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How Leading Companies Creatively Cope with Asia’s Structural Challenges

19 September 2015 By Vincent Chin , Ranu Dayal , Michael Meyer , Christoph Nettesheim , Bernd Waltermann , and Jing Ting Yong

Even though emerging markets in Asia are the world’s greatest growth markets, many companies struggle with the region’s talent gaps, overstretched infrastructure, and uncertain regulatory environments. Some companies, however, are better than others at finding innovative ways to overcome these barriers.

Related article:Overcoming Asia’s Obstacles to Growth

Such companies proactively shape the environments around them by developing their own talent pools, improving infrastructure, and working actively with authorities to adopt rules and regulations that support their business models. As a result, they are capturing the biggest growth opportunities. Several are also amassing formidable competitive positions that are difficult—even cost prohibitive—for most rivals to replicate.

Some of the most successful companies in emerging Asia share what we call a first-mover mind-set. Such a mind-set has three main characteristics: an entrepreneurial culture, a long-term view that enables companies to invest in areas beyond the normal scopes of their businesses, and a willingness to create local partnerships. 

For our report Overcoming Asia’s Obstacles to Growth: How Leading Companies Are Reshaping Their Environment, we analyzed five companies in depth that have proved particularly successful at developing ways to cope creatively with various constraints in China, India, and Southeast Asia. These companies are Astra International of Indonesia; Wipro of India; S.F. Express of China; AirAsia of Malaysia; and Unilever, a London-based multinational corporation.

How Astra Is Winning Indonesia’s Talent War—Again

Astra International, one of Indonesia’s most venerable conglomerates, had for decades been regarded as one of the nation’s most sought-after employers. But when Prijono Sugiarto took over the leadership of the company in 2010, he realized that Astra had lost that mantle. Banks, oil and gas companies, and other businesses had improved their people practices and were able to attract high-potential candidates to their glitzy new office towers in Jakarta’s city center.

Today, Astra is back on top as Indonesia’s talent magnet. The $21 billion conglomerate, whose businesses include automobiles, tractors, finance, and agribusiness, ranks as the preferred employer by college students, according to a recent survey. In a nation notorious for its tight skilled-labor market, Astra hires about 3,000 college graduates a year. And it enjoys a strong record of retaining its best management trainees.

Astra is winning the talent war thanks to a comprehensive program to identify, recruit, and nurture top candidates at every level. The company grooms future workers from across the archipelago by partnering with high schools, polytechnic institutes, and universities.

The Astra First program illustrates the company’s successful approach to boosting its profile among job seekers. A partnership with 14 Indonesian universities, the program enlists 80 promising sophomores each year to serve as “Astra ambassadors.” Astra provides the ambassadors with scholarships, leadership-training workshops taught by successful alumni, and factory visits during their remaining three years at university.

The hope is that the ambassadors will not only become Astra managers after they graduate but also persuade fellow students to see the company as a career opportunity. Sri Martono, the chief of corporate human-capital development, credits such efforts with boosting Astra’s reputation on campuses as a desired employer. “We have worked very proactively with the universities to make ourselves top of mind,” Martono says. “Now it is easier to get talent.”

For Wipro, Talent Is About Much More Than Skills

When India’s Wipro searches for future star performers, the IT services giant looks well beyond an applicant’s technical qualifications and academic performance. The company also seeks to understand the person’s “social footprint.” Online articles, Facebook pages, and social-media posts all provide insights into the character and values of job candidates. Have they consistently shown the ability to create innovative content? Do they like to teach others? What social or environmental causes do they care about?

Wipro believes that in dynamic, fast-changing businesses such as IT services, where today’s hot technologies quickly become obsolete, the basic ethos and personal attributes of employees can be just as valuable as technical and domain skills. Among other traits, Wipro wants employees who can solve problems, can quickly teach themselves what they do not know, and are passionate about their work.

“Competencies can be developed,” says Abhijit Bhaduri, Wipro’s chief learning officer. “The problem is always finding people who fit your culture and share your values.” Bhaduri, who previously led human resources teams for Microsoft, Pepsi, and Tata Steel, even wrote a book on the topic titled Don’t Hire the Best: An Essential Guide to Hiring the Right Team. “We are looking for people who have depth. We want people who can really think, who have both expertise and broad interests.”

How S.F. Express Can Guarantee the Fastest Delivery in China

When a customer sends a business document or parcel to a far corner of China through Shun Feng Express, better known as S.F. Express, 90 percent of the time it arrives at its destination within two days. If the customer pays a premium, S.F. Express guarantees a full refund if the delivery is late. “No other delivery service would dare make that promise,” says the chief strategy officer, Ted Chan.

By living up to its reputation as China’s fastest, most efficient courier service, S.F. Express has become Federal Express’s biggest competitor in China, with more than $6 billion in annual sales. It also can charge premium rates.

