Why Western Companies Move to the Asia? Part 2

What is today's global financial centers? 10 years ago, this question has been asking again and answer was `USA and Europe` But according to today's business, we need to answer this question as `USA and Asia`.

When we look at the TOP 10 Global Financial Centers, there are 4 American (New York, Washington DC, Boston and San Francisco) , 4 Asian ( Singapore, Hong Kong, Tokyo and Seoul) and just 2 European (London and Zurich) cities.  Asian Business Centers are growing and Business is moving there. At the Part 1, I explained why western entrepreneurs or firms move to Singapore and Hong Kong. Now, it is time for Tokyo and Seoul.

TOKYO

Japan has the third biggest economy in the World after USA and China. And our subject is the capital of  Japan which is Tokyo. Moreover, Tokyo is the one of the most exotic and extraordinary city in the World for Businesses.

Why Doing Business in Tokyo?

First things first,  Japan is the 4th biggest US Products Importer and 5th biggest European Product Importer. This demand makes Tokyo more suitable and charming for the West. Because there are already bazaar for the western companies, they don't have to create it from nothing.

When you look for Google about Tokyo, mostly you will find `what is the challenges to do business in Tokyo`. Yes, Japanese people are not easy, they have strong traditions but why not it is an advantage for the Western Companies? In Tokyo, everything is planned, business meetings, dinners, coffee times, delivery times. If supplier say that `Yes, 14th of November at 4 PM, we will bring to you` you can be sure that it will be exactly at 4PM. This very timing business tradition is one of the reason for Western companies to move. Coca Cola's CEO Muhtar Kent said `Japanese Business culture is hard to adapt but easy to enjoy.` Tokyo is so called where western business environment meet with traditions and became perfect.

Usually in any place, existed firms have more advantages than start-ups except Tokyo. Tokyo is the small businesses heaven and almost 80% of businesses are small or medium sized. What does it mean? Big fishes don't eat small fishes. If you try to go to China and open e-commerce, probably after 2 days Alibaba will eat you. However, in Japan, the business environment is stable and secure to get bigger for foreign start-ups.

About Corporation Tax, the only good thing about it is year by year tax rate is decreasing. The corporation tax rate whether you are local or foreigner is %35 which is relatively high and maximum Income Tax is %50.  (Still less than France)

SEOUL

Korea Island is always on the news because of the political tension between South and North Korea. Despite this all problems, South Korea developed and adapted to today's business perfectly. Furthermore, Seoul which is the capital of South Korea is one of the most modern and smart city in the world. Technology is used by city beautifully in every aspect.

Why Doing Business in Seoul?

Like Singapore and Hong Kong, in South Korea entrepreneurs can establish their firm less than 1 week. South Korea is in the 4th place in Ease to Doing Business Rank by World Bank Group. What is the advantages of it? No unnecessary European bureaucracy, no abnormal costs. (only $700)

Foreign Direct Investment has very big importance in South Korean Economy and usually government gives subsidies, tax reliefs to the foreign companies and start-ups. Another government's favor for companies are free-trade zones. South Korea's Trade Agreements with USA, Japan and China creates big advantage for the companies to reach the bigger markets with low cost. (Plus South Korea is the 15th for GDP and 12th for Purchasing Power Parity) And this makes doing business in South Korea more and more charming for West. Specially, when we take into consideration South Korea's perfect location between Japan and China which are the world third and second biggest economies, this free-trade zones cause big benefits.

Big purchasing power is another reason for doing business in Seoul. South Korean Samsung's one of the key of the success is the domestic customers. One truth about South Korean people is they are good and loyal customers specially in tech industry.

South Korea has 3 different corporation tax rates which are 22% 20% and %10. This depends on the industry, subsidies, tax reliefs, company's age and income etc. Anyway, this is lower than most of the European countries' corporation tax rate (France, Germany, Norway, Spain) and Income Tax is %38, not so bad yet not so perfect.

In Conclusion

Both Tokyo and Seoul has different and dominant cultures and traditions than West.Entrepreneurs and companies have to be aware about the cultural differences and try to adapt quickly. As I mentioned above, Seoul and Tokyo are the place where you should do business like West with Eastern traditions and this is not so easy. Because of that mostly foreign companies who move there prepare before move. In previous article, Singapore's and Hong Kong's biggest advantage was the lower tax rates than West but for Tokyo and Seoul, I can say that the biggest advantage is the huge Asian market.  

Part 3 will be on our blog so soon with Beijing and Taiwan.