The Asian Manager, July 1997 Issue

SPECIAL DOUBLEISSUE

JULY-AUGUST/SEPTEMBER.OCTOBER 1997

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-Fidel V.Ramos,Presidentof

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INSIDE

. The Making and Moldingof Entrepreneurs _ E- Morato . Industrial Entrepreneurship in SoutheastAsia_ K. yoshihur,, . The Manageras Man of Letters- F. Arfonso

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Associationoi ii t i, "r"oit qualificationsdo not measureup? The Bankers' so where doesthat l*o ,n. ,-"iii".i..*-un Corporatlon' the Philippines designeda solution: the BAP Crcdit Cuamnty BCGCwasspecificallycreatedtoprovidetinancialSuppodtothesmallandmedium-scaleentrcpreneuls.Therequirem e n t s a l e s e t t o a m i n i m u m : B C G C l e n d s c r e d i t a s s i s t a n c e w i t h o u t r e g a r d t o t h e t y p e o f Sto i Z e o f c o l l athat tera a lborrower ' I n s t e a dis. a t h o r o u g h orders and Letters of credii ;re sufficient establish credit investigationis conducted.confirmed Purchase difficulty in have never had credit dealingswith banks To help reduce indeed in business.l his meansaccesseven to those who rates' payment, interestratesare set lower than the averagelending itis nirst' BCGC is well-managedand professionallyrun Second into-credibility translate that BCGC hasthe credentials p400 million. Third, it is suppo(ed by the whole banking community' backedby well_fundedwith an authorizedcapiralizationof the strengthand stability of all BAP-member banks' BCGCexistssothatSmalltomedium-Sizedventurescanthriveandflourish'ItelevatessMEstothecreditStatusthatwill, banks' someday, make them eligible to do businesswith regular

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\(/c are also pleaseclto infirrm yotr that :r portion of er,erytransaction you make goes tou,ar.l the developnent of n wrrrld-classelectronic AIM Etluitnble Lilrrary.

Yrlr irrrtomatically l-econe a Sociri Investor of the lnstinrte.

For carcl assistancc lntl inqrrirics, call: A I M S . i e n i i . R c s . r r . ht i { , n J i r i , , n . I n . .

A S I A N ] N S T I T T I T EO F M A N A ( J E ] \ 4 F J N T C L ) I l., \ e r , l , R h l c M i c k i n gC a n , r y s I l I P r s e (,,1 . R o M s .V c P ( ) B ( , \ 2 r r 9 ; I 1 6 0 M r k r r i , M c r . 1 ,I ! 1 , , r i 1 , , T e l \ o s . l l 9 l 4 L . r lrl , , t 5 l o . . : i 5 , I i l , l 4 4 t i \ , s i / - 9 . 1 4 0r:l 9 4 _ 1 4 0 i Intcrtt: :ri', rtnr.cJLr.lh

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TFIEASIAN

A/IANAGER

vol. x, Nos.4 5 - OCTOBER I997 JULY. AUGUST,/SEPTEMBER

COVER STORY of lntercsts EastandSouthAsia:Convergence

48

byPhilipplnePrcsidentFidelU Ramos Indiahasa vital roleto Playin regionalintegration'

inIndia withAIMAlumni SJ5h?"$fi5="."-".os

52

COVER STORY SIDELIGHTS The Managerasa Man of Letters bvDeanFetipeB. Alfonso,AIM President

AIM Alumni tnterview:DoingBusinessin India

40

ROUNDTABLE DISCUSSION Asia in Southeast IndustrialEntrepreneurship

64

by ProfessorKunii Yoshihara,Centerfor SoutheastAsianStudies' with AIM FacultY andtechnology hingeson science industrialentrePreneurshiP Successful

INSIGHTS for the21" Century Education Manasement

l8

bv De; Felipe B. AtJonso,AIM Prcsidenl for A5ianmanagement hasmadeit imPe-rative lnternatronalization s;h;ols to reinvent their teachinBmethods

Gearine Up for the Next Millennium h.' AIM oy DeailesisG catlegas,

Excellencemakesno compronises:AIM movesto further imProve its standing among Asian businessschools'

TRAVEL NOTES Oh. Calcutta byircfessotNishiMukeii,AIM

43

FEATURES SituationalLeadership:Theoryand leadersbtpStyle of IndianManagers Effectiveness

by PrcfessotR.D. PathalgDt PnthpalSingh,and ShnR'K Chauhan in India to leadershiP aPProach themostbankable A stuiv to deterrnine

ManasementAudit Frameworksfor Banksin lndia Sciences andDislribuion aJMatketing universiry i, ifu S. Laveri,

t4

The Making and Molding of Entreprâ‚ŹneuF EduatdoA Morat6,AIM byPrcfessor

2l

The law CanWork for the Environment Awatdee Magsaysay tooTRdmon Mehta. iiUanrsnChandet

59

Indian banks have now seenthe need to evaluateoPerational resultsside bY side with intemal managerialfunctions

of lVorldwide market integrationhas increasedthe imPortance them' suPPort and Thu\ the needto educate entrePreneurr'

.fat PublicSeryice lawsof Indiamustbest ctly enforcedto Prevent ihe enviromental from thesubcontinent tuminginto a wasteland

4

The AsianManager I Januaty-February 1997

To Influence management thought and practlce In Asla lrom theMissionStatementof THEAsrANMtNtcen

Wh?tJapanCanLâ‚Źamftom Entreprâ‚Źneurship in America byDr RalphZ. Sorcnson,BabsonCollege Entrepreneurshtp thri\esin theLS,partt\becauge Ameri(an culture

77

nonors and Ieveres rt.

