Over the past five years, I have met with many US Commercial Service officers in key Capital cities of Asia. These are the local country nationals who work every day to facilitate business transactions between US companies and their Asian counterparts. They have many comments, suggestions and criticisms to make to their US clients but are reluctant to do so out of courtesy or fear of offending. I am taking the opportunity here to send an open letter to US hospitality companies interested in doing business in this part of the world representing their collective voices.
TO THE CEO’S OF AMERICAN HOSPITALITY COMPANIES
We in the US Commercial Service are anxious to help you to develop business relationships in the Asia Pacific region. In this letter, we offer some suggestions that we hope you sincerely consider. We are confident that these recommendations will make your business activities more successful going forward.
First, be willing to adapt your products or service to the local market conditions or you most assuredly will fail. Change your menus to include popular local dishes. Upscale the ambiance and seating to match Asian customer expectations. Price your products to be reflect the same relative positioning that you enjoy in the US.
Second, be ready to change your business model. This is 2009 and Asian Companies are not very interested in buying expensive franchises with no significant market presence in the region. They don’t see any value in paying a high price for something that has no proven model locally. They want some commitment from the franchiser/brand owner. Even offering a small minority equity stake in a joint venture is better than offering nothing. These companies know that if you have a direct investment in the success of the local franchise then you will do everything possible to make it a viable business. In short, put some skin in the game!
Third, be prepared to establish a regional presence to develop and support your local business relationships. A twice year visit from US headquarters is not enough! You will need to be on the ground in constant touch with them to understand the local conditions and refine your product and service offering accordingly.
Fourth, it is almost an imperative that you establish some company owned stores in China to prove the business model and attract high level local partners going forward. Trying to find a local partner is a real “hit and miss” game and the chance of success in the beginning is very low. Joint ventures in the second stage are a good way to develop but not at the first market entry point.
Fifth, don’t just come to China now because the US economic situation is weak. The successful foreign companies in China have been working in the market for many years and have refined their business models and built up solid local relationships. Are you willing to make such a commitment?
Sixth, don’t have such low expectations of the local markets and their consumers. Many times your packaging, menu and plate presentations are too low quality to the eye of local customers. Remember that Asians eat and buy with their eyes!
Finally, don’t take the easy way out and give a multi-country franchise to a one country operator. These companies collect franchises like postage stamps and are rarely successful outside their main operations base.
We hope that you will consider many of our suggestions and re-think your business strategies in the Asia Pacific region going forward.
YOUR TEAM AT THE US COMMERCIAL SERVICE IN ASIA