The Asian Manager, April 1996 Issue by Sherbet Manalili

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THE INSULAR LIFE ASSURANCECOMPANXLTD

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VOL.IX,NO.2

IntemetAddress:tam@aim.edu.ph

THEASIAN

MANAGER APRIL/MAY 1996

L.Lontoc, ttu fu Dr.Patricia

COVf,N STONY

Borderless Asia

beyond haditional reengineering.

byDr. KenichiOhmae Educationand technology shouldallowregionstates to leapfrog.

Enhepreneurship

POI,ICY I'OBUII

QuickandEasyForecasting

byProfessor Francisco L. Romnn, um andHazelSangdang WelcomeForecast Profor immediateresults,evenfor inexperienced users.

FamCors: Understanding theFamilyBusinessl8

7thAIM Management Conference on Asia

br1Professor EdwardChen Growthpolygonsaccountfor economicdynamismin Asia. byDr. Narong Akrasanee 26 Complementarities within theGreaterMekongSubregion promiseeconomic growthin thebahtarea.

Marketing

byProfessor Fnncisco L. Roman, ,Nu Ogilvy's4-Psofadve ising:positioning,personality, penistence of memory,andpursuitof thepositive.

aotlriShlO 1996b! Tlr ^ii., Mdn,8./ AII nghts r.s.rvBl. Repntuction inan)'mannerin wholeorin part in Englishor otner l.rrguaSesprohibildl. The Ashn Manageiis publish.! blmdnthly by th. Asi.n Institltc of Managemcnt Edrtonal and Advertising Officc Asian Institute of M.nagemcnt, Euitenn,Lopez Foundatnrn,JosephR. M.Mi.krng Campus, l23Pas€odeRo\as,Cityoi Matati,Philippinet T.l 1632)8q2 ',0 I I 25; 89201 35 .13;89333,11Fa\: (632)8l792.10 Phok) Braphssourcedby lhe AIM Libr.ry Pnntedby Times PrintersPt.. Ltd..Srngaporr The Asian ManagerMITA (l) 196/lO/95 KDN PP{s)1076/l/9:l lSsN 01167790

THEASIANMANAGER. APRIL-MAY1996

Gabino A. Mendoza, AIM fo Professor AIM meetsthedemandfor morerelevantmanagement programsthroughmanagingtheleamingprocess and research. NBSDANC|I

Initial MarketPerformance of PhilippineIPOs 42

MANAGEMDNI UPIIATES

TIrAsrAN MANAcER-A tublic.tbn olth. A5ianInstit!t.ol Vdnagencnt dnd theFeder.tionoi Asianhrstituteof Manage nenl Alumni Associations.

by Professor Quintin C. Tan, AtM Findout whatdistinguishes entrepreneurs from businessmen.

Education

byProfessor Francisco L. Roman, uu andAsuncion M. Sebastian Familydynamics drivesthefamilybusiness.

Snlm

Innovate and advocate.Develop corecompetenciesand go

byProfessor AidaL.Velasco arulProt'essor Erfll B.Perez, AtM High returnsof PhilippineIPOsimply high risk for investors. DIANAGDMDNT COMIIUNICATION

Gemsof Communication

Roberlo byProfessor H. Lim,atu Diregtyour message to an audienceto beeffective. OPINION

Entrepreneur's Corner

V. Chandrnn, MBM'74 by Robert "No" Stopsaying andembrace opportunities.

PublislEr Felipe B. Alfonso (o-ltblirher & ldiloFin{lhicl

K€ardo A. Lim Irnrging tditor Ma. TeresitaMartin'Palo Diftlor.llpt|ali|is & {lkrhlim Millie C. Ferrer l|f{dn & fn'dudiontbmlllrnl Franco Patriarca trsocialeliilorJudith AngelaE. Alpay

Philippi!$: DolinCutienez, Fax (632)894,1809; Ardy Rob(ro, Fnr (632) 895 6973' Lu.lwi8 Fcdcri8an,Fax(632)032'255ll08 tloq long: Panela Choy, Fa! (J5 2) lJ3.t5elJ0. sin$F|n: T.ddy Tan, Fax(65)4408760 fndd6l.: Rama Slamcr, Fax 16721) 7E)2t|,0, 79737PA lbLlrin: Connie Ng, Fax (603)7175370 Inab rrFl ordn.dt Media SouthAsia (P)Lld.,

ll.s.|!.t rnd PNdu.lion Amy C. Espiritu Mrfflisilg,lssishntVanessaM. Jaballas {:iftthlird $sislrnl Eden S. Cardenas Puhlhhina&'||d ReneT. Domingo, lesus C. CalleSos, lr., RrcardoA. Lim, Victor S. Lin ingan,EduardoA. Moratd,Ashok K. Nath

PrlisM: s.l. salahuddin, Fax 19221J564 2271 I'm.: Y.K Chun. Fax \n22)n4797o. J.p.!t Toluii Niinuma, Far (813)35129104 ft.lLid: Dr. AnthonySharma,Fax (662)3319303. tnit l li.tdqr: Bnan Taplin As*iates, Far (0,142)2,16034. tnm: Staphan.de Rimuet, Fax {33 l) 3989 63 4l

ids shouldnot be able to seethcscthingsl" v u ift' savsof .r local nervspaper,rvhich hasa front-pagepicturt'ofa naktd Fi)ipinan ith a storv on "Mail Order Brirleson thc Intentet.""Thtv should cclrsorpornographv0n thc Netl" mv rvift continues, "ancl vou knorv tht'r' .rlso havebt'stialitvand pedo philia?"As a future partnt I .1gree \\,ithher.But should r,r'talso ccnsorour books at Itonrebouks on scx,anv book n ith viulenceor four lettcrn Ords...and ves,evcn ban Internet altoqc.ther? Tir.rt u'oulclshitld kitls fronrthe batl stuff,ves,but it lr,ould also cleprir,ethem of a rrtole world of knorvledge. The morc basiccluestiou is, rlhere drcs one clrarvthc line on ccrrsorshi;r? As teachers lc both agreethat indiscriminate censorshipcouJdsupp.rrcss onc basichumanrighttthc right to cducation.Thereis a hiskrric.rlparallelhcre:ln the fifteenihccnturvloJraunts (iutenberg n,asregardcdin religiouscirclesasheretic. Insieacl historvshoi{sth,tt his krrv-costnrovablttvpe printirg prcss sparkecl a rvorldrvicie t'xplosionin knorvledge,u,hich until then u asavailabltki orrlvtire richcstpeople.Bv the salnt tokenthe Net is opcning new vrstasto the poor peopleof Asia,who do not have the sanreeas1,chcap access to informationtheir wcstcrn c0unterpartsh.rVe. Most of the Net'sWorltl WicleWebsitcsrvill vield onlint cncvclopedias, practical hou, to information, great books,current nervs,and hot businessleads all at low cost. (ln factCutcnbergis norv immortalize.d on his own u'cbsitc', http:/ / rvww.r,urv.ac.nz/uon-local/ 1

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RicARDoA. LrM PROFESSOR

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guteuberg. Tirissiteallorvs von hr dorvnloacl clrssic booksfor frce.) The probltm norvis that solnr.rlebsitesprcstnt seru.tl perversions, Iromemaclt bomb nraking,rrto-Nazi speeches, and otherantisociaiidcas.Wlratwill a Catholiccountrvlike the I)hilippinc's do .rboutproabortionwebsitts?What shoulclarrIslamiccountry like Malavsiado .rbouttht'2(J assortedSalmanIlushdie rvebsites, or a regul.rterl countrvlikc Singaporedo about \,\'tvuiliunl-lnlntS.Co]tl (Cht'r'inggunr is banntd irr Sing,rport.)? lnrliscriminate ctnsorshipcould thus erase .rnotherhum,rnright: frt'cdom of speech.Yes,rr,t must supporttreespccch... but onlv if it docsnot "harm" "velling citizens,tht' 'Firel'in a crorvdecl rnovit house"argunreni. Whtrc is the line?lVith changingtastes.tnd mornls, the line u'ill foreyt'r lre blurred. Ilcg,rrrllessof ivht'rt'

tl1.rtline is, most current ccllsolslllp systenrsare

practic,rl:You le'tvour govemDrentsetslancl.rrds and allorvthen to regulatc TV,prinl, arrdfiln. If vou do rrotlike thosestanclards, thel vou could ust vour vote to chalrgcvour govemmentBut governmeutcannot regul,rtethe Nct. The Net is inhe'rentlv uncensorablc. "lnternet, Thercis no Irc." that monikrrsthe ,l(Jnillion currcnt"Netizens"(and gro$ ing ai 25 percenta vcar) n ho aresurfingthc Nct. (Thercis an Internet 50ciet\', ISOC,u'hich ovtrsees standardsfor all uscrs,but hasno regulak)rvpo\\'ers.) Bill Clinton'sgovernmcrrt oncetalkedaboutcontrolling the Ncf, but sbpped. It is a nearirrpossibietaskto complctc,becauseit nreans tracking eachonc ot thc. thrcc million computer serr.ers and leascdlints th.rt loosely"run" the Net. The Nct is a manifestation oi free market iorcesrun amuck,

arrclis so pervasivethat Malavsia,Sinrapore,and the Irhilippirres havt thus far chosento let frecmarket lorcts reign.The Net is a kev componentof Singapore's "lnformation lsland" stratcgvand of Malavsia's "Muitimctlia SuperCorri, clor" in Putr,tJaya,as Kelicl.riOhn.re explails in this issue.ThestAsian governn-Ients reasolrthat ihev cannotafford to miss the boaton the Intemet's irrcsistibleeducationaland busurcss0pp0rtunities. Regarclless of how we fecl about censorship,rve arc back kr squareonc. Mv n'ife arld | ,rrercsoluteabout "no pornographv"in our home, electronicor otherwise.Less liberalparentswill chooseto ban thc SntairicVr,rsr:s or heavvmetalmusic,and morc libcr,rl parentsn'ill lot; ir is their right to choose.ln turn wc choosenot t0 irnposeour on'n r,alues,our orln u'ill, on others.(Exception: our on,nkids. "As long as you live underour roof...")Andrvclike the Net, .rnvrva\,."The Net has clevices uhich let us lock out the pornosraphicsites,"I sav.We need not deprive childrenof the information re\,olLltlon. Mv tl ift' turns on the TV There's.rnactionmovie, gcxrdanelbad guvs shooting eachothcr with automatic weapons.Wc prtss the remote:"B,rvnatch,"as close. as thc net\,\orkscanget to full nuditr.: \Nepressagain: CNN nel s of a massacrc ilr Tasmania .rntltht.latest Hollvu'oodscandal.We "off" press and chooselo read a bqrk.

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A|RjL-MA)'1996. TrrEAsrA\ MA\ACER

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BvDn.KsNrcur Onues MANAGTNG DrREcroR,YoKoHAMA GRoUP CoNSULTING

Deregulate telecoms, banking and transport.

Free up your rcgion states. Educate!

Natlonal Borders? lllstlnct Keynesian theoryis theprimaryeconomicconcept taughtinlapanese schools perhaps worldwide. It was develand 19th opedat the tum of the centuryand wasbuilt aroundthe modelof a closed wherenationalsovereignty is economy, important.Everythingwas confined If you rnwithin sovereignboundaries. nationshad fringedon thoseboundades, a right to fight back.Onewonderswhy boundaries aresosacred. A little rock islandriesbetweenKoreaandJapan.Bothcountrieshavebeen Twogid ispuiingthatrockfor cenhrries. ganticand otherwisegood friendslike Japanand Koreaspendall their energy hatingeachotherover a rock.My suggestion?Explodeit so it will disappear Who cares?Countrieslike the former SovietUnionhavesuchvasttenitory and they don't know what to do with it. THEASAN MANAGER. APRIL-MAY,1996

MaybeduringthedaysofAlexanderthe Kowloon, the New Territories,and in Greatit wastrue that "big" wasgood.I time,Shenzenprovince.Did Beijingaphavenot seenlargecountriesprosperof proveof it? I don't know,but it is happening.Theper capitaGNPof peoplein late. Look at smallermore prosperous Shenzen-over2.5 million people-is placesand you cannotevennamewhat $6,500. The averageof Chinais $300.In theyare.HonBKong:whatis it?A coun- Hunan,$250.ThespreadbetweenShentry?TheBritishcallit a territory andI call zenandthepoorestregionof Chinais 20 it a regionalstate.Doesit havedistinct times,a greaterspreadof wealthgreater borders?It's hard to saybecausewhat thanbeforetheOoium War WhileComusedtobeHongKongnow encompasses munismcouldnot distributewealthand makeeveryonehappy,Chinanevertheless hasarms.Theyarestrong,solistento them. What they saymay not be right but they havethe "right to say."The irony of nameans"therighttosay." tionalsovereignty Keyneslan Measunes No Good Wearemovinginto the 21stcentury yet we areusing19thcenturylanguage, Thegapbehveen models,and concepts. the two is one centurvwide, In Iohn

MaynardKeynes'sdays,and beforehim Adam Smith and David Ricardo,the national modelwasgoodenoughfor figuring out fair ways to trade wood from Yorkshirewith wine from Portugal. One "fair" nationalmodel useduntil this day is to managecurrenry exchange rates.Japanand theUS"adjustexchange ratesto adiustthe tradeimbalance,"they say.Nothingcould be morewrong,becauseJapanand the UShaveonly $200B of annualtradein both directions,with a gapof about$50B.Yet,everydaythe two countriesexchange$600B in currency. Thefinancialeconomyis sogiganticthat speculators,not traders,set exchange rates.While theJapanese aresoafraid of the yen going too shong, the currency haders want a strongeryen. It is not a gaussianor randomdistribution of rates becausein the endthe BankofJapanwill stepin and buy dollarsshouldthe yen startfalling. Lo andbehold,in thepast15 years,the taxpayersof Japanhavebeen thevictims of this old fashionedconcept. EverythingtheBankofJapanhasdoneis pay for, because somethingthatJapanese they lose money.Becausethey lose money,thecurrencytradersmakemoney, It is an unfairgame. Another Keynesianmodel was govemment "shmulation" by creatingpbs. "Tostimulatethe economy,"Keynessays, "you mustcreatedemand."Effectivedemandwill callfor supply,andsupplywill call for employment.Using taxpayer's money ip thereforejustified so long as thereis upward dernandandsupply,and more employmentwill createconsumption"thengoodbusinesswill result.While Keynesianmeasuresworked in closed economieslike the US'sduring its great depressionin the1930s,1 haven'tseenthis modelwork of late.Yetgovemmentscontinue to use taxpayers'money in most inefffcientways. Becausethe Japanese ecortomyhas beensluggish,its government has used $300B in taxpayer's moneyto "stirnulatetheeconomy."It has madeit worse. Neitherscholars,journalists,nor politicianshavecorrectedtheir old principles. Politicianswill say,"l will createjobs!" No.Whatthey'resayingis. "Lâ&#x201A;Źtmespend taxpayels'moneyfor my projects!" I havenot seenefficientproiects,particr:larlyin civil conshuction.We'rebuilding bridges and highways in Hokkaido 6

and Okinawa.You know why? Because it's the easiestplace to build. All the moneywe spend,we spendto no avail. It is like the story of a man trying to find somethingon thesheet,neara lamppost. He says,"l lostmy wallet."I said,"Olt thafs sedous.Let me help you. We'll try to find it." We couldn'tfind it. I asked, "Are you sureyou lost it over here?"He said,"No, I lostit there."I asked,"Why arewe looking for ii here?"And he said, "Becausethereis light here;it is easierto find." Govemmenthasnot reallyfound thewallet.

eventheJapanese in Asiagetthespillover That's the structureof Americanindustry today.

Tbehnology and s'IQtt Capltrl The disparity betweenthe theory of sovereignnation statesversuswhat we arewitnessingwill becomewider because of technology.Changeis not random;it is a resultof technology. And it is ineversible. Oneirreversiblehend over thelast 15 yearsis the muchfreermigrationof criticalmanagement resources suchasmoney. Moneymovesthroughtelephonelines and satellites-"digital cash."We can move money in any direction,in any form, from any,vherein the world. Anotherirreversiblehend is non-tangiblehade.TheAmerica-Japan hadedeficit is exactlythis problem: how do you measureit? What happensto the poor customsofficercountingtonsof imported goodsminus the tonsof exportedgoods? Today,financialservicesand intellectual propertiesoverwhelmthe flow of hade betweenthe USand Japan.In theseinvisibleservicesectors,America'sdominanceis an overwhelming,absolutesurplus, and there'sno way of measuringit. When Bill Gaiesexportssoftwareto Technology f,urdles Borders Japan,doeshe reproducehis operating Today,closedeconomies do not work. systemdisksin the Ut put price tagson I wasin SubicBayatAcer'splant.All their eachpackage,and ship them to Japan? insertionmachinesareautornbted.Topro- No. Bill Gatesis no fool.He comesto Jaducet.8M motherboards a year,Acei re- pan with one masterdisk in his pocket. quiresnot thousandsof peopld,but a few He could producethesethings in Japan, hundred. They can produce three,four get $2 B in sales,thank you very much, timesmoregoodswith half or one-third andsendmoneybackhomeelectronically. thepeople,because theyuserobotics. It is never recorded.He can also downWhat doesthis rne4n?First,we have loadhis softwarethroughtheinformation movedinto anerawheretechnologydoes superhighwayand collectmoneyelecsomethingoppositeto what wastrue in honically by credit card. Bill Gateshas Mr. Keynes'sdays.Nowadays,if you collected$15B this way,from all over the want to increaseproductivity in most world. companies,you must get your unionsto Themostvaluablekinds of goodsand agreeto reducethe numberof people,so servicesarethe-lQ-intensive kind. They you can increasethroughput.You re- crisscrossnationalborde$ without cusspondto demandby reducingpeople,by tomsofficersnoticingthem.America, usingrobotics,or by usingcomputers,or Europe,andlapanareincreasinglyusing combiriationsihereof. lndia for engineeringand R&D subconSecond,national bordersare perme hacting.Projectspecificatiorsgo through able.If I increase demandin Japanor the ihe saiellites.India'scustomsofficersmay U$ supply will comefrom the outside. say,"Wehavea tradedeficit!"But that's Whenthe USeconomypicksup, the fust only part of thegamâ&#x201A;Źbecause India'slargpositiveimpactis felt by theMexicansand est exports are engineersand programthe Canadians,not by the Americans; mers.Their secondlargestexport is satAPRrL-MAY 1996. THEAsrANMANAGER

ellite transmissionof softwareand R&D. Bangaloremay do R&D; Singaporean Thatcherdid. Theywent througha lot of "lndia doesn't have natural resouices," wholesalersmay procurecomponents; turmoil, andtheirown peoplestill haven't they say.Not true. Their biggestnahrral Dalianin Chinamayassemble theprod- given them enoughcredit and appreciaresourceis smart,wellâ&#x201A;Źducated,English- uct; FedExor DHL may ship the product tion for whattheyhavedone. speakingpeople.That'sthe mostpower- to the whole world; someintemational UnderThatcher,the United Kingful thingin theworld. credit card network may collectall pay- dom'sfinancialservicessegmentbecame ments, shongaftertheBig Bang.BritishAirways The Philippinesmust use a different today is the most efficient,low cost oF Bulld Spoclflc Nlches Look at the prosperityof lreland. Of model than before.Ten yearc ago, you eratorin theworld.Whowould havebe the EurooeanUnion nations.Irelandhas couldattractcompanies basedon generic lieved that old BOACcould becomethe ihe highestgrowth per capitaGNP.In the advantagesof cheaplabor and English- world's numberonecarrier?British Aircosts$0.55.Japan old days the unemployedIrish went to speakingskills.Now you haveto be well ways' passenger-mile Now, theydon't knownin specificfunctions.I canusein- Airlines?$l .30perpassenger mile,Ifyou the US and succeeded. haveto move becauseof the telephone. sertionmachinesto assemblemother- are a national flag carrier,you are proLotus and Microsoft and 2,500other boards,all remotelycontrollableandpro- tectedby sovereigntyand cost goesup. North Americancorporationshavesetup grammable fromJapan.I woulddelegate SingaporeAirlines costs$0.75,which is they shopin Ireland.Americaninsurancecom- motherboardproductionto somebody competitive.How andwhy?Because panieslike Cignahavehansfenedclaims elseandkeepmy engineersin Osaka.And don't havea domesticairlineand have processingto Dublin. It is convenimtfor I havesomanyoptionsfor my otherbusr only one airport.If you havedomestic Cignato dump its claimson the work- nessfunctions.Forfinancialservicessub- airlines,the nationalgovernmentwill, in station,go homâ&#x201A;Źat five, andrelaxat din- contracting,I would go to Dublin. For the nameof nationalinterest,set high nerwiththeirfamilie. Thenextmorning complexpackagesoftwaredevelopment domesticprices.In Japan,the Tokyo(roundtrip). they corneto work, and haveall the fin- I will go to SiliconValley.Forlaborinten- FukuokaroutecostsY54,800 ished work hansferredback from Dub- siveareas,I would go to Vietnam.While In the competitiveinternationalmarket, lin. This is createdover 250,000jobs for Vietnamis on top of my shortlist,thePhil- the samecompan, JapanAirlines, offers Irelandin the last five yearsalone.In In- ippinesis not,because I don'tknowwhat Pusan (Korea)-Tokyoroundtrip for AsianaAirlines is Y24,000for dia, similarly, Citibank and SwissAirdo good,unique thingsyou cando. Youtell Y35,000. their backroomoperationsin Bombay, me your laboris competitive;I cangive Seoul-Tokyoroundtrip. you otherplaceswherelaboris morecomIs governmentservingyou? No. through satellite. It is a satellite-based,telecom-based petitive.You say you speakEnglish;in Thelre suckingyor.rdry I'm not asking migrationof industry.In the 19thcentury AmericaeveryonespeaksEnglish.You governments to do anythingunreasonEuropeansmovedindustry to the new sayyou'rewell-educated; that'swhatthe able;I'm saying,"Open up! Give us a continent-America. In the late20thcen- Irish say. choice!"If Asianacando thisforY24,000 why don't we allow them to fly ftom Totury,Americancorporationsmi$ated out Merico, of theirowncountryintoCanada, kyo to Fukuoka,Tokyoto Hokkaido,ToandAsia,andnow theTaiwanese to Vietkyo to Okinawa? narn,ttle Philippines,etc. In the years ahead,corporationswon't haveto mi-And Centrallzed Systcms gratephysically.Jobswill migrateacross llont Work telephonelines,aooss nationalborden. Japanis too centralized. Japanthinks The shapeof the company,therefore, it hasonly onesetof solutions,and if the changesin drasticways.We no longer solutionsdo not comefrom Tokyo evehaveto moveout of our homebase. ryone is paralyzed.FreeKyushu,free Nike, for example,contracts50plants Hokkaido,freeKansai.Kansaiis the area all overAsia,operatedremote-control out aroundOsaka,Kyoto,Kobe.Thatecono. my is $600B.If it werea country,it would of Beavertonin Oregon.Nike headquarters usesworkstationsto designthe be numberfive in theworld. Kansaihas molds,controlqualiry and monitor pro22 million people,the densestwealth on duction, yet Nike doesn't own a single lDeregnlatlon ls tr(ey-. earth. But most foreign companieswho plant for producing $5 B in sporting NewZealandis themostderegulated cometo Japanget buried in the hustlegoods.Theyareoneof the mostefficient economyin theworld. It is growingat six bustle of Tokyo and say,"The Japanese and futuristic companies.They do what perceritper annumand hasa surplusin marketis difficult!" It is easyif you go to they haveto do well, and they delegate the national budget, probably the only Kyushu and becomenumber one in what theydo not do well to partners. country in the OECD with a surplus. Kyushu,a marketthe sizeof Korea.Why The shapeof the companyin the IT- Deregulatedeconomieslike New Zea- not give theseregionsfreedom?Theyare intmsive erawill bedifferent.Traditional land'sareidealfor the 21stcenturyBut not breakingaway from the sovereign businesssystems-R&D,manufachrring, this is not new. Fifteenyearsago, that's state.Justgive themthefreedomto intersales-are falling apart. Engineersin what Ronald Reaganand Margalet act with the global economy. THEASIAN MANAGER. APRIL-MAY1996

