Should Your Firm Be Working in Asia?aderantuser
If you’re searching for growth in the global legal industry, Asia-Pacific has been a shining example over the past few years. While U.S. and European firms have struggled with stagnant revenues and flat-at-best demand, the Asian legal market will likely double by 2017, according to the Asia Law Portal. This would make it the world’s second largest regional market.
The power behind this jump in demand for legal services is the 6-7% overall economic growth in the region, which is expected to continue for the foreseeable future. In fact, the World Bank projects that while North America’s GNP will increase by 66% in 2030, Asia’s GNP (not including Japan) will grow by more than 250%.
Not surprisingly, firms around the world have taken notice and are heavily investing in the region. In Asia’s Allure, the Lawyers Weekly Australia wrote that “Asia’s desirability as a destination for law firms shows no signs of abating… To ignore Asia is to risk not being a part of the growth and development of the next decades.”
Noting the “flurry” of mergers and acquisitions involving international firms in the region, The Australian Financial Review cited the economic weakness in Europe, and “an international battle for supremacy in legal work stemming from Asia-Pacific capital flows and the booming Australian resources sector.” And just last month the Financial Times reported that “The tough nature of competition in the region is nowhere more clearly revealed than in South Korea, where in the past two years more than 20 international law firms have opened shop.”
Obviously China is a huge part of this discussion, and that market is gradually becoming more amenable to foreign firms. The Lawyers Weekly story indicated that “Macroeconomic factors like the significant rise of the Chinese middle class, exceptional requirements for infrastructure investment and increasing demand for hard and soft commodities, will continue to attract international law firms as they aim to capitalise on the economic growth and associated need for legal work.”
Moving into Asia—and China in particular—is no guarantee of success, however. In a recent article titled The China Paradox, The Lawyer reported that “once-mighty international firms have hit a brick wall in the Middle Kingdom.” The problem, in essence, is too many firms chasing too much of the same work. With more than 180 foreign firms having a base in China, many are “chasing the same type of high-end work, [and] competition on fees is cut-throat.” Even beyond the issue of whether the profits are as advertised, firms face a variety of other challenges. Just the cultural nuances and time zone differences will require a period of adjustment.
To have hope of success in Asia, outside firms need to carefully consider each local market. For example, a recent opinion piece in the Lawyers Weekly argued that for global firms to succeed in Australia they will need a “highly targeted strategy” for the domestic legal market. And Simmons & Simmons managing partner Jeremy Hoyland recently told Legal Business that “All law firms see the need to be in Asia and have serious and creditable practices but it’s an investment and law firms always struggle with investments.”
Despite Asia’s promise, firms face huge challenges once they arrive. In the larger picture, however, firms seeking a foothold there have the right idea in terms of growing revenues and strategic thinking. To succeed in the current legal climate, firms must adapt by pursuing new revenue opportunities and accepting the associated risk.