After 25 years of doing business throughout Asia and the US, I’ve
come to understand that the fundamentals are the same everywhere, but they sure can look different in practice depending on where you decide to conduct business.  Nevertheless, if we do our homework and figure out how to implement well, there are big rewards.

Unique Opportunities

The Asian market indeed offers big rewards.  The US exported 43% of its total Agricultural exports to Asia/Pacific in1996, the year before the recent financial crisis; that amounted to $26 billion of agricultural products.  Exports to Asia were down to 33% during the recent economic crisis but are on the rapid incline again this year.  Add to this the crop protection exports and ag equipment and the export total soars.  Asia is also an important source of goods for import for commerce; $6.5 billion of agricultural products are imported for processing and sale in the US.  And a significant portion of the $9 billion ag machinery parts business is sourced from Asia.

Some of the export markets are for unique speciality products.  Ten percent of the 39 million bushels of soybeans sold to Japan are Natto beans, which are fermented and eaten cold and stringy for breakfast.  Natto lovers may even be in the minority in Japan, but the market is valuable and the US is the dominant supplier.

And then some of the unique markets are for American commodity products.  Ninety-five percent of the 39 million bushels of US #1 soybeans sold to South East Asia are consumed as “Tempeh”.  Tempeh is to Indonesians what French fries are to Americans.  Indonesia has been news to the American public during its change of government, but it has been a staple market for the American farmer.  Indonesia, a country of 216 million people, the fourth most populace country in the world, consistently takes about one third of its agricultural imports from the US.

“American growers develop these Asian markets through the consistent efforts of their American Soybean Association and the United Soybean Board,” says Gil Griffis, Asia Division Director of the American Soybean Association.  This is an excellent example of doing the homework along the entire value chain.  An ongoing breeding program develops varieties to match the users needs, growers develop contract-production relationships, and overseas offices support international customers with technology and marketing.

Opportunities are not the exclusive right of large organizations; individuals and entrepreneurs do well also.  CBI (Cooperative Business International, Inc.) is an agricultural business development company headquartered in Worthington, Ohio.  They were originally organized around two equal pillars: International trade and strategic consulting.  Their trade beginnings included Asian spices and coffee, and the trade was predominantly import.  Fifteen years later business is thriving and trade surged to 70% of their effort.  CBI conducts business in 14 countries and has added international investments to their portfolio.  Products have expanded to include from proteins to popcorn.  And this year exports will exceed imports.  “Opportunities just keep presenting themselves”, is the humble explanation of Bob Clark, President.  He reminds me of Wayne Gretzke’s explanation for his luck in being where the puck is, “the harder I work, the luckier I get.”

Cultural differences present some surprising opportunities.  A Korean agricultural conglomerate invested $10 million in the Oklahoma panhandle to make Korean soup stock.  They buy the fresh femur bones from slaughterhouses that are spread from Texas to Kansas and process it into a traditional Korean cooking ingredient.  “This is a higher value use for what would have gone into animal feed,” says Lou Bradley, Regional Manager for Asia, Oklahoma Department of Commerce.  It just proves the old saying, “One man’s meat is another man’s offal.”

Doing the Homework

While culture and differences in business style provide opportunity, it is also the very reason to do one’s homework well.  The fundamental questions are the same in business; but the answers will be different by country and by culture.

A first fundamental question is, do I understand the market?  When marketing to our home-country market we understand our customers and our competitive environment.  When starting in any new market, the first rule is “Don’t assume anything…check everything”.  

Even the big companies have had surprises introducing everything from brand names to biotech acceptance.  Intercultural business legend has it that when Coka-Cola developed the phonetic translation of its famous name in Chinese characters, one version came out as “bite the wax tadpole”.  Their trademark research did go on to select a more appetizing   name.

Biotech has suffered from cultural differences too.  The ag biotech industry has done an unprecedented amount of work to introduce this new technology and to prove the science is sound.  Science has shown that foods produced using biotech grains are as safe as what came before.  Nevertheless this development is attacked on questions of ‘economic imperialism’ and its potential impact on international food trade.  These questions would not be automatically anticipated in the west where biotech was commercialized first.  The industry is now engaged in serious and expensive efforts to communicate with the Asian markets.  The cost of fire prevention always looks expensive. Always, that is, except when compared to the cost of fighting a fire and repairing the damage. 