Anothercountry with onesetof solutions was the SovietUnion. They failed becausedifferentregionsof the Soviet Union neededdifferentsolutions,and Moscowdid not allowthemto acton their own.Anotherdevelopedcountryin trouble is Francebecauseof its centralbureaucracy.Countrieslike theseareall hitting ihe wall because of thenatureof technology. Deregdatc Tbleaomq F'lnancee and Tbansport Onemustfirst deregulatethetelecommunications,financial,andhansportsectorswithin eachregion,to let regionsstart taking their own initiatives.By coincidence,Reaganand Thatcherin the early 80sderegulatedthesespecificindustries. Theywerelucky,becausethesewerethe specificandmostcmcialindustrieswhich by natureare borderless.If you regulate them,moneywon't move,the airlines won't move,and phonelines crisscross. Pmple will get frushated. TechnoJogy is movinBsofast.thereis only one direction: acceptthe global forcesat work. Accept,not becauseyou haveto catchup with therest,but because you have an opportunity to leapfrog. Many countrieswant to bea Japan,a Taiwan, a Korea,by using the flfng geese model of going in sequencethrough higher value-addedindustries.It is the wrong way to go. 5'llle, Tboee ls No Good Onceyou havederegulated,you rnust becomeexcellentin specificfunctionsor services.Companieswill cometo certain regionsof the Philippinesonly for spe. cific services,becausein thesespecific servicesyou areexcellent.Youhaveto be amongtheshortlist. "Me, too" is no good. The shortlist has room for only two or threenames.Beexcellentin specificbusr nesssystemsand get economiesof scale, to achievea clusteringeffect.More people will come,asin thecaseof .Dublinor Bombay.Educateyour peopleand developspecificmanagement talents.If you say you're good at everything, nobody will come.Don't bewide andshallow,but insteadbenanow,well-defined,andhave a brandtobe recognized. Subichasdevelopmentpotential but its identity with the rest of the world is unclear.With so much potential,Subic's R

like "multimedia" are sprinkled all over theplace.In contrastI couldn't find a srngle descriptionof mulhmediain theJapanesebudget.Japanmay be advancedin certalnareasbut it maybe in troubleinto the21stcentury Leapfrog Ufilh lbchnology The global economyis fair and is availableto anybody.Technologyhas madethis faimessavailable. Forthe fust time in history whether you are a Muslim, Buddhist,or Christian,man or woman,old or yourg, it doesn'tmatter What you input onto that network matters.You should not sit behind your PC screenand look rnerelyat your neighbor Look at the world. The world economyis sogigantic.If you havea label or brand and havethe skill to deliver what you've promised,you can be part of the globaleconomyand you canprosPer. I always had the convictionthat the Philippineshas the besttalent available in AsiaPacific,albeiitotally mismanaged, under-exploited,and under-utilized. Now it's tirne for Filipinos to free yourselvesup. Imagination,vision,and the will to do areyour only limits.

temptationis to do manythingsacrossthe businessspectrum.Cebuwants to usea similar strategy. You can succeedif you define your brand. Communicateyour brand to the global economy.Thenthe money,corporations,and peoplewill come.Your economywill accelerate andcreateapositive, virtuous circle.Thereis room for everyoneto succeedbecauseglobal economlesarevast. Malaysiais working on a multimedia super<orridor.Malaysia'sweaknessis its costsarecomingup. Futuresuccess is less likely if they takethe sameold haiectory. Theyhavemovedinto a totally differeni kind of game:informationtechnology, specifically,in multimedia.PrimeMinisterMahathirhascreatedthiscorridornear the new airport and new capital Puha Jaya,30 kilometerssouth of Kuala Lumpur The corridor is a 15by 40 kilometer Quesllons and Ansvers areadesignatedasa multimedia"utopia" whereprevailingfacilitieswill belike Sili- Q: How should governmentsmanage conValley's.Malaysiawill becomea dif- transnationalcorporations? ferentplace.Malaysia'smultiracialproblem, which Mahathir called the "Malay Ohrnae:Theglobaleconomyis ab'soluiely Dlemma," is now a positivebecausethe a reality. mothertonguesof MalaysiansareIndian, Today,you sell morecolor TVs in InBahasa,and Chinese.Malaysiacancom- dia than anywhereelse in the whole municatewith two billion people.If I de- world. WethoughtIndiawasapoorcounvelop a product brochure,I would work try but now they are buying more color in the MultimediaSuperCorridor and TVsthantheUS,Japaryor China,because convertmy materialsto addresstwo bil- of RupertMurdochandsatelliteTV translion people-the Indians,Chinese,and, missionof BBCand CNN. Indian conBahasa-speaking people all over the sumershavebehaveddifferently in only world-which I couldn'tdo out of Tokyo. a span of threeyears.Prime Minister Conversely thiscouldactasa catalystfor Rao'seconomicplanwasreallyfuelledby understandingthe market, understand- the availabilityof informationreaching ing thepeople.Deliveryof thesecouldbe consumersdirectly. donethroughsatellite. In Vietnam,Doi Moi is the sameway. Multiracial diversity in the informa- In Vietnarn,you can find quality labor tion driven eracouldbea positive,if poli- unavailableelsewherein theworld for the ticians,bureaucrats, and everyoneelse pdce you pay. Vietnam communicated work togethertowardsthiskind of vision. this "brand" wiih the rest of the world That's exactlywhat Deputy P.M.Anwar and positionedthemselvesin the global Ibrahim and Prime Minister Mahathir economy.In a way, global economyrs a share.In Malaysia's1996budget,words good deviceto discipline governments' APRIL-MAY1996 . THEASIANMANAGER

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behaviors.Given the first signs of VieF "heavy hands" of government, namese moneywill go elsewherebecauseinternationalmoneycan find other opportunities. New multinationalsbehavedifferently from old multinationals.Old MNCs and TNCs behavedin local, parochial wa1s.Theywinedanddinedbureaucrats. They were Biven specialPermits.Once Iicensedto operateinside the country, they were as protectedas the domestic andbecamePartof thecorrupt cornpanies and docileindustry of the country. Youhaveto openup. Do not let MNCs halfwayinto themarketbecausetheywill againstconsumers. usetheir technologies Onceyou openup, makethe opportumtiesavailableto asmany corPorahonsas possiblesonaturalfreemarketforcestake over In capitalistic, fueemarkets,lailure is punishmentenough,and consumers will benefit. Theold gamesbelongto 19thcentury govemmentswhich want to regulateand control.If you insteadgive consumers information--andtechnologiesareavailableto give consumersinformation and outlet choice-then you let marketforces discipline TNCs to behave.lnformation is the key word if consumershave the ultimatechoice. rice is expensivebecause Japanese farmers are protected.Foodis Japanese cheaperin Singaporethanin Japan.Why? doesn'thavea single Singapore Because farmer!If Japanis opento importingthes€ oroducts-and we havethe industries, iortunately,to accumulatewealth-we don't haveto producethingsthat other Thisway,we are countriescan'tproduce. interdependent. Lip ierviceby JaparlsPrimeministers to apologizefor the war 50 yearsagois not going to solvethe problem.lf we can and improsperby this interdependence port othercountries'goodsandservices for which they are proud of, Japanwill get respectfrom the market.A country you resp€ctcomeslast,not firct.

havea chapterdedicatedto thenotionof a GNPladier In the $500to $3000GNP range,governmentcantakea centraland coordinatingrole.At eachstageof development,governmentmustunderstandits role,and that is not to have,for example, the Shahof Iran trying to developeverything andbuild contemporaryppamids and Sphinxes.Bearwith me; I fully acknowledgetheroleof governmentat cer' tain stages.

Governmenthas a role evenat the stageof $10,000per capitaGNP.But govIt is similarto deernmenthasto change. veloping your own children.Whenchildren are still babies.parentstreatthem differentlyfrom when they dre already teenagersor young adults. Use these stagesas a yardstick.Unlesi parents change,thechildrenaregoingto feelthey area big nuisance,evenan enemy. Japanwassuccessfulup to the $5,000 per capitastagebecauseof well-thought bureauout programsandconscientious crats:Oncethesebureaucratssucceeded, theytendedto staywherethey were,and olaved encoresof the samemusic over ind over Theaudiencehasleft the audikeepplaying torium,but thebureaucrats the sametune. No organizaIndonesia is interesting. tional theorywill help you in a placethat islands,and Q: How we candrop IntemetequiP' has200million people,18,000 ment into Irian Jayaor otherunderde' 500tribes.Regionalautonomyis even velopedsocietiesif they don't evenhave more important early on in the 8ame. themoneyto buy clothes?Howcanwe Twentyyearsago,SurabayaandJakarta werethesame.YetJakartatodayhasrunadevelopso all of us will prosper? way prosperiryirespective of the restof Ohmae In TheEndof TheNationState, I Indonesia.Why don't you freeup Ban10

Medan,andotherplaces dung,Surabaya, aspart of theglobaleconomy?Havethem interactdtectly with therestof theworld. Again, not for themto fly awayfrom the union of Indonesia,but to givethemmore Ireedomso the restof the world candisall coverthem.Whatyoudo ir Indonesia goesto Jakarta.Jakartais overcowded, like Bangkok. Thailand used to have placesthat were prosperousin their own right. ChiangMai today is sofar behindBangaregoing kok thatBangkokbusinessmen to VietnamandMyanmar Thaishavenot spent their moneyand energyin developingtheirowncourtry.Lettheseregions organizeand developthemselves;theresultswill be muchbetter. Asia hasmany good countriesdeveloping through this ladder.Thenall of a sudden,prosperity clustersinto one location,and that locationsuck up all the wealth.Wemustavoidthis.Wealthypeotendto incomPanies ple andsuccessful vestacrossborders,not within the countrv.And if localcompanieshaveto invest acrossborders,theniet foreigncompanies comeinto their otherregionssothatthese regionscan interactwith the global economy. ' Japanis abadmodel.Japandweloped Tokyo,and Tokyodominatesso much. and Whenyou talk to Tokyobureaucrats politicians,theywill sayTokyowassuccessful,andthereforeJapanis successful. in Japan But whenJapantails,eueryone fails. jakarta'sGNPper capitais alreadyapproachingthe $3,000level while the wholecountryis only ai $600or $700.This bipolarizationis noi healthy.It is imPeraa corporahon's tive:in a constitution,like articlesof incorporation,you mustdecentralize and let the regionstakeinitiative. Q:Will globalizationleadto homogeni zationof tastesandculture?Sincepoliticsareconditionedheavilyby econonics,how,longwill it takebeforewe see individual nation statesbeing superI am sule sededby world government? will be Philippines the President of the to saY. you have in what interested Ohmae:ThePhilippineshasneededleaderslike FidelRamosfor thelasttenyears. He is makinga difference.Now you have put yourselv€son this six-yeartermlimit, APRIL-MAY1996 . THEASIANMANAGER

soyou haveto moveon.Whatdo you do? Theirony is thatyour peoplehaveproven that onemancanmakea hugedifference; anotherpersoncan pull you back;yet anotherpersoncanstagnateyou.Thenext penonbecomescmcial,because you have all thepotentialto leapfrog.Youmustnot you takethisnextelectionlightly because must continueto becomepart of the global economy.Otherwise,you will become miserableand feel left out. The Globallogictendsto homogenize. United States'articles of incorporation weredrafted200yearsagobecausetheir stateswerc so autonomousand strong. The Treatyof Parisallowed eachstateto be autonomous,hencethe notion of the "United States."Germanyhasa similar article which forbids coss-subsidiesof overthreepercentfor oneslateto another. With a constitutionlike that you would expectgoodregionsto getbetterandpoor regionsto beleft behind.ButAdamSmith wasright in this one-the invisible hand actssuchthat thepoor regionstend to beunemploycomemoreattractive,because ment is higlu peoplewant to work and wagesare less.Over twenty years,Germanywasableto producei15 percentp€r capitaCNP distributionwithin its variousregions. Japan,with its enormouscentraldistribution, has more than a factor of two differencebetweenthe prefecturesof Kawashimaand Shimaneand Tokyo. Italy is anotherexample.Northem Italy produces;Southemltaly receives.There "average"or "typiis no such placeas cal" Italy. Rome'scentralBovernment takestheroleof circulatingwealthfrom north to south. In the short run, cenhal coordinationseemsmoreefficient,but it doesnot createhomogenoussuccess.It costswealthy regionsdearly and makes poor regionssit there,expectingmore money. Homogenizationtakesplacewhen you have a Germanyversusa Japanor an Italy. Evenhrally,if the whole world usedthis borderlessconcept,but still coordinatedwith eachothet it would createa morehomogenizedsocietyandp€ople would strive to succeed.This excep tion is at theearlystagein thegamewhere peoples'educationlevels are not at par with the rest. Invest heavily into education"not intobuildingbridgesandroads. While bridgesand roadsare important, ,196 THEASIAN MANAGER. APRIL-MAY

more moneyshould go to developing youngerpeopleto becomeplayersin the world. borderless Nationalgovemmentsand regional statesarecompatibleconcepts,solong as the national side realizesthat their role haschanged.If thePhilippinescouldonly regionsin say,"we havefiveprosperous the country," it is a prosperouscountry. The role of cenhal govemmentis to be' comea facilitatorfor its regionsto prosper Cenhalgovemmentshouldn'tbethe only enginedriving everyonein thecountry The Philippines,like Japanor Indonesia,is an islandnation.It is difficult to propel all islandswith onesystem.If bureaucratsacceptthat there is roorn for everyoneto prosper,we arenot just split-

ting a limited pie; we can increasethe entirepie by havingmultipleenginesall looking into differentdirectionsof the global economy. Until suchtime asall theseregionsare mnning at thecmisingaltitude,however, the centralgovernmentcantakea role.It should promote education,creategood banking systems,and build compatible communications andnationalstandards. Youcannotafford everyonedoing differEuentthingsunderdifferentstandards. ropesufferedunder this for many years. "end Q:FrancisFukuyamaspeaksofthe of history" and Huntington speaksof the "clashof civilizations,"In a borderlessworld do you foreseeany new ideology supersedingliberal democracyor deniocraticcapitalbm?"Fault lines are flowing now fron cultural considerations,"in the words of Huntington.Do you seeother sourcesof conflict that might engulfthe world at large? Ohmae:It is not the endof history;it is

the beginning.We are graduating hom theindustrialrevolutioninto theinformation revolution.I calledmy book TlreEad of TheNationStafenot to meanthat central govemmentis all finished;wlut is all finished is the fradilioral role of govemment, which assumesthat govemment owns its peopleand industry,and that it can do anything to solve its problems. Sinceour politicians and joumalists are sousedto this notion of sovereignnahon states,I namedmy Vr} Endof TheNatiol, Stdteso they could get the message right. Huntingtonwantedto say,'1dhm the Cold Waris over,the new fault lines will be acrosscivilizations." I don't think he hasevervisitedAsia.If you go to Phuket, onevillage is Buddhist and the next villageis Islamic.It is l*e Japaneesukiyaki beef:fat is all mixed with red meat.It is not all red meat on one side and far on theother Peopleareliving togetherquite peacefully.You can agitatethe sihation and you cancreateproblems.But they're living happily together.Are there fault lines?Yes,you could find fault lines if politicianswant to exploit differencesto their gain. Malaysiawill graduallybecomernore Islamic,but they will still have many ChineseandIndians.InplaceslikeSabah or Mindanao,different civilizations,cultures,and religionsall coexist.It can be aggravatedby inesponsiblejournalists and scholars,but Asia hasfound waysto live together.It is time for us to show Huntington that fault lines don't haveto be the case.What'sgoing on in Northern Irelanddoesn'thaveto be thecase. Solutionsexist.Asiansare not digital-if it is not one,it is zero.Wearegood at living with ambiguiry Sooneror latet thingswill movein onedirection,but we don't haveto logically determineif it is zeroor one.ThelargestIslamicnationon earthis Indonesia.Thereshouldbe fault lines in lndonesia.How then do you exolain thesuccess of ASEANandAsia-Paciftcprosperityifsuchfaultlinesexisted? The new fault lines are betweenge erationsthosf'who understandthe 21st andthosewho centulyandits t€chnology, don't.TaketheNintendokidsin Asia,in Europe,and in America. The old folks want to explaincivilization and passon valuesanddisciplineto theseyoungkids by using their old stories.Thrt'sthe fauli 1l

line. Kids don't listen to grandparents thesedays.They play TV games,they watch the samecartoons-theycan almost speakthe samelanguage. Young Californiansand Asianssharea more commonculture,becausethey all play SuperMario Brothers.Theyhavea crossborder civilization more coherent throughout the world than all prevrous generahons.

equalefforts,but expectequalresults.You canhavea docileand expensivecountry as we haveseenin certainNordic countries.We shouldnot call the Malaysian attempt a real successbecauseI cannot iustifya conceptlike Bumiputn,Ihoughl understandwhy they did it.

Q: Perhapsyou couldaddressthe issue of what changesthis borderlessworld might require,in termsof educational contentandsystems.

I comefrom a differentbackgroundof Japan where education was priority numberone, sincethe Meiii restoration. Education, education, education.lt is in the genesand chronosomesof Japanese parents.Youcancertainlyuseeducation to explainthe successof the Japanese up until 10-15yearsago. Chineseparentswould pay morefor theeducationof theirchildrenwho would thereforeget the advantageof being smarterand moreinformed, and would end up with the larger portion of the wealth. If you educatepeople,thecostof civil societygoesdown becauseyou don't need many policemenand nany other things.Educatingpeopleis the bestway to removethe poor sectorfrom the society. Oncethis happens,the poor sector will comprisethosewho don't want to work; he will alwayshavesomeof those. Let today'sworld be informationdriven, but give everyoneequal opportunities.Theinlormationsocietyis inherently fairerthanthe haditional industrial society.Whichuniversity you graduated from, whetheryou areman or womanall thesematteredin industrial socieues. In the information era,it doesn'tmatter I've beenoperatingthesechat networks for sometime now.I chatwith Francois or Chris,who I thoughtwerefemale,but they hrm out to bemales.I can't eventell if it is a man or a woman.Technologyat leastgivesus an opporturfty to createa fair societyand to usethe wisdom of the peoplecollectively.Wisdomhas been missingfrom many societiesand I hope

Ohmae I havebeenproposingacomplete overhaulof Japan'seducationalsystem. Our systemover the last 100years has beensingular:to memorizeanswers,becausewestemsocietyhad found the answers.Academictraining in Japan,thqrefore, is to go to the library or listen to teacherswho know the answers.The more you memorizethe answers,the smarteryou are.Yougo to theUniversity of Tokyoandendup workingfor theMinistry of Financeas the smartestman in Japan. Lookat what'shappeningin Japanas a resultof this education.It is not iust the faultof theUniversityofTokyoor Ministry of Finance.it is the natureof today's world. We are living in a world where thereare no solutions,a piori. Yo.uhave to think aboutihe natureof the problem. You haveto be ableto steeryour own courseto find the solution. Sometimes thereisn'ta solutionandyet you haveto act on the bestavailableoossiblecourse. Wearenotcor ortablebvlngln a soclety wheresoluhonsdon't exist. Educationshould teachpeoplehow to faceissues,how to strugglewith problems,and how to comeout with the best possiblecoursesof action.We have to deemphasizememory.SomeJapanese memorize3,000Chinesecharacters, memodzeimportant yearsof in history and memorizenamesof important peG ple and theircontributions overthepast 2,000years.All thememorythattheJapaneseeducationalsystemfor the first 12 yearsof a studentwill requireis Y500,or $5worth of memorychips.All you need todo is knowhow to punchin Fl in your laptop then you havâ&#x201A;Źthe solution.What is the valueof memorization?Somepeople remember all the 107elements in the periodic tableor how to prove Pythagorean theoremsin three different ways. Whata waste.Yetour educationalsystem is going in the direction of perfectingit, and makingit moreexpensive. Of course,you musthaveknowledge. But we mustalsoemphasize values:so-

Q: Poorersectorsare being left behind. Youdislike giving themsubsidies.What do you suggestforequalizing strategies the poor sectorsin Bociety? Ohmae: Let's put somehistorical perspectivein developing countriesin the 19thcenturyrnodel.The disparitywas evenworsein Latin Americanbanana republics. The rich got so rich and they exploitedihe poor,and the rich became part of the colonialmling class. Thesituationis not thatbadtoday.Dr. Mahathir'sBumiputrapolicywai unpopuJaroutsideMalaysia,and eveninside,dependingon who you talk to.Looking backat fifteenyearcof Bumiputn,it hasdone a lot for poor people.The pmple who are working in the plantations have the opportunity to be educated. BumiputraBaveeqlralopportunity to be educated-not the equalresulg but the equal opportunity. Once they are educated,they are home free. It is time for Malaysiato gSveup Bumiputrabecause everyoneis now educated. At ihe stageof Malaysian develop ment from $1,000to $3,000per capita GNR this forced distribution of educahonalopportunityrorld!r fustified,grven the political reality of that country.It is like a husbandandwife relationshiD.It is difficult for a third party to iudge if it is goingwell or not. Results,however,have shown that more peoplein the poverty zonehavebeeneducated.Theyhaveonly 60,000morehomesto build to eliminate homelessness. Accordingto their plan by theyear2000,everyonewilJbe living in modemhouses. Givepoorpmpleequaloryrtunityfot education.If you go onestepfurther and guaranteeequalresalts,you aregoingtoo far. I think you have to give equality of educationalopportunitiesbut not the results.If you startguaranteeingtheresults then you createpeoplewho don't make 12

that you will beableto developsuchconceptsover here.Thenyou canleapfrog.

