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BLOG: Understanding the Confucian business culture

Andrew Milroy | Feb. 26, 2013
How to market IT services in the diverse Asia Pacific region

In the IT services business, the propensity to purchase services is often different from what might logically be expected. This is particularly obvious in the extremely diverse Asia Pacific region.

For example, organisations in the Philippines, a relatively immature economy with lower labour costs, are more likely to purchase services than organisations in South Korea, a mature economy with relatively high labour costs. Why is this? Nobody knows for sure but it appears that the propensity of organisations in a country to purchase services is heavily influenced by three cultural and economic variables as follows:

#1 The cost of labour. In mature economies, the cost of employing people with technical skills is often significantly higher than the cost of buying access to skills from a third party. Hence, the countries in the world with the highest propensity to purchase IT services are those with high labour costs. In the Asia Pacific region, the best example of such a country is Australia.

#2 The influence of the Anglo Saxon business culture. Buying IT services from third parties is most widespread in countries that are often described as Anglo Saxon, led by the United States and the United Kingdom. The business culture in these countries has, over the last 25 years, focused on outsourcing 'non core' activities. The belief in the Anglo Saxon business culture is that sourcing services externally can drive down costs, give organisations access to 'best of breed' services and offer greater flexibility.

#3 The influence of the Confucian business culture. In the Confucian business culture, which exists in most of Eastern Asia, service is widely perceived to be something that is free. Services are considered to be critical to the differentiation of products. The loss of control associated with sourcing services from third parties is thought to remove a key differentiator from corporate control. Furthermore, paying for such services is anathema to many organisations in East Asia.

Consider the three variables carefully

Organisations that wish to understand how to sell services into countries in the Asia Pacific region must consider these variables carefully as they develop their marketing strategies. This is particularly important for organisations that generate the bulk of their business from parts of the world that are heavily influenced by the Anglo Saxon business culture. 

In a country where the cost of labour is low, the influence of the Anglo Saxon business culture is low and the influence of the Confucian business culture is high, such as Vietnam, the challenges of effectively marketing IT services are profound.

Conversely, in a country where the cost of labour is high, the influence of Anglo Saxon business culture is high and the influence of Confucian business culture is low, such as Australia, the propensity to purchase IT services is extremely high.

 

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