S.F. Express’s main advantages are scale and a degree of control over its far-flung transportation and service networks that even its biggest competitors will not be able to quickly replicate. Unlike any other privately run express courier in China, S.F. Express controls its own fleet of 40 cargo planes—18 of them company owned—and 16,000 delivery trucks. By having its own delivery fleet, the company can dispatch planes and trucks anywhere at any time. While most rivals rely on franchisees to operate sales offices, S.F. Express employs 350,000 people at more than 300 hubs and 12,000 service centers across China.

This operational control gives S.F. Express a strong edge in the business-to-business market. The company’s niche is China’s middle market. The leading multinational delivery services tend to focus on large corporations and heavy cargos, while local Chinese competitors target the low end of the market—especially for e-commerce deliveries. More than half of S.F. Express’s business, by contrast, is with small and midsize enterprises.

S.F. Express further differentiates itself by specializing in small parcels that are time-sensitive, such as business documents. This business enables S.F. Express to charge premium prices, furnishing the cash to continue expanding its reach—and distancing itself from the competition.

Unilever: Enabling Mom-and-Pop Shops with Digital Technology

A secret of Unilever’s success in emerging Asian markets is its ability to sell products in remote villages. Unilever supplies some 1.5 million small, family-owned shops in South Asia and Southeast Asia. Such “general trade” channels account for about 60 percent of the retail sales of fast-moving consumer goods (such as soap, snack food, and shampoo) in Indonesia, up to 70 percent in Vietnam, and more than 90 percent in India.

Serving these mom-and-pop stores cost-effectively is a daunting challenge for consumer product companies. Many shops are difficult to reach, sell small quantities of goods, and lack Internet or landline phone connections. Getting the stores to stock and prominently display a company’s products, moreover, often requires maintaining a personal relationship with the proprietors.

To bridge this gap, Unilever’s representatives maintain a digital profile of each mom-and-pop shop that the company serves. The database includes photographs of the shops, their placement of Unilever products, their precise locations, and data on sales, market share, and competitor presence. Unilever’s team of more than 1,000 sales representatives gathers this data for the company by visiting these outlets.

All of this information is transmitted instantly through the handheld mobile devices of Unilever’s sales force. Among other things, access to this local data enables Unilever to gain a better understanding of the outlets, position its products in shops, and plan distribution routes.

How AirAsia Became a Regional Power as a Minority Partner

When Malaysian entrepreneur Tony Fernandes launched his vision of building Asia’s first no-frills airline in 2001, the idea seemed farfetched. Fernandes had used his personal savings and mortgaged his home to buy a money-losing, government-owned carrier. Even if he could raise the capital to acquire a jet fleet, getting landing rights in neighboring countries would be difficult because Southeast Asia lacked open-skies agreements. Acquiring local carriers was not possible because of laws barring foreign majority control of airlines.

Today, Fernandes’s AirAsia operates a network of airlines in four neighboring nations—with planes bearing the AirAsia logo—that add up to the region’s largest low-cost carrier, serving 100 destinations in 23 countries. Within Southeast Asia alone, AirAsia carried 50 million passengers in 2014.

A key to Fernandes’s accomplishment was his willingness to enter cross-border joint ventures as a minority partner—a strategy that would give more established airlines pause because they would see it as tantamount to ceding control. Fernandes’s strategy has been to partner with Asian entrepreneurs who share his vision of budget travel and are willing to allow AirAsia, ranked as one of the world’s most-efficient carriers, to manage the business. That has enabled each carrier to achieve a consistent level of performance: the average turnaround time of an AirAsia flight is 25 minutes—the fastest in the region—while its prices are the lowest in the world, thanks to an average cost per available seat kilometer of $4.02.

With the exception of a venture in Japan, in which ANA was the majority owner, AirAsia’s joint-venture partners tend to have no airline experience. The company owns 40 percent of Philippines AirAsia, 45 percent of Thai AirAsia, and 49 percent of its remaining ventures; private domestic investors hold majority stakes. In 2013, Philippines AirAsia in turn acquired a 49 percent stake in another Filipino airline, Zest Air, which provided routes from Ninoy Aquino International Airport in Manila. The carrier is now named AirAsia Zest. In 2014, AirAsia received approval from India’s Directorate General of Civil Aviation to begin commercial operation of a new joint-venture low-cost carrier with Tata Sons, again with AirAsia owning a 49 percent stake. AirAsia recently formed a new partnership in Japan and hopes to reenter the market.

Even if an established airline tries to mimic Fernandes’s formula for building a regional presence, the game has already changed. In 2001, low-cost carriers such as AirAsia accounted for only about 3 percent of the aviation market within Southeast Asia. Today, they control nearly 60 percent.



How Leading Companies Creatively Cope with Asia’s Structural Challenges
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