SMTA International Conference Proceedings


CHALLENGES TO DOING BUSINESS IN ASIA EFFECTIVELY

Author: Franz-Josef Kahlen
Company: Advanced Manufacturing Solutions
Date Published: 9/24/2006   Conference: SMTA International


Abstract: Offshoring has become a fact of doing business in the beginning of the 21st century. While outsourcing in the beginning of the 1980s was an economic reality in the face of a high exchange rate of the US Dollar, today’s mechanisms are driven by Free Trade Agreements, the competition of countries for business-favorable environments and incentives, and by logistics and supply chains. An illustration of this fact is that the workbench of the 1980s has moved on from Hong Kong to other places in mainland China, and may in the future well relocate again to Cambodia or Laos.

The details involved in “doing business in Asia,” however, are not always appreciated to the fullest by companies operating in the area. Transportation security, labor shortages and questions regarding the loyalty of labor, shortages of affordable production facilities and issues relating to the protection of IP in some countries in the region imply that a decision to locate production or development facilities in Asia should not be subjected to following a trend. Further challenges for the macro-scale logistics (goods) sector concern the global shipments of goods under JIT pressures, the restrictions on the free flow of goods between countries and capacity limitations at ports of entry. As a result, logistics infrastructures in Southeast Asia are changing around the clock. New concepts are even addressing the possibilities of processing while goods or parts are in transport. On a micro-scale, transport within a city or in a developing country leaves much to be desired. Logistics within Asian mega-cities alone can take several hours or half a day. Efficient, i.e., lean logistics thus must address the speedy transport within a country or region as well as transport from Jakarta to Seoul.

Operating a consultancy company in Europe, Australia and Asia, the author is a strong proponent of the integration of the Greater South/East Asian market. Here, the author will present the efforts currently underway and the expected and integrative development required within the ASEAN framework. A case study is presented where it will be shown that logistical challenges within one country are a sufficient incentive for companies to maintain production sites in two different countries.

Keywords: Asian market strategies, logistics, production, en-route processing



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