The Growing Influence of the Asia Pacific in the Global Economy - Report Example

The Growing Influence of the Asia Pacific in the Global Economy Executive Summary The Asian Pacific region continues to be an interesting and exciting location for global business. It is not only one of the most hospitable block of countries for business growth and companies interested in multinational expansion, but the region is increasingly known for quality products that now have global name recognition. The region itself, particularly Singapore and Hong Kong, have a history of European and American influence that has enabled them to strengthen and maintain solid partnerships through the years, further contributing to they sense of economic well being and prosperity. In today’s fiercely competitive and global business environment, it is little wonder that many corporations are increasingly going worldwide in their effort to increase profitability and efficiency. While this reality can be seen in many countries around the globe, it appears to be especially true in Asia where numerous companies once thought to be endemic exclusively to the Asian Pacific region now have a presence throughout Europe and North America, and indeed the world. Consider companies like Samsung and Daiwoo. A Japanese and Korean fixture respectively, both companies are now household names in nearly every locality on the globe. Consider again the Japanese car manufacturers of Toyota and Honda. Now only are these two companies the leading seller throughout Asia, they now have manufacturing plants throughout the Americas, further expanding their international presence. The bottom line is that Asian companies are on the rise and multinational corporations are playing a growing role in different industries around the world. They have an influence perhaps unparalleled in the modern world, which is leading many to believe that Asia will possess the dominant economy of the future. Time will determine whether that prediction comes to fruition or not, but for now it is a worthwhile discussion to consider how various Asian companies are effectively reshaping the global business landscape in our generation. 1. Introduction In today’s fiercely competitive and global business environment, it is little wonder that many corporations are increasingly going worldwide in their effort to increase profitability and efficiency. While this reality can be seen in many countries around the globe, it appears to be especially true in Asia where numerous companies once thought to be endemic exclusively to the Asian Pacific region now have a presence throughout Europe and North America, and indeed the world. Consider companies like Samsung and Daiwoo. A Japanese and Korean fixture respectively, both companies are now household names in nearly every locality on the globe. Consider again the Japanese car manufacturers of Toyota and Honda. Now only are these two companies the leading seller throughout Asia, they now have manufacturing plants throughout the Americas, further expanding their international presence. The bottom line is that Asian companies are on the rise and multinational corporations are playing a growing role in different industries around the world. They have an influence perhaps unparalleled in the modern world, which is leading many to believe that Asia will possess the dominant economy of the future. Time will determine whether that prediction comes to fruition or not, but for now it is a worthwhile discussion to consider how various Asian companies are effectively reshaping the global business landscape in our generation. 2. Literature Review To begin, let us consider one of the rising global economic powerhouses, which is Singapore. Singapore is closely aligned with the Chinese economy, yet due to its independent status and capitalistic mindset, the country has evolved into of the most densely populated homes to multinational corporations. The country itself is home to a variety of different ethnic and cultural groups, and it has made a practice in recent decades of attracting multinational corporations to focus on doing business there. In fact, numerous companies based in Singapore have a rising and global presence throughout the European Union and North America. Conversely, many companies from the aforementioned regions of the world have chosen to locate their base of operations in Singapore in order to capitalise on the rising economic power that is the Asian Pacific region. The fact that countries such as Japan and Singapore are such rising powers on the economic scene is really rather amazing considering the relative small geographic size of many countries throughout the region, save China. Singapore itself, for example, is only about the size Chicago, encompassing just under 225 square miles of habitable land. Yet, the size of the economy continues to grow exponentially, and it shows little signs of easing up anytime soon. Within the country, roughly 75% of the country is Chinese, benefitting from the economic ties of the most populated country on Earth, but there are also a sizeable number of Malays and Indians working throughout the region. Beyond this, through the years, Singapore has attracted a large number of expatriates living and working throughout the island state, staking them claim in the multinational corporation revolution sweeping the Asian Pacific region (Barr, 2009). One of the many factors contributing to the growth throughout the Asian Pacific area is the climate and culture. As an example, Singapore touts a mostly stable, although very hot, climate and countless options for entertainment and leisure. This has served to attract a global workforce that is innovative and creative, being able to market products from various industries to the world. In addition, countries from Singapore to Japan to South Korea offer world renowned medical facilities, in addition to globally renowned schools at all levels, providing increase higher education opportunities that has further served to spark the economic growth throughout the region (Ong & Serwe, 2013). All of these factors have combined to make many countries throughout Asia Pacific a highly competitive business environment ripe for the growth of countless multinational corporations that have take a sizeable chuck out of the EU and North American markets. 