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Mark is an Associate Professor of Marketing at Melbourne Business School and is recognised as one of the world's leading experts on brand strategy. His clients have included McKinsey, PepsiCo, Donna Karan, Johnson & Johnson, Dom Perignon, Baxter, De Beers, Krug, Ericsson and WD40.

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Sayonara APAC: Australia on the outer as China’s rise redraws the region

Published 27 March 2013 07:29, Updated 15 April 2013 11:24

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Sayonara APAC: Australia on the outer as China’s rise redraws the region

China’s development into a region in its own right threatens to drop Australia from the Asia-Pacific grouping, potentially forcing it into an unwieldy club of disparate nations or leaving it out in the cold almost entirely with only New Zealand for company. Photo: Tamara Voninski

Everybody knows the five main corporate regions of the world. Explore the website of any major global company and, inevitably, their business usually divides across the same five regions: North America, South America, Europe, Africa, and our own region of Asia Pacific. You’ll see this same structure, with only tiny deviations, across companies as diverse as Diageo to P&G to Apple to Ford.

Australia’s place within the Asia Pacific region is also well established. When most organisations created their APAC regions back in 1980s or early 1990s they drew a line from the top of China to the tip of Tasmania and across from New Delhi westwards for 6000 kilometres until they reached Tokyo. Where once we were banished to our own little isolated corner of Australasia, modern multinationals made Australia one of the key APAC countries.

Mark my words. If you work for a global company there is almost certainly a change coming. You could be soon part of AMEA or SMERSH or NAMBLA or some other new-fangled regional confection.

And Australian executives enjoyed the subsequent advantages. Take training for example. Suddenly Australian managers were flying to Tokyo or Shanghai or Singapore for major training programs conducted on a scale and level of quality that had been hard to achieve back home. Our executives got to sit next to their Chinese and Korean colleagues and quickly appreciate the abilities and different strengths. These experiences made them better managers and, in many cases, often allowed Australians to become regional leaders within their APAC regions.

But all that is beginning to change. Unfortunately for us, China is getting too big for Asia Pacific. Over the next five years many major global corporations are going to redraw their regional map because the existing size, potential scale and superior growth rate of China mean that it can no longer be treated as simply another part of Asia Pacific. Some companies are simply splitting China off from the rest of the region. Others are linking mainland China with Hong Kong and Taiwan and calling it “Greater China” or “North Asia”. From consumer goods to luxury to medical products to engineering – the growth of the Middle Kingdom means that the days of APAC as a single region are coming to a close.

Let me give you a recent example. Like many global firms the PR firm Hill and Knowlton has enjoyed explosive growth in China. According to the firm’s CEO, Jack Martin, the importance of China cannot be overstated. “It’s the largest economy in the world behind the US, has eight cities that are larger than New York and has demonstrated an accelerated growth pattern for the past 30 years. To continue to sufficiently grow and service our impressive list of clients in China vigilant focus is critical”.

And so Hill and Knowlton took the plunge last month and announced a dramatic restructuring of their Asia Pacific Region. The company now operates across six regions: Europe, USA, Latin America, Asia, China and… AMEASCA. That last one probably came as a bit of a surprise to you. I am not quite sure what it stands for but it includes countries as diverse as Egypt, Rwanda and India.

Oh and it also includes Australia.

We should get used to it. As more and more organisations restructure their Asian regions to cope with China’s growth Australia is often being relegated to a second tier position or affiliated into some very odd new regional structures. In some cases, like Hill and Knowlton, we are being conjoined into a dog’s breakfast region with strange acronyms and even stranger bedfellows. In the past month I’ve seen companies propose Australia be linked with South Africa, South East Asia and even Canada.

Even more troubling, many organisations are returning Australia to its original isolated status as a separate standalone region, thus reducing the all-important Asian synergies we once enjoyed. Big global players like Mercer, GE Energy and Eli Lilly all now treat Australia as a separate mini-region. That might make a lot of sense from a global perspective and suit our independent mind-set, but we are likely to lose in the long term from such isolation.

Mark my words. If you work for a global company there is almost certainly a change coming. You could be soon part of AMEA or SMERSH or NAMBLA or some other new-fangled regional confection. Worse yet, you might just become relegated to being the ANZ region again with limited international interactions. The Chinese Century might be all about connecting China back to the rest of the world, but those connections look likely to come at our expense.