Overcoming cultural barriers to build business ties with Asia

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.com PLC.

Cultural barriers – and languages in particular – remain a significant obstacle to trade relations with South Korea and Japan and continue to hinder the development of European businesses there, despite bilateral trade agreements, writes Thierry Fournier.

Thierry Fournier is Project Manager of the Executive Training Programme (ETP) at the European Commission. He contributed this commentary in exclusivity for EURACTIV.

"The significance of the EU’s recently signed free trade agreement (FTA) with South Korea, as the first EU trade deal with an Asian country, and the most ambitious FTA ever concluded by the EU, serves to underline the importance of trade links between the EU and Asia.

East Asian markets offer vast business opportunities for European companies which remain untapped. Amongst these, Japan and Korea are leading world economic powers and important partners for the EU. Japan is the 6th largest EU trading partner and Korea is the 9th largest. The continued development of trade relations between the EU and Japan and Korea is hence a strategic imperative for the EU. Key to this is the ability of the EU to strengthen the presence of European companies in both countries.

However, a number of societal and economic features remain barriers to the success of EU enterprises in both Korea and Japan. Language, cultural and business protocol differences in these countries continue to hinder the success of EU companies.

The importance of these factors in maximising EU trade and export opportunities is pointed to in a recent economic analysis conducted by economist Ronan Lyons of Oxford University on behalf of the European Commission. It shows that the vast majority of EU member states trade significantly less with Japan and Korea, on a per-capita basis, than with Australia, another developed economy that is located about the same distance from the EU. Per capita, Japan consumes approximately €340 worth of EU imports per year, while the equivalent figure for Korea is €570, and Australians consume a significantly higher amount of EU goods at €1,200 worth per capita. There is clearly potential for growth.

Indeed, if the language and business culture barriers could be overcome, it is estimated that by 2020 the six largest EU member states could each enjoy new export opportunities of up to €2 billion a year to Japan and Korea, whereas for the smallest member states the value of such new opportunities for exporters could amount to €100 million.

The Executive Training Programme (ETP) has been put in place to empower EU businesses to succeed in Japan and Korea and in turn to empower EU economic growth by supporting exports to Asian trade partners. By providing their executives with the training and insights necessary to develop an adequate business plan and overcome the language and business culture-related obstacles through the ETP, European companies better position themselves to develop and execute successful business strategies for Japan and Korea.

The ETP starts with a three-week induction at the School of Oriental and African Studies in London, where participants learn about the history, economy and business background of their destination country (Japan or Korea) while starting to develop their business plan for Japan or Korea. Then they continue with a 30-week business and language training course in Waseda University in Japan or Yonsei University in Korea. The language component is focused on effective communication in the working environment. The business and management component of the programme is designed to teach business expertise and management skills that are vital for doing business in these Asian countries and to develop their business plans in detail.

Participants deepen their understanding of the characteristics and customs that are particular to Japan and Korea. A combination of different teaching methods, site visits, guest speakers and networking events enable them to apply their knowledge in practice and immediately transfer it to their companies’ businesses. Finally, the programme participants will spend the last 12 weeks of the ETP doing an internship at a Japanese or Korean company relevant to their field of work. The internship allows the participants to apply the skills they have learned on the field.

Since its inception in 1979, the ETP has helped a number of European companies to expand their business activities in East Asian markets. Indeed, the programme participants become experts in distinctive and specialised markets and thereby, proficient resources for their companies. To illustrate this with an example, a TV5Monde employee who participated in the ETP was the driving force in achieving a significant carriage deal for TV5Monde in Korea, largely due to his participation in the ETP. The programme is considered by many as the best preparation for EU executives and companies having long-term plans for East Asia.

So far more than 800 firms in 20 different sectors have sent their executives to take part in the programme. Our surveys show that on average, participant companies’ related turnover with Japan or Korea increases two fold after completing ETP and two-thirds of ETP alumni become top executives within their companies.

Convinced by the programme’s success, the European Commission has decided to launch three new training cycles. The programme has also been revised with a sharper focus on practical skills. Now the participants have to develop a business plan during training, and by graduation will be in a position to help their companies achieve more in these markets by concretely working on improving their business plans. Sixty selected European businessmen and women will participate in the next cycle starting in November 2012. Applications are accepted until 31st May 2012 via www.euetp.eu."