2.1 Historical Relevance To truly understand the rise to power that Asia Pacific is currently experiencing, one must first understand the historical construct existent in this region. Once again, Singapore and Japan provide worthwhile suitors in this area, as their combined histories demonstrate the resilience of a people that are destined for internationally recognised and sustained success. Consider that Singapore, for example, has not always been a country of any note in regard to economic power, and it certainly was not even on the global radar a mere century ago. Going back to the 14th century, we can see a picture of Singapore as a simple island country that was largely dominated by a small fishing fishing village. Fishing, in fact, was the only sustainable source of income from the residents of the country. Today, in contrast, Singapore, is home to various industries, each of which has enabled the still small country to gain an international foothold throughout most reaches of the globe. It was not until the United Kingdom began to see a possibility in the deepwater ports of Singapore in the early 19th century that the country became notice on an international scale (Soh & Yuen, 2011). Other countries throughout Asia Pacific experience a similar type of history where only recently have they begun to be noticed by other countries, and their products be globally recognised, marketed, and sold. Continuing with a historical construct, consider that one of the first multinational companies in the Asian Pacific region is found in the British East India Company. Headed by Sir Stamford Raffles, the company located to Singapore to foamily set up a trading post throughout the region. This established it with a global presence and would truly set the tone for future economic growth and expansion throughout the region. In fact, outside of China, many countries in the region have fallen under European or American influence throughout the decades. Malaysia and Singapore, for example, were actually territorial possessions of Britain at one time or another. While both countries today are fiercely independent, the tone has long been set for multinational growth and a presence that dominates various industries (Talib, 2013). 2.2 Economic Power Many of the countries comprising the Asia Pacific region are surprisingly small from a geographical perspective, yet they have gained traction on an economic scale that rivals many countries in the European Union, Canada, and Mexico. Singapore, by way of example, is the smalls country in the totality that it Southeast Asia, yet it has the most powerful economy in the region, and one of the largest and most developed globally today. Singapore itself has become one of the most friendly and accommodating countries for entrepreneurs in the world today, making it home to innovative designs that are the marvel of the industrialised world. As such, many multinational corporations in a variety of industries have chosen to make countries such as Japan, Singapore, and South Korea home owing to their business friendly environment (Kim, 2006). With the rising class exhibited throughout the region, many residents have benefited from the economic prosperity of the growing industrialisation made possible through capital growth and international investment. Once again, Singapore is a perfect example of this truth. Since gaining its complete independence from British rule in the early 1960s, the economic growth experienced in the island state has grown at a constant rate and remains at a high level in comparison to the global economy (Heracleous & Wirtz 2014). In fact, must of the growth in the Asian Pacific region can be attributed to European influence, as a century of domination has opened up trade markets globally perhaps unlike any other region in the world. In essence, the region is ripe for multinational company development because of the lasting trade partnerships and relationships that have been fostered through a century or more of sharing economic resources and liberal business regulations and policies. In contrast, it is fair to also mention one of the downsides to the regions economic growth, in addition to some of its inherent limitations. The nations of Japan and Singapore, to name a few, are limited to certain business sectors because of a lack of land size, the geographical location of the countries, and a perceived lack of natural and physical resources. Because of this, there have been periods of stagnant economic growth relative to the regions dependence on imports, but this has been minimised in recent years due to the explosive growth of multinational companies in the industries of electronics and petroleum, just to name a few (Khiun & Wee, 2010). Because of the regions dependence on imports, however, the countries of Asia Pacific are a bit more volatile during a global economic downturn, yet they have rebounded quickly in each such instance. Industry wise, various manufacturing sectors have over taken petroleum production as the leading source of exports to the European Union and North America, contributing the rapid economic growth and enabling the region to grow in prominence globally. In terms of this phenomenon, it can certainly be said that the electronics industry is by far what the Asian Pacific region is best known for globally, with many countries throughout the globe looking to the countries of Japan, Singapore, and South Korea to satisfy much of its thirst for innovative and modern technological goods. Not only do many multinational companies from Europe and North America relocate to the region in order to provide manufacturing components for its various products, but increasingly Asian Pacific companies are developing their products that are marketed and sold globally (Mutalib, 2011). Traditionally one industry companies, such as Mitsubishi, have now branched into various sectors. Some companies, such as the one just mentioned, commonly make air conditioners, cars, televisions, household appliances, and more to be sold globally. These brands are replacing traditionally dominated industries by companies located in Europe and North America, further sparking the economic growth and rapid rise of the Asia Pacific. Economic growth in the region is not limited to the electronics industry, however, as gains have made in the wholes and retail trade sectors, in addition to financial and business services being focused on globally. In fact, the Singapore and Tokyo stock indices are now amongst the most highly traded in the world, attracting enormous interest from international investors, and playing home to various multinational corporations making their home in the region (Nicolas, 2007). Comparison to Western Business Culture and Expansionary Growth There are some other non-economic factors that have contributed to the rise of many countries in the Asia Pacific. Consider that, for example, outside of Morocco, Singapore is the second densest country in the world in terms of population. The ethnic diversity present in the country has served to spark ingenuity and bring various flavours of industry to the region that has, in turn, enabled multinational corporations to flourish (Norman 2012). In contrast to many Western cultures, Asian society, particularly those