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Pioneers of Swiss Trade: How to Do Business Successfully in Asia

Summary:
Despite all of the differences and current challenges, Asian expansion is worthwhile – now more than ever. There is no question that Asia will play a prominent role in the 21st century. In 1863, it took Switzerland's Caspar Brennwald a full 122 days, or four months, to travel to Japan. Brennwald, the son of a baker from Männedorf on Lake Zurich, was part of a diplomatic delegation whose aim was to conclude the first trade agreement between Japan and Switzerland. The project proved worthwhile for Brennwald, as he stayed in Yokohama and, with fellow countryman Hermann Siber, founded a trading house, the future SiberHegner & Co. In the 19th century, however, there were interesting opportunities throughout Asia for adventurous young men from Switzerland, which at the time was mired in poverty in many places. "Go east, young man," was the motto. Eduard Anton Keller reached the Philippines in 1868; three years later, Wilhelm H. Diethelm arrived in the British crown colony of Singapore. Independently of one another, they found work in trading houses, worked their way up, and after just a few years, took over management of their respective companies.

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Pioneers of Swiss Trade: How to Do Business Successfully in Asia

Despite all of the differences and current challenges, Asian expansion is worthwhile – now more than ever. There is no question that Asia will play a prominent role in the 21st century.

In 1863, it took Switzerland's Caspar Brennwald a full 122 days, or four months, to travel to Japan. Brennwald, the son of a baker from Männedorf on Lake Zurich, was part of a diplomatic delegation whose aim was to conclude the first trade agreement between Japan and Switzerland. The project proved worthwhile for Brennwald, as he stayed in Yokohama and, with fellow countryman Hermann Siber, founded a trading house, the future SiberHegner & Co. In the 19th century, however, there were interesting opportunities throughout Asia for adventurous young men from Switzerland, which at the time was mired in poverty in many places. "Go east, young man," was the motto. Eduard Anton Keller reached the Philippines in 1868; three years later, Wilhelm H. Diethelm arrived in the British crown colony of Singapore.

Independently of one another, they found work in trading houses, worked their way up, and after just a few years, took over management of their respective companies. Thanks in part to their open and positive attitude toward people and cultures, within a few years they managed to expand their businesses geographically. Diethelm & Co. expanded from Singapore to Indochina, Thailand, and Malaysia; Ed. A. Keller & Co. went to China and Hong Kong. In the middle of the 20th century, there were unimaginable business opportunities across the entire region. For example, in the early 1950s Diethelm & Co. provided British Austins for the entire Bangkok taxi fleet; a few years later, it helped Swissair establish a new route between Zurich, Bangkok and Tokyo, thus promoting trade between Switzerland and Asia. In Japan, meanwhile, SiberHegner & Co. was the leading exporter of Japanese silk.

The End of Traditional Trading Houses

The Asian crisis in 1997 dealt a severe blow to the three trading houses, all of which were by this time headquartered in Zurich. Right before the start of the new millennium, SiberHegner was on the brink of financial collapse. But a turnaround process initiated at the last minute led to solid gains for the company again within a short period of time. In 2000, Diethelm and Keller, which had family ties going back many years, decided to merge after the fourth generation took over management of the two companies. Shortly thereafter, discussions were initiated regarding the merger of Diethelm Keller Services Asia and SiberHegner. The DKSH Group as we know it today was created in 2002. Ten years later, its shares were listed on the stock exchange and Diethelm Keller Holding AG is still an anchor shareholder.

Of the major Swiss trading companies, DKSH is the only one that still exists today, as Swiss newspaper Neue Zürcher Zeitung recently noted. World-renowned names from the past, such as Winterthur's Volkhart and Lausanne's André & Cie, have disappeared entirely. Others, such as Desco and Cosa Liebermann, were taken over by DKSH. Business has developed very nicely since then. The number of employees has more than doubled to over 30,000, and DKSH's profits have increased fivefold while its turnover is more than twice as high. The company had to fundamentally rethink its business model trading houses have lost their traditional geographic and temporal competitive advantages as a result of globalization and digitalization. In recent years, DKSH has transformed itself into a service provider for market expansion in Asia.

What works in China or India will work in Japan or Thailand as well – is a common misconception.

Tokyo Is Not Bangkok

Market expansion services for Asia are still in high demand; this is because, although modern communication technologies have made international trade much easier, the region is still highly complex, especially for Western companies. Perhaps the most common mistake is to believe that there is a one-size-fits-all pan-Asian solution for business expansion: "What works in China or India will work in Japan or Thailand as well," is a common misconception. Not all countries in Asia are alike. This is just as true for religion as it is for culture. A successful business in Buddhist Thailand will look very different from one in Indonesia, the largest Muslim country in the world. Nor is taste the same everywhere: A blue rice cracker snack may be a hit in Japan, but it will not necessarily catch on with consumers in Malaysia. And, of course, differing levels of purchasing power also play a crucial role. Myanmar, with a per capita income of around 5000 US dollars annually, cannot be compared with Singapore, which, with a per capita income of 85,000 US dollars, is wealthier than Switzerland.

A sense for such differences and local refinements cannot be developed overnight. DKSH is able to share the valuable experience it has gained from more than a century's worth of local presence. This experience benefits not only a large number of Swiss SMEs, but also international companies such as Mars in Southeast Asia and Procter & Gamble in Hong Kong, which recently outsourced a large portion of their local operations to DKSH. DKSH is often able to develop local business better than producers themselves. Over the years, the company has established a large capillary distribution network in the region, which allows for comprehensive retail distribution to a wide variety of businesses from a supermarket in Taiwan to a pharmacy in Hanoi to a beach bar on Koh Samui. DKSH also has proven marketing and sales capabilities.

The Asian Century

Despite all of the differences and current challenges, Asian expansion is worthwhile – now more than ever. There is no question that Asia will play a prominent role in the 21st century: China is once again the second-largest economy in the world, while Japan, despite all the doom and gloom, remains a strong No. 3, and India has been making strong gains for years. Meanwhile, the countries of Southeast Asia are developing into another economic power. Ridiculed just a few years ago as the "extended workbench of the West," the ten member countries of ASEAN are now becoming independent and self-confident economies. Asia is developing into the dynamic center of the global economy, offering countless opportunities for business success.

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