APRrL-MAY1996 . TIIE ASAN MANAGER

haveglobalized,they havetaken manufacturing outside the country. They neededmorepeoplein Germanyto sup port overseas operationsfor design,marketing, and things like these.Therefore, Gerrnaneconomydid not hollow out.Actually, employmentshifted from manufacturingto morethinking andmoresupporting.I haveno evidenceto believethat migratinginto roboticsand goductivity improvementwould totalunemployment mcease. Central governmentsmust understand that many opportunitiesexist in areasotherthanmanufacturing.Tourisn; for example,is the world'ssecondlargindustry.Oneman namedYokoyama manufacturing implies est Q: Automating faster invested we have to chum out business that $2 B in a small city in the Gold Australia. Now we have 50 rate. Shouldn't Coast of than the unemplopnent purchasing flights a week from Japanto the Gold we also be increasingthe power of our markets? Do you seeany Coast.The Australiansalso understand role for manual labor in the future you that toudsm is good and tourists from aretalking about? Japanarepositive. Onemustunderstandtheimportance Ohmae:This issueis the result of Keyn- of banking,pensions,and IT to take adesianeconomies.Keynesianstend to em- vantageof dynamicsegrnents. Japan's phasizethe importanceof the manufac- populationis aging,with manypmple on peopleareamazturing sâ&#x201A;Źctor.But a developedeconomy pension.Old Japanese typicallyhaslessthan2070ofits working ingly rich. Peopleaged55and over have populahon in the manufachrringsector an averageY22million in savingseach, Eachrehredmanandwife The importanceof the servicesectoris about$220,000. in savings.Thesepeopleon by manyKeynesians. has$440,000 underestimated morein pension Youareright aboutthe needto ceate averagereceiveY370,000 jobs fasterthan the rate of improvement eachmonth-almost $3,700.It is, unforof productivity.But if you look at the US hrnately,in their genes.to savemoney. "old age"at theageof and UK, where they have done major Theysavefor their deregulation,manufacturingemployment has comedown. The unemploymentratetodayin theUSis 5.5%.During the worst tirne after the Reaganrevolution, unemploymenthit almost 9%. Wherearethenewjobscomingfrorn?The servlcesecror. The servicesectoris not only McDonald's and hotels-flipping burgersand changingsheets,as they say-but also highly paid,value-addedintellectualcontributions by 35 million peopleworking at home,thanksto telecomcapability. Thesepeoplearelving well andarepaid, on average,better than others.Therearc 65,and they keepsaving-they grew up two segmentsin theservicesector:labor- in the poor days of Japanwhen savings intensiveandIQintensive.Wemustsepa- was so important. So take advantageof rate thesetwo. The more important sec- it. Theywould like to havea goodtime,a tor is the IQ-intensivekind, which can good life, and they arerich. If you figure generatea lot of employment,as evr- out how throughtelecoms,to participate in Japanese privatesavingsof $l 2 trillion, dencedin deregulatedeconomies. TheGermanexperience is that,asthey you could benefitenormously. ciety,people,family, ecology,the global village, working together to achieve something,even returning borrowed rroney.In thelatter value,Japannow has 1.2millionpeoplewho arebankrupt,private individuals who useplastic money too much. They may have graduated from the University of Tokyo,but they don't know how to borrow money and rehrn it. Educationhas to changefrom memorizing to thinking, theorizing,and comingout with possiblesolutions.You mustget comfortablewith the lackof soIutions and answers.That is reality.

. APRrL-MAY 1996 THEAsrANMANAGER

Think of a servicesectorbusinessand hollow out Japanesesavings.You don't have to manufacture.You don't haveto becomea labor-intensivenation.' Q: Towait for a new generationof politiciansandbureauoatsis costlyin temrs of economicopportunities.What canbe donewith this dilemma? Ohmae You have to educatethe voters sothat theymakebetterchoices.I am not pessimisticaboutthis processof change. Logically it is difficult to change,but if you obsewewhat's happenedover the last 15 yeart none of thesethings were Iogicalprocesses. We have seenhow one leadercan make a difference,not only here in the Philippines.Nobody predictedtheemergenceofGorbachevBeforetheBerlinWall camedown, I wastalkingto theEastGerman guys who all said, "We cannot change."The Britishhavealwayssaid, "This country is going downhill and we can'tdo anythingaboutit. It's politics:Ifs labor, it's Tory,etc." but one woman changedit all. Thesewere not logical steps,but in rehospectthesechangeswerelong overdue. Communication,telecoms,and television causedthesechanges.Informed citizensand consumerscan swing the situahon. Let's not be so logical. If there is enoughnomenhrm,therewill bechange. t predictedthe fall of the SovietUnion, not becauseI had a crystalball, but be"one system" will causeI believedthat not holdwater;I saythesamefor China. I maybe off a few years,but I believethe Chinesesystemwill not last. If youaccept'aitacmrpli, nothingwill happen.Startto think thatyou want these changes.I'm not logical in this sensebut theseare the forcesat work and it will happen. Whendinosaursruled the world, I'm prettysurethesmallmiceandlittle plants all said, "Theseguys will dominateforever" But we know how the dinosaurs farcd.Let'shopethat theright vision and will enableus to find a way to change.i Dr. knichi Ohmaeis theM\flo8ing Dieclor of the Yokohnma ConsullingCroup.Heis theauthorof End4 theNationSIates, TheBo etlessWorld,Tiad Power, B(Wd NationolBoders,akd TheMind ol Theshotes,st.

{p.,

By PRoFEssoR FnANCisco L. lloN4A\,JR. AND HAZELSAN(;AI-ANC

QuickandEasy Forecasting Logic This is the last of the seriesof three 'l articLson irrrcca.tinc.hcrciore. .rrericrr of the overalllogic of the seriesis in order. The Forum's main taskis to engage in forums (or fora, to be precist').These confercnces often bring togetherclifferent interestgroupsor stakeholders to find ,r commonground for poJicvactionon an issuc. Theseconstituencies oftenbring b the lorum thcrrorrn ;er.plctir r.. br.r-e-ir terpretationsofdata, anciconclusions.For example,an issuesuch as thc'presenat i o r t, ' [ h i o L l icr r s t l t i n a n a r e ar ! r l l b r i n g out difierent positions of indigenous t r i b c sa b o u t . r n . c . t r . t l . t n J , ; , ' a . l a l fisherfolk rvho mav or mav not use clvnamite or cvanide,en!ironmentalists, eco-tourists,land developcrs,etc. Even as mundanean issueas traffic rvill involve conflictsbetl cenpublic anti private vehiclcs,betw'eenthosr.\\'ho beIicr,ein traffic enforcemeni.rndthosewho favor drir.er-education,bctweenmunlcl palitiesand cities$'hich might become eithermain bottlenecks or secondarvaccessduring peakhours,and so on. l4

Eachgroup, thus, nill har,cits ortrr scenarioaboutan issuereflectinsits particularposition.A kev taskof the Forunr i - t o L\ l r . l c ti h r ( \ . 1 ' n \ c f c , r . l rc , r , ' r r,p l o - i l i , , n - , r n Jf r c \ e n t l h r l n , r \ \ i L , r r r , , \ lor luturc action. Thesescenarios are essentialh. rlualiI n t i \ H H | t \ e \ e r , d c c r t , t i nm i r r m u n r( , 1 quantitativedata is neededk) carv out an informeJdis.u..ron ha.edon a$rtrment on lundamentalinformation. Scenarioplanningis the logicbchind thc three kinds of softrvarediscussedin this seriesof articies.Stclla,tbr exampJe, simulateclthe possibleoutcomcsofpolicv options over the long run bv tracing out theconsequences of policies.CrystalBall assessedthe probabilitiesof different coursesof actionup to a medium-term period bevondn'hich other driving forces might substantiaih'alter the risks.finailri ForecastPro, oflers a quick and simple approachto short-termforecasting.

qu,rrtcrlvricc prices,monthlv tradebal, ances,,rnd so on. Tiresevari,rbles mav bc forL'caste(i in st'ricsolcr tinre.Think of "tinre serics"as"hiskrrical"elata.(At this point,theusualdiscl,rimtris in order:this .rrticled(X'snot t'nclorscthis softutre or cr other relatccltvpesof soft$,trt but onlv aitcnpts to prcsentthc ,ruthors'obse^,ttionsfrom useoi the soft$itrc.) Tht'basiclogicof thetimeseriesis thai , r l lt h . r tr - r e . l u i r " Ji - . r r r . t i t - r . , 'ri l . Lp a l ternsof tht mo\,ementover time for thc variablt.bcingforecasted. Timeis thconlv factor useclto forcc,tstthc lariable; all other critical factors,rrt ,rssumtdkr be embedcled or incorporatedin thai singlc y a r i a b l e t, i m e . I i a l s o f o l l o w st h a t r n e m()recl,rtaovcr timr.thatu ill be ayailablt. l o r . r p , 1 l 1 . 1 1. 1 * 9 1 * . r t r r fl rh,(, b . r h r l i l \ , ' t an accur.rte and rt'lclant forccast. Consiclcrthis absurd erampJetonc cannotforecast\\'ith o|lv onc datr point $'hile trvo clatapoint! rvill onlv vield a straightline.On thcothcrhancl,dat.rover Time Series 25 vc,rrslill traceout the cvclesof oil ForecastPro for Windorvs is a man- pnces/lor examPle. agtr-friendh', forecastingk)ol becauscit I r r . i d c n l a l l rf . r L ' L , r lrrl , ' r c r r ' S n i , / ( \ r | q u i r c -L l a t ai p 1 1 -. r m p J e .llo r m .i ' r r n - i l r c c r i r t c n r l o f . L r . o r t , t l r rIr . m a l l r t stance,annual PC salcsfrom 1950-1995, clesover.r 12 month pcriocl),such thai APR]L-MAY 1996. Tr{FAsrA\ MA\AC;EII

monthly and quarterlydata shouldbe within a year usedto analyzedifferences as well as acrossyears.The softwarers thususefulfor short+ermforecasting. Forecast Prois quitemanager friendly it requiresdatawhich the manbecause ageroften alreadyhas on hand.The analysisis an extensionof the visual graphswhicha manager is alreadyfamilThesoftiar with, throughspreadsheets. ware evendoesall the statistical and work. The managermay mathematical selectany forecast methodor mayaskthe softwareto makethe selectionby analyzing differentmodelsand comingout with thebestfit. Todigressbrieflyfor a quickreview: ot the analysis of "fit" usuallyconsists For testinga forecast againstexistingdata. example,if themanagerhasdataover25 years,the softwarewill take20 yearsof data, make severalforecastsover five years,then comparethe five-yearforecastswith thedatathatwas"withheld." Tbehnieal rersus Fundamenlal Analysls Stockmarketanalystssometimes makea distinctionbetween"technical" analysis,which focuseson trends,patterns,and other movementsof stock p r r c e sa, n d " [ u n d a m e n t a la" n a l y : i s . whichanalyzes otherdrivingforcessuch as indushy growth,companystrengths financialandoperation andt'eaknesses, process ratios,etc.(Thetechnical wasfeatured in an earlierTAM articleby Prof. 1995isGeorgeH. Tan.February-March sue.) Thetime sedesapproachof Forecast Pro,in essence, reflects"technical" analymostnotasis.A numberof statisticians, havedeblv thepairof BoxandJenkins, velopedandrefinedtheanalysisof time

GDP-Philippines

1985

1990

1995

valuesin PhPMillions NoterReferto Table1 for actualandforecast

Note that fundamentalanalysisis a sis requiresgatheringdata on several key factorsthat might influencebeer superiormethodandoffersmoreflexibilsales, suchasadvertising e^pcnditures, ity for policyanalysisandmanipulation. numberof outlets,disposable incomes, Afterall,whatcanonedowith time?Techproductprices(yoursand the competi- nicalanalysisalsorequiresa "iudgment call" on therelevance of dataand "structors), etc. Thisdatagatheringis in itselfa for- tural changes." midabletask.To forecastbeersales,the For example,oil pricesprior to the analyst needstheforecasts of othervari- MiddleEastWarandtheresurgenceofthe ables.Acompanymightalreadyforecast cartelareprobablyirrelevantfor timeseThis judgmentis readily its advertising budgetanddistribution ries forecasts. strategy,and the govemmentmay or apparentby observinga graph of oil prrces maynothavea forecast rn- prices:fromtheearly-tomid-1970s, ofdisposable will notlikely wereflat,almoststable,risingsteadilybut comes, but thecompetitors oil pdceswererevolunteertheirrecords. slowly,in partbecause Incidentally,at least,for the Philip- putedlycontrolledby the largeoil comConpines,a good indicatorfor salesin the panies- theso-called SevenSisters. senes qata. beenthepriceofsugarand trol over oil pricesshiftedto OPECand The counterpart,fundamentalanalv- provinceshas Srnce typi- coconut,two majorindustrieswhich affiliatesto thecartelin themid-80s. sis,js anived at bv econometricians, employlargenumbersandwhoselabor- then,marketforceshavegenerallybeen cally through a procedureknorvn asmultiple regression.Macroeconomicmodels ers are loyal and heavybeerdrinkers. at work, with external,mostlypolitical, comingintoplay,such aretradedglobally forcesoccasionally of a country use this method, although Sugarand coconuts in thefuturesmarkets,andtheseindus- asduringthelran-lraqwar andtheinvawith [ar more comple\ mathematics. Consider this example: A company tries undertakecommodityprice fore- sionof Kuwaitwherethethreatto suPPly wants to forecastsalesof a product, say castsbasedon dataovera centuryHow- temporarill'raisedprices.Theperiodafbeer.Technical analysiswill onJyrequire ever,the point remdinsthata forecast terthe70sprovidesthemorerclevanttime historicaldata,possiblvmonthlyorquar- using fundamentalanalysisrequires seriesfor study. of other variables.Hencethe Similarlvan easyconclusionmay be terly,which mar be sub-dividedby geo- forecasts based madeabouttimeseriesdatafor forecastgraphic area,if it is consideredrelevant. appealof time seriesforecasting, ing gold prices.Theperiodwhen it was On the other hand, fundamental analy- on its simplicity. 1996 THEAsrANMANAGER. APRIL-MAY

controlledat US$35an ounce,and the brief period when it rose aboveUS$600 ignored;gold anouncemaybereasonably hasfallensharplyfromits highsandhas beenstrugglingovertheyears. However,the conclusionrnay not be asclearfor otherproducts.For example, assuminga scenariofor an intemationally competitiveChina,which products will experiencelower prices-PCs, rice, or garments?

rangingfrom nahonaloutput,levelsof exports,unemployment,sales,temperahrres,and passengerhaffic on an airline, aslongasthedatamaybepresented in a timeseries(e.9., monthlyor quarterly).It forecastsalmostinstantaneouslygiven a fast computer,generatesgraphs with a click of the mouse,and providesa full rangeof diagnosticstatisticsfor each model or forecast.

Ihe f,xpert lbol Toreeast Pno for Wndows Themanageroftencamot answerthe Forecast Procanpredicttheoutcome question: "What model best fits my in theneartermfor virtuallyanyvariable data?" Forecast Prohasiis "built-inex-

Table 1 Expertdata explorationof variableRPGDP Length 15 Minimum 47648.000 Maximum5718tX1.000 iv|ean221437.000 Standarddeviation158913.466 Classicaldecomposition(nonseasonal)

Trend-cycle:92.817o lrr€gular:7.19% Logtransformrecommendedfor Box-Jenkins, so I will choosea univariatemethod. Seriesis trendedand nons€asonal, Seriesis too shon to considerBox-Jenkins. Recommended model:Exponential smoothing Forecast Modelfor RPGDP Automaticmodelselection Holtexponential smoothing: Lineartrend,No s€asonality

StandardDiagnostics Numberof parameters 2 Standarddeviation1.645e+005 Adju$tedR-squar€0.9595 Ljung-Box(3)=1.7'14 P=0.366i1 (Bestso far) BIC3,689e+004 RMSE3.08e+004

Samplesize 15 Mean 2.214e+005 R-square0.9624 Durbin-Watson1.758 Forecqsterror 3.308e+004 MAPE0.06782 MAD 1.438e+004 Date

Historic

Fitted

1980-01 1981-01 1982-01 1983-01 '1984-01

243749.000 281596.000 317't77.000 369077.000 524481.000 571883.000

223216.891 211926.84 319979.344 360311.094 410894.500 5714A4375

1985-01

ForecastedValues

Dato

Low6r

For6ca.t

Uppe.

Hirtoric

1990-01 1991-01 1992-01 1993-01 1994-01 r995-0r 1996-01 1997-01

811359.688 839172.563 860357.750 875525.813 88s127.000 889512.000 888969.125 843735.813

1087979.500 1364599.375 1077237.000 1191238.125 15i13303.750 1248011.000 1294496.750 1728635.750 1351559.000 1397755.375 1919985.000 1466325.000 1501014.125 2116901.250 1474367.000 1604272.750 2319032.750 1687704.000 1707531.375 2526093.500 1810790.000 2737444.250

pert system" that examinesdata and with several matchesits charactedstics forecashngmodels. TheExpertToolperformsa batteryof dataexplorationtests,identifiesthecharacteristicsof the series,and recommends aforecastingmodel. Whenanexpertsystemis consulted,theprogramdetermrnes the characteristics of the data and the powerof potentialexplanatory variables or leadingindicators.Thena rule-based expertsystemdescribesthe datastatistian optimummodel, cally,recornmends andexplainswhy it chosethatmethod. The managermay apply the Expert Tool'ssuggestion, or selectfrom among otherrnodelsthat might be moreapproPnate. forecasllng wlth forecast Pro Considertwo simpleexamples:the GrossDomesticProduct(GDP)of the Philippines from1970to 1995andMalaysia'sexportsfrom1984to 1995.Usingthe Philippinedataasanexampleof theForecastProDrocess, the softwarefirst transforms thi data setinto logarithrnicform (althoughit canrecommend raw datato betransformed intoeitherlogarithrnic or squareroot form). Incidentally,once hansformed,ForecastPro automatically back-hansforms theresultssothatthestain tisticsand forecastsare represented their original form,and aremore"intelligible"to themanager. The graph in Figure 1 showsa forecastingmodel using only the data from 1970to 1990.i.e..thesoftware"withholds" thelastfive entriesfrom 1991to 1995in the series,to test the accuracyof the model,by comparingits "own" forecast with the achraldata.Noticethat theforecastis fairlycloseto theactualor historicalGDPfrom 1991to 1995. For the statisticallycurious,Table1 Proanalvsiswhich orovidestheForecast : .. indicatesthat thereare no shonglyslgnificant regressorsto "justify" why it chosea univariatemethod.Because the it sedesis too shortto useBox-Jenkins, further recommendedExponential Smoothing.Finally,ForecastProselected Holt'smodelfor exponential smoothing which meansthat ihe daia mustbe linearly trended and must contain no (asshownby theactualdata). seasonality Note that thegraphin Figure1shows a steadilyrisingGDPforecastfor thePhilAPRrL-MAY 1996. THEAsrANMANAGER

ippines despite the tepid growth in the mid-1980sfollowing the assassinationof Ninoy Aquino and the coups in the late 1 9 8 0 sd u r i n g t h e a d m i n i s t r a t i o n o f CorazonAquino. One should not make too much of the forecastbecausethe model in use puts greater weight on the more recent data where Philippine GDP has been rising could steadilysince1991.But theforecast and ofeconomists support the contention Philthat the policv analvstswho believe "boom-andippines has overcomethe bust cycle" that characterizedits pasteconomic history. Under this scenario,the Philippinesis poisedfor slou (relativeto China)butsteadyCDP its neighbors,like growth. The graph in Figure 2 shorvsMalaYsia's exports.Tradeis also dsing quite rapidly, as befitting a country with a strongtradition and infrastrucfuregeared for exports.Indeed,the pattem of export grorrth,.rrerthe time perio.lis fairly predictable,even rvith simple visual analyc dvnamic .i:'.Notefhatthesolh|are.hor'r grou th but in a cvclical.non-linearfa.hion. The Malavsiandata sampieclearlv "real world" behavior:variables indicates do not dse in a straightline. Manv managers tend to make their "straightline," probably for forecastsin a simplicitv but with somelossof accuracy "mechanics"(or ForecastPro providesthe m a t h e m a t i ctso)e \ ' a l u a tnt 'o n ' l i n e adr d t d and to make the appropdate nonlinear forecasts. Even for the inexperienceduser (wlth to P,ena fa.t. ompuler).theenlireProcess erate forecastsand diagnostic statistics (assumingspeedydata-entry)might not takemore than ten minutes.Howevet the task of interpreting data and making the appropriate judgement, should take far more than ten minutes.The softwaredoes not substitutefor thinking; it merelv provides data to make more informed decisions.