THE ASIAN MANAGER'S CoDorate Civil Wars byPtoJessor WctorS.Limlingan, AIM

BOOKSHELF

56

Why family firms in the Philippinesare buffeted by clan conflicts.

CASE IN POINT The One-Minute Candhi: A Shategistt Tools byProfessor Pat ciaL. Lontoc,AIM

62

C , a n d h i t e d c h e su s t o g o b e y o n d g e n e r i c ( m a n a g e n a l ) \ t r d t e g r e sb y c n e c K r n go u t w h a t t h e y d o t o o u r v a l u e s .

DEPARTMENTS LetterfromJapan:BigBang byPrclessorAkira Tsusaka,IJnive6iryof Marketingand Distribution Sciences

t)

CiobalIiberalization and deregulation havepromDtedlaDanto rmpiementmdjor reformi in tlie tindncial.eitor.

Management Update:ManagingInnovationin ThaiFirms

3l

Business Options: Growing Pains of Small and Medium bntemnses byProfessorQuintin G. Tan,AIM

84

byDr. GuntaleeWechasan,Chulatongkom[Jniversityand h ^unal Basu, McCill Universit, F)po-rl diversili(dtion andcompetitivene.\ underscore theimportance or ma\imlz,ng opportunrhes.

5i4Es need all the help and incentive. the) can get,d5 the\ do not hdve the lun(tronal management staff dnd resoirrces 6f lareer fi'rms

Profile:The ForemostFilipino EnuepreneurialFamity

by Prclessot Gabino A. Mendoza, AIM The Zobels:Abusiness dynasty that,smore than 150yearsold and going strong.

BestPractices:BlueBird Groupof Companies byMelindaJaneHewitt Hdrdworl, honesty. dtscipline. andcustomer courteslhavemade

91

94

r h e c o m p d n y a t r d n 5 p o r t a t i o ni ( o n i n I n d o n e 5 l a .

Gemsof Communication: Careful,Careful byProlessatMa. Milagrcs T Garcia,AIM Wordsarepowerfulcommunication tools,paticularlyin business.

EntrepreneurtComer:SimpleTruths

by Robert V Chandnn, MBM '74 Firms.oftenfail to minimize early starFup losses,expectingtheir system to click in due course.

FROM THE EDITOR

90

98

0 July-August,/September-October 1997I TheAsian Manager 5

SAIM THE ASIANMANACER Publishedbimonlhly, e x , " p tI o r l o - r i s s L ec. o r b ' n e d ' 1 l o n Pi Mrrc'JLnea , n dJ u l vO c l o b ebr v t h ' A 5 . a n lnslituteof ManagementIMITA (Pl 196/10'/ Edi' 0l l6 77901 95 KDNPP(Sl107613/97lSSN Office:AsianInstitrlleof torialandAdvertjsing MakatiCjty, de Roxas, 123Paseo Management, TeL:(632J892 401125;892043s' Philippjnes.

43; 8933341Fax (632)817 9240.

Intemet Address: tam@aim.edu. PIL Selections lrom past and current issues Jou nd in http :./ /wrvw aim' ed u.Ph. Copyrjghto1997 The AsianManaget Allt\ghLs in anymannerin whole Reproduction reserved. without ianguages other or in part in Englishor pdor written perroissionprohibited.Printedby TimesPrintersPte.Ltd.,Singapore BoArD: EDIToTAL Jr Chairman:lesusG. CaLlegos, victor S LimLingan' Members: ReneT. Domjngo, A Moratd, L. Lontoc,Eduardo Patricia AshokK. Nath DEPARTMENT: EDnoruAL EditoFin-ChiefrPatriciaL. Lontoc ManagingEditor: GertieA. Tirona M. Liwanag AssociateEditor: MjcheLle Isy H Ramirez Editor: Cont.ibuting Resâ‚Źarchand Roduction Officen Any G. Espiritu Busnts Drpmtt'lrrr: Publisher:FelipeB Alfonso Copublisher:PatdciaL. Lontoc OperationsOfficer: MillieC. Ferrer M laballas Adve.tising Ofrcer: Vanessa Cardenas Eden S Ofrcer: Circulation MEDh

fu PRTSENTMI'E OFFICES:

(632)B94480s Philippines:DeliaGutierrez, of AIM, Inc AlumniAssociation (b32)8937408 Choy,(852)834 5980 Hong KonS:Pamela (65)440 8760 Singapore:TeddyTan, Indonesia:RamaSlamet,16221)79920W 16221)7q73784 Malaysia:ConnieNg, (603)7\7 5374 India Subco ment MediaSouthAsia(P)Lld 336 19771)227 Pakistan:S.l.Salahuddin, \9221)5682271 KorearY K. Chun,(02)738 7970 Japan:TokujiNiinuma,{813)35 829 104 (662)3319303 Thailand:Dr.AnthonySharma, I'ssociation Taplin Brian f.ingdo[L United 10442)24&34 (3311398q6341 de R6musat, hance: Stdphane 'lhe

A Toast Asia to Entrepreneurial t sia, Guntalee hallwe olfera toastto Asia'sgrowth? s h i p i n S o u t h e a s A in Thai innovations into delves Wechasara like sowonderfully Asia,havingaged Intraces Hewitt Melinda and iane wine, hasbeenthe en!ryof many firms, that shifts high'flying Bird's Blue regions,andwaspoisedto bethenomme d0nesia's andbroughtit envr its business Yet,thisJuly' redefined deguerreofthenextcentury. n0 alsospares Tsusaka Akira it hassufferedfrom one curency attacK ablesuccess. foreto analogies ln sports bringing me t o a n o r h e rA. I M s R o m YN e r i .w h o i s "Big wisemenwnen1t castthefutureofJapan's Bang":shall amongthe Philippines' hadsigheddeeplv: it go the way of Wimbledonor the J comesto economics, All of theseauthorsproposesubhisstudieshadshownthatthe cunencles league? and tly that Asia ticks becauseo[ entrepre' Malaysia, Thailand. ol thePhilippines. {reativity.