How will your competition respond?  Asian markets are as competitive as anywhere.  Pricing can be a hot issue culminating in complaints of unfairness and ‘dumping’.  While no market can claim to be fee of some gamesmanship, the most common cause of this disagreement is the different accounting practices in each country.  When your competitor only looks at their variable cash costs, which is common in commodity businesses in China and Taiwan, their view of a ‘fair’ price looks downright predatory from a GAAP (generally accepted accounting practices) point of view

Winning strategies can be found however.  One global herbicide was struggling in China by trying to compete with the low price of a low-quality local product of similar chemistry.  The international company reversed its strategy, raised price, promoted their quality brand and went on to succeeded phenomenally.  Savvy price and positioning did unlock new growth.  It should be pointed out however that this was built upon a solid foundation of local ‘presence’ in the form of a strong local marketing team.

How do you match the home-court advantage?  A fundamental everywhere is relationships.  In Asian business, relationships are more important, take more time and arguably yield more results.

The Korean investment described earlier is a relationship success story.  The Oklahoma State Commerce Department has for years courted their international alumni of Oklahoma Universities.  One particular old friend of Oklahoma State has risen to become Chairman of the powerful Cheil Jedang Corporation.  During one particular courtesy call on that gentleman, the conversation wandered and the Oklahoma State Commerce officers discovered that Cheil had a need for a source of soup bone which Oklahoma could provide.  And a new business was born.

The ability to have access to such conversations, especially at such a level, only comes with relationships nurtured over time.

The highest penetration of hybrid corn in Asia (outside Japan/Korea) is in Thailand where it has achieved 85 percent.  This was achieved in part due to a 20 year partnership between Charoen Pokphand (CP), the leading ag-based conglomerate in Thailand, and Dekalb Genetics Corporation (today a wholly owned subsidiary of Monsanto Company). 

“However, it is more than just making a business partnership,” an old Asia-hand said, “Marriage is easy, the skill is to dream the same dream.” 

Dekalb has applied that same philosophy in China and enjoys rare profitability in their first decade.  Very often a western company has specific know-how that can help their partner achieve their own local goals.  A milling technique, an introduction to a niche market, a staff training program.  Your in-house know-how that is taken for granted in the west may create real value for your partner, and greater depth to that all-important relationship.

Tenacity is Required

What is the secret to success?  A fundamental everywhere is tenacity.  In a new market you will have to grin a bear unforeseen steps, seemingly unnecessary steps.  Some are a deliberate run-around, but most are not.  Recall your first serious tangle with one of our homegrown bureaucracies, maybe a building permit or a certification for ISO 9000.  Imagine being new to the US and facing such local ‘customs’.  But once you have gone through a new process you have learned the ropes and are ready to handle the new reality.

One of the great cases of tenacity in the face of extreme requirements is the story behind the first McDonalds shop in Japan.  It took years to find the right partner, develop the plan and find the right first site.  The first site negotiated was a prime location and worth the time invested.  A permit was issued to construct a restaurant in the space of a street-side show-window of a leading department store in the fashionable Ginza shopping district of Tokyo.  One stipulation was that there was to be no disruption to regular shopping customers.   They were allowed only 36 six hours to complete the entire installation, from close of business Saturday to opening on Monday morning.  The construction team had to practice in a warehouse until they got their time down.  But they did it and achieved a profitable, if unique, launch.

Tenacity can require patience as well.  Cargill began its approach to the Indian market back in the early 80’s when regulations required majority local equity.  With much effort over five years the government of India was convinced by industry to modify rules so that foreign companies could hold 51% in cases where high technology was brought in.  Application was then made to demonstrate that hybrid seed is a high tech activity, which quickly qualified for a 51% venture.   Today they are recognized and rewarded by the market for their leadership.  It is a paradox that western business is respected in the East for its impatience for results but that a business style can only develop trust if it demonstrates patience.

“Make sure you understand the time required to achieve success,” says Bob Clark of CBI.  If you set your definition of success correctly, then you are less likely to experience disappointment.  The good news is that there are ways to learn the ropes other than trial-and-error.  The State Department has declared that their number one priority is to help American business.  The US government has many services, some of which are free.  Trade Associations and the American Chamber of Commerce chapters are brimming with experience and a willingness to share experience.

For in-depth services, there are specialized consultancy companies.  Bob Clark of CBI summarizes, “The use of consultants pays dividends because they show both what can be done and how to avoid the pitfalls.”  It does take time, but others have gone before who are there to lend encouragement and more.

Like fishermen, there is a great camaraderie among Asian business hands.  Join the conversation and you will hear the recurring themes of understanding what works, of relationships, and of patience.  And like fishing, you can’t catch anything with your line out of the water.

© Larry Taylor