Figure 2 C

GDP-Philippines

U) l

'r8000 DATA+ HISTORIC 16000

14000

12000

10000

8000

FITTEDDATA+

6000

4000 1986

1988

castsof other explanatoryvariables.Data timelinessis uneven.Thus, trade data may be recorded dailv and classified weekly; however,consumptioninformation oftencomesquarterlyand may bedeProcirlayedby 'everalmonths.Forecasl cumvents that problem by making forecastsof other variables,then usesthe results in a different forecastmodel-multiple regression. lhe ideal combinationfor ctralegi. scenarioanalysi' is to combinequalltaThelattechniques. riveand qudntitati\.e ier tend tobelimited notonlyby the availability of data but alsoby the complexitv of the model building effort. A previous article descdbingStella Conclusion One can go further with the analvsis presentsdynamic behavior for cornpliby including other explanatoryvariables cated data; while user-friendly, it does for GDP, such as net exports, consump- require preparation in designing the simulation model. On the other hand, tion, expenditures,and national level investments.The processinvolves a more ForecastPro is morelirnited in scope(only complermodel,suchas multiple regres- time sedes data) but is extremely user"Exfriendly; asthis articlepoints out, the sion. But note the requirementfor such a foreca.t:G DPrequiresindependent f!,re- pertTool" caneven tell the managerwhat 1996 THEAsrANMANAGER. APRIL-MAY

1990

1992

1994

1996

is the most appropriate model to use given the particular data set.Incidentally, for data which shows cyclical (over the v e a r s ) a n d s e a s o n a l( w i t h i n a y e a r ) behaviol ForecastPro is likely to choose some form of exponentialsmoothing lt is, thercfore,important to continuallv update the data asmore data points become available, and to rerun the forecast-a fairly easyiask given the software'sfeatures. ForecastPro substitutesfor the traditionally tedious proiection and forecasting methods which often consumelarge amounts of time for calculations,analysis, and editing. The availability of most time-seriesdata allows quick and simple manipulation with immediate results, and should acceleratethe utility and skill in making forecasts. Diectar ol .istoL.Romn]t, t'roi.Fnt ll. tslfu Erecutju th. AIM PalicvForut . hlttrnrt: itt kidovattk.edLt.ph is thc Poli(v Anallsl af the Svsk'tt1 Hn:fl Sn,rjsd/nt.q C{rnfcliirrfr.ss Drsk.llrlelnt!: k ett@ain eduph

'*.:.+ POHcyFORUM.\ I

By PRoFESSoR FRANCrsco L. ROMAN,JR. ANDASUNCION M. SEBASTIAN

TheFamilyCorporation:

Underctanding TheFamityin Business (Partl) llala and Dlffer.enees Family corporations(FamCors)range from neighborhood "mom and pop" storesto large conglomerates, Iike the SalimGroup in lndonesia.Little research is availableon Asian familv corporations but someresearchftom the US offersclues which mav applv to Asian FamCors.Statistics indicatesthat over 90% of all corporations (including 35c/.in the Forlrrne 500)are either owned or controlled bv a family (Lansberg,1983).Somefamily enterprisesgo out of existenceafter ten years,although their averagelife expectancy is 24 vears-which is roughlv the averagetenureof founder.of iamilvbusinesse.(Beckhardand Dver; Lansberg, 1983).An early s1u4y (Dun and Bradstreet,1973)estimatedthat approximatelv 70% of all family businessesare either sold or liquidateddtter the de,ithor rctirement of their founders; another revealedthat onlv threeoul of len survile into the secondgeneration(Poe,1980). Family corporationsare different and more complicatedthan the "normal" professionalbusinessbecausethey are both 18

a businessentitv and an extensionof the familv. Like any business,FamCorsmust grorv and profit. Rolesas a family, however include cale and nurturance,and developmentof individual needsof its members,be thev relatedby blood or marriage,bv formal or "informal" adoption. The diverse and complex problems which confront leaders,as headsof both families and businesses,make survival difficult, and the dvnamicsof working t o g e l h e ra ) a f a m i l v t o m e e t s i m p l e ' goals of profit-making become complicated.Thus,neitherorganizationaltheory nor pure businesstechniquesare able to addressthe problem of FamCors. Family as a System Familv members rarelv see themselvesas a cohesiveunitj this mav seem counter-intuitl\c.Severdlp'vchologi.t. studied the (American) family corporation a. a svstem.One theoryof lhe family svstem(Bowen,1978)suggeststhat persons are programmed from birth to act in certain ways, and try to sensewhat the e\pectedbeha\.ioris given the envi-

ronment around them. Thus, a range of b e h a v i o r o p e r a t e si n a f a m i l y , s o m e "gut" basedon feel; otherson "rational" thought. In Bowen'sdefinition, to reactaccording to the familv messagesystem is to funchonfrom an emotionalbase,whereas to eleclbeha\ior other than rr hat one i: "programmed" to do is to functionfrom a thinking base.The balancebetween emotion and intellect allows a penon to function from a thinking baseunder periodsof stres..Thus.in somefamilybusinesses,memberscanoperatethebusiness effectivelv but, rvhen under pressureor "prostress,thev act according to their g r a m " ( a c t i n go n a n e m o t i o n a lb a s e ) rvhich may conflict with sound business prachces. Another psychologist (Toman, 1976) studied how one's position in the family stru(tureinfluencespatternsof behavior. For example, the eldest are expectedto take on responsibilitiesfor younger siblings. Becauseof agesupremacv they arc expectedto be in charge,conhol,and lead. The goal of applying family systems APRIL-MAY 1996. THEAsrANMANAGER

Categories of Assumptions

Paternalistic

Laissez Faire

Participative

Relationshipsr

Lineal (Hierarchical)

Lineal

Collateral (Grouporiented) Individualistic

Human Nature '

Peopleare basically untrustworthy

Peopleare qood and trustw6rthy

Peopleare good and trustworthy

People are neither qoocl nor ev ;eutral stance

Nature of Truth l

Tiuth resides in the founder,/family

Truth residesin founder / familv althouah outsiilers are giv-enauthority

Truth resides in group decision-making participahon

Truth found in professional rules 6f conduct

The Environment a

Proactivestance

Halmonizing/ Proactive sta;rce

Harmonizing/ Proactivestance

Reactive/ Proactivestance

Universalism/ Partiolarism 5

Particuladstic (Nepotism)

Particula stic

Universalistic

Time o

Present-or past-o ented

Present-€r past past-oriented

Present---{r future.oriented

Present-odented

Human Activity 7

Doingorientation

DointOrientation

Being-in-becoming

Doing orientation

Prof€ssional

r Are relationshipsbetweenmembe$of the organizationasiumedto be primaily lineal (hierarchical),collateral ot individualislicin nature? GrouForiented), ' Are peopleconsideredto be basicallygood,basicallyevil, or neutral (neithergood nor evil)? 3 Is truth (correctdecisions)derived from authority figuresor personalinvestiSationand testinS? { ls therea basicbelief that peoplecanmasterthe environment,that they rnustbe subjugatedby the envilonment, or that they should atiempt to harmonizewith the environment? t Shouldall membersof the organizationb€ evaluafedby the samestandardsor should certainindividuals be given Pteferentialtreatrn€nt? 6 Are membersof the organizationprimarily orientedto the past,ihe present,or the future? 7 Are peoplebasicallyactive(doing orientation)?Are peoplepassiveand unableto alter extstingcircumstances 6eing orientation)?Or, is a person'sprimary goal the developmentof self asan integratedwhole Oeing-in-becomingorientation)?

theory in businessis to identify family patternsthat impair operationsorimpede progress(Bork, 1986).

businesses. In the patriarchal family, the father (or the familv leaderwho-may be the mother or one of the children) is the in dominant of Families authority figure who makesall Cultural Patterns major goals and decisionsand expectsto Business The leaderof a patriarchal father asbe obeyed. In many families, the often familv rarely takes his children and sumesthe chief executiveposition while sometimes,evenhis spouse,into his conthe mother assumesthe implicit and infidencealthough they maybe nominallv valuable role of emotionalleader-interpreting the behavior of one family mem- part of top management and informaber to anothet keeping communication tion. The head of a collaborative family lines open, making sure that feelingsare often takesthe spouseand children into considered,and planning specialfamily ones' confidence,as sourcesof informafunctions. tion and ideasin making decisions.Each Thereare threecommon cultural patternsin a familycorporation.Eachrepre- family memberhasan opportunity to exsentsdifferent ways of handling author- ert somepoweras the familv sharesgoals ity, achievinggoals,making decisions, and values and placeshigh prioritv on maintaining familv solidarity and coopand managing conflict. EachreflectsdiF ferentas'umptionsaboutfamilvrelation- eration. The conflicted family exudesmrsships.basicnalure of familv member>, trust, conflict,alienation,and an absence and the method of solving problemsand resolvingconflicts.Thesecultural pat- of sharedgoals.Individual motives and desiresguide everyone'sactions.Famrterns are often the sourceof manv frusliesin conflictareoftenunableto develop trations and problemsthat plaguefamilv 1996 THEAsrANMANAGER. APRIL-MAY

to resolve problem-solving mechanisms differences andrely on seeminglyimpersonallawsuitsor merelyavoideachother Cultural Patterns in Business Theculturalconfiguration ofa particubecause it forms lar companvis significant thecomplexithebasisfor understanding tiesof the firm as it evolvesover its life cycle.Dyer(1986)identifiesfour cultural asfollows: patternsofthefamilybusiness, to to laissez-faire, from paternalistic, participative,evolvingfinally to professional(SeeTable1). In a patemalisticculture,thefounder and otherfamily leadersretainall decision-makingauthodtyand key information aboutthe firm's operationsso decisionscanbe madequicklyandresources mobilizedrapidly.Leadersin a paternalisticcultureareoftenhighlycharismatic. Theirfollowershavea similarlyhighcommitmentto canying out the leaders'vision.Thiscommitmenthasa positiveeffecton a small,strugglingbusiness. Familymembersaregivenpreference 't9

over non-familyemployees. Thereis a arereplacedby wordslike leaderor spon- hrrearehighly proactivein aftemptingto high distrust of outsidersso the founder sorto de-emphasize theuseof titlesand increasethe firm's profitabiliry They enandhis farnily closelysupervisetheir em- to createa feelingof communityThecom- gagein long-range or strategicplanning ployeeswho havelittle discretionin per- pany under this culturedispenses with and havea cleardoing orientation.To formingtasks.Theemployees'role liesin jobdescriptions or organizational charts. them,gettingthe iob doneand the botcarying out thefamily'swishes. Relationships arebasedon highlevelsof tom-lineare crucial.How to get the iob Patemalisticfirms areclearlyoriented trust.Co-workers aredeemedto bebasi- doneis relativelyunimportant.Thispaseitherto the pastor to the present.The callygoodand trustworthyso closesu- sionfor resultsleadsto receivingrewards past-orientedaresteepedin family tradi- pervision or other overt control mecha- basedon skillsor performance. Thecritionsand carryon the founder'slegacy. nisms are avoided.Commitmentand teria for advancementis universalalThepresent-odented, on theotherhand, moraleare high; responseto changestn thoughin somefirms, politicalintrigue are quick to meet new threatsand chal- theenvironment, arequick.lnnovationis and connections are usedinformallyto lenges.To them, hadition is lessimpor- present.A senseof freedomand respon- gainrewards. tantthanremainingprofitablein theshort sibilityamongemployees, seldomfound A majorweakness of theprofessional run.Theydisplaylittle"loyalty"to a par- in familyfirms,is alsoevident. cultureis its tendencyto alienatetheemticular market nichethat the founders Nepotism and other forms of fav- ployeesusedto working for the family may havecreated. oritismaredisdained. Evaluationcriteria andwho mustadjustto a differentsetof Thefirm maybein jeopardywhenthe areuniversallyapplied with overall per- assumptions.The negativeeffectsasleaderdies or becomesincaDacitated. formanceand contribution to the group cribed to the shift to a professionalculFamilymembersin ihe businesstendto assalientfeatures. Emphasisis on using ture includeabsenteeism, turnover,unfeelincompetent andpowerless because thegroupto makedecisions. All employ- healthycompetitionamongindividuals theleadermadeall thekeydecisions, and eesare consideredDotentialsourcesof and departments, low morale,and low training and developmentof the next valuableinformationand solutionsto commitment, generationhadbeenneglected. Another problems. possibleproblemsurfaces if leaderscanTheculturehasa "being-in-becoming f'rom lamlly Buslness Ib Tamnot manageambiguity or complexity odentation"toward the natureof human lly '60orporatlontt when the businessgrows or when the activity.Personalgrowth and developSalomon(i977)identifiessomeforces "rulesof the game" change.The pater- mentof individual employeesareintegral whichhavedrivenfamiliesto offercomnalisticpattem,thus,seemsidealwhen to thework of theorganization. ThepaF panystockto thepublic:to increase pera businessis smalland theenvironment tem succeeds in complexandever-chang- sonalwealth,to diversify,to obtaineqis fairly stable. ing environments whereinputs from uity capitalfor expansion, to attractand The laissez-fairecultural pattem rs manylevelsareneededto maketheright motivateemployees,to avoid internal often a transition,"experimental"state decisions. revenueseryicevaluationof companyasbasedon highlevelsof trustbetweenthe The major weaknessof the partici- sets,to satisfyinvestmentbankers,to workersand the family.Authority is pativecultureis time in arrivingat a professionalize management, andto sell largelydelegated to lower-leveldecision participativedecisionwhich.is usually out. makersif theleaderrecognizes a lackof delayedor underminedby theprocess of Thereareunintendedconsmuences of experienci: or competence in particular gatheringinput from employees. It be- taking a family businesspublic.These business functionsor activities.Employ- comesa challengefor management to dif- include(1)conllictamongexecutives and eeshavea widelatitudein achieving the ferentiatebetweendecisionsmaderap- familymembers, (2)a focuson short-run goalsset by the founder and the family. idly with minimaldiscussion, anddeii- results,specifically on priceof the comProblemsoccurif the employees do not sions which need more time and em- pany'sstockagainstlong-termviability act consistently with the family'sbasic ployeepariicipation. of thecompany,(3)resentment of public valuesand assumptions which are not A professionalculture is generally scrutiny-thepublicbeingoutsidestockalwaysaPParenr. foundin firms wheretheowningfamily holdersand boardmembers,(4)change The participativeculture discounts tums management of the businessover in the powerstruchrrewhich dilutesihe farnily membershipandownershipasthe to non-family,professionalmanagers. The family'spowerandinfluence, and(5)the primary basisfor power and influence. owning family'sinvolvementoftendis- risk of a takeoverwhich is anathemaro Relationships tend to bâ&#x201A;Ź morecollateral appearswith the adventof professional thefoundingentrepreneurs. in natureand moregroup-oriented. The manaSement. Therecruitmentof professional manstatusandpowerof thefamilyareminiMost often,professional managers agersin a family firm is usuallyrelated mizedto createa moreegalitarianatmos- find themselves in situationswherethey with the process of goingpublic.A fampnerealrnougnnon-lamltymembersare arecalledto turn arounda falteringfam- ily firm usuallyrecruitsprofessionalmannot necessarily on equalfootingwith the ily business. Theyfind themselves in a agerswhenthefamilyperceives a lackof founderand his family. reactormode,respondingto environmen- technical expertise to continueto run the Peopleworkingfor the companyare tal forcesand dousins the fires which businesseffectivelyand/or considers calledassociates ratherthanemnlovees. tfueatento consum"t}refi.-. professional managers astherationalallennslKe Doss/ manager, andsupervlsor Othermanagers in a professional cul- temativeto nepotismand familialcon20

APRIL.MAY 1996. THEASIANMANAGER

manageilict.. Brin8ingrn professiona) the ment create5 and accelerate- ten5ion and processof decisionmaking because threeorganizationalstructuresnow overIap (SeeFigure 1). Certain tradeoffsoccut for instance,in leadershippatterns, the psvchologicalcontractbetweenmanagementandworkers,organization-communitv relations,and organizationaleffectiveness.Nerv leadershipstvlesmust "profesemergebecause,by definition, a : i o n a l ' m a n a g errr i l l a p p l vf n r m a l h u . i nesstraining,and mav comefrom a diffcrentbackground. While founclcrsare motivated to cr!' ate an organizationand takesigt.tificant risks,professionalmanagersseethemselvesas or,erseersrvho build on what foundershavecreated.Professionalnrarr agersare committedto a businessonly as far as the job is challengingand offers theabthepossibiJitv of advancement.In senceofeither,thev mav startlooking for olher job opportunities. Professionalmanagers also tend kr follow professionalcodes of conduct .u. h that rheyare oftenperceired asim"run p e r s o n a li n d i v i d u a l s w h o our rules" in contrastto thc charismaticfat h e r f i g u r c so r l o u n d e r s . , f[ a m r l vb u . i ncssesrvho may be characierizedbv theirintuitionratherthantheuseof analvtical tools. The familraI natureoi thep'vchologi' c a l c o n t r a c itn a f a m i l v - o t t n c dh r m i ' suchthat the founder and his familv takt' careof then orler. ,rnJ,in rcturn,reccirc t h e e m p l o r e e ' 'l o r a l t r a n . l d e d i c . r t i o n This personal relationship may extend beyondthewallsofbusinessto reachthe communit)' at large.In contrast,the psychologicalcontractbetlveenprofessional nr,rndBeri dnd \\ orLer..( enrsu Ii]it,tri,ln. It is a function of salarv bonuses,and other fringebenefitsrvhich mav increase "distance" betw'cenu'orkers on the the onehand, and the managementand familv membersstill inr,olvedin the business on the other Professionalmanagersof"tough decisions," ten are calledto make ihen are pressuredas not giving enough lveight to the needsand concernsof the localcommunily,for example,when la1'offs or plant closurestake place. The pressureto turn the company around during,a cri.i. Lre;le. thc Prrceptionof a short term orientation.More ominousis the stereotvpeofprofessional . APRIL-MAY 1996 THEAsr,\NMANACER

overlap ttr*",3,I],tA1finasâ&#x201A;Źrial OWNERS FAMILY MEMBERS

MANAGERSAND EMPTOYEES

Competent

Incompetent

Loyal

Superstar

Family Retainer

Non-loyal

Transient

Parasite

manaâ&#x201A;Źierswho use company profits to cnhancetheir careerswhich mav conflici rvith the desireof familv membersto use the funds for themselves.A practical erample is thebattle over rctainedearnings or:urplur. betweenretentionin thebu.inessand payout to family stockholders. Non-familv nembers (NFMs) who decide to stay in family corporationsfall under fourcategories,dcpendingon their level of competence(professionalancl t'u.inc:'.krll.) and lovnllv to theorp,,rnization(SeeTable2). A compctentand lova) NFM, being a "superstar." greatassetto Famcors,is the A conpetent buinon-loyal memberis caF "transient,"r,r'hereas who egorizedas one is loyal to ihe organizationbut is incom"famiiy reiainer." pctent becomingthe "parasite" The refersto the incompetent a n . ln o n - l o v a n l . h oa p p e a r na l lo r g a n i zations,familv or otherwise.Note that the family retainersmay outlastthe transients becauseof the value placed on lovalty. "other" dutiesThe former ma1,receive informant and confidant, for example. It is possiblethat every professional managerstarts out as a transient.The obviousgoal is to be the superstar;mar"informal" riage into, or adoption bv, family may take place. If at some the point, in a rapidlv changing busincss environment,the superstar'sskills become obsolete,then he or she had better build tics that bind, to demonstratc loyalty to the FamCor.

Editor's Note:ThisttrfitlL'is fln'firsfpdrf itr a stritson fatnilycorynrntilns.Plrf I focus$ Pnrt'Il ofi t'h(bnsicc)nctpfstud sfrucfura. , ',,1<1,/, v , rar4r/r. ,'f 1d,'8,fd,rC{'r: rj' 1'111 Asn. REFERENCES L Bcckhard, Ilichardand Dr,er,lV. Cibb, "MmagutgContntritynt Tfu Fantilu-Oit:ntLl lr. VI.rr)aHemt'nt A.. \ i.rBr,.r'r,.. Americ,rn I{eprintedfrom Organizationai tions, 19113; Dvnamics. Riskv 2. Bork,Davicl.FamilvBusiness, B u ' i r < ' - .l l , r r rI , ' \ l a l e A t \ \ , ' r l . \ e r r \ , r r l , A.\oci,l \e\ \r,rL. Anterrian\l.,n,r!,umtrll tion.1986. andLeach, 3.Davis,John;Gallo,Mich.rel; Otrer VanPeter"Non FamilvManagers." lnstitute,1990.(BulletPresenagedBusiness 'l l , r t l oV n J h n a l . S e m i n . r r , ' n, a d r n ;T h e FamilvBusint'ss.") . 1D . r , r . h . C i b h .l r .C r i l ( u r ,(rhl a n F ien f a m i h F r r m . . \ n t r c r F , r t idnn! d\ l a n a g i n A B u . r n e . . . r nl a J m i h T r a n . t l r , ' n5r '.t nF r a n ' Business Publishers. cisco,London.Jossev 1986. "Mar/tqrrts Httrtrl,lRr 5. Lnnsbrr&IvanS. ' . . t r '., t t L t ' u t f|ut . ' r ' f h c l r , ' b l i m. , i I n . l i l u As tionalOverlap."AmericanManagt'ment fromOrganizational Reprintecl sociatior,1983; Dvnamics. 6. Poe,R. "TheSOB's.",'lrrossi/rcBortrd. pp.23'33. Mav,1980, Pn)f fra|.is.o L. Rorri r, /r rsllf fr c., /ir. llird.lor ol lht AIM PolrcyF,vtrIt 1|l(rntt: in11kl.@ntldu.ph ,,1srr./(rrM. S.l,,rilid,Jrs ir Rfn'i?r.,rfrdl llrf .4srorl,r &lu lh s i i t r n , r i M n r d s f r r r d r/f,.r i . r t 1 t l : ab l a a t t n

Mamcnmnnn 7ryr,AIM Conrnnnrucn oNAsl,r

r-$"

BY PRoFEssoR ED\\,.\RD K.\'.CHE\ l ' r , - r J .n r i r r r n . l r ( . , l l 'g . H , . r g K , , r ' -

AsiaPacific Suh-Regionalism A CaseStudvof the SouthChinaBconomi c Zone

he rise ol Asi.rn grol th polvgons accounts ior econonricdt' namism in ihe.region in the past 2(l vc.rrs. Fifteen ve.rrs ago, wcll knor,n economistsprcLlicterlthat e\ port-orir.ntcdindustrializationn'oulcl soon come to an enc1.lt is a zc.ro-sum, if not a ne'gative-sunr,game. Hol' could thc l'hok l'orld .rbsorb,rll the manufactureclprod ucts pouring ink) t h e r v e s t c r n m . r r k e t ? E r p e r i e nc e , ho\vL'\'e'ttells us othenr.ise. Export orientedinclustrializ,ttion has provedto bc a positive-sumgame.rsmore d e v e ' l o p i n gc o u n t r i e se n ; o r , c dr a p i c l grorl'th though subregrona I de|eLrpmcnl in this part of thc worlcl.The econornists have underratedthe possibilitVof t'conomiccomplement,rritr,. Thtr',r1lfocuseri on competliron.