He had neudal-opportunity'seeking Indonesiahad beenovervalued. glvesit TAM and 50 turns As India for reformsin exchangerate advocated becomes entrepreneurship but untilfie Bahlplunged centerstage, managemenl, tneme'luxta' and, almostlike a dominogame,the the dominantmanagement experl' Asian other with Ringgit,thePeso,andtheRupiahdid,too. posingIndian the had China' India,like Nerisays was ences. fromeverycontinent Almosteveryone and its cunency not to overvalue euphoricoverAsia'sgrowthandhisvoice foresight Nishi was a whimperin the cold.NoW it has manageits exchangerate well. dnd alumnus. prolessor and The AsianManagerwas not Mukerji,AIM happened. lakirg Tagore. of Nehruand spared.We had to look for remedial descendanl and generalmanagement from out time tne pages and white and black solutions: poem Calcutta-a on a l a u n c h i n go f T A M O n ' l i n e t o t a k e finance,scdbbles power of peopleto break of the reminder of scope. of economies iNeri's advantage crisesof cultufes. paperis alsofeaturedon TAM On line). downor breakthrough "nonverbal" AIM ani More impofiant,the attackcalledfor a I alsosharethefirst viewed be rethinkingofwhat reallymakesAsiatick. mationcaseon Gandhi{it can pushing reflections Fidel on AIM's website), In tiis issue,we find President practition' as fromalumniandmanagement democracy lndia highlighting in Ramos have could its stabilizingfeature.AIM alumniin In- erson what Gandhiwould0r stratGelli, done,if he werechiefmanagement dia,includingtheinfluentialRamesh In- egistof Asia'sgrowthtoday. as resoutces human hadunderscored A l l i n a l l , n o m a t t e rw h a t t h e Fil President AIM dia'sleadingedge. saynow of Asia,lefs dareof Alfonsounderlineda valuesdrivenAsian doomsayers entrepreparadigmovercomingma fera loastro herelernalbeauty: management Asia.No,not a tdpod neurial,opportunity'ffeating tdalsby balancing croeconomic but a o f c u l r u r ec,o m m u n i rayn. dc y b e sr e n s i - with a hallemptyglassof dismay hope. fiom India' half-fullglassof hope-humanizing tivities.Guestexpert'writers sees e n d i n c l u di n g M a h e s hC h a r M e h t a . Forhope,liketheAsianentjepreneur.

Magsdysd aw V a r d e feo l p u b l i cs e r v i c e . whatis notYetwill be. leader shafeinsightsinto entrepreneudal giants, from AIM's shipandorganizations. to Morato Jess GabyMendozato Ed to OTTanto AIM'sfoundingfac Gallegos of sharetheessentials ulty BudSorenson, blossom for the environment anenabling anryhere,crl].ng Associal ing of enfepreneurshtp Lolttoclenches c L)e011 Publicadminislrd antlIT i MBM, pro- tion,andints atiollalrelations KunioYoshihara concreteexamples. <llonlo(@nin.edu Email: dnd MDP. Ph> CDM entrepreneurvidesa critiqueof industrial

AsianManaget July'August/Septemberoctober1997

O.

4^ar"^r/'

GearingUp for the Next Millennium The main cogsin the wheel:strategicresearch,IT, innovation, flexibility,practitioner.orientation, Asianfocus.

ow doesan institutethat is com rures leei for currenrrrendsandappliAnorher prioriiv, program re5earch, mittedto excellence advanceto cations. will identifycasegapsin programcur. the top of 1tsfieid?And, once AIM hasmaintained hlghstandards ricula.Localandoverseas primarily cases, there,how doesit keepfromslldingback throughout its29 yearsof existence; more on Asianmanagement, will then be de, t0 secondor third?At theAsianlnstitute rhan24.000alumniwjl.a esrrorhar.yer, veiopedto fill in the gaps. of Management (AIM),the answersro theInstituteknowsfullywell thatsuccess Meanwhile,specialinterestgroups bothquestions arecleariyetched. hasno roomfor complacency, ashlstory andindlviduals havealsoplungedinto re.

S e v e r ael n h a n c e m e nstc h e r n e s is thickwith tragedies ofstagnation.

Com. search.AIM hasthrown substantial sup, are alreadyon wheels,the main cogs p a n i eosr i n d . v i d u ahla. v eh i tt h eb i gr i m e port behindthe activityby makingre b e i n gs t f a t e g i cr e s e a r c hI ,T , i n n o v a - with pioneering products, onlyto skidinto searchexcellence one of the criteriain ti0n,proaction,flexibillty,andhumanre. obliviorwhenthenoveltvor prdcticaliry rankandtenuredecisions. s o u r c ed e v e l o p m e n A t . I M h a s l i k e - of their productsfaded. . Customerdriven management wlsemovedlo cemenrand furtherimLeadership, therefore, demands dy. programs.