of Singapore, South Korea, and Japan are largely based on the family unit. Families are charged with taking care of each other, across multiple generations. Through the years, this has encouraged business growth because families are vested in their own prosperity. Workers are highly loyal to the company that employs them, which has provided stability to such companies as Samsung and others at levels that European and American companies simply cannot approach. Many Asian families are rather small, with two children at the most. This has enabled families to focus on education rather than survival. This has contributed to one of the highest rates of female attainment of degrees of higher education in the world. In fact, women in Singapore today earn advanced degrees at rates now exceeding many countries in the West (Shin, 2006). It is important to note that many countries within the Asian Pacific region rank extremely high on the Economic Freedom Index. As an example, Singapore recently recently scored as the second freest economy in the world. The only country ahead of it, as a matter of fact, was Hong Kong - also in the Asian Pacific region. These two countries have long been trading partners and, being in closely proximity with one another, have attracted companies from around the globe. American and European businesses have a great deal to gain from maintaining a lasting and noticeable presence in this region, particularly given the recent economic growth taking place. Another feature of some countries in this region is that, in an age of increasing corruption at many levels across various sectors of government throughout the world, areas such as Hong Kong and Singapore rank as one of the least corrupt countries in the world. This has enabled multinational corporations to expand openly free from fear of government intervention, and the liberal tax policies afforded to them are more favourable than those existent in the European Union and North America. In fact, several countries within the Asian Pacific region were ranked just below the historically low corruption countries in the Scandinavian region and New Zealand (Ng, 2012). Multinational corporations depend on solid trade relationships, so they choose their base of opera rations very carefully in order to provide maximum opportunities for economic growth and productivity. Considering this, it is certainly interesting to note that Singapore is not the 14th larger exporter in the world and the 15th largest importer. The latter statistic is even more surprising given Singapore’s relatively small size, yet it demonstrates the reason why internationally minded companies are choosing the Asia Pacific region for their rapid expansionary plans. In addition, companies that are founding in the region are finding it increasingly possible to expand into the European and North American markets based upon their name recognition and established business partnerships globally. Singapore has also developed into having the highest ratio of GDP to trade in the world, with Hong Kong and South Korea close behind (Quah, 2013). This is yet another indicator of the relative importance that counties in this region are placing on trade, which entails that businesses around the world are now choosing to invest in countries such as Singapore, as it is a perceived that already have an established presence in the region and can quickly expand. The aforementioned economic data all points to economic growth throughout the region and the region why companies are able to move their products freely on the open market. Given the status of trade partnerships with Asia Pacific that the European Union and NAFTA has afforded the area, multinational companies are now established globally at rates unprecedented before. Singapore has now achieved an AA credit rating from all three of the major reporting agencies, and Hong Kong is close behind. Having the support of Standard and Poor’s, Moody’s, and Fitch has instilled investor confidence throughout Asia Pacific, which is contributing even further to this growth as many countries in the European Union have encountered extreme economic difficult during the same period. As a result, many multinational companies are abandoning these markets in exchange for the Asia Pacific. As of today, there are an estimated 7,000 multinational corporations from the European Union and the United States alone operating in Singapore alone. Adding in the countries of Japan, Hong Kong, South Korea, and China and that number jumps into the tens of thousands. India has nearly 1,500 companies operating within the Asian Pacific region (Soh & Yuen, 2011). Out of this explosive growth of businesses moving into the region, companies from Asia Pacific also face favourable economic and trade conditions to expand into the aforementioned regions as well. This one region today accounts for much of the global economic growth, particularly in the wake of the global financial crisis of 2008. International business from the region is occurring in nearly sector and industry. Singaporean companies alone have now expanded so rapidly and at an exponential rate that they are the second largest investor in the country of India (Soh & Yuen, 2011). American businesses are now turning increasingly to the region as a market for growth, even when Asian companies are increasingly turning to North America as a new market for their own products and services (Talib 2013). 3. Conclusion The Asian Pacific region continues to be an interesting and exciting location for global business. It is not only one of the most hospitable block of countries for business growth and companies interested in multinational expansion, but the region is increasingly known for quality products that now have global name recognition. The region itself, particularly Singapore and Hong Kong, have a history of European and American influence that has enabled them to strengthen and maintain solid partnerships through the years, further contributing to they sense of economic well being and prosperity. In today’s fiercely competitive and global business environment, it is little wonder that many corporations are increasingly going worldwide in their effort to increase profitability and efficiency. While this reality can be seen in many countries around the globe, it appears to be especially true in Asia where numerous companies once thought to be endemic exclusively to the Asian Pacific region now have a presence throughout Europe and North America, and indeed the world. Consider companies like Samsung and Daiwoo. A Japanese and Korean fixture respectively, both companies are now household names in nearly every locality on the globe. Consider again the Japanese car manufacturers of Toyota and Honda. 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