Deonomic ( omplementaritl l V h a t h a v t b c e . nt h e v e h i c l e so l

.rnreC . ountries b u i ; r 1 - r o s i t i V c - s ugm graduaiclron onc t() ihc nc\t ticr oi in, i r n r f l Lr n Ln t , r n rI\ T l . ,\ t r , t l t L. f t ' . t ( l u t f , tlustrir:sas thev en$,rgein co()ler,rtion, out inclustrics, sophistic.rted clivisionoi rathtr ihan cutthroiitconlpctition.Fast l a b o r ,f o r c i g n d i r e c t i n l c s t m c n i , a n c l , , , ' 1 ' , , 1 1-11., ' r r l lL1i i . ir , , ' rr . r l ul l , , . i i r r EasteruEunrpe,l-atinAnrerica,or in Afr i , . rh t r . r u - r h ,r r ; , . * . l r . lr t . ' ri l r r r '. , neat ind tid! patternin the abscnctot coopetation,rndcomplenrentarihproduc tiru. i.:'.r r.rr-.,:r..ir ei Enrergingfllrr the e.rrlv 198()s, the trJ'l itt F c o n o n r i c Z o r r e S o u t hC h i n a consjsts itiylt :1u-rJi!y p r l n c i p a l l vo f C L r a n g e l u natn c lF L r j i a r r , Tail'an, ,rnrl Iklrg Kong. lt js so far the lJ!cxei.j, mostsucces:fu I groi\1htrianglcin Asra.I an] noi too optinristicabout the gron th enrergingsubrtgionaleconomiczones.If trianslcsnol't,rking placcin Southtast all clt'r'ekrpmg countrir.sr.ng,rgc morc 1n Asia beritusethet onlv seerl to be joint conrplemeniaritv rathL.rthancompetitive * , , ' - 1 . 1 1g' ' . p 1 , ' rlr r ! . r r r r r ! ! - , U t Lj l It l r . l .rctilities,it \\'i11 no longerbe a zero sum structurc.I:orL'ignr.rs might comt in and

tirfu-,r

\'1,\\ 1996. THI Asl,\\ M,\\,\cLti APRrr_

engagein economicactivitiesin an intensified closedftectio& not only between thezonesandoutsideeconomiesbut also within threepartiesof the zone. One key successfactor to the South China EconomicZone is high degreeof vertical,rather than horizontal,comple mentarity. Complementadtyshould be along the value-addedchain.On a horiis ratherlimited and zontalplang success short-tved. China,Hong Kon& and Taiwan's complementarity,in terms of re. sources-natural,physical,human,financial-nets a high degreeof economicdeveloprnent. ; . Complementarityis highly visible in vertical,value-addedchainsand equitable distributionof mutualbenefits,which accountfor successin the South China EconomicZone.Growth triangles,however,may not besustainedif mutual benefitsarenot realized.If only onezonewill benefit,then it will be difficult to sustain otherzonesfor the long term. In the South China EconornicZone, everypa*y getsthe maximumbenefitof 1570in real terms.Hong Kong reduced its labor force from more than one million peopleto 400,000. Guangdongand Fuiiangot a 15%increasein realterms

Bole ol The Pnlvate Soator Another key successfactor to the SouthChina EconomicZone is acuve participation of the private sector.It is possiblythe only zonewhich wasmotivatedenttely by theprivatesectorBusinegsnetworking-inter-firm and intrafirm trade-leads to closerprivate sector hesthat sustaineconomicgrowth. Wth somederegulationandfriendly policiesadoptedby MainlandChinain the early 1980s,the private sectorhad the chanceto explorebusinessopportunities.Businessmen frorr theprivatesector know how to resolveconflicts and minimize risks through arbitration mechanismswithin businesstradeassociahonsin Hong Kong evenunder constant political antagonismand in the absenceof diplomatic relationsand formal channels. ASEAN countrieshave been trying hard to achieve blend-to-friend complementaritywith multinationalcorporations,which took placenaturally in Souih China. Governmentcan only do somuchwith cooperativeeffortsif there is only minimal private sectorpaticipa-

tion. Whai llec Ahead Will the SouthChina EconomicZone be ableto maintain its success, say,in the comingtenyea$?Evenwhile we arcfaced with political uncertainties,I am optimistic. I do not think therewill be a civil war unlessTaiwanformally declaresindependence.The Thiwanesehave built up their economy through hard work. They would not want to dâ&#x201A;Źshoyit. Interferenceby otherpartiesmay trigger war in South China becauseChina will resentinternationalizationof what it considersdomesticissues.China will not tolerateanything that would hurt its unity. China will maintain its unity ai all costs.'"W'emust promote hade between TaiwanandMainlandChina,"TradeMinister MadamePooYeesaid. "China intends to maintain its prosperity. Other foreigncountriesmustnot overplaytheir part." South China is not a labor surDlus country.You can hire a worker for a6out US$600-$700. It is quite expensivenow.It is no longer low-costproductionbase. Manylabor-intensive indushieshavebeen

for 15years.Taiwanalsounderwenta hansformation. smootheconomic

Gcogaphlcel Prodnfty and Oufiural Affnfty Other key successfactors to the SouthChina Econonic Zoneare geographicalproxinity andculturalaffhity. With wide distances,transportation becomesa problemin the SoutheastAsianEconomicArea.Connecting SouthChina,on theotherhand,is sirnple.HongKongis only onehour away from anyotherpoint in thezone.More importantly,oneparty of theeconomic growthzoneshouldactasa nucleus. Holrg Kongassumedthat role-of being the center-with the intellect,infrastructure, manpower and professional services,and businesssupport sysrerns. Scholarsandpoliry makerstend to exaggeratethe value of cultual affinity but I have sorre doubts. Business is business.Where there is business, there should be profits. Who cares aboutcultural background?

. APRrL-MAY 1996 THEAsrANMANAGER

Value-

electronics

^0(\

textiles

in-countryshift to higher value-addedindustries r+transfer

industry andinvestin LDC

importspioduction exports

Time Theflyinggeesemodelwasfirst ussdby Prof.Akamatsu to describe the lifecyclesof industrios in th6courssof economic develoDment.

has TheChinese economic develooment pattern. takena bow-and-arrow

relocatedfurther inland. Investment

0pportunlties

transportationand civil aviation,finance,andinsurance. Thereis a huge marketin high technology industriesin South China. T h e C h i n e s ee c o is renomicdevelopment ferredto asthebow-andpatarrow geographical running tern.Thebow is a l o n g t h e c o a s t ,f r o m NortheastChina downto Hunjianglsland.Thearrow is now the up and risingregionalongYangtze River.50you get a bow and arrowwith the arrow spearheadpointing at America.People

haveto takea broaderpe$pectiveslightly beyond SouthChina to cover the middle part of China as well.

Investorsshouldlook for opportuniChinais a marketonly for high qualties in services,telecommunications, ity products.Otherpeopleshouldnot as-

sumethat the Chinesehavea low purchasingpower,therefore,thev only deservethe secondbestbrand.Thatstratwrong.TheChineseonly egvisabsolutelv wantthebest.Thereis something to learn A big necktiecomfrom this anecdote: panyin HongKongsells"Cold Lion" necktiesin Hong Kong.Theythought "SilverLion" woulddo in China.It wasa totaldisasterWhat the Chinesewanted wasa "DiamondLion", somethingeven betterthana "Cold Lion." Lesson:It is wrong to pitch the Chinesemarketlowerthananvwherein the world. Butif you pitchtheChinesemarket higher,thenyou getyour sales.

ProfrsorEfuuard K. Y.Chcnuashighly recomrnended byAIM Clr1er0r DauidK. P. "c}ntrast" Li.Professor Chengn:ent1erudite Asia polvg}ns speech on uthatSoltLl.l.'ast lack:i)erticnl complemettar ifv. Professor Chenholdsa PhDdegree lrom andMA nndBA rlegrees OxlortlUniuersity fromHongKongUnitersity.

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fi,,,,,,,

ot& rcvN MrUft"C'Ar

7rn,,AIM MmncnMnnrr eoronnRrruc[ oNAsrA i!, sI,: j,

-i:^

r : 4..r..,,:j/n

i_:.:2..

BY DR, NARONGCHAIAKRASANEE ChairmanandCEO,CeneralFinance & Securities PublicCompany,Ltd

TheBahtEconomy he BahtEconomyencompasses five r e g i o n a l e c o n o m i e sC : ambodia, LaosPDR,Myanmar,Thailand,and Vietnam (seeFigure 1). Due to their close proximity to Thailancland their current .tdgeof economrcdevelopment.therei. great potential for trade between these countriesand Thailand. The Baht Economy refers to the relatile strengthof the Thai economyin the region and the useof the Thai Baht asthe currencyfor trade and investmentamong thesecountries.Thailandhasa relatively stablecurrencydue to its remarkableeconomic gro\\'th and prosperitv in recent trmes. The Baht Economt however,is quitc difficult to fit into the so-calledpolvgons, sinceil onlv involyescertain activities n e a rt h e T h a rb o r d e r rh o v "p e o p l el r r e . what kind of productsthey use,etc.On geo-economicand geo-politicalscaies, countries near the Thai borders. tvould rather not be identified with the baht d r e , r ,o t h e r l v i 5 eI n ( ) \ v n A s t h e n e i g h borhood svndrome-"Never iove thv neighbors." The three Indochina countriesand three Mekong countries(including Yunnan Provinceof the PRC)are collectivelv 26

referredto as the GreaterMekongSubregion(GMS).Since1992,thesesixcountrieshavehelda seriesof conferences on subregional economiccooperation, with particularattentionto thetransportation and energysectors. Subregional initiatives havealsobeenidentifiedwith respectto tradeandinvestment; humanre-

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source development, tourism, environmental protection, and natural resource management. The Creater Mekong Subregionand the Northern Growth Triangle(with MaIavsiaas the point of reference),nonetheless,are two areasof interest.People never really paid much attention to the areas.But why are rve interestedin these areasat this time? Double Colncldenee of Wants Notice the complementarities.The fit is perfectat the moment.Thailand needs the help ofthesecountries.(Thailandused to conquerlands,takeaway n'omen,and makethemqueensofThailand.)Now we need the natural resourcesavailable in these countries, particularlv as markets for our goods and services. Thailand has been grorving,on the average,about 8% a vear for the last 30 vears.We have ran out of oil and energy resources and areo0' dependenton imported energy.Wehave developedall the hydroelectricfacilities that r'r'ecan have. Now r'r'heredo rve go? The best solution is to buy energl from theCMS countries. Thesecountries,consideringtheir geographv have the best potential for hyAPRIL-MAY 1996. THEAsrANMANAGER

Bangladesh

Figure1 TheBahtEconomy

THEASIAN MANAGER. APRIL-MAY1996

droelectric power. These countries are energyaccordwith Thailandhas facili- 77oGDPgrowthassumption). mountainous. Thailand, therefore,being tated a public/privatejoint venturefor All thesecountrieswant to change surroundedby thesecountries,is alsosur- 210MW a $210millionTheun-Hinboun from commandeconomiesto market rounded by mountains. When the rain PowerProjectin LaoPDR. economies. Theywelcomeforeigninvestcomes,they hit the mountains-typhoons The fit, therefore,is Thailandneeds ments.They haveembracedmarketreon the east, monsoonson the west-and electricity,energy,and marketsfor its forms afteryearsof inward-lookingauturn into rivers. Theserivers lead to fast goodsand services; the GMScountries thoritarianrule.Theywishto reconstruct waterfalls, which make the best electric- needincometo do otherthingsthat they their econmies. "Cometo ity and costpracticallynothing. need. Cambodia evenadvertises, TheGMS'swater potential,according The strongpotentialfor this region Cambodia-Land of The Future to estimatesof the Asian Development arisesfrom two reinforcingtrends:in Growth-Your New Destinv."But if vou Bank (ADB) is tremendous.If you turn Thailandon the one hand,and in other go there,you might getstu;k. Why?Beall theserains and waterfall into hydrocountrieson theother.Demandfor natu- causethereis yet to be effectivebusiness electric powet you will have a capacity ral resources and cheaplabor will con- supportsystems.Bureaucrats in these of about 100,000megawatts.Of course, tinueto intensify. countries,for at least20 years,were you cannot dam all these rivers because Thailandhas huge power needs brought up under the command you have NGOs preventing you from which may be satisfiedby Laoselectric- economy.Theystudiedin China,Eastdoing so. The onesthat would not invite ity and Burmesegas.Thailandis also ern Europe,and Russia.Backthen, noNGO intervention amount to approxi- keenon developinganalternativeexit to body knew aboutmarketeconomies. mately 58,000megawatts. the seathrough Vietnam.A road will Theydo not trustcapitalists. This projection is based on a plan to soonbe completedwhich will connect establish commercial relationships with NortheastThailandto Vietnam,through Conelusion othercountries,particularlyto gainaccess which goodsfrom Thailand,Lao PDR, Sowhataretheimmediateprospects? to their natural resources.This plan will Myanmar,and SouthernChinamay be You can do infrastructureand trading be key to all our development. shippedto therestof theworld. dealsto someextent.Thereis no doubt This map is developed by ADB, the Thedoublecoincidence of wants,de- thatthereis anincreasing amountof ecobestbible for businessin the GMS. In sup- mandfor resources in Thailand,and de- nomicactivityand greatpotentialin the port of this cooperation,ADB has promandfor liberalizationanddevelopment BahtEconomy, thoughatmostgeographivided technical assistanceof more than in thesecountries, showthatbothparties cal and economicconnotations only,but $5 million for a seriesof country consul- standto gainfrom closereconomicties. not currencyconnotations. tations,sectorstudies,subregionalproject It is only lateron when the GMShas idenfication, and development. Market Reforms and money from infrastructureand energy Areas with the biggest potential hyInfrastnucture projects,cantheybuy otherthings.At the droelectricpower that one can develop Politicalchangesin Chinahaveush- moment,the countriesaresopoor.Thev without much danger to the environment erednewglobalhends,liberalization, and do not have money to buy anything, have been identified. With high mounmarket economies. Countrieshave thereforeit will not be wiseto try to sell tains and fast waterfalls, not too many changedtheir policies:they areopento anything.If you give,it is okay;but do a r e a s u h d e r d e v e l o p m e n t w i l l b e investmentand economiccooperation not sell at the moment.If you first build flooded. that will yield benefitsfor ali parties infrastructure,then commercialand Na Trang, in anticipation of NGO rethroughcomplementarities. otherindustrialinvestments, the GMS strictions, dug a tunnel so that water can If we wantto do business in theGMS, will providegoodpotentialfor the next comethrough the tunnel to generateelec- canwe actuallydo so?To seeGMSde- decade. tricity and pump water back through a velopinto its full potential,it will takea The Baht Economybestrefersto a 21O-megawattdam. We are talking about few more yearsafter infrastructurehas geo-economic areaencompassing this developingin Laosa total of 15,000mega- beendeveloped. group of countries,with the GMS as a watts of electricity.We have identified arSubregional,regional,and trans-re- concreterecognitionof this reality.With eas,again based on ADB studies, which gional cooperationis an important ele- the shift to export-orientedgrowth and would not generateenvironmental probmentin the economicdynamismof East market-driveneconomies,competitiveIems. If Laos is to do that, income per and Southeast Asia.Otherfactors,how- nesshas.become important.Subregional capita of Laos would quadruple just by ever/ must be addressedto further proiectsenableefficientuse of human, selling electricity. strengthenthis cooperation.Thereis a capital,and natural resources; sub-reNote that Laos PDR has hydropower greatneed for infrastructurein these gionalinfrastructureproiectsdraw on generatingcapacity far greater than its countries,especially in theform of trans- theareasof comparative advantage from foreseeableneeds.Developmentof this port/ energy,and telecommunications. eachcountry.'capacitycan and should be basedon the Considerthecurrentlackof transpordemand and supply conditions of its tation facilities.TheADB estimatesthat a PhDdegree fromlohnsHopkins neighbors.Thailand,on the other hand, until the year 2020,therewill be 10.4Vo Dr.Narongchaiholds (utithhonors) UniuusityandMA in Business Economics has huge foreseeableenergy needs.An annualgrowthin freighttraffic(basedon theUniaersity of Western Australia. from

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0gihyRevisited and even in EasternEurope are still best reachedbv p nt and radio, and because the print ad graphicon the Internetis still mark more than a generationago.Ogilvv cheaperto produceand easierto distribin particular wriies well, thinks sharplv, ute electronicallvthan a TV-video ad. and takes positions. The update serues To rerieu md repeatt'oreadersOgilrq's three purposes: matimson adtertising.SaatchiBrothers "tdtert'ising" To discnss ts opposerlt'o mav be popular in media but they never "mnrktLing." Og|rw thought of himself as wrote thoughtfullv enoughon the subject (advertising).Ogilvy was somethingof a a pure advertising man. The "huckster/ shyster"imageofadvertisingneverboth- purist, perhapsdogmatic but very clear ered him and he never neededto claim in defining "good" advertising. the more exaltedtitle of a marketingmanFor instance,Ogilvv believed in reager In his book, "Ogilvv on Advertissearch,not intuition. He cited George ing" (p. 167),from which most of the Callup's earlv work (1930s)with Young quotes in this article are extracted,he & R u b j c a mi n i d e n t i t y i n ga d v e r t i s i n g wrotc: "When thev told me I had won the techniqueswhich consistentlyoutperParlin Award for Marketing, I thought formed others. He rvas fond of quoting thev rverekidding. I cannot even underRorser Reevesof Ted Bateswho 'aid, stand what the expertswrite on the sub- "What do you want of me (theadman)? ject(p.'167)." Do you want masterpieces?Or do you To disctLss ytritttad,tcrfisrrr3. After trvo want to seethe goddamned salescurve "high-tech" issues-on marketing re- stop moving dorvn and startmoving up?" .earchand "marketspar(,' it i' lime to get If the namesand examplesjust noted back to basics;and n hat can be more ba- readlike ancienthistory then perhapsthis sic ihan the pdnt ad, which, incidentally, updatecanshow that the bestupdatesare is enjovingsomethingof a revival because thosen hich have.tood the testof time, ds of its discipline rvithin confined limitsthe next sectionand the first ad will show in language,designand lavout,etc.,be"ads-as-stories" causeTV becameslop- Ogilvy on Prlnt pier as the conceptwore out, becausethe Thep nt ad entitled "GuinnessGuide emergingmarketsin China and Vietnam to Oysters" was the first advertisement

Conslder only a feu of many good points: Readers,whetherbeerdrinkersor not, briefly and delightfully are informed in less than 50 rvords per oystet -"Pocahontas fed Tangiers(ovsters)to Captain John Smith, rvith famous results." Ovster-eaterswho are not beerdrinkers might be tempted to trv a Cuinness rvith their next ovster meal, which is the best, first step. Beer drinkers are noto ouslv loval and Guinnessmalt is decidedly different from pilsensand lagers. The ad appealsto both sexesot more exactly,it does not discriminatebetween sexes.The ad targetsa specificaudience (basedon a readershipsun'ey)which rvill be left to the readers'imagination. The lowly beer,asa product (not neces.arilv the.pecificbrand ol Cuinne5s). i. associaled hith the "oy\ter-rmage good taste and a touch of class,even an aphrodisiac. 'snob The tert reinforces the appeal" and trdn5fer5 rt to Cuinnes'dccordingto Prof.Saint<burv. r,rith an e\pertappropriately sounding name-"That noble liquor-the comeliestof black malts." If vou reflect on some of the fine de-

APRIL-MAY 1996. THEASIANMANAGER

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preparedbv David Ogilvy himself as the head of his on'n agencvat age39.

the agency help him get customersT Hehad$500to spend.Not surprisingly, the headofthe agencyturnedhim over to the office copy boy, who subse. quently.I investedhis moneyin penny postcardsand mailedthem to wellheeledpeoplein the neighborhood. Six weeks later,the hotel openedto a full house."l hadtastedblood."

The alna.dng 8tory ofa Zlppo that worked

Thisupdateis not theplaceto go into theprosandconsof directmail.Sufficeit to presentOgilvy'sviews.Forhim,direct mail wasthebestvehicleto measurethe resultsof advertising,because in direct rnail,accordingto Ogilvy:"Testingis the nameof thegame." Sinceonecanonly testonevadableat a timeto getrobustresultsandtheprocesscan be time-consuming and costly, Ogilvvhadhis5-Pstonceagain.mv classification) for directmailadvertisingtestrng-posifioning,llricitlg,pIlment terms, (ormailingformat). premims,andpnckage Forexample(p. 144):

F="UF,.E*W_,* Note the editorial layout, and the story formboth plus factors.This advertisementpromised 'lf it ever fails to work, we'll fix it free.' Every morning hundredsof old and batteredZippos arrivedin the mail.Theywerereturnedthe same day, in perfectworking order-and no charge. aboutyour product-"and do a clearer, andproduct(in a particularad). Ogilvy'slast"P" is pursuit0f thep1si- morehonest,moreinformativejobof sayfioe.This maxin has severalelements: ing it..."Saleswill swingto themarketer One,he eschewed"attackads" and, at who doesthe bestjob of creatingconfiworst, only tried indirect and implied dencethat his productis "positively comparisons. Two,hebelievedin "pleas- good." ing thecustomet"by providingusefulinformation,as in the Cuinnessprint ad, Ogllvy on lflreet Mall long beforethat phrasebecamea core Ogilvywrotewell andwaswell read. maxim of total quality management. Not surprisingly,he had much to say Three,he had no qualmsabout parity aboutmanythings-usesof research, tips sinceit doesnot insultconsumers' andsoon. intel- for TV,corporateadvertising, ligence. Ogilvy'sviewson directmail might Standardtextbooks emphasize seem like a pleasantsurpdseto the "new theneedto convinceconsumersof thesugeneration." pedodtyof theproductagainstcompetiOgilvyregardeddirectmail "first love" tors.Ogihy,however,thoughtotherwise; ashis and sharedthis story and attributed articulationof this prrncr- (p.143): ple,notto himseltbut to hisagencypartner,JoelRaphaelson: One day a man walked into a Lon. If yoirandyour competitors all make donagencyandaskedto seetheboss. excellentproducts,do not imply thatyour He had bought a countryhouseand productis better Justsaywhat is good was aboutto open it as a hotel. Could

Whencollectionsof MoscowOlym. pic Gamessilver,gold,and platinum coinswere sold by direct mail, a mailing which otferedonly "silver" coins led to more sales...thaa n mailing which otleredthe completecollection.