Giobalizarior olen requires proveits standingamongthe region's namism-theabilityto flowwith the flux. high-speed analysis andreaction.AIM is b u s i n e sssc h o o l tsh r o u g hc u i n g . e d g e AIM, thetefore, strives to stayst.rides pacebvconsranllv anead keeping review.ing and and maintenance research,customer. in its field of specialization and in the updatingits degreeand nondegreepro. d f l V e nm a n a S e m epnr o t p r a mS 5U . a t e g i Ctrendsit perceives. g'amsas regardb design.learningmet}l markering f a, c u l ' va n d5 - a f d[ e v e l o p odology, duration,andlocation. ment, improvedinformationtechnology AIM's RegionalAccomplishments Lastyear,for example,theInstitute in capabiiity, the establishment of cenrers 1996-r997 got thecontractfor theADB,ViehamdeI o r b u s i n e sasn dd e v e l o p r ] em n la d g e . Recenthighlightsin the lnstitute'srelent. velopmentmanagementprogram, besting ment,andprogressive fundraisinginitia- lesspushfor distinction: sixprestigious institutions theworldover. tlves. . Cuttingedgeand maintenance Theprojectis now beingsuccessfully run resparch.

Inrelleclual caprtalis a prime, by threeHanoi-based AIM professors.

AIM'S Strategies sometimes scarcecommodiryAIM thus Similarly,the ExecutiveMasterin The institute'sAsianand practi continuousiy endeavors to build up both Business Adminislradon program wasin. tlonerorientation hasset it aparttrom theoretical andpracticalknow-how. troduced lasrMavin Ma.avsia.

Thepart0therschoolsof management in the philFull resources supportis givento time but intensivecourseruns for two ippinesandthe regon.Bystressing man pfofessors who will write bookswith an years.TheInstitutealsostronglyendorses agementpracticeoverpuretheoryAIM As:anfocus. lhararepracriLioner-orien |ed the useof multimediain the teachingex. hasproduced managers who cancomfort- andexecutive-friendly, andwhichprovide ercise. ablyapplvatworkwharrhevpickedupi'l new andvaluablecontributions . Strategicmarketrng.Still in line to existtheclassroom-from anAsianperspective, ing knowledge.Threebookswere com. with globalization, AIM is sparingno ef of course.Closecontactwith thebusiness p l e r e lda s rv e a ta n dt w oa r ec u r r e n l 'iyn fort in projecting its imageon the world communityfurtherheightens the Insti. the latestages of production. academic map.TheInstitutehasbeenleanJuly-August,/September,October 1997

TheAsianManager 7

i n g h e a v i ] y o n m o l e a g g r e s s i v e m a f k e t i n g , c o u r s e w a r e ( e . g . , o n l i n e d i s c u s s i o n s J t h a t n e u r s ,professors a n d p r e pare arethemforthe learningolfcampus, the centuryFourfu]l'time diatance publications, itswebsite,anOneworrin[. will facilitate greaterac' handlingongoingACEprolects' The resultshave been inspirin!. therebygivingits stakeholders di blingstogether ThePolicyFo1um The IT postedanait.tm; cessto its informationresources.

Schoolyear1gg0,1997 to dis roof a neutral under verse entities is linkedwith theAIM'5research strategy havejum;;J record;revenues enrollment iscussandresolvecritjcalmulti-sectoral agenda.

2o%. sues.

TheInstituteisalsodevelopingman AIM hasaddedfive representative andFinance TheCenterforBanking databases' informationsystems, agement beefing grid and is officesto its ovefseas ln the bank for executives offerscourses uotheircapabilitjes.Theinstitutenowhasandmultimedia,andcontinuallyupgrad. ing andlinanceinduslries rep officesin 11 countries: region. of the Asia'Pacific Zealand, Australia./New . Fund campaign andCompetencies India,In' CharactoriEtics Bangladesh, Alit'sDistinct Japan, to supportthe thrusts.Am' Singa' donesia,Malaysia, require strategies bitious .

PractitioneForiented Thailand, pore,Switzerland, - Thecasemethod ofinstruction. mode financialsupthe main is substantial the UnitedStates,andViet' practice ovelpure - Thecurriculum onmanagement focuses port.Thelnstitutehasconnam; and anotherwill be theorv. its fundraising solidated community - Thelilstitute openedin Chinawithin the linkwiththebusiness hasa close its andintensified activities . Asian currentschoolYear addigenerating at effofis - Thecurriculum needs. . InUeasedvisibility. totheregion's isadapted tionalrevenues. the courses' in used als are mate cases and Asian AIM boastsactiveParticipa . Stalf develoP mostlyAsian toreigners, include bodies student Thetacultyand tion in variousinternational ment.The importanceof (non-F;lipino). amongthem organizations, thePhilippines its humantesources - A number outside areconducted has oforoorams Economic the Asia'Pacific worldwide cities - AIMhas11r6presentative inmajor offices not beenloston the Insti C o o p e r a t i oH n umanRe. lTWindow toAsia in-houseand te. Several . International Program Exchange sourceDevelopment Student {APEC courses training external uanaoa' InAustralla' - Thelnstitute haslinkswithuniversities Meeting HRD),Asia'Europe forall sponsored been have States United andthe Sweden, Spain, theNetherlands, Japan, UnitedNationsEco' {ASEM), with members, staff . lVlanaoement Parschool nomicandSoclalCommis' - B-usiness on lT. emphasis management ticular sionfor Asiaandthe Pacific - Developmentmanagement The Work ManagePacificBasin (UN-ESCAPI, . Alumni network Progamhasbeeninment Council(PBECJ, Economic - More in68countries alumni than25,000 troducedto improveem. lnternational of Deansof ofGovernors andAssociation Board and ployeeperformance is ofGovemors - AIMis theonlyschool Board inAsiawhose AsianGraduate Southeast effectiveness. cost comandacademic ofthebusiness of members comoosed S c h o o l so f M a n a g e m e n t The360'degree Per 16 countries in munities theIn' Moreover, (ADSGM). system, appraisal formance stitutealsohas an lnternain which an individuaiis Pro tionaiStudentExchange peers'and in Ausualia. ing its computerequipment.Sofar,AIM ratedby his or her supeNisor, univerriLies gramwili various this will be implemented itslocalareanetwork(LAN) subordinates, Sweden, hasenhanced LheNeherlands.

