Passage to Asia

Even large multinationals can make mistakes. Particularly when it comes to putting down offices in unfamiliar territory.

Asia is one such territory for many IT companies whose roots are either in the U.S. or Europe.

The main obstacle, according to M. Hillman Lentz, CEO of Asia Pathways, is simply a lack of awareness of how things are like in the Asian environment.

"They don't understand what exists here," said Lentz, "they don't understand that there are multiple cultures, multiple countries, multiple currencies, multiple languages."

For multinationals investing millions to set up offices in Asia, that lack of understanding is potentially disastrous.

Incorporated just over two years ago, Asia Pathways is a company dedicated to bridging the gap between the east and the west. The company signs on smaller but established IT companies from the U.S. or Europe and develop their Asian operations here.

According to Lentz, a company in the U.S. or Europe would begin to think about expanding into a region when there is a clear sign of a demand in the region for its products. Often it's when a dealer or reseller express an interest in the company's product, or when a substantial deal has been closed in the region.

Once interest has been indicated, the company must then brace for the surprises that the region might offer.

The big surprise about Asia is its diversity.

"Sometimes, the product that they are trying to sell are not even multi-byte enabled," noted Lentz. "It's kind of hard to sell products in China or Japan or Korea that are not multi-byte enabled."

The multi-byte enabled process allows software to read and display character-sets other than English. It is particularly handy for cultures whose languages are character based instead of alphabet based.

"Even colors make a difference," said Lentz, "colors that we find appropriate here in Singapore, may not be so in other Asian countries."

For western executives who have just arrived here, however, this is all new.

"In America, we are simply not taught to understand this part of the world," explained Lentz, "when I grew up in America, all we were taught about was America."

According to Lentz, it is still very common for Americans to view Asia as one homogenous culture, as either Chinese, Japanese or Korean. "There is just an unawareness and lack of knowledge of what the differences are," said Lentz.

The worst mistake is for company executives to think that they do know the differences and can transfer their methods from the west.

Speaking about the common mistakes that companies make when expanding into Asia, Lentz noted, "they assume that everybody over here needs their products, and they assume that they can sell their products over here exactly the same way they sell over there, and furthermore, they assume they have plenty of time to just fly over here, and make sales, and fly back to the States."

"Which is a monumental task, considering the time zone and air travel time," Lentz concluded, "it doesn't usually work."

Still, to many U.S. and European solution providers, Asia presents an opportunity too irresistible to pass up.

A Goldman Sachs report estimates Asia's B2B transaction will reach US$440 billion by the year 2005.

Singapore alone will total US$11 billion by that time, and China's US$5 billion in B2B trade this year will bloom to US$125 billion.

However, apart from the size of the market, expansion into new territories in general offers a company a source of revenue that it has never had before.

It's incremental revenue that gets companies so thrilled about venturing into a new region.

Some companies opt for an easier way by limiting their direct presence in the region, relying instead on resellers and partners to market their products.

This option is cheaper and far less risky, but the company gets virtually no brand recognition and will only be able to deliver limited support to its customers in the region.

"We have found that companies do not grow their business well over here unless they have a physical presence here," noted Lentz.

However, there are many obstacles to overcome before a company can successfully develop its operations here.

One chief obstacle is the high cost of doing so. As Lentz observed, "not everybody has 2 or 3 million lying around to go open up an operation in Asia."

With Asia, the vast cultural divide poses yet another challenge.