Onecannotdeteminea-p,"i0,,1 without a test,what the appropriate"product mix" ofcoins(andtheirprices)should be. Testingcanshowthat "lessis more"if an ad is testedon full-colorand with onlv twocolors, or on a largeanda smallsize (relatively speaking), with realgainsif the testresultsshownosubstantial difference with the"moreeconomical" package. Premiumsare"two-faced"andrequiretesting:Premiums canbuildup responses but may alsoathactcustomers who are not the loyal, long term buyersevery firm seeks. Innovationis still possibleevenin as mundanea mediumasdirectmail after testing.Ogihy onceran a directmail ad to selltheCessna Citation iettolargebusinesses.It consisted oflive carrierpigeons with dn invitationto tale a freeridein a Citation.The invitationwasset up first by releasingthe carrierpigeonwith the companyaddressor CEO'scallingcard strappedto its leg.Amorepedestdan approachof telephone follow-upswasused APRIL-MAY 1996. THEASIANMANAGER

tails in the original ad-the color schemewhich complementsthe product (no jaring redsor blues,and with "oyster-pastel"shades),thefree subtle "suitable for offer for a reproduction iramlng,' the happy tace on tne headof the beerin a glass,the careftrl American selectionof coast-to-coast oysters(no Australian or Frenchoysters,no matterhow good)to appealto the target(American)market.

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4Ps of Adventlslng The4-Psof marketingarethecore of texibookliterature.Ogilly alsohas his4-Psof advertising(Thisis my classification,he neverusedthatphrase). Positioning is the first key factor "Position" Considerhow you want to your product.This term finds great favoramongmarketingexPertsbut no two of themagreeon what it means.

"what the My own definition is product does;who it is for" I could have positioned Dove as a detergent bar for men with dirty hands but choseinstsadto positionit as a toilet bar for women with dry skin 1p.12). inthe Thesecond"P" is personality brand image.Ogilvy could not lay claimto the MarlboroMan (in Marlboro country);that honor belongsto LeoBurnett.ButOgilvycreatedother fairly longJastingimagesbasedon personality.Examples:the famous "Hathawayman"with thedistinctive eyepatch(with BaronWrangellasthe model), andtheoriginalCommander Whitehead,Schweppes'president, who ran in the ads for that product for 18 years.Ogilvy did not automati"celebrityiestimonial" callyendorsethe personalityforimagebuilding.Notethat "known," when neitherindividual was the Schweppes and Hathawayadsfirst ran. doesnot necesOf course,Personalify sarily meana personbut the ability to evokean image:Ogilvy's Pepperidge Farm commercialsfeatured two horces pulling a baker'sdeliveryvan down a country road, pursued by two eager, youthful customers. Therearetlvo points to ponder:First, "image."If a group customersbuy the . APRIL-MAY 1996 THEASIANMANAGER

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This is the first advertisementOgilvy wrote as the head of his own agency-at the age of 39. of testsubiectswastold that theywould be given distilledwater,and askedto its tastgmanywouldstatethat describe theycould discemno taste.On theother hand,if anothergroup was givendistilled waterbut told thatit wastap water,manywould suggesta tasteof chlorine, plasticor aluminumpipes,fluoaspeople, ride,etc.Second, customers, identify with other people-from the Marlboro Man to Wendy'sGrandmotherasking"Where'sthe beef?(in the 'burger)". Thepreviousdiscussionleadsto the of thead. thrd"V'-Wsist ceofmemory

TheMarlboroMan adscut acrossgeneraban,the tions.lf not for theanti-smoking ad rnieht havebeen evenmore successfuI. Ogilvy did not believethata new ad everyseasonto marntarn was necessary in theproduct.He precustomer.interest ferredinnovativeextensionsof thecoread andbelievedthatcustomerswould not inherentlybecomeboredby repetition,and ceaseto identifywith ii. Note,however, "P."He wasa theothersideof this Ogihry on consumerattihrdes ruthlessresearcher not hesitate to pull out an ad and would oncethe researchsuggestedlack of interest or identificationbetweencustomers

to ensurethat the messagewas received. SinceeachCitation sold for well over halfa-million dollars at the time, selling even one, which Cessnadid, gave direct mail a high benefit-to-costratio. Ogilvy believed in applying principles of good print advertisement to direct mail. Examples:the power of good photographs, long over short copy (as long as it clearly and simply informs custom"mini-ads," and so on. ers,) coupons as There is one key factor: Ogilvy believed in the headline.The ad on the Moscow Olympic coins ran with this headline-"A solid silver issueso limited, only a fraction of Olympic Coin Collectorscan own this edition." Few headlinescan top the mail-order ad written by Vic Schwab for Dale Carnegie, from the title of his "How To Win Friends and Influence book, People"; the ad by itself sold one million books. Incidentally,Ogilvy was no Neanderthal; he embracedthe computer age and endorseddirect selling by television,and telephonedorders.As always, he had his mind set. Ogilvy thought that the best direct

should(1)setup sellingTV commercials (2) howtheproda problern; demonshate uct can solveit; (3) give a moneyback guarantee;(4) includethe price;and (5) askfor order,explicitlyandurgently.Contrary to Procter& Gamble'sformula of emphasizingonekeybenefitpercommerof cial,Ogilvybelievedin demonstrations multiplebenefitsto theconsumer. with hisbeliefin longcopy Consistent for print ads,Ogilvy alsohad no objec(atleasttwo tionsto "Iong" commercials minutes).Adirect-sellingTV adprobably requiresabout 20 secondsor more for potentialbuyersto absorbthe essential informationonhowto order-at theleast, to getthe seller'stelephonenumber.Accordingto his agencypartnet Al Eicofl "Marathoncommercials do not seemto irritate peopleas much as a clusterof short ones,like five salesmenknocking on thedoor,oneafteranother"(p.M9). As a final word of caution,Ogilvy statedthat therewas no correlationbetweenthe sizeof your audienceand the numberof ordersyou received:"When viewersareboredby an old movie,they aremorelikely to pick up the telephone

and order your product than when they arerivetd to anepisodeof Dallas"(p.149). Conelusion on Print Ads In 1983or thereabouts,Ogilvy prein print advertisdicteda "renaissance" ing. He may havesimplybeenreflecting a personalbias for that medium.But a renaissance of sortsis takingplacein the 1990sfor thereasonsindicatedearlier. Consumersin developingcountries benefitfrom print ads,sincetheycanreflect on the information(assumingit is Theyarelikely to fall for a false accurate). senseof urgencythat a TV commercial Print ad illustrations(really generates. "persistence of good ones)reinforce loyal,longmemory"thatcouldgenerate termbuyers.Thebestprint adsbrilliantly illustrationandtext.(Toconclude execute thisarticleon print adstakeonelastlook at the plain black-and-whitead for a Zippo lighter.Evenif thecopyis unclear, notethat the ad tellsa story emPhasizes the product'sbenefits,and offersa lifetime warranty.) Director L. Roman, Prof.Francisco lr., is theExecutiae oftheAIM PolicyForum.lnternet: fnnkie@aim.eduqh

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City Addresses : PNCCComplex,EDSA,cor.RelianceSt. Mandaluyong Call: l. ExecutiveOffice I Tel.Nos.631-5G84;631-84-3 Fax.No. 631-53-62 Division 2. BusinessDevelopment Tel.# 631-50-36 Fax.# 633-84-02 Bicutan,MM CentralShopYard,Km. 15SouthSuperhighway, Division, Call EquipmentManagement Tel. Nos.823-2L86to 89 Fax No. 823-06-23

PNCC... In vlgforous pursutt of government and other developmental proJects & upgrading of the Phllippine tollway system to a world-class tollway network.

PNCC supports Philippines 2OOO THEASIANMeuACrN . APRIL-MAY1996

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I}ImIcEmENT IPI,

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BYI'RoFESsoR C. TA\ QurNTrN

HowDifferentare Businessmen from Entrepreneurt? hr, is it thatbusinessmer ihrou{th out histolv havch,rddiificult\ in i.arningrt spt'ct,rbilitvrvhilc tntrcprL.nL.urs havt g,rintd r!ide .rdmrr,rtion? [ : \c n 1 , , J , ) h\ .u . i n t . r n t t n . ] r L i'LIrF subjectedto bhses,and legaland politi' in nr,rnvdeveloping cal cliscriminatiort sumnon kr c()urt countrits.Covr.rnmL.nts nranvbusincssmen u e.rlih of substanti,rl l ' , t . l l ( ' , , \ ' (r f J r l , ' r n l u .h , , 1l h Lr r Nlanvcntreprcnturs,orr amassedassets. theotherhand,art'betierrecosnizecl not somuchfor theirmatcrialaccluisitions bui for theirir1n0\'.itiYe products. l'crhaps,there,rredisiinctclitfcrcnccs between tradition.rl businessmenand entrcpreneurs. Somt'tntrcprcneurs,rre admircd for tht succt'ssfulbusirrt'sst's t h e v h a v e e s t a b l i s h ejdu s t , r st h e r e . r c busincssmtn rvho .rreacknorllt.dgcd tor their entrepreneurial spirit. Entreprcneurs .rreconrmonlvunclcr skx)dto bc thoscpcoplcu ho si,rrta nct busincss.Entrepreneurship st,rrts\\'ith ,l creativeidea that is tr,rnslriedand fash' iont'd into a productrviih.r spccificpur31

posclor a spcciiiccust()Irlcr or cnd-uscr. B u l l . L r : r ' r ( : : r r r . ll l r o \ t . l r t r t e \ \ I ' t r : i . ncss(.s nll the timc.Stiulingi ncr{ cntcrprisec.rnbt comeentrepreneurial.rsmuch asan establisht'el lirm c,rr continucto bc t'rrtrt'prt'ucnrirl.5o rlhat is it th.lt(listingu isht's busincssmcn fron cntrt'prt'neursl I c.tmcul.rn ith a looscdichot(nlr th.rt characterizcs both irarlition,rlbusint'ss

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ncrr ,rntl totl,rr"sLT rtr.rl of tntrtl-rrr'nttu s. Distincitr.rits(seeFigure1) havc1edthem both to success: the businessrn,rn's corl panv btcominc ,r corrglrnrtratc,rndthc

cntrcprL.nr.urbtlonging to ,r confeeleration ot suralllirnrs. Itluch mar,bc gJcancd,rborrtr.ntrcpre ncurshiplrom ,rcursorvstucl\.oi thcpcoplt',rncitht'ir cnterprises bthind the eco nonic gr()\vtir,particulrrlvin China,Viftnam, lhai]and, ancltht, resiof South' eastAsia. l-ht'sepeopleh,rver,isionsof grou'thanddevtlopmcnt.Thcirprociucts ncu and innovativcvet alcl scrvices,rre provirlirrg ior basicrl('cr'ssiiicsof sp(.cific ( u s t o m e r \ .T h e i r i i r m s a r e r c l , t t i v t ' l v anclst.rifed \1)unr ,rnd muJti-p,rrtnerecl rvith peepl('o[ c]ifierentcultur.rlb,rckgrounds. F()rinst,lr'rrc, lhc Fort llonifacioiancl tlevelonment deal,thcbiggr.stin thc I'hilipprnesrver, rvas,ru.rrdr:tlt() n consorin variousbusiness tiul'r'r ot l9 c(rlrp,rnies s('ctors: re,riestnte(11),bdnks(3),invcst(1),lood (1), mcnt firns (2),congiomer,rte , r n c lo i l ( l ) . E s t a b l i s h e a ds t h c F o r t B o n i f a c i oD r v L . l o p n r c nCt o r p o r . r t i o n (IrUDC),rftcr n innins the bitlcling,tlrrs L , ' n \ , ' n r u nr -t l , J L ' v\ 1 r ' t n l' ' . r , i t rC. " r poration,a subsidi.rrvof thc FirstI'acific Ciroupot Honr Kong,rvhichis 5.1?conArRrr \,1\\ Igqb. TrrEAsrA\ MANACLn

food,cour- for those introduced in the last year. To trolledby theSalimGroupof Indonesia. penserof world-standardized to everycon- match the challenge,new strategies,ne\\' Filipino CEORicardoPascuaof FBDC, tesy,value,andcleanliness "to Antarctica. Accordingto the funding approaches,and ncn'focuson thc vision: tinentexcePt summedup the organizational Mr Tim processof innovation were also intr|J in Poland, well-managed, headof McDonald's createa well-planned, "almostheaven- duced by management.(ltrduslrrlWcck, sustain- Fenton,McDonald'sis u'ell-developed, environmentally "some able,globally competitivemetropolis, sentto thesepeople"asit offers June5, 1995:p.28)3M hasmaintainedris of the of the bestfood around;the serviceis entrepreneuringculture, providinâ&#x201A;Źi ihe'ir servingthe needsandaspirations urbancommunityin the21stcentury..In quick, and peoplesmile.One doesn't employeeswith time and resourcesto de we decidedto of- haveto payto usethebathroom,there's velop products with initially srnall marchoosingour strategy, theplaceisn'tfilledwith kets.To date,it sellsmore than 60,000cliffer the bestproductin the market."Yet, airconditioning, doubtedthatprofitwaspos- smoke.Wetellyouwhat'sin thefoodand ferentproducts,rangingfron Post-ltnotes competitors siblefromtheventuregiventheconsorti- we $'ant you to bring kids" (Ftttfune, and pan scourersto surgicalsuppliesancl October17,1994:pp. 81-82).[n essence, road signs. um'shighbid for it. Managemcnt of beleaguert'clf irms Somewell-knownlargebusinesses McDonald'sproductsare not merely frenchfries, havebeenlookingfor waysto sustainoptoday startedas a one product/service food suchas hamburgers, erations, mostlv through company-byanentrepredournsizjng,c0st-cutting,and neur.Theystartedby servtrimming of managenent icinga needwhicheventuFigure I staff.Horver.etasidcfrom the ally attracteda wider panegativeimpact on emplovL'L' it tronagethatencourafied moraleand corporateculture, to becomea business.InEntrepreneul Businessman a recentstudy (Doughertvancl creaseddemandfor the Borvman)showedthat organiproduct resultedin comService-oriented Profit-orienled zationaldownsizingalso af. satisfya need pany growth and eventu. makea gain fecteda firm's innovative ally in additionalrelated edgeastheintemaJand extc'rproducts. lnterdopendont Indepondont n a l n c t w o r k o f i n n o v at i v c . relieson network A l e x T i l l e yo f T i l l e y . self-reliant support bre'aksdou'n. (Th' . lnc. developed . Endurables, limitedresources capability in-house Ecoriorrist, September9, 1995: . . integ.ated a specialhat for boating subcontracts operations firms norv conp.74). Many himself as his peoplelike that what thevhaveto d0 cede original product which Customor-focusod Itlerket-odontod "entrepre is to accluire an . end-user among . marketdemands found acceptance wants neurial spirit" ratl.rerthan just . marketniche . massmarket o u t d o o r - l o v i n gp e o p l e . rely on reengineering anci . specialized . broadproductfeatures Sincethen, he has develproduct TQM. opeda whole arrayof reIBM broke awaY from its lated productsof various Collaborative Competitive long-standing tradition auci . strategic suchas . combative typesandfeatures, alliance the outside not hired from . ioint-venture shorts,pants,vests, . acquisitive iackets, businessm.rn an accomplished . partnership . monopolistic shirts,bags,morepopu"travel n o r a m a n a g e n l e nct x p e r t . and larly knownas hired ont' thc board Rather, adventureclothing."What Coordinative Control-ofientsd "home-made" ' I\'ith n to start who is known . relativefreedom . soP startedasa ancl vision for his companv . empowermenr productdevelopedfor his . strictconformance an envlronmcllt who creates . management . DUreaucracy own needhasgrowninto a delayering conducive to entreprencur . Ieam family-owned . pinpointresponsibility successful "flagship ship-Lou Cerstner businesswith a Entrepreneurshipis abotlt store"and severalretail noble aspirationsand doabli' As AIex outletsin Canada. "We have becomea manuTilley puts it: facturet a retailet a wholesaler,and a direct merchant." Successfulenterprisesare likely to be those which introduced new and novel products and servicesfor specifictypes of customers.McDonald's,oneof the four easy-to-exportAmerican brands, is selling a service, not a packaged good. McDonald's considersitself as a dis-

1996 THEAsrANMANACER. APRIL-MAY

and the like-but a way to satisfya need. failfor their Perhapsmanybusinesses lackin entrepreneursthatcontributenew products or explorenew targetmarkets. In 1992, 3M's top management challengedthe companyby raisingtargetsfor new product contributionto total sales from 25% for productsintroduced in the last five years,to 307ofor productsinhoducedin the lastfour years,and 10%

thingsi It is about new wavs to solvc olcl problems and new products for nt'rt th r1 needs.It is aboutideasand concePts impr.oi t provide comfort, a need, satisfy \,\ \"tluc i tu well-berng, dn,.l .rdd one's ety.Yet,it is alsoabout making enterprrscs successfuland businessesprofitable. Prof. Q itltll G. Tan ho[ls tl t Crnrrliltt Pmlr\.aurl Chatrof BusintssMntlngttnItt

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t r l r r i l \ l ) l - ( l . \ l " l \ . l r r l u r r r l r l r g r o l r u o r r sl i.k c l ] l \ l l ) - 1 . \ ( ; \ . i r l ' j r r . t r r l o r r r r rl l r r . r r l r r c rl ). o l c r r t i r r lI r r l | i r r t l .: { t ' i r r , . lt,l r l r I i r l r t t o r r 0 l x r lrtr r i r I k t ' l : r l o . o i r l a l l a r r r l r oI.) o r ' l r . r t"l.i r i l l i l i r z i r rrgr t r t i o n i r l t o t t t P t ' l i l i r t r t e si:r r l r r . i r r lr l i i r r r r o r rrrl li r l n o l l o r r l ' s i l l t i t t s l t t t r ' l i o ur' ) r l r ) \ \ ' l ( ) t t t i u t i t g tcr i t r ' l l t g o \ t ' r r l l r ' r l i t t t t lt l t i t t t l c r i r l i a l r l r ' '( l ) o r t c r ' 1. ( ) ( ) 0 : l l + - 1 2 [ ] : ; l l ( ) l ; ) . . \ r r s r i r r 'i 'r r ' i g l r r .i r r t or r r r l l t U i t t gt l r t ' r t r | g r r l i r r t lIl r i r l i : g r ) \ 1 ' l r | l l l ( ' r rl it r l t r o l t i t l t c t : r ' r ' r ' ri rl ' l r r 'l r r r .r ' i r l l l r ll i r r i r l r ' t l r i r r l i r r go l ' l ) : i r { s : - g ( , \ r ' n t r r r ct r r ' l i r r i 0 r r(. \ r r . t i t r . l ( ) ( ) 0 : l + l l l i + ) . h n r g r r r i r rur r r l k t r l u . l l l l l l g l r : l r i t t ( ' g i a \ 1 ' r ' s u sl l ( ' ( ' l l i r ( l r ' l ) l r l r i r i s r ' .r r l ' \ ' ( | I | { ' i I i ( ) I I :i t.

l i t i t e t t t a l i r\' . i r r r rr n i r r l t g c ll r o u l r l l r r t l i r i u r s u c r c r l ( K I r r u r r r i r r lr(. ) t ) + :l : j ( ) - f + + . l i i l l ( ) l ) . 'l l r t l r r i . . i r r gi t t : l t t t c l i o r ltr o o k l l t . i r l c l i r r ' r r r o r I r 1 r r-l lrr r r s l l r ' tro. l i \ r ' o l t t - i l t r r r i - l i i r l r l l r . . . r r ni r c l l r c j r r r r u kt' o l r i l t l l r c r r r .l r r L i r r go l ' l ' l i r r l r r I l i l r r r r i r r rt.l t t r r .t l r t t l r i r r L l r i .r ' o l t i . l o r k . r ' p r . r r . I t r o i t r l r ' rat .r r r l c r r l i r ' ll rl r t t r r c r r ror l ' j r r r l u r r r o rlli r l l l r r . t i r r k c r c l l l l r o l t r ) i r r I r i r r r cItI r r . i I I r r , i o tr lI r a t r r 1 l l { ' r ) r ' iss. li r r r p l r r. ' o I I r ' r ' t i o(r)Il l ' l r i . ti\t u ( l l r r r p i r i r . u l { i r r l i r r g "r i t ' l r ls l r t l i f i r '. o l r r t i o r r tsl r r l i r r . t i o n. l c l r s 1 o s t t l r cl l t r ' p l i r r ' t i t i o r l ' r ' 1s I r o I r I t r r r . - o r r - | r i r( rSI rr .| r ' I I i l - r r r , r rlr' .) i r r I l r . I ' r ' ; r g r r r i rl 'r ri i' r 't i r i " n ' . r - . l r a l k l l r r r r rt l r ' . . r r r l i ! r l rot 1 ' r ' r r l i g l r l t r r ct lrrlc o l r 1 r r l ' l r r t , , .; , r ' r , r , . r ' l ' i, ;irrlr , . r r r u - ti | | r - \ \ | . |: . 1 | r Il r r . - t i o r r s. r l r r i r l r ' l u r itlr tool' trttlril rli.po.al( 1 ) t l l l ) i t l rl \r 0 l i r ' \ l ' (' o r r r ( r ' t .r l n t l U | 1. i t I | ( l) , 1 r i t l r ' : J r .I l t c ( l u i ' i t i o nl r r r '' l r i l r l r l l i r r r r r" \ \ l r i r t. l r o r r l r l : { r , \ 'n( l u r l n l l r l r I r i r r gt o . 1 x ' r ' rrl r p l i l x . r ' t r l i z i r t i o r r T " t o \ \ ' l t r r t . l l r r l c g i r ' l r i l r i l g ( ' l l ' n l t o o l . .r ' a r rl e { l l l l i i t c k o l t r r o u l o l l l r t i ( i l r i t l r ' i t rt l r c l i l t r l l i z a t i o l l r r r xr ' : . T O t l r t l l i ' r . . i r l c r r ' l l c r lp l r n i r r u f i c l r l I t r t o u r r ' sr r o t l r i r r lgr r r ti r l I r r ' l l r . r il l 1 ( l t r i l t \l ) l i i t e a t l $ l t I r ' r ' I l r c r | i : l o t r ' l l | l t l t l r r r r lrr r ' l ; rl i r r r r rg o r I r ' r r r r r r r t l i r l r l l r l g r r l i rl i l u i r r r l r r . lri r . . .