Canada, Japan, andcompleted schoolyear. andinternetconnectivity andthe UnitedStates. arestill projects Seven l2'storyAIM l0 IT inilastJucture Thenewlycompleted Roundingthe Bend ongoing l1 pipeline, along.with Centerfor ContinuingExecutiveEduca' in the is strategy AIM'sexpansion-oriented Projects. which offersIirst-c]ass contentdeveloPment tion IACCEED), ofchoice to makeit thefirslschool . Centers and devet geared makesthe Jor business andhotelfaciiities, conference year 2000,for anyoneintendlngto by the commit' AIM'S Institutean excellentoptionfor localand opmentmanagement is mostevident work in Asia.Theseare ambitiousgoals mentto relevanteducation meetings. international which will Manage' for the comingmillennium, Re- in the Centerfor Development AIM'sInternational Meanwhile, effortof all of the In' n D e lR o s a I i o . needthe concerted Croupl'asdrawnupanaggres5ivem e n r , C D M t ,h eR a m o V larions s r i r u l se s t a k e h o l d eLr sh:ef a c u l l Ys,l a [ ] , multimediaplan to promotethe Institu Sr.AsianCenterfor Entrepreneurship elsewho andeveryone Sycip PolicyFo alumni,students, Awardsfor Asia, (ACE),the Washington tion. The Management B.Femandez, Jr.Center hascontdbutedto the Institute. which honorsthe regions outstandlng rum,andtheJose Finance. and TheAsianManagermagt for Bankingand managers, , of DeanlesusC Gallegos on develoPment on lhet)r$entaLion CDMfocuses Prac Based of thebluezineareimportantcomponents Boauj lhc AIM Meetn!rt Att,tunl thi lnint economy. ofthe lr..at titionersin varioussectors print. afCot, rn,,r,andBnrd t1l ru,kf () l'22 kbrua . !nJormation technologYllT) Its flagshippro$amis the Masterin De' '1gg7).Dean Gallegosis AIM Chief O\ttatitlg Theelectronic velopmentManagement.

Olfictr nnLlthe SanMiguelCorPantiollProlessor buildupandimprovemenf. en' in l ternationalEntetpriseDe'Jelopment. to organized was ACE busi Promote of element a vital lT has made age du Pl1> Email: <l ess@ain.e n e s s .A I M i s i n t r o d u c i n gi n t e l a c t l v e t r e p r e n er iua l l e a r n i n Sa.5 s i set n l r e p r e I

The AsianManagerI July-Augusvseptemberoctober1997

The Situational Leadership Theoryin the IndianContext A look at the leadershipstyrethat is most effectiveamong Indian mana|ers

he SituationalLeadership Theory (SLI), or Life CycleTheory is a p o p u l a rt r a i n i n ga n d t e a c h i n g tool. Like mostothercontlngency theo, ries, SLTassumesthat effectiveleadershipdependsuponthe leader'sabilityto accurately diagnose situational conditions andto respondwith an appropriate combina on of behaviors.

Meanwhile,SLT diflersftomolnercontilgency rheories in its inclusionof a singlesituationalfactor andits specincrecommendations regardl n g a p p r o p r i a t lee a d e r s h i spi t u a t i o n matcnes.

confidence andcommitment.

It centers on maturitylevelcombinations arebelieved acnlevement motivation,the willingness to be: to taketesponsibility, anda commitment . High structure,/low considerato an objective. tion (telling)forlow subordinate maturity, Psychological maturityhas also . High structure,/high considera "the beendeinedas relative independence tion (selling) for moderately low maturity, lan individual s sellsufficrencyl, . Low structure,/high achieve. considera, ment motlvation,and abilityto takere. tron formoderatelyhigh {pafticipating) ma pedorm. turity,and sponsibility" of the subordinate. anceis consideredas the behavioral . Low shucture/lowconsideram a n i f e s t a toi oI ino b . r e l p v amnarr u r i rdye. . tion (delegating) for high fotiowermatu. terminedmainlyby abilitytimesmotiva. nty. t1on.

Thus,whileSLf recommends a lin.

Leadereffectiveness resultsfrom earrelationship betweensubordinate maappropriate amountsof task and rela turity (both psychological job) and and Attributes of a Leader tionshipbehaviorappliedby a leaderto taskbehavior, it proposes a curvilinearre T w o p r i m a r y t y p e s o f l e a d e r subordinates of differentlevelsof mau. lationshipbetweensubordinate maturity behavior-taskand relationship-are riry.Thp mosteflecrive ]eaoership sryle andrelationship behavior.

SLI'smainconcern.It alsofocuses on subordinate"maturity"asthe keysjtuational characteristic thatmoderates therelauon shipbefweenleaderbehaviorandleader effectiveness.

