Business Times (Malaysia)
02-06-2001
ASIA has always been proud of its diverse cultures, customs and
traditions. In a way, the rich variety perfectly complements Asia's unique
style of conducting business, which has garnered a high degree of respect
from certain quarters. But Asia's family businesses are now confronting
a host of new challenges. As the region ventures deeper into the new Internet
economy, things change. Even the most cautious of Asia's family companies
must wake up to the realities of the global business game.
NEW PARTNERSHIPS Compared with their counterparts in the US, Asian
corporations face significant challenges in forming effective global partnerships.
In Asia, business partnerships have tended to be built around existing
personal or business relationships, sometimes referred to as the "bamboo
network". As a result, Asian companies are generally reluctant to enter
into partnerships that could threaten long-developed existing supplier
or other business relationships.
According to an e-commerce report by The Boston Consulting Group, one
of the most difficult organisational challenges is to manage the myriad
partnerships that are vital ingredients of competitive success.
The report, titled: Organising For E-commerce: Global and Asia Pacific
Challenges, states that e-commerce partnerships are fundamentally different
from traditional partnerships: companies form many more partnerships; they
change quickly; and they are more complex.
In reality, the way in which the emerging "new economy" operates is,
in many respects, the antithesis of the traditional Asian business model
because e-commerce thrives on open, global networks, while traditional
business models rely on closed, localised networks.
As such, most e-commerce partnerships today are going horizontal, thus
linking competitors or players from entirely different industries.
Says Hiroshi Kasugai, managing director of NEC Business Coordination
Centre (Singapore), "The Internet facility has made information so easily
accessible to everyone. In the business world today, we are more concerned
about `how you manage your information' rather than `what you know' or
`how much you know'." Knowledge, he emphasises, plays a significant role,
but trust is equally important in the business world, be it Asian or non-
Asian.
Kasugai also mentions Nemawashi, a well-known traditional corporate
practice in Japan. "It involves winning over one person at a time through
private meetings. However, as modern business requires decision making
to be on par with the pace of the business world, such a traditional practice
will be of less significance," he says.
Ken Davies, chief economist and bureau chief of The Economics
Intelligence Unit Asia, reckons that Asian family businesses have not been
entirely successful in adapting to new economic conditions such as liberalisation,
globalisation and e-commerce.
Apart from those that have made the e-business move, there are still a
number of Asian companies in the traditional business that haven't felt
the need to adapt or haven't known how to do it. In the middle there is
a rather large grey area, where companies have started to make some sort
of change, but still have a long way to go, he explains.
But again, the speed in which one adapts to the new playing field
clearly depends on the type of industry one is in.
"For example, there are thousands of restaurants in Hong Kong that
will probably continue to be quite successful even though they don't have
very good Internet advertising. If the food is good, it doesn't matter
if there is this new economy out there," remarks Davies.
NEW NETWORKS On the other hand, Hong Kong traders who rely on global
supply chains for raw materials and components will have to consider the
most up-to-date way of doing business.
"Those companies which haven't managed to adapt, or are not looking to
adapt over the next few years, will eventually disappear," says Davies.
"These will be industries that involve fine-tuning mechanisms where
small margins can make a very large difference in gross profit, and where
markets are all of a sudden being joined electronically."
It would have to be markets where there is already a great deal of
transparency and globalisation such as commodities. Before this, it actually
mattered that you knew somebody who knew somebody else who knew where to
get a particular product, he says.
Once a market is created for that particular product on the Net and
you can see all the producers at the same time, it's a matter of choosing
the cheapest or the one that can deliver the fastest.
In that case, the network which you once valued so highly, may no
longer be as useful.
Still, Davies does not think that these "bamboo relationships" will
absolutely disappear in the new economy. Instead, it will be superceded
by broader relationships.
Preserving this valuable network of contacts naturally remains key to
Asia's success. But to survive in the future electronic marketplace, companies
must now look beyond their shores for strategic partners to complement
their product offerings, rather than merely sourcing for suppliers and
purchasers.
"So it's not about demolishing the bamboo network but extending it to
a new global network," rationalises Davies. "You have to be prepared to
form partnerships with different types of groups. It's no longer about
being confined to your own community."
And no matter what, the Internet economy is still about business,
whether virtual or physical. "For business to flourish, trust and relationships
are still required," says Goban Arasu, senior manager, digital markets,
Arthur Andersen Business Consulting.
Certainly, the advent of the new economy does not herald the end of
traditional ways of doing business. Adds Shannon Boase, president for Asia,
VLinx.com, "Contacts and networks such as the 'Asian bamboo network' will
remain significant. Doing business over the Internet means that companies
also need to adopt new methods in order to maximise their opportunities."
However, companies must be aware that in the global online environment
where multiple buyers and suppliers interact, companies are less likely
to know of each other, making it even more crucial to be able to guarantee
credibility and to proceed to do business. Established e-marketplaces,
such as VLinx.com, assure that buyers and suppliers are vetted first to
ensure reliability as well as adapting a more transparent approach to sharing
information about their companies.
Goban from Arthur Andersen also shares the same view.
"Despite the fact that digital marketplaces lend themselves to
`franchising' this trust, the marketplace hoster or operator still must
be trusted. And therefore, this new intermediary now plays an essential
role."
UNIQUE PRACTICES The ways of the new economy are slowly but surely
influencing traditional business practices.
Raymond Teh, president for i2 Technologies Asia Pacific notes a common
trend that is fast emerging in many new Asian markets: a new breed of next
generation entrepreneurs (children of the owners of family-run businesses)
who have obtained a Western education.
"These new entrepreneurs are fond of using technology as an enabler
and spinning off new dotcoms to pursue e-commerce activities," says Teh.
This is done either as an interest, or to impress upon the older generation
that there is a new way of conducting business. Apparently, consortiums
are also often formed among these young entrepreneurs to capitalise on
the synergy generated, or to raise funds to form new IPO-intended companies.
Terence Leung, marketing director of The Commercial Press (HK) Ltd
says that the first e-business wave in Hong Kong was initiated by visionary
youngsters with sound IT backgrounds. "They modelled their new business
after successful Silicon Valley start-ups and got financial support from
local institutions or even foreign investments," says Leung.
Many of these new techno-logy ventures are kept separate from their
traditional family businesses and thus operate under different entities.
"This adds excitement and challenges to traditional conglomerates
which would now have to keep up with the new e-commerce initiatives," comments
Leung. Many traditional conglomerates today are using Internet technology
to extend their vertical businesses. In short, their e-commerce spin-offs
are not only able to invest as a new venture but also provide value-added
services to enhance the corporations' core business.
As Kasugai from NEC puts it simply: "These Asian family businesses may
have survived the last century, but with information becoming easily accessible
and competition becoming tougher, they have to open up to the new world
of challenges and opportunities.
WORLDSOURCES ONLINE, INC., A JOINT VENTURE OF FDCH, INC. AND WORLD TIMES,
INC. NO PORTION OF MATERIALS CONTAINED HEREIN MAY BE USED IN ANY MEDIA
WITHOUT ATTRIBUTION TO WORLDSOURCES ONLINE, INC.
COPYRIGHT 2001 BY WORLDSOURCES ONLINE, INC.
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