.,\l'RIL-lvlA\l996 . THE ASIANMANAGER

the manager's his articlerevisitsBaumol'sTheory and oligopolieslobby govemmentsinto and Porter'sapproaches, grouped into two, may be tools overcashategic about issuing pronouncements to se€ how Markets of Contestable these two may be a mix of in practice, off and industry to shoo judgment pacity in a specific in breaking he deepens (See Figure 1): new entrants? what he suginto monopolymarketsand 1. "lnnovateto avoid." ExplorebustHowever,consider,if therearesuper gestsasrulesof thumbin levellinga playinnovationsandproductdeing field, in the contextof curent devel- normal profits in any monopoly/ nessprocess velopment to avoidbarriers.Borrow-Dewould industry in a country, oligopoly opmenm. or go technologies velop-Lend indigenous we questions be; Why are not the logical Formulatedduring the recession foreign comventures with other into barriHow we hack entry can years,Baumol's theory pushed further not there? ioint monoPoly to enter the petitors positioning to government How do we respond analysisof the haditional theory of per- ers? fect competition to include monopolies policy on marketpowerandreshaint?In market (Seealso Lorenzoni & Baden(Baumol,1982 and1985). 1985,Baumolwas alreadylooking at Fuller,1995). andoligopolies "contestable "Perfect 2. "Advocateto alter."Participatein markets'performance" contestabilHe recognizedthat affiliate groupsandassociations; A decadelater,with business iiy servesnot primarily as a descriphon (Baumol,1985:533). "strategic associagroupsand consumer with lobby po' nade," of reali$ but as a benchmarkfor desir- the emergenceof facilitation ableindustrial organization"(Baumol, tential entrantswatch out for the crack tionsto ensuremorebusiness "determined -243). positions on or take (Kngman,'199 rather than red{ape 4:237 explicitly, 1982:2).lt is public and expolicy reorienting pending For example,what are the common endogenously,and simultaneouslywith pricing,output, advertising,and other entrybarriersin developingeconomies? ternal relationsofficersof the firm to be with non-govdecisionsof the firms of which it is con- We can group them into two: (1) those rnoreopento collaboration groups. and non-profit to ernmental initiatedby monopolies/oligopolies stituted"(Baumol,1982:3). maybedeveloped Corecompetencies thmry is ward off potential entrants,like excesAt theheartof contestability in four areas: the assumptionon freedomof entry and sive,evendeceptive,advertising,to enandenlarging 1. Consensus-building loyaltyandbrandimage; market price. Competitorsin a perfectly sureconsumer business Maior advocacy arenas. competihvemarket are pdce takers;not healy investmentsin new technology business by big corto be dominated orice makers.Adam Smith'sinvisible and R&D; and contributionsto political groupstend (2) and moirand would then saythat sellers,in pur- funds of key personalities;and those porations,probably oligopolies New or starttheir industries. like courtde- nopoliesin suitof profitEseekout thebestr€sultsthat imposedby govemments Theprofit- cisionsthatcanbeexploitedfor competi- up businesscorporationscoulddevelop attractandbenefitconsumers. maximizing principle would then oPer- tive purposes;red+apeand investment their externalrelations to include advocacyin businessgroupsin the nameof ateasfollows: givenmarginalrevenueis restrictions. Giventhehigh costof information,it deregulatingindustries.Additionallt lessthan selling price of the good, rnonopoly price is greaterthan competi- is no surprisethat big colporations,en- lobby groups may be organizedfor contive priceandoutput is lessthancompeti- joyingmarketconhol/powe1,easilybear gressto shift focus{rom red-tapeto busltheir costs,and ar€ therefore,in the best nessfacilitation;regulationsto challenges. hve outDut. Using the thmry of contestablemar- positionto maneuvercontestabilityof the Industrypositionpaper-writingskillsfor ketsthen,it is inevitablethatmonopolists' marketthey are operatingin. Strategic policy issues,evenlegislativedrafting, find themtinkering will alsohaveto be developedbalancing profitathactnewenhants.Whenpriceis planningsessions greaterthan marginalcosts,thereis real away with what can be introducedor industry with firm interests. 2. DevelopBorrow-DeveloP-Lend opportunity for profitableentry.Baumol lobbiedfor to keeppotentialentrantsout. (BDL)schemes. Tospurcreativityandinasindustrys€ctorsup Masquerading notesthat unlike in the old theory a mowhile still small,a firm, BDL novation, competigovemment, strategic port to but to behave no real choice has nopolv like thereis competition:in the long run tion may lead to ncin-rationalgovern- mav exploreschemeswith other small ln suPPortlndustnesto save marketstolerate ment interventionsand marketdistor- comPanres equilibrium,contestable informationand technology costs of uP of on the opening tions that slow down no economic inefficiency and no Profits; Thiswould meanenhancdevelopment. monopoly or rnind if the markets. Never cost to marginal must be equal prices meolum-lnsmall-ano Baumol's lng or develoPlng (Baumol,1982:5; alsoBaumol,1985:533). oligopoly has inefficiencies. as well asthe core mapping skills, dustry that that reminds us however, the theory theory, for him that It wasno surprise partners. of must competencies long: they not keep for with situation can governments concemed is usedby 3.HaveclearcompanyPolicieson how regulating,monitoring,or facilitatingin- behavelike thereis competition,because with red-tape.Clarify what redto deal is inevitable. mean competition of rale dustrieswhereeconornies - i . . Thisis betoleratedor discarded. entaDe can the vlew oI tne laKnS firms can operate number of only a small Potennal rcqurFore\amPle, ucal $sue. really an e market (Baumol, in the monopoly/oligopoly trant 1985:533; also at anygiventime andZch, 1994andMcGrath,195). then,the key action questionis how do ing standardslike ISO9000maybe in the Joesch Is this why govemmentintervenhon we surmourt entry barriers?Thegreater long run beneficialfor thefirm, but'14sigcomesin in almost every imPortant in- the difficultyin surmountingthebarri- natureson a licenseor permit may only Wasit ers,the greaterthe supemormalprofits amount to entry barriers that can be redustry in developirg economies? from the industry Building on Austin's moved through persistentlobby or monopolies only yesterdaywhen some . APRIL-MAY 1996 THEAsrANMANAGER

through consistentbriberv. What will it be for the firm? 4. Utilize evâ&#x201A;Ź'ntsmarketing and o t h e r n o n - t r a d i t i o n acl h a n n e l s T .o counterbig promosand excessiveads, maximizeuse of communitvand national evcntsand non-traditionalmarketing media to takethe gamefrom the ballpark of big advcrtising. 5. Strengthenand reorient pubhc relationsand liaison.Politicalmapping becomesimportantif only to have a deeperinsight into the nationalcon text rvheremonopoliesdominate.Thrs conditiondoesnot mean politicizing the firm. It includespoliticalriskanalysis in its cnvironmentalscanningand developing responst'mcchanisms. Like a liaison office,it can flag the warning sign in the eventofa nervlaw with implementing guidelines that amount to introducing new market barncrs. Beatingthe monopolicswould mean going bevond reengineering.As Tom Peters would say,the managementviftues to cultivate todav h,ould be to pedal to the medal and to keep the focus amidst the mayhem. Frcn R,rmbi'would probablv'av. in a dercgulatinrintlurlrv,:,trategrc planning is for ten minutes.But betweennow and then,we canjuggleinnovationwjth advocacyand bust the rnonopoliesout.

Difficult

surmountability of Barriers

Extremely Ditlicult

lnnovate to avoid

Advocate to alter Attractive (Presence of SuperNormal Profits)

Extremely Attractive (Presence ol Extremely HighSuperNormal Profits)

Presence of Protits Monopoly-Buster'sStrategicApproachesSpectrum Figure1

Principlesand Policv.San Diego, CA: HarcourtBraccJovanovich. Buchanan,Allen. Ethics,Efficiencv anll The VrrLct. \en ler.ev: Rowman and Allanheld. Hilsman, Roger.1956.Strategiclntell i g e n c ea n , , N l . r t i o n , rDl e c i s i r ' n l. l.l r n o i . : FreePress. Joesch, Juttaand CathleenZick. 1994. "Fridence o f C h ; n g r n g( o n t e c t a b i l i it ny C o m m e r c i a lA i r l i n e M a r k e t s i n T h r . 1980s."Tht lournnlLtfConsumerAffairs Krugman.P,tul.19q4.T'eddlingPro' peritv Nen'York: WW North and Com-

REFERENCES: Austin,J.1990.Managingin Develop- Pany ing Countries.New York:The FreePress. l,orenzoni,C. and Baden-Fuller,C. "( rc,rling,l William.J.V,rrch1q82.'Cun Baumrrl. StrJtegirCcnterlo ManageJ testableMarkets: An Uprising in thc Web of Partners" Caltflrnitr Mnnarylnent Thr,'rv uf Industrv(tructure" Arr,ri,arr Rclitro Vol.37No.3 Spring, 1995. EcottLttnic Rn ietL,. McCrath,Neal.Nov 1995."Beerlvars Baumol.Wi)liam.J. iLr85tconomic\ TeachSoberingLesson"AslnrrErrsiness.

Osborne,David and Ted Gaebler. 1993.l{einventingGovernment. New York:PlumeBooksof thePenguinGroup. I'acificBusiness Forum.1994.A BusinessBlueprint forAPEC. 1I994. Peters,Tom. The Tom Peters Seminar: CrazvTimcsCall for CrazvOrganrzatlons. Porter,Michael1990.Competitive Advantage of Nations.New York:The FreePress. Shepherd, WilliamC.Sept1984."Contestabilitvvs. Competition.",4rrcrrcarr Economtc Rn ittL, . |r4. |'atri,: t L La to. t .h6 at lb (ottu l1)rt)L,i'tt ollntt'tllMntn*||ltol, slr(cI i-r. n nnymlii,c l\thlir atlttlit strntirt.hutirl rt!n)r/r.r\ dr'i'.l)/rI0l, slrdli,tl. t]tidtlnganrttlnnd iraldaao,r0rll(5 ntd iuts tonvrlll /,rusr/f'riid1Asrs ld,ri/il,?,?.rn./clir,1/ir lrf0ftr( 0filr. Irt:siilt: t oi lht: lhtlippi $. l tt:nrt: f.lr.ltol

As someof you are awareof, the Boardof Judgesofthe 1994-1995 ChemoilCasewriting Competition had decidedlatelast yearthat therewere no winners.Basedon this experience, Bob Chandranand DeanGallegoshaverecentlyagreedto cancelthe 1995-1996 contest.Theybelievethat thereis a need to reviewits conceptand objectives.Althoughthey do not expectentriescomingfrom individuals outsideAlM,the recentadvertisement ofthe contestplacedin TheAsianManager,December-January issuenecessitates an announcement of its cancellation. In casesomeonestillsubmitsfrom outside,it will probablybe consideredas an entryfor 1996-1997. 38

APRrL-MAY 1996. THEAsrANMANAGER

UPDATB: I|,INNCNMENT

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'Bnucrusru

B \ f R o t t ' : ( ( )C Rr R t t , ' A . V l r o o z I

AIM Re-inventing for the Millenium ect'ntlr',AIM n as cltallcngt'dbv a fL f JL consortrun ()l Pr0gressl\'r' I L \ 1 . ' i n t . ' . ' n ' i ' r r ' l ' rt t r " \l r ' , r c t l L ' l ' ' r thcm a m,lsi('r's tlcgrt't'program th,rt rvoukl rccluirt'thr'ire\ecutivcsk) sPcnd ,rnda\\'avfronl ltss tirlc in the classroom jobs. out Tho' pointccl ih,1tihc elerthcir indtlstrvanclthe L'\'cr morlt'rn chartgint gro\\'ingcompeiitionmacleii prohjbitivc for them t() takt'tht'ir nranagcrsoff tht' jobfor a Iongtimc.At thc sanretiInc,thcY J r r . . l r n , . , 1 r r lr , ' r r 1 ' x r , r t l l"r , . l i l l ' . r r r crt',rscilre knon'leclge,ancl delt'lop thc r',rluesof iheir prt'scntmanaet'rialcrlrps. ThcAIN'lfacult\iat theirannualmet'ting hckl al Cavlabnt'inDt'ct'nrberl9c)5, clecidcclto risL'kr ihis challenct',ii ihe gor,t'mors,tncltruste't'sn ould allorv thonl kr do s0. vt'arsuou, thcclemancl Fora hturclre.l t tl evt'lo1-rnren for shortcr n'ranngenlcnt progranrs pariicularl\;lor shortt'rmas tL.r'sclegrL'cprograns-hls bt't'n rl'ith rrs "8" schoolsh,rle respondecl hr this The rlcmandin i ariousu avs:part-iimcProg r a n r s ,t ii : t , rn c e c d u c a t i o np r o g r a m s , shorfener]c\ccutive Progr.lms,ctc. But - o n t rh o r r .l h c n , r ' t l t l - t l , ' th c ,n l L r l l \ l t isfierl.If anrthing, thc dem.rnrlfor shortcr , \9\ '9 6 T H f A s r \ \ \ 1 , \ \ A ( ; ! r t. A P R I I - N 4 1

intensifit'tl. proeramshasincreasinglv In 1971,barelvtn'o ve,rrsafterAI\'1's founcling,the Boarclo[ (;olcnl()rs sugqesterlthat the facultv tlt'sign a ont'l ear program.Thev,rrgrrcd m,rsttr's clegre'c that thr' t$'o ve.1rMBNdProgranr\\'as manmuchtoolongfor alrea(lvPr,lcticing "a C a d i l l a ci n t h e \ b l k s a g c r s ;i t r l a ! l,rgen economiesof thc Asian rcciorl." Thus u as AIN4'sont'vt'ar Mlt'l program initiatt'clanr.levcntuallvcrc'aiec1. Elerr such bastionsol nlan,lqenrent ttlrrc,rtionorihocloxl as Harvartl ,ltrd Chicagohavebct'nfct'lingiht'sameprt.s suresanrl have positivt'lvrespondedk) tlrc.cl,rmorfor shortcrprogram:.Bothof thtm non offt'r their MBA stuclt'nisthe o p i i o n o f c o m p l e t i n gt h c t r a d i t i o n a l l \ ' tlro-vearprogranlirr onet c,trantl a lrali. Earlr'lastDeccmber,at,'t mcetirlgot t h ( ,l l t r r . r n . l l i , ' l t .\ r l. r , l c n r r, ' [ \ l . r n , r 1-, School ntnt heLlai tht'Han'arclBusiness (HBS),ont of tht'topics that Pro\'okcd . t n i m . t rt ,l , l i ' u . . i o n \ \ ' 1 .l h t r e \\ ' l r l t i , n l ihat nlanagcmentcduc,ltloll arv ch.-utgc io r'\periellcL'inthc nt',lr txpect coulcl fuiurebccause of thc rapicldelclopmernis iechancl communications in computL'r nokrgr,.Amoltg the irleasbanclietlabor.rt

not rverethepossibilitvoi holclingclasses virtu,ri class but in rn phvsicalclrssrooms rtromsantl of studenisscattercdin the anrlin Asiaintcracin Eurol.rt', Anrericas, tivcll cliscussinga cast'iu cvbcrslacc'. C)nelcft the rneetingfeelingthat nlan,rge u asai thocusPof a paraInenterlrrcation digm shift and that tnrh'globalconlpetilvas all ti()n ir1managtmclli educ,lti()11 inrrineni possibilitr'. Thr Uffe(.| ol \erv Tcchnologies Qu,tlitv managt'mt'trte(iucaholl,aswc is b.rscci 0n ortt'clorlinant knoiv it hrclar', thecaserncthr ' technologv: ped,rgogical tiratrvealso Thtre areotht'rtechnoloeies Thcscare: rrst'bulmainlvassupplt:mcnts. Lecturecum discussionmtthocl, . Fielclprojects-l\'1RRm,rnagt'mt'nt r , \ ' . r r (I r r L f , ' r l .r r ' t l l l h , ' r r t i n t c r r r . l r i p ' etc. . C o m P u t e r - a c t i v a t citnl t c ' r a c t i v e nanagenlentg, tles, . lrogr,rmmerllt'arning(themainstav and of rlistanceeducation), . I earni:rgcvclt'basedstructLtrccl e\ (c.,t., re'lahuman role Plaving, l,ericnces etc.). tionsganles,instrumentatloll, Forall theserlifft'renttt'chnokrgics,ihe lLl

maincriterionfor determiningthequal- evensometimeconstraints. washawaythesomnolentandtheunwary ity of educationhasbeenthe amountof Already,somebusinessschoolsare anddrown thestick-in+he-muds. sustainedcontacttime betweenthe stu- experimenting with theuseoftheseparadentsandfacultyin theclassroom. When, digm-shifting technologies: llanaglng The New lcarnlng . In his report to the International Pr.ocess almost30 yearsago, we designedthe MBM program,we madesure that we Academyof Management, Associate The casemethodis a convenientinhadmoreclassroom sessions per subject DeanEarlSasser ofHarvard'sExecutive structional technology.It enablesthe than eventhe HarvardMBA had.This, EducationProgramrecountedhow,with teacherto help studentsachievedifferent in our mindsthen,would ensureour pro- the useof their in-housecomputernet, leamingobjectives at thesametime: gram'squality. theypre-processed o Deuelopment casesbeforethe class of skills The pastfive or ten yearshaveseen andinputtedtheprofessor's summaryof Intellectualskillsof analysisand syntherapidflowering of teaching/leamingthe initial reactionsof the participants thesis technologies that promiseto fundamen- into theclass'thinkingbeforetheactual Behavioral skillsof communication tally changeour currentparadigmfor free-wheeling classdiscussion. He also andleadership qualityeducation. Thesetechnologies are gavea demonstration oAcquisition of videotapeand of knowled ge actionlearning,multi-media,and the interachve cd-romproductsof HBS'new Abstract ideas,such as conceptual internet. publishingsubsidiary frameworksand standardprocesses and r Actionlearninginvolvesconfronto DukeUniversity'sFuquafthool of proceoures ing leamerswith realbusiness problems Business is developing andofferinga 19Information on businessand busito solvein their own workplaces. More nesses theworld over thana decadeof research on "on thejob . Forrnation of aalues andattitudes training" has conclusivelyestablished Personally enhancing that managersmost effectivelylearn Managerially appropriate whenleamingis linkeddirectlywith their Sociallyresponsible work, and the taskrequiresknowing, o Pe(ectingof goodjudgenent. doing,and,with a learningguide,a menOtherpedagogicaltechnologies arenot tor,transmutingwhat is learnedinto an nearly as flexible as tools of the teacher explicitbodyof usableknowledge andexThe lecturemethod,programmedlearnperience. ing,andmulti-media,for example,transo Multi-mediainstruments, like vidmit knowledgeand informationmuch eosand cd-roms,havemadeit possible moreefficientlythan casesbut do little to to presentcomplexideasin user-friendly developleadership skillsandgoodjudgwaysthatmakeit easierfor studentsto monthexecutiveMBA to selected inter- ment.Othertechnologies aresimilarlylirnunderstandand absorbthem. A well- nationalbusinessfirms. "During thepro- iting and limited. They eachhavetheir made20minutevideo,for examplgcan gram,studentswill conveneat sitesin excellences and their shortcomings. morevividly and moregraphicallycon- Europe,Asia, and the Amerieasfor a toIf we areto usethemmorâ&#x201A;Źextensively vey the ideascontainedin an hour-long talof11weeks.Between thefiveresiden- andintensivelyin thefuture,therefore,we lectureol evenan articlethat takestwo tial modules,Fuquafacultywill deliver will haveto experimentwith andleam to hoursto readandunderstand. the balanceof the instructionusingin- masterthesedifferent tools as surgeons . Internetmakesit possibleto main- teractive,distanceeducationtechnolknow their scalpels and laserknives.We tain sustainedcontactbetweensfudenrs ogy that complements and extendsthe will needto and faculty without always having to classroomexperience." e Think throughand craft clearleamIt is theirgoalthat gatherthemtogetherin a physicalclass- their initial classwill bb madeup of 45 ing objectivesfor eachspecificsegmentof room. students-15 each,from Europe,Asra, the learningprocess Thesetechnologies hold out theprom- and the Americas-whowill spendthe . Bemuchmorecarefulandjudicious ise of our being able to economically balanceof 71 weeksin their own work- in our choicesof appropriatelearning "hold classes" in cyberspace evenwhen places. iechnologiesand r Late this December, theparticipants arephysicallylocatedin . Manageour interactionswith stuthe business widely separatedplaces.ln effect,they s c h o o o l f Assumption U n i v e r s i t yi n dents,individually and in groups,much canchangeour management education Bangkokannounced that,in cooperation moreskilltully. paradigmfrom with an asyet undisclosed U.S.univer= (face-to-face) physical classsity, they would be offering a distance Developlng Alllt Oompetonoles Quality roomcontacttimeto education degreeprogramwhichwould If AIM is to stepinto the future-world Quality=.on1u.,nn.'einactualor vir- makeuseof theworld-widenet. of management educationhansformedby fualclassrooms. Therecanbelittle doubtthat,within paradigm-shiftingtechnologies,it will Thisnew way of gaugingthequality the next five years,the structureof glo- haveto developa different constellahon of management education is revolution- balgraduatemanagement educationwill of competenciesthan it now has. The ary because it liberatesus from space,and undergoa drasticseachangewhich can changeswill haveto takeplacei& at least,