Maturityis definedas the "ability . Highstructure/low andwillingness of peopleto take consideration forlowsubordinate responsibility for directingtheir own maturity (lel/rng) behavior" . Highshucture/high consideration formoderately low Subordinate maturityconsists of two maturity (se//rng) job maturityandpsychologi. dimensions: . Lowshucture/high calmaturity.Jobmaturity,or theabjiityto consideration formoderately high do something, is presumed to resultfrom naturity p g) a rti c i i at n @ the amountof educationandexperience . Lowstructure/low consideration that the individualhasacquired.psycho. forhighfollower maturity logicalmaturity-the wiilingness (delegating) or motivationto do something-isjnfluenced by July-August,/September.October 1997 ) TheAsianManaper g

diRepub scoredabove+6 on the effectiveness the thelormerUnionot SovietSocialisr regafding Generaiprescriptions profile SLT matches in Thelrsfyle crucialrolein mension. a leader's match(nowrefeffed licsandconfirmed leadership-maturity levelofsubmaturlty low moderately with institutions in research matchlstatethat motvatingscientists to as leaderreadiness callthese andBlanchard Hersey ordinates. "situational not onlypositsthe to performbetter.A leaderhasto lntegate leadership 'sa[e"sly]e).astliesesrvlechoices levels and needs vaflablewith the forvari' thework-related styles ieadership highprobabilify in andwit]] areneverthatfarfromthe appropriate group of scientists of the concerns indicates also levels,but ousreadiness considera' (i.e., task-\o\r'/ high terventions in Lhesituation. of theofier srvles otherrelevantfactors ofsuccess rheprobabilitv maturityl. lronIor highsubordinate to or unable if the leaderwereunwilling a conducted also Singh and Pathak " "desired ifsub' SLTand lndian Managers: style Forexample' usethe 142middlelevel involving in 1981 study areat the lowestlevelof matu' The Evidence ordinates fiom threeprivateandtwo gov' a managers conducted andBlanchard HerseY felllngis thebestleaderrity or readiness, managers emmentfirmsin India.Seventy is secondbeslipartici' studyin 1982 involving20,000 middle shipsryle.5e11lng based effectiveness perceived (4S%) had rein 14 cultureswho had pattng,lhird,iatfl delegating,tneleasref- managers between scores instrument on LEAD-self nad Themanagers to LEAD-self. sponded fective.

(38%)'be-6 0 and +6, and54 managers 12 situations' +12 in to between scofed SLI On a purelytheoreticallevel, that, found was also It +12. +7 and tween with otherpopular whereanindividualusuallyscoresfuom overlaps substantially combihad a managers al1 the two, save dependingupon viewsof leaderandgroupbehaviorThis 2 to +2 in eachsituation, behavior nationol la5kand relalionship style. chosen of the appropriateness hardly is thatwhatSLTpropounds suggests excluthan rather style leadership their in in delermining Thecriticalelement original,althoughit canalsobecontended either only having sively is not the range0r effectiveness thatmanyothertheodesmayalsobesaid a leader's In Yet anotherstudy (Kaliaand of adaptability but style, of the flexibility to havea highdegeeof overlap. from 1980),I I branchmanagers Pathak, which leader AlthoughSLI offersvery specific the style,or the degreeto to responded banks public sector of Indian to thedemands for effectiveleadership' behavioris appropriate prescriptions to 25 subordinates' thet and score LEAD-self, effectiveness the theoryhas receivedonly limited a givensituation.The inILtAD-olher instjumenls. other in termsof LEAD is determined empiricalattention,with mixed results. of themanagers perIhesubordinates measure in all of strumenls success probability of overali the Further,the fact that SLTcan be shown efand behavior leader's of theh ception 12 situations. r o o v e r L aopt h e rI h e o r i e s{ i n v a l y i n g LEAD'self's the both ftom results The I n 1 9 8 8 , fectiveness.J degeeslis not showed m i d d l e - LEADseifand LEADotherdata 1 5 4 "2'3" style in itself suffi' had a managers levelmanagers rhatmostofthe ln determining a leadcient evidence f r o m a l a r g e profile.Fufther'both in termsof LEAD of its validity, er's effectiveness' the data,morethan60% p u b l i cs e c t o r ielf andLEAD'other particularlY scores had fertilizerfirm of the managefs effectiveness critical element is not since many in india were o f 0 t o + 1 2 . of the other the range or flexibilitY a styleof leadership, Tounderstand administered theorieshave it Rather, style. of the rhe'LEAD'self it mustbe examinedin termsof general not also Cross i n s t r u m e n t . stucture and specificexpression. is the adaptability ot achievedsuffi' have style leadership of The effective culturalstudies cient empidcal the style, or the de' between adequately nessscoteof failedto djstinguish supportdespite of styleand leader gree which to the managers the globalcharactedzations afairamountof need leaders which the specificbehavior from attention in behavior is aPProPriate ranged particular a if 4 to + 19. Al' to usein a givenculture, litera academic the demands of a to t h o u g h t h e i r styleis to be attributedto tiem. rure.

A n e x a m p l e 'as s t u d vo f l h e P e r o v e r a l ls c o r e given situation.

Leader' in planlsupervisors of electronics range was Leprjons ship phenomand States,Japan' slightlyhigher GreatBritain,theUnited enahavemosfy Blanchard Hong Kong.The findingsshowedthat' and Hersey Pio- than that of the enterprises in indusuial beenexplored of P (perform furtherdiag while the characterization needed of study.themanagers settings in orgadzational neeringstudies leadership (maintenance) and M ti?e have nosticabilityfor matchingtheir stylesto ance) manufacturing a predominant.iy jn each structure asonly I 1%hadan effec' stylehavea simiiarfactor on thetaskandpeopledimensions the situations, focused associated culture,the speclficbehaviors scoreof +12 or above. tiveness behavior. of leadership thosestyiesdiffermarkedlyin ways with of 35 samPle on a In anotherstudy The work of PP SinghandVS.R. within thecul' in IndialPathak'1980)'it whicharecomprehensible and bankofficers course Krish'naiah {1989ltookanother normsof eachsetting. asa malor wasfoundthat 51%of the officershada tural theroleof leadership examined of manage' "2'3" basicstyleprofile{i.e.,a basicstyle Also,datafromsamples of influenceon work climateperceptions traineesfromGreatBritain,the US, units.Thestudy of hi?hstructurctask-highconsideratian' ment anddeveiopment research of 1otltask- Japan,and HongKong,which were not datacollectedin Argentina,Eglpt' followedby a supportingstyle analyzed patterns many of whom includedin this study,showed oI Korea,Poiand,and high consideration), India,the Republic lO

