There are significant opportunities for Australian security companies in Asia. Companies considering expanding into Asia should, however, be aware of the pitfalls than can befall any Western company trying to establish a successful business.
Asia’s rise to strategic and economic prominence will naturally create thousands of business opportunities, seemingly on every street corner. But the Asian landscape is littered with the remnants of Western businesses that decided to expand their operations into Asia. They ploughed money into these ventures to see little or no return on their investment.
Whilst working across Asia for the past 10 years, I have noted that, typically, Western companies make a number of similar, fundamental mistakes. I have summarised the most common, as follows:
Cultural norms and hierarchy.
Many of the problems Western companies have with Asia are founded on the lack of understanding of their culture and hierarchy that perpetuates throughout Asian societies and work places. This hierarchy is a powerful controller of behaviour and it affects staff and their relationship with managers. There are thousands of websites that outline the cultural differences between Western and Asian countries, but companies continue to ignore this information.
Even today, a friend from an Australian company that is currently establishing an Asian head office was telling me that the Asia Pacific Regional Manager (who has never been to Asia before) was offended when he told her that managing in Asia is different to Australia. She then went on to say that the staff who would be recruited would have to work in her style if they wanted to work for her company.
Relocate staff to Asia.
Company staff typically do little to prepare themselves for conducting business in their respective foreign country. Many do not understand the local cultural norms, especially those relating to the way that business is undertaken. It’s akin to getting these staff to play a board game blindfolded and nobody has told them the rules.
When you clink glasses in Asia, in some countries it’s a sign of respect to clink the glass lower than the Asian person you may be entertaining. It’s knowledge and execution of these subtle cultural differences that will be the difference between success and failure on that proposal you have been working on.
Lack of management oversight.
I recently completed a project in China reviewing the security policies, procedures and programs for a large European multinational. They were losing IP which had resulted in a reduction in their revenue of more than 33%. I learned during the four week project that there were no policies, procedures and programs in place. The entire operation was run by locals and there were no European managers providing oversight. After submitting an extensive report and briefing to the local management, with an offer to assist / resolve the issues, it was not surprising that there has, to date, been no action to implement any of the corrective actions. And the reason why, because local management are profiting very nicely, thank you.
I have frequently witnessed the ‘we don’t need expats’ syndrome frequently through Asia – Asian branches of companies start objecting to expats holding management positions within the country branch. They say things like, “we want to employ locals – foreigners cost us too much” or “a Westernerer is not a better manager than a local”. In most cases, the Western companies fall for it and they allow local Asian personnel to fill all key roles and suddenly regional management has little oversight on the day to day operations of the branch. Before long, operations are not being run as effectively and revenues stall or begin to reduce. The reality is that mafia-type organisations can quickly become embedded in Asia based organisations. These groups exploit the lack of oversight and the reluctance of subordinate staff to report the irregularities and skim revenue or profit through other means.
An example of this was a review on a department of a large multinational company in the Philippines. The position of country security manager was the last position held by Western trained management, however, at the insistence of the country chairman the regional management caved in and the position was filled with a local applicant. As a result, the review established that the department was probably losing more than US$5 million a year due to fraud and business practices that were not in line with the company’s code of conduct. Once the expat was removed, the local staff colluded and became nothing more than members of a local organised crime network.
Establishing a successful Asia based security business?
To get your company in a position to succeed, I recommend you implement the following:
Establish an existing opportunity for your company.
An initial step, before you write the business plan, is to undertake an opportunity analysis – is there really an opportunity for your company to establish a business in Asia. Your opportunity analysis should include market research (who are your competitors), how you can differentiate your company in the market and time to positive cash flow. There are a number of companies that provide these services and spending money at the start to undertake an opportunity analysis may save you millions in a failed venture down the track.
Keep costs down:
Unless you absolutely have to set up in a certain location, I’d recommend you select a low cost location to establish your business. Cities such as Singapore, Hong Kong and Tokyo are expensive to operate a business, especially in relation to office and apartment rents. Cities such as Jakarta, Bangkok and Manila (recently proclaimed Asia’s cheapest city) are much less expensive to operate from. After living in Singapore for 5 years, I now reside in Bangkok and I did this for a number of reasons, but primarily because 1 month of rent in Singapore = 6 months’ rent in Bangkok. Please note, though, the cost to incorporate your company in these low cost locations are higher and the process is much longer.
Sometimes, it’s not only about cost – it’s also about where is the best location for the company to establish. A software company recently approached me. They were unsure whether to set up in Manila or Bangkok and were seeking guidance. Manila was the cheaper location and provided the company with the IT personnel they required but the company was also focussed on security, safety and quality of life. I completed a detailed analysis and presented the facts to company’s board and management and they used the facts to make their decision (Bangkok won)…
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