systems have been primarily communist regimes with closed economies to protect themselves from outside interference (India – partly socialist with a closed economy until the 1990’s, China – before reforms, Burma). Certain other countries have chosen religious systems based on a “perceived” fear of persecution (Pakistan – more of a political move for power by its founder M.A. Jinnah, Afghanistan).

Such political systems built on the premise of “fear” have led to practices both in the economic and business environments that promoted- corruption, nepotism, religious and social intolerance, social injustice and restricted freedom. Multinational or local businesses in a region have to understand and adapt to these systems if they wish to be successful. Several East Asian countries have new democracies with evolving institutions such as constitution and judicial system. Hence political policies are not ideology based and lack predictable outcomes. The Human Development Indicator for Asian Countries (2003) shows how unstable governments have also led to poor human development when compared to the GDP growth (Bangladesh, Cambodia and Pakistan).

Business relationships between Asian countries have also been influenced by past events. Military and political issues have affected Japan-China relations and several countries suffer from unrest and risk (Philippines –communist uprising, India – communist and Islamic tensions, Thailand –Islamic tensions). Following the financial crisis in 1997, Korea has taken a strong position on FDI and multinationals operating in the country. Again, the fear of being affected by foreign powers has led to the country taking a very careful stance with multinationals to protect its assets. Anglo-American business practices need to adapt to these complexities as they select partners, customers and businesses while operating in a country. Businesses should be aware of such repercussions when they set out to make unfavorable deals by taking advantage of weak political systems. Singapore’s Temasek Holdings faced such a situation when it tried to acquire Thaksin’s Shin Corp, Thailand’s largest telecommunication and media firm. Hence, political risk is not just created by regional constituents but is also a result of bad business practices by companies that flout rules to gain undue advantage.

Corruption & Culture

Corruption, as would now be evident, has been a derivative of political system influenced by a risk-averse population that favored easy wealth for better prosperity. Broadly speaking, it has been defined as the misuse of public office for private gain. Several Asian countries have dealt with and are still dealing with corruption, especially the type that links politics and business. With less economic freedom in certain countries like India or Indonesia (In the 1990’s), government regulation had been high and with that came greater incentive to be corrupt. The Socialist “License Raj” policy in India (1947-1990) was considered as a major reason for restrictions on business (even for locals) and the birth of the parallel economy in the country. But even with the recent rapid economic growth, corruption has been on the rise. With wealth unevenly distributed among the citizens, the growth opportunities are still being vastly utilized by the privileged, in turn killing competitiveness – a powerful repellant for corruption.

The concept of “fear” mixed with corruption also lends to some unique Asian business practices. Personal trust and credibility are high in the mind of local businesses and legal rules (set by a discriminatory judicial system) are not considered reliable. Asian countries also have high populations and lesser land. Hence, given that most Asian countries built their base from farming, land is valuable and so is the perception of wealth with respect to greater possession of land. Having a high density of people in societies has also led to greater relationship building among people, which for businesses means better customer relationships. Such crowded societies have also built strong cultural and social ties that in turn lead to emotionally charged relationships. These societies hence build businesses that value reciprocity and mutual obligations as a sign of closeness. Multinational and local businesses can put a check on corruption by not being a participant in such practices and setting up strict measures to prevent them in their business. Again, there is no major change to the Anglo-American model of business.

Coupled with corruption is the continuous change that Asian societies are going through with rapid economic development. Cultural influences have a significant impact on business practices. People of Chinese descent control a lot of businesses in East Asia. Confucianism has influenced the culture of countries such as Japan and Korea and form the basis for respect of tradition and strict code of conduct. Coupled with them are some commonality between Chinese, Indian and several Asian cultures – a holistic mind (a mix of yin/yang or both), ritualistic obligation to the family, seniority and respect with age, personal contacts (ningen kankei in Japan, guanxi in China) and trust (High in Japan, low in China and India). A lot of cultural behaviors come from religion and these in turn influence how businesses are conducted. An example is how Muslim traders avoid borrowing loans (the food for capitalism) as it is against their religious principles.

Economics & Finance

The GDP of most Asian economies has been consistently on the rise since the past ten years. China (10%) and India (8.3%) have the fastest GDP growth rate in the world. The reason for Asia’s rapid growth has been due to high savings and investments attributed a lot to the growth of the female labor force and the “demographic gift”. Businesses following the Anglo-American model can thrive well in these economies by being active participants in the growth of the local economy. The private sector has been opened in a lot of South East Asian nations and so has the government interference in large public institutions eroded in countries such as India.

In East Asian nations, exports constitute 43% of the country’s GDP (2004). This lends to a healthy Current Account (CA), which in turn leads to a healthy economy. Business firms can understand the viability of their investment in a local region based on these macroeconomic indicators. Multinationals also need to be aware that Asian countries maintain a high-value for the dollar by investing in US treasury bonds with the ultimate goal of protecting their exports. China also does that to devalue the yuan and help its domestic banking sector to improve in the meantime. The risks that they need to be aware of are- the dependence on US economy for exports (China, India – services, Bangladesh, Pakistan, Vietnam), high costs of energy, war or political tensions (India-Pakistan, Taiwan Straits, Korean Peninsula), exchange rate pegging (China – but so far a government with strong macroeconomic influence has helped prevent a crisis like the peso fall for Argentina) and protectionist policies such as trade barriers (possibly by US), remittance restrictions (Philippines, India- through export oriented services).

To summarize, there is no need for any significant modification of the so-called “Western” or Anglo-American business practice to succeed in Asia. All it needs is a change in mind-set and a much broader perspective on Asia’s biggest asset– its people.

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