The AsianManagef July'August/Septembe'October1997

that werebroadlysimilarto thosefound the cultuaalpreference to view worKrn Sucha growthprocess is basedon a within the electIronics plantsamples. thecontextof relationship (Sinha, l97g). relationshipof reciprocalinfluencebeT h e An ide. tween the leaderand his subordinates. f i n d i n g so n al supedoris Initially,the subordinates dependheavily the electronn o t j u s t a on the leaderfor guidance anddirection, ics plantsution of performance D O SW S n o s e aswell assupportandencouragement.

By pervlsors also a u t h o r i t yi s workinghard,the subordinates develop leadrevealedthat clearlydelim- skillsandgainexpedence andself-confi, in the West, errhip style have a eimii t e d b y t h e dence. the behavior Asthe subordinates matureandacthat prestional man qurre commltmentto their work, they suredsuborual0r taskre- slriveforrecognidon. jnfluence. andpardinateswasa q u i r e m e n t s . ticipationin decisionmaking.If the leadm u c h R a t h e r , h e e|s response to his subordinates, altered ated with those styles suongelele i s o n e o n expectations is to reducethe quantumof ment ln perdiffer markedly in ways wnomsuD0r- direction,retaintie warmth,anddelegate formance d i n a t e sc a n moreresponsibilify which andautonomy, arâ&#x201A;Ź compreherrsithesub_ style than in d e p e n d o n ordinatesare encouraged and feel more the East. f o r i n d u l . involved.Theythusexertmoreeffortto Conversely, nor]ns of each setting. gence.

Subor' lncrease productiviry and.jn sodoing,beplanningand dinatesread- comeDetterpreparedfor greaterparticigoalfacilitaily acceptthe pation. tion were much strongerin the Eastern higherstatusof theirbossandrespect and Eventually, the leaderandthe sub. conceptof performance, sothatperform- obeyhimwillinglyprovidedheis support. ordinates createa participative systemin anceand maintenance were closerto, ive as regardstheir work, personai,and whichrheyinteract fully and freely; rhe gether.Further,while the US separated socialneeds(Sinha,1980).

In otherwords, culturalflavorof deference and affection whatpertained to thetaskfromwhatper. a leaderin sucha situationhas ro oe blended personalized in a relatjonship is tainedto interpersonal relations, in other nurturant. not lost.Thereis evena distantpossibility settings,taskbehaviors were usedto fa, A nurturantleadercaresforhissub- tiat bossandsubordinates will createan cilitatetaskissues. ordinates, showsaffection, takespersonal autonomous goup in which the distincThecontrastfitsin ratherwell with interestin theirwelfbeing,andabove all, tronbetweenthemis minimized.Thepro. thefindingsonindividualist leade$hip val, ls committedto their gowth. However, gression in styleftomnurturant-task (NT) uesin Westerncountliesandcollectivist to be effective,the leadermakes his to participative is a gadual and interacvaluesin ChinaandJapan.

Whenindividu. nunurancecontingent on the subordi, tiveprocess.

In certaininstances, rhough, alistvaiuesprevail,a ieadercan be ex nates taskaccomplishment.

In the proc- theprocess canbecomeregessive.

It may pectedt0 exertdirectpressure towarda ess,theredevelopsa relationship of un be contended that the NT styleis aimost goal.With collectivistvalues,leadership de$tanding,warmth, and interdepend. identicalto a 99.9style,ot a hgh on con wiil morelikelyemphasize a reciprocal in encethatleadsto higherproductivifyand sideration- init iating strvctute. fluenceprocess. gofih for both parties.Thisdescription The nurturantand participative Thus,whiie the transcultural di. of a nurturantleader .. stylessharea concernfor the mensionof leadership sfylecanbeidenti- emphasizes thecondineedsandfeelings of subodified, the skill of executingeachstyleef- tlonalrelationship be:r nates.But while the orientalecLive]y varies by culturalsetdng.

Forin- tweenthetwo leader tion of the stance,substantial culturaldifferences shipfunctionsthatare werefoundin an examination of thespe- saidto be effective. cif,cbehaviors associated with a perceived The require nurturantstylecontains "9.9" the styleamongmanagers in GreatBrit. mentthatthesuiordiain andJapan. nateeam the leader's ' lent paternalsymbol.The nunurance is consistnurturantstylereflectsa dif, A Model of EffectiveLeadership ent with India'sscor, ferencein statusin whichthe Style in India ing substattiallyhigheron powerdistance nurturanceof a superioris symbiotically Herseyand Blanchard arguedthat thantheUS,GreatBritain,andJapan.

There. relatedto the dependence of the subordi a ieader'staskandrelationship behavlors fore,managers operating in culturesother nates. interactwith subordinate maturitytc sig- than their own needto be moreLhannorBut the fwo stylesdo overlapand nificantiyinfluenceleadereffectiveness. mallyawareof themeanings which maybe thusholdthepossibility of a smoothtran However,task characteristics are much placedon theiractions byouers.Organjza- sitionfromNT to participative undercon lesscrucialin Indianwotk organizations tionsthat provideopportunities for such ducivecircumstances.

