Companies Shift Top Offices to Asia, Seeking to Crack Markets
Amid ear-splitting clashes of cymbals and drums, a team of lion dancers strutted its stuff on the 34th floor of Citibank Tower last month in a traditional ceremony aimed at bringing good fortune to the office that was being inaugurated there that day.
The office is special: Located in one of the most prestigious towers of the central business area in Hong Kong, it now houses the global headquarters of Infiniti, the premium brand of the Japanese auto maker Nissan .
Nissan’s headquarters are in Yokohama. And Infiniti cars are manufactured in Japan and the United States; two more sites are planned for as yet undisclosed locations in Europe and mainland China. But Nissan’s management made a deliberate decision to base Infiniti’s brain — operations like brand strategy, product planning and sales, as well as the chief executive — in a city that is not a must-be-there location for the automotive sector and where office rents are among the highest in the world.
“The beauty of Hong Kong is that it is a gateway into China,” and China is the brand’s most important growth market, said Andy Palmer, who oversees the luxury business unit at Nissan, explaining the decision to base Infiniti in Hong Kong.
“This is not a cost-reduction or outsourcing exercise,” he added.
In fact, Nissan’s decision highlights a broader trend that is gaining momentum across Asia.
For years, U.S., European and Japanese companies have been building up blue-collar and back-office operations and representative offices in places like mainland China, Hong Kong and Singapore. Now top-level executives are joining them, increasing the amount of quality time they spend in those areas.
Take General Electric , the U.S. corporate powerhouse whose products include medical equipment, turbines and locomotives.
Last year, John Rice, vice chairman of G.E. and president and chief executive of global growth and operations for the company, relocated with his wife to Hong Kong.
The move was “part substance and part symbolism,” Mr. Rice said in an interview at his Hong Kong office. “Being outside the United States makes you smarter about global issues. It lets you see the world through a different lens.”
Mr. Rice had traveled to Asia many times and visited China for the first time in 1989.
“I’ve come to China close to 100 times,” he said, “but I’ve learned more about China in the last 18 months than I did in the preceding 20 years.”
Michael Andrew, who took over as global chairman of KPMG International last October, echoed that sentiment.
“By being here, you demonstrate that you are not just an Anglo-Saxon firm — it is a visible demonstration of your commitment to the region,” said Mr. Andrew, who chose to base himself in Hong Kong.
Given the amount of traveling he does, Mr. Andrew spends only about 25 percent to 30 percent of his time in the city.
Still, even that means “you become part of the fabric here,” he said. “You have regular access to key business leaders, and you are able to talk to them as one of them, rather than as someone who is just passing through.”
Another example: Schneider Electric , a French engineering company that derives more than a quarter of its sales from Asia, recently announced that two senior executives would move to Hong Kong. That increases to four the number of managers based in Hong Kong who report directly to the chief executive, Jean-Pascal Tricoire.
Mr. Tricoire remains based in Paris, though he spends so much time travelling in Asia that his family has moved to Hong Kong to spend more time with him.
Surveys conducted by the Economist Corporate Network show just how rapidly the trend toward more Asia-based management has accelerated in recent years.
In 2008, just 19 percent of non-Asian multinational companies surveyed had one or more board members living and working in Asia.
By last year, that figure had reached nearly 30 percent. What is more, 45.3 percent of the respondents in the 2011 survey expected to have board members in the region by 2016.
Not so long ago, said Ross O’Brien, director of the Economist Corporate Network’s Hong Kong office, the trend was about moving manufacturing to where the growth was.
Now, “it’s about globalizing your brand and your thinking,” Mr. O’Brien said.
“It’s hard to make a decision to invest when you are based in a region where belt-tightening is the order of the day,” he added, so being in Asia helps focus a company’s thinking on the region’s potential.
Hong Kong is not the only beneficiary of the trend.
Singapore, too, has attracted an expanding flock of top-level managers and divisional headquarters as companies seek to capitalize on the city-state’s highly educated work force. And while Hong Kong is seen as the gateway to mainland China, Singapore is an ideal stepping stone for Southeast Asia and India.
Abbas Hussain, who oversees emerging-markets operations at the British pharmaceutical giant GlaxoSmithKline , is based in the city, as is Deb Henretta, a member of the senior management team at Procter & Gamble.
And this month,Goldman Sachs announced it had rehired Mark Schwartz to serve as chairman of its Asia-Pacific region and as a vice chairman of the overall bank. Mr. Schwartz will be based in Beijing.
At the other end of the spectrum, many top executives, rather than making Asia their home, are simply travelling to the region more frequently.
And in March, Goldman Sachs, in a nod to India’s growing importance, held a board meeting in New Delhi for the first time.
Starwood, the U.S. hotel company, went one step further: for a month last year, the senior management team based itself in Shanghai, a 12-hour time difference from Starwood’s headquarters in Stamford, Connecticut.
The 15-member team was already relatively international. The majority of the group is not American, Frits van Paasschen, the Starwood chief executive, said by phone from Stamford. Moreover, two members are based in the Asia-Pacific region, one in Europe and one in Latin America.
Still, the temporary move allowed the team to immerse itself in the local culture and meet staff members and business partners in the region face to face. That sharpened management’s understanding of how the Chinese market differs from that in the United States.
“We realized, for example, that in China many people book hotel rooms at the last minute, and on mobile devices,” Mr. van Paasschen said.
The monthlong relocation, Mr. van Paasschen said, was “both more strenuous and more useful than I had imagined.”
But clearly, the usefulness outweighed the strain, because Starwood is planning to repeat the exercise next year — this time in Dubai, another important market for the company.