BSR Insight | Doing Business in a Changing Asia

We live in interesting times—times when global changes are permeating societies as issues, institutions, and information begin to collide. Developments in connectivity and access to information are intersecting with changing societal expectations about political participation, environmental stewardship, economic equality, and expectations of governance. Society’s new expectations are being driven by developments in economic growth patterns, education, scandals, and natural disasters.

In Asia, these trends are increasingly apparent. In China, the blogosphere’s angry reaction to the high-speed rail crash that killed nearly 40 people in Zhejiang province influenced how the government responded to the accident. In Japan, trust in government has continued to deteriorate in the wake of the nuclear disaster. Thailand’s saga over its leadership means that country’s political unrest is far from resolved. In Hong Kong, protests over both governance and spending priorities are slowly becoming more common. Elsewhere in Asia, environmental issues, income inequality, and poor political leadership are testing governments’ ability to meet the changing needs of their citizens.  

These tensions are also affecting companies operating in Asia. In the past year, several topics have surfaced as important: labor rights, freedom of expression, international labor migration, consumer safety, corporate transparency, corporate governance and accountability, environmental degradation, employee welfare and mental health, and the end-use of products.

If your company is operating in this environment, it’s important to understand your business footprint within the local market so you can identify the risks and opportunities, clarify and change where appropriate, and invest as necessary.

To do this, five ideas are important:

1. Make sure your values are clear. Setting clear corporate expectations not only on compliance issues such as bribery and corruption but on expectations of behavior, values, and intent is important. Employees should understand not only the what but the why in order to enable rapid and appropriate business decisions in a dynamic environment. This is especially important if the local business environment differs from your corporate ethics.
2. Understand the footprint of your product. Is your product being sold for the purpose for which it was designed, or does poor regulation or improper usage put your product, and your consumers, at risk? Do graft and corruption influence your sales processes? What environmental or social impacts are embedded in your product? In short, what are the most material issues for your business model in this marketplace?
3. Understand your trust base. Why do consumers trust your product? If the trust of your consumers is influenced by external actors (such as regulators or NGOs), how can you strengthen your company’s reputation in the event that these external actors loose trust and legitimacy? Consider what happened in the case of the recent food scandals, infant formula, or the impact on the nuclear industry from the Japanese tsunami.
4. Invest in localization and learn from the margins. Capitalize on your global strategies by investing in your local teams. Their staff, resources, and knowledge should be focused not only on understanding the traditional influencers in your industry, but on recognizing the leading edges that may influence you in the future.

5. Invest in change before it’s required. Make friends before you need them. The experience of JinkoSolar, a solar product manufacturer with bases in Zhejiang and Jiangxi provinces, illustrates why this is a necessary practice: In September, after warnings earlier in the year from province officials about the factory’s waste-disposal system, and complaints from villagers about pollution, more than 500 villagers stormed JinkoSolar’s factory in Zhejiang, demanding an explanation for recent mass fish deaths. In response, the company CFO Longgen Zhang said JinkoSolar would need to pay 8 million yuan (US$1.25 million) for environmental cleanup, facility upgrades, and compensation to the village.

   As was the case with JinkoSolar, chasing changes when situations force you to follow is both expensive and risky. If you can equip your local teams with clear values and an understanding of risk and opportunity, they can offer you insights early, allowing you not only to understand important trends, but to act on them. You can also get advance notice of changes by building relationships with nontraditional opinion leaders. Open your business model to both constructive criticism and inquiry. Invest in relationships and, most of all, try to understand, meet, and react to concerns and opportunities.