 Market Entry Strategy to Asia North American law firms have traditionally been well behind their UK counterparts in creating an international presence. There is a real feeling in Asia and other emerging markets that North American firms have plenty of room for expansion, and that the skills and expertise they bring to the market are in high demand. However, creating an Asia strategy and implementing market entry is not easy given the complexities of legal markets in the region and the need often times to create alliances. These alliances are necessary due to the restrictions of foreign law firm practice and the impact of cultural differences when doing business. It is ironic then that these cultural differences create many of the problems in law firm alliances. Additionally, it is somewhat difficult to assess the quality of law firms in emerging markets. The problem arises since there is a lack of objective and reliable data upon which to accurately judge firms or the quality of the legal talent in any specific locale. In China there are over 12,500 law firms with 130,000 licensed Chinese lawyers. How many would be truly competitive on an international basis? Moreover, full integration in the case of a merger is very hard to achieve between partners of disparate size and profits per equity partner (PEP), not to mention the cultural issues involved. Law firm collaborations forms can take various forms. We don’t tend to see many consortiums or licensing agreements involving law firms, although according to the Wall Street Journal, U.S. law firm McDermott licensed its name to a Chinese law firm (Yuen Da) for a fee and presumably to claim it has a office on the ground in China. Strategic alliances are the most common form of arrangement between law firms, yet their use is surrounded by failure and disillusionment. Research suggests up to 50% of alliances fail. In an article published in the MIT Sloan Management Review (2008), Bettina Buchel highlights a number of minefields that can impair alliance performance. These include unclear partner roles, unequal sharing of risks and benefits, not being prepared for the inevitable crisis and no formal exit mechanisms. Similarly, Patricia Anslinger and Justin Jenk (consultants at Accenture) suggest six key factors to enhancing alliance success chances: (1) develop clear, common objectives and definition of success; (2) ensure proper alliance form; (3) determine appropriate governance model with clear decision-making; (4) anticipate the most likely conflicts; (5) plan for evolution; and (6) establish clear metrics to track and measure success. What these factors suggest, and indeed what research shows, is that a marketing mindset is crucial to the outcome of an alliance. Being client and market focused must be part of your thinking especially considering recent research that demonstrates social capital is not a good indicator of firm performance from an internationalization perspective (that is, following your clients as the main basis of your decision does not produce optimal outcomes). As mentioned, a major hurdle for North American firms seeking out alliances or joint ventures in emerging markets such as Asia is that of culture. National cultural characteristics can have a major impact on alliance success because it is the individual interactions between the players that determine the quality of such alliances. For example, research conducted by Yadong Luo (Administrative Science Quarterly, 2001) shows that attachment between parties is impeded by cultural distance. Unfortunately, the U.S. and Canada are highly individualistic societies whereas most Asian societies are collectivist. This means that the different values given by each party in terms of relationship building and sharing of information is rooted in varying perspectives. In other words, North American firms are likely to look at the alliance from a transaction basis (time and costs) whereas Asian firms are likely to look at it from a resource basis (building capability) perspective. This can cause fundamental conflicts as each party expects something different from the other. If you assign people from either firm to regularly interact it might be worthwhile looking at choosing people who are from similar national cultural backgrounds. If the relationship is closer (joint venture, merger), then the firm leaders and their goals will have a major impact on the outcomes, and hence finding partners with compatible goals and beliefs becomes even more important. Asia and other emerging economies are proving attractive destinations for law firms from North America, but how you reach that destination has a major impact on the potential benefit and future viability of your firm’s internationalization strategy. About the author: Robert C. Sawhney is the founder and managing director of SRC Associates Ltd, a pioneering Hong Kong based firm that works with professional service firms throughout Asia on their strategy, marketing, internationalization, and leadership issues. He is the author of “Marketing Professional Services in Asia” (Lexis Nexis, 2009). He can be contacted at bob@srchk.com, http://www.srchk.com. Page: 2 of 2 pages for this article < 1 2
|
|
|---|