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APRrL-MAY 1996. THEAsrANMANAGER

threedimensions: . Mnnagingthelenrningprocess We will have to acquire as deeP an understanding of the different pedagogical technologiesaswe now do of the case method;we will haveto masterthe art of mixing them, melding them with one another to achieve individual students' learning objectives;we will eachhave to learn how to effectively and efficiently mentor students on a remote, removed (non-face-to-face) basis. . Managingtheresesrch process At present,our researchfocusesexclusively on capturing and understanding the reality of Asian businessmanagement/ on the who, what, how, why, and when of outstanding managersand entrepreneurs,ofbusinesses,industries,and countries in the region. It is imperative that we continue to take the lead here and continue to be known as the most Practiceorientedschoolof managementin Asia. In addition, however,we will have to start researchon processesthat we use to help our studentslearn management.We will have to learn how to assessand measure not just what we teachbut, more importantly, what our students are actually Iearning. . Managing the prepnrationof teaching materials We will have to make fundamental decisionsin this area. For starters,what teachingmaterials (cases,industry notes, technicalnotes,etc.)shouldwe produce? In what media?What rolesshould the faculty play in the preparation of teaching materials?What part of the processof producing video tapes,cd-roms,other media should we do in-house?What should we make?What should we buY? What c o m p e t e n c e ss h o u l d w e P o s s e s si n house?What should we contractout? For a quarter of a cenfury,we havehad it easy.We have had to contend with only other SoutheastAsian graduateschools of business as our principal rivals; and becausethey and we were all preoccupied with keeping up with and trying to satisfy our rapidly growing markets, competition was polite and gentlemanly.The future threatens to bring in much hungrier competitors from the developed countries of Americas and of Europe where enrollments have been shrinking for about a decadenow The new Pedagogical technologieswill make it much THEAst.cNMeNecPR . APRIL-MAY1996

more feasible for them to try to snatch away huge chunks of our markets. We will be in for quite a fight. The urgency, therefore, of answering these questions and starting to do something about them presseson us. Thesethings are not iust "alsodo." We needto focus what we can on them, to give them priority. We need to invest substantial resourceson them. More than the investment on hardware and software that they will entail, however, we will need to fund and mount a massivefaculty developmentand transformation effort if we are to get to the millennium in fighting trim. AIMt Strateg$ for The Year 20OO If it is true that the fundamental structure of graduate managementeducation will undergo a paradigm shift within the next five years,then it follows that AIM's strategy for the millennium should be seriously re-examined.We need to ask ourselves the basic questions all over again: . Whutbusiness shouldwe bein? to be primarily in we continue Should educamanagement level graduate entry offer to also we continue tion? Should educamanagement mid-careergraduate tion? Should we continue to offer general management focused non-degree programs?Should we continue to offer specializedfunctional non-degreePrograms? Should we continue to offer tailor-made programs to specificconglornerates? Should we move into the businessof teaching materials publishing?'For other schoolsof management?For corporate training departments?Should we produce theseteachingmaterialsourselves? Should we contract out production and concentrateonly on Product design and marketing? Given the massiveinvestmentsthat new technologieswill require, can AIM afford to continue as a free-standing institution? Should we look to forming more substantialalliances,say,a consortium with HBS and other Harvard-assisted schools of managementin the world? Theseand many other similardirection-determining questions need asking and answering: . Whoshouldlur priffiaryffiarketsltnrbe? getcustomers Individuals? Companies?In the tra-

ditional markets of Indonesia, Malaysia and the Philippines?In the new markets of China, India, and Indochina?In the NICs? Given an expandedcapability to compete globally, should we aim at markets in developed countries?Should we considercateringto Asiansnow living in the Westwho want to return and make a career in Asia? To Europeans and Americanswho aspire for a more fulfilling life in the world's fastestgrowing region? c Whatmakesa t'acultyffiember? What competenciesshould a faculty member have? Should we differentiate between generalists and specialists? Should we prefer one more than the other? Where should we absolutely require expertise?In the businessfunctions?In the managementdisciplines?In the learning technologies? What credentialsshould we require? ComAcademic?ManagerialexPerience? puter/ CommunicationsexPertise? How should we measurecontribution to AIM? Are ATS/ (actualteachingsessions)and ETS/(equivalentteachingsessions) still relevant gaugesof a faculty member'svalue to AIM? The answersto theseand other similar strategicquestionswill define, per-haps, even redefineAIM's basicch-aracter for the third millennium. In the decadeof the 70s,we decided to broadenAIM's reachand expand the competenceof its faculty by investingin development management. We suPported years of action research,developed casesand other teachingmaterials, mountedexecutivedevelopmentcourses and, in the 80s, offered a newly minted degreeprogram in this pioneeringfield' We, in effect,re-invented AIM, causingit to metamorphosefrom a businessschool to a schoolof management. Today,we are being challenged once again to re-invent AIM, to shapeit into a graduateschool technology-sophisticated of managementcapableof comPetingglobally. We need, therefore,in the coming years,to confrontthe issuesraisedin this papermost gravely and with a profound senseof urgency. K.T.Li ProfesistheInstitute's A.Mendozn Prof. Gaby sorin lnternationalManagementand hashad zuideetpeilencein businessnnd businesseducation.lnternet: gaby@aim.edu.ph

. Rnsnancn

BY PItOFESSO A IRD A L , V E L A S C O AND P R o f [ s s o RE n R o LB . P E R E Z

TheInitial MarketPerformance of PhilippineIPOs I rlrlirfi \r,h f/rls rrrtir1, t; n Ln lin!tnlii'tj llaaa ,{nal) sis This uas also the vear uhen the I'hilip1rlH(,(, Ilislv rrfcPhiliypiuclPOs? ptrl, IP() rcturn on the first dav of listine pine Skrck 1\'larketrt'gisttre.da groivth ir'/i,d i,/ L.l,\11(l'l;. avcr.rged 29.()9'lper Inonthwith a stand- r a t c o f 1 6 0 . 8 ' ;A. g r a p ho f t h t ' r t l a t i o n arcleltviationol..1374.18. This returl rras ship of 169.r'"ro*.. ,tturn .rndthe stanel()r thi p.st r,i{ht I'ear:,69cpn1p,]is shorvnon Figurt l. higherth.rntlre reiurn on risk-freeasset arclclcvi.rtion r i r , . i r r t h t ' P h i l i p p i r r c so f f e r e c l oftcn rcferrerl to as trL.asurvbill for thc .()nlrlon \tocks hr the public t() pcrioclbeingconsidered.lleturn for trcas- (on<.lrrsion r.ri'f ftrn(lstor L.\P,lrsion ,rnrl cJeLrt rt tirt' PhilippineIPOsrt'gistcrcdarrabnorr r r rh i l l . t , ' r t l r , p c r r , ' Jl q d h - j q o r- ,l r t r e ( l mrlt Initi.rl[)ub]icOtltrings, or nrore from 6.5ti k) 361i pcr vt'.rr.Thus,a high mallv high returnorrits initirl clavof listL o n r n r o r r l rc , t l l c d I l O s , n t , r e s t r t r s t - p r e r r r i u m i- i.,.irtp g a r Jr , ' rr h Lr r . l h v r r r F r n c F i i r r r , * , r l , ' . 1 r , ' r r e tJh . t tt h r h r g h L ' r LlLrt'rttlr lr.tcd ,rndactiltlr trarletlat tht' borncbl invtstursxfio subscribtto the return, fhc higher the risk for inyestors I ' h i l i p p i r rS c t o rk F r c h a n g r( f S E ) .A t bv tht stanclardtleliation. ofteringprice.lPOsn ereoiferedI month as eviclenced r r l ' O r l , \ , . , ' r l r i - , , 1r l r , l i - l , , 1 [Ttiorether,.rrt listed.rt thc I'SE.Table.I This ltaelsus b conclucleth,rtthc initial 1'r,-, ,rctirr,lltr,rdL.d sttrcksin thc nrarket. of thest'unstasolttriissues f r ( - ( r t r t h ( r r r r l i arlr ' t u r n, ' I l h i l r l ' p i n e 1-trform.rnce ll'()s hart' trni'ratcLlvariousinierest ll'Os.Thehight'stinitialreturnregistereel i . , r n r v i J ( ' n i , o I l l r , i , r p i t , r l , r . . spt1 ; , ; n g iitcraturt' Selcr,tlotrptric,rlsttrrlits halc bt' BenpresHokling Corporatiorretlual modcl at n'ork. The positivecliffercnct conclu.lr,rl th,rtI I'Oscilc,ln abnornr,rllv 20(l'l ilhile the loh,estrvasCosmosBoi- betweenthe rcturnof thc unseasunecl sehigh returnkr inr estors:ubscriLring kr it\ curities or IPOs ancl tht avcrag!.retr.rrn t l i n si v i t ha r e t u r no f - 1 5 . 7 1 ' ; 1 . offt rinr:pnr'c.ln finanr't., this rscallcd,ts on iht'risk-frecassetis the pavmentfor There,rrt ,r k)taloi l3 sccuriticswith l l ' O L r n d t ' r p r i c i n rA. l t h o u g h r . r r i o u s ./cro rL.turn,6l securiticsn'ith positir,e l h , . r i . L , ' r rler a .I ' o r n co n j l t ) . u h . r r i p t h c o r i e sh a r c p r o p o s e rkl r e r p l , r i nt h i s rr.turn,l2 securitir.s $ ith negati\,ercturn t i o n . pht'nonronon, rrocomclusile elirlcncch;rs ,rnclthree st'curitie'sthat clid not rtgistc.r c o r r l r n c i n t lt ' r p l , r i n i ,idi . anv iraelton the iirst dav of listing.Table 2 summarizt'sthcsefindings. / l ' i l , 4 J , iI, r l i , l , r n , ,r ! t l r fa r , r , l ) { r n , , ) l t / r fl r , t r , / r 1 , 1 i Th.. Il:!a:l T,rble3 sirolvsthat 191i7registeredthc l I { r t u l " r r t t l . f , r j r r , r r i , ) f D , / . , rS , r l l rt I' J r i r A r l r / , r , l ' r'J '. I l l , r r r r r . . ,trhr , r r r r rl r. ,l . , r , ' r l i - l i r r * I ' r ' : l r . -irn i r i . rrl ( t r r r n\ r i r h t h , h r g h c - t r n,rs strrrjir.'rl ior E9securititsof 69 corrr slrrdarrl devi.rtiorr rvhile 1991has tht . e t u r n s l r ,' ,' r , . \ l f , c r r , , r n t , l n ( c , 'irtrr i t r . rtlr . r J r n g f . r r r i . s\ \ i t h p u h l r co f f t ' r i n g s R Il1,t ffl,tN /l)1:^,r r ' r r l . f r, n , , ) , r t r . ! i i r l ) f l l r f \\'er"c c()nlpLrt(.Ll baserlon thechsrngpnce \ l . r \ a . , , r . r J !n n ; l l r c ( l i \r r - i t \ , ' f , ' f f L ' r i n r . M , r . l . r i r , \ , r r r , r . i . f l f, r l i ) r l ) . r r I l,tlttttLt se.untif\ ()n ihc itrstrl,rvoi listing. 1993rtcistt'rerlthe highcstinitial return. l2

APRII-MA\'1996.TlrFAsr^\ \'1'\N,\cEt

Stocks BenpresHolding Corporation Unioil Expl& Mrl Dev'tCo.Inc-A Kepphil Shipyard,Inc StenielMfg. Co1p. Petron Ayala Prop.VenturesCo1p.-A Ayala Prop.VenuresCorp. -B CebuS/Yard& Eng'gWorks,Inc-B SouthChina CebuHoldings CebuS/Yard & Eng'g Works,Inc-A |ollibee FoodsCorporation VictoriasMilling Co.,Inc. Philippine SavingsBank KeppelPhils.Shipyard,Inc. ABSCBN BroadcastingCorp. FilinvestLand,Inc. "B" JGSumrnitHoldings,Inc. Philippine National Bank IntegratedChromeCo1p.-A Robinson'sLand Corporation Switfs Foods KeppelPhils.Shipyard,Inc. IntegratedChromeCorp.-B TerraGrandeRes.& Explo.,Inc. Kuok Phil. Properties,Inc.-B Bacnotan CementCorp. & Tel.Corp.-B Phil.Telegraph Union Bankof the Phils. SoutheastAsia CementHoldings SelectaDairy Phil.Telegraph & Tel.Co1p.-A Alcom Petro.& Mrls. Corp.-A UniversalPeholeumExplo.,Inc. Cityirust BankingCorp. Mines,Inc. Dzon Copper-Silver Easycall Comm.Phils.,Inc. Aboitiz Equity Ventures Inter Phil. Laboratories-B Libâ&#x201A;Źriy Telecoms Asian Peholeum Summit Minerals,Inc.-A SummitMinerals,Inc.-B PalawanOil & GasExplo.,Inc.

1996 THEASIANMANAGER. APRIL-MAY

Return 2 1.9 't.7

Stocks

ManilaElectricCompany-B DavaoUnionCement-B Manila ElectricCompany-A Inc.-A 1.516154 KuokPhil.Properties, 1.361111 DavaoUnion Cement-A NegrosNavigation 1.2 1.18 Mondragon "1.'145455 MegaworldProperties Int'l ContainerTerm.SVCS,Inc. 1.1 1.033333 SanitaryWaresMfg. Corp. A. Brown 0.94 0.805556 SM PrimeHoldings FirstLepantoCorporation-A 012 0.568047 AyalaLand,Inc.-B First LepanioCorporation-B 0.56 0.805556 Inter Phil. Laboratories-A 0.485714 Manila Bulletin PublishingCorp. 0.477273 LodestarMining Corp.-A 0.470588 PetroExplo.& Dev'tCo.,Inc.-A 0.433333 PetroExplo.& De/tCo.,inc.-B 0.3769'36 Phil. Orion Properties,Inc.-A Phil. Orion Properties,Inc.-B 0.337't54 HoldingsCorp.-A Mabuhay 0.333333 0.333333 MabuhayHoldingsCorp.-B 0.3 JRGaimentsCorporation lnc. 0.333333 MariwasaManufacturing, Trust Far East Bank & Co. 0.275 0.270073 PacificRim 0.255814 7-SeasOil 0.226667 Cophil Exploration GrandPlazaHotel Corp. 0.2n881 0.2't1679 BalabacOrl Expl. & Drlg Co. Inc-B PrycePropertiesCorp.-B 0.2 CebuProp.Vent.& Dev'tCorp.-A 0.2 0;t76923 CebuProp.Vent.& Dev'tCorp.-B 0.138889 UniversalRobina Balabac Oil Expl.& Drlg Co.Inc-A 0.125 0."t22807 PrycePropertiesCorp.-A Meho Drug,Inc.-A 0.1w375 CosmosBottling 0.1 AlcornPeho.& Mrls.Corp.-B 0.1 LodestarMiningCorp.-B 0.1 Inc. Properties, Shangri-La 0.1

0.1

Refurn 0.099174 0.095238 0.0u746 0.08 0.079137 0.070"t75 0.066667 0.0625 0.059701 0.050885 0.033333 0.028037 0.02 0.019231 0.018182 0.015625 0.0125 0 0 0 0 0 0 0 0 0 0 0 0 0 -0.00463 -0.05 -0.05 -0.056 -0.072 -0.08594 -0.1 -0.1 -0.10236 -0.15714 No Trade No Trade No Trade

! I

STDEV AVRET

1987 -0.2

Return

Numberof lssues

ZERO POSITIVE NEGATIVE NOTRADE TOTAL

13 o l

3 89

o/o

14.6'l 68.54 13.48 3.37 100

Year

1987 1988 1989 1990 1991 1992 1993

Numberof lssue (With registered trade)

I to

11 10 11

Average Inltial Return

Standard Deviation

. 0.9311 0.0472 0.6755 0.0544 -0.0068 o.1214 o.7799

0.8467 0.1448 0.4449 0.1172 0.0606 0.1811 0.6590

APRrL-MAY 1996.THEAsrANMANACER

f have called mv staff I assistants' attentionmanv I times and askedthem, "Haven't vou ever written a love letter?" Then I reminded them that a letter "To whom it may addressed concern" never gets its messageacrossto its rightful audience.Everycommunication must be preparedfor a particular receiverin a specificenvironmentat a certain time to effectively transferyour idea. I recall Winston Church"l ill's offer to you blood, sweat,and tears" speech addressedto the English people when he took over the leadershipof the British Empire at the beginning of World War II. Therewas also the inaugural speechof Presi"Ask not dent John Kennedy, $'hat vour country can do for you but what you cando for your country." I also ran acrossan article written b1'Edward Park about CharlesLindbergh. Here is an excerptftom that article: "l work standing up. When people ask me whv, I murmur somethingabout my back.The real reason goesback to December 1943when the Pentagon rediscoveredour long forgotten fighter scluadronin New Cuinea'sRamu Valley and gave us P-47s. Thosemissionswere far longer than any we had flown before:four eyen hours. But even thesemissionswere not long enough for the SouthwestPacific. "So CharlesLindbergh, representing Pratt and Whitney, briefed Fifth Air Force pilots on long range

menecnlffir

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Bv Pnoresson RoarnroH. LrM

flving. I remembergathering in a lantem-lit messtent one evening and being introto the godducedcrrrriassc figureof all pilotseverY' where. He was tall, slendet familiar. Someonewhisperedthat he had shot down an enemy plane that afternoon thoughhe never mentionedit.

"ln his soft midwestern voice, he told us t() trv a high throttle setting and onlv 1400revolutionspcr minute.Our propellers would grind alor.rg,taking greatbites0f air. "We stirred uneasilYat the heresvand Lindberghread 'Thescare our thoughts. n.tlitary engines,built to take

'Str punishmcnt,' he said punishthem.'Thenhe added that if rve ft'lt unconfortablc about flving this rvati we should not clo it: 'You are the captainsof vour sllips. You n.Iustmake those ciecisions.After all, you know more about flying than I clo.' ''At that wc burstout laughing anclbeganflying eight-hour nissions. Wc would returnso numb that wc rvould taxi standinguP, feet on the ruddcr bars, our buttocksrvith massaging both hands. "Oh, ves.Thc I'47 was rvonderfullv forgiving and brutallv tough. Arrd thanks to CharlesLindbergh, I now rvorkstandingup." Whv do I want to share this gem with others?We all hot pilots were,in 19.13, hct\^eenll tr)l:t vearsolal. We kneq,evervthingand listcneclto no 0ne. Lindberghknervthat. Therc'rverea million and one reasonslvhy rve could prove he rvas wrong. But he $'on the fighter pilots n'ith tl.tose feu, n'ords. He identific'd rvith his audience.Ht' spoketheir language. Ht. sharedtheir fears and triumphs.Hc respectcdthem as rulers of thcir on n fate. They had the respousi bility .rnd shouid be honored with the authoritY to do what was bestfor them.That madefor good communication.His idea becametheirsto implement. All managers,to be good communicators, must do the same.

lL".L

Juan Trippe,founder of Pan American Airways, with CharlesLindbergh.

1996 THEAS]ANMANACER. APRN--MAY

of lMiamiArchives Source:Universitv

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o banishNO is to welcomeYESandto open doorsto immense possibilities.You begin to explore unchartedwaters and new horizons;facenew opportunities or sks. With this mindset,vou will scarecompetition;and even bureaucratsin youl organizationwill leaveyour company to find new jobs (Hopefully, they will join competition!). This processstartswith you as the owncr or CEO. Make sure you love change. True,man strugglesfor constancyin life-from the conceptof mariage fo growlng roots ln a communitv as to be in a stateof constantchangeis uncomfortable.Nonethelessman reluctantlv acceptsvariables to cope to the changing environment.For instance, businesseson the fast lane like the oil industry, force changeon you but if you are running scared,it becomes different. Continuing Business Educationis a great sourceof new ideas.Cet into the habit of implementing new ideas immediately.Your employeeswill notice the influx of ideascoming their way. Somemav opposevour ideasin the name of conseNatism. Watchout for logical conservativeswho canmakeblacklook white anv time they want. You would likely identify the statusquo stalwartsin this process.If you think vou can changetheir views, think "They again. shoot horses... Don't they!" The earlier vou detach them from the companv the easierthe transformation. The questionis "Can you afford the luxury of slow or no changewith this attitude?" In Chemoil, this is our deep conviction. We never "No" sav to anv requeston

that were abandonedfor more than a decadeon the island of Nonoc, Philippines and convertedthem to a dist bution centerbecause "can of do" attitude.There were many challengesand, RosrnrV.CnaNonen in early vears,wc looked Iike fools. Eventually,it became MBM'74 the best strategicmove we \ evermade.Convictionis the backbonebehind this attitude. We delight in the process "driving of competition crazv?" Bigger competitors love to set rules of engagement. Southl'est Airlines is eating the lunch of United and American in the USA by our doorsteps. Wearealwavs whencostincrease offering cheappricesand is committedbevondour involved,they clecideb live good servicein the airline financialandphysical industry. Nimble competiwith statusquo.Twenty means. tors (flexibleand thosewho percentcomebackto vou "Yes") Beingstretched has believein within six monthsto accept area becomeour wav of life.Our your proposal.Thegoodwill nightmare for most of the systemis regularlybursting market.To yield to status vou build bv iusttrying to at theseamsandwe are quo meansdeath or defeat. delivertheirrvish is enoralwaysremindedthat "Even mous. What arethe sks godshaveclayfeet."More inherentin this attitude?As Whathappenswhenyou thananyone,we know our decisionsget done in a fast try a newconceptandfail? limitations.Findingpeople pace, the line between Customers understandthe to matchthisrollercoaster obstaclesand risks blur. risksyou knk andare philosophyis tough.We Peopletalking about risks tolerantwith your failures. knewdeepdown thatwe are Youalsolearnmoreabout rvill be labelled as navbuildingan excitingorganisavers-people rvho do not your capabilities valuableto zation.Wedo notsayNO. distinguish betweenthe future. vour "Anythingis possible. We In theoil industry,supply needsand wants of the makeit easyfor you to do customers.Long-term capital is critical.Refineries tendto business with us" is the is invested to solve short producea wholenew slew secretof our success. This of off-specification products. term needs.Major failure is attitudemadeus grow and right behind the corner.How Supplytraderslookfor you come out of failures is reachINC 500(Fastest peoplewho canhandleall GrowingCompanies in what rvill make you a better kindsof problems. You USA)in fiveyears.The manager.Managing expectabecomeknownin the companyhad4007o tions is a double-edged turnover industrysuchthatpeople in thefirst threeyearsof its sword lvith immense callvou with theirproblems inception. possibilities. asyou areingenuous enough Customers arealways I am a great believer of to take careof them. afterthesatisfaction this concept.I would like to of their ln early days of our needsandwants.Thinking relationshipwith Venezuela, hear tlom vou (E-mail this will add to thecostsof RVC@chemoil.com) about Maraven faced the problem operations, your erPeriencesif you are suppliersare of high Vanadium Boscan afraidto openthePandora's Fuel Oil. Chemoil brought a one of the few who practice "l boxof expectations . Thus this vieu'. would rather die trialcargo and was able to "No" theyeasilysay trying than never to have even blend it to someusable withoutcheckingit out. tried at all!" product. This was the basis I usedto tell my customfor a ten year supply conMr Roturt v. chn,ttninis tht "Your

EnrnnpnnununT 0onrm

'How to banish 55No'e

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ers wishis my commandl"Mostof thetime,

qqact

Webok petroleum tanks

Pn'sti.nl of Ch'l oil Cnryoratt)n,

Lr.s.A.

APRIL-MAY 1996. THEAsrANMANACER

A SaluteTo TheWorkingman FromTheSocialSecuritYSYstem' Throughyour patienttoil,livesprosper' Standtall, all Youworkingmen' Though Your lal)or be simPle' Though Your wage be meager' \trur persistencegives dignity to your family' tirur labor movesindtrstrY' Your perseverancebrings lbrth progress' Your creativity enlrancesthe nation's future' And in vour endeavors,the Social Security System is ever ready to helP You' llb provide different benelitsfor your protection' l'he SSScan be reli€d upon to deliver fast service' especiallyin tinresof unforeseendistress' So stand tall, noble work€rs' ProsPeritYawaitsYotl' In Your Persistentlabor' -You hal€ a Proverbial shoulder to lean on -" tlre SSS'

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