How Should FSI MNCs Build and Sustain Success in Asia?

After a historically brief spell of about 200 years, Asia is once again acknowledged as the economic growth engine for the world. The financial returns of Western multinationals, given low growth rates in their saturated home market, will increasingly be impacted by the performance of their operations in Asia. Yet, every market in Asia is now being contested by a plethora of Western multinationals; local champions, a number of whom have embedded advanced management and technology practices and have or potentially will become an Asian multinational; and traditional domestic competitors. While revenue growth and margins have been high within many countries in Asia during the uncontested market era, it is not realistic to expect the same levels to continue in this new competitive era. 

Business research [Malnight 1995 – see post in Literature Synopsis] suggests that when multinationals define their ‘global’ strategy and how they will structure and manage operations, they rarely follow a planned process—rather, they evolve in response to a series of challenges and opportunities. Failed tactical actions can be illustrated in Australia during the 1990′s when AMP Society withdrew from Asia in favour of the U.K. or by their banking counterpart, Commonwealth Bank of Australia, who acquired Colonial Mutual Bank and then proceeded to whittle away the value of the acquired company’s well positioned insurance franchise in Asia (which raises the question as to why Australian financial services providers have not managed themselves to be more successful in their regional backyard). Tactical approaches have been clearly evident among the financial services multinationals operating in Asia as they have focused firstly on market entry and generating revenue to demonstrate business viability in what were once relatively uncontested markets. But that uncontested market era is now over. 

Relative to their insurance and asset management counterparts, bank multinationals appear furthest along in applying a more considered strategic orientation to realigning their management structures and operating model for the Asia region. The challenge is not simply devising the target multinational operating model for Asia but also determining what approaches have been successful in making the transition. To avoid costly misadventures for both established players and additional new entrants, it will become critical for executives of financial services multinationals to draw from research of previous experiences and understand as well as debate what are the key considerations and attributes of success for effectively managing a financial services multinational across the culturally diverse region of Asia. 

MNCGuru