Similarly,it could thanin manyothercounffiesbecause of leamingcanhandlethe issuebetter. bearguedthat,in anautloritarianculture

llWrilethe characteriza-

lar factor structure in each culturâ&#x201A;Ź, the specific behavionsassoei-

ble within the cuhural

have

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drawnfrom a wide rangeof orthesestyles managers like India's,nurturanceis but a glotified clustertogether;meaning' in Japan,GreatBritain,and ganizations peoof style generalized faqadecoveringan underlyingauthoritar- belongto a mole who managers countries, three all In India. be Hence,it may not "nurtulance"were ian stance.In otherwolds' an authoritar- ple'sorientations. on high as seen wele to movefiomone difficultforanexecutive conditioncanal "task." ian leaderin a favorable the authoritar- alsolikelyto be seenashigh on Similarly, another. to style and fordtheluxuryof bestowingaffection ian and bureaucratic careon hissuborstylesandtheirderiva- India Goes for the NT Model dinatesalthough ' in this artiThe studYdiscussed tives are often comselfheisbasicallY for the NT support provides strong task leader's cle A bined.Taskorientation ishandpower-of atleast' effectiveness; leadership of model is a distinctconfiguraand rcLationship ented. environindustrial Indian the regards as tion which,in someorHowever, interbehaviors alignswith ment. The researchof Singh and ganizations, there is no unorientailon Krishnaiahshowsthat the NT model is thepeoPle's act with subordiequivocal eviin others,with the usedby researchscientists-avery signidencethatIndian nate maturity to 'i and, authoritarianbureau-ficantinput to the rapidlyevolvingundercultureis authori Their effectiveness. standingof leadership ffatic complex." tarian.Thereare adempirical and a theoretical are findings In the studYin iniluence leader someovett auseems which leseach, existing over vance thoritarianfeafer- to doubtthe validityof the NT modelin a state-owned ftom tutes,suchasan : (exeffectiveness tiiizerfirm in India,it promotingleadership on hier- l emphasis conspecific limited in wasfoundthatsubordi cept,of course, archy,disciPline' the managershigher texts). gave of 92% nates reiationpower,andstructured obedience, stylethanin NT.leadership in the scores of thecorrespondships.Butthepresence bureau- Notes: (i.e., authoritalian, styles other of authoritadanism"Supeingpsychodynamics Sinha(1978)' 1. SeeJ.B.P. orientation). task and participative, cratic, anxiety,insecurity,cynicism,ego-alien andAlienaRelationship stylesof man- rior Subordinate whentheleadership sexuaiity,and paranolddispositions-is Further, Bulletin Instttute Labor agerswho hadscored+6 or moreon the tion." National doubtful.

The (1978).

Kahar S. = 96) were 4(3),pp. 209'223; A factorstructurestudyof ieader- LEAD-selfinstrument[n of Study Psycho'Analytic by their Inner Wortd:A 18.7s%wereperceived of 523 analyzed, shipstylesbasedon theself-ratings London: Society. and and, Hindu Chitdhood asprimarilyNT lead-ers gen- subordinates of a largepublicenterprise executives Oxford UniversitYPress;and D'C' while leaders; p ip ative artic as the secondarily, of leadership, erated10 dimensions Power:TheInner partici- 61.45%,as mainlyNT leadersand' sec- McClelland(1975). flrstthreebeingsubordinate'based Ac' Expeience.NewYorkTheFreePress. leaders.

Dation,leader-centerednurturance,and ondarily,as task-orientaflbn Indian an what (1978), "nufturance" Althoughthe NT leadershiPstYle cordingto Kabar an authoritarianstyle.The wlth 92%of is sensitiveto (andconcelnedwith) ue factorwasstronglyandpositivelyrelated was distinctivelyassociated that in the LEADjselfinstru- not thegoalsofwork andploductivity guidance, anden- the managers, to friendlyorientation, but managers ale externalto the relationship' the couragement;and negatively,to power ment,only 19%of the effective "distance," scoreof relationshipitself,the unfoldingof emoeffectiveness wasstrongly (with a leadership which,alongwith ashavingpri tionalaffinity.McClelland(1975)alsoobperceived +6 or above)wele style. with an authoritarian associated servedthat Indiansperthat marilyan NT undelstandable It is,therefore' form their work as a "favor"to someone. in India, an effectiveNT styleof leader- l e a d e r s h i P with the perceivedcu1- styleand,secshipis associated 2. The discussion andthe ondariiy,the valuesof selflessness ture-specific hereis adaptedfiom the personal participative ofpowerwhenpursuing negation

by Propaperpresented goals.This,in turn, makesit easierfor the style.Meanat the Sinha fessor J.B.P. NT leaderto empowelothers(in practice while, a maConference International ratherthan in theory),palticularlywhen jotity of the Osaka on LeadershiP, of leadership- m a n a g e f s theothertwin ingredients JaPan, UniversiryOsaka, ( 6 1% ) w e r e expertiseandempathy-arethere.

1984.

August, 23-25 perceivedas 3. P. G. Herbst and above all, is having a NI LeadershiP NT on The Evidence (1976). Alternat\ves model, l e a d e r s h i P To test the NT leadershiP to Hterarchtes.Leiden: studieshave style, folover30 fieldandlaboratory MartinusNiihoff, Social

by Sinhaandhis associ lowed by the beenconducted ScienceDivision. atesin a decade'In the book, The task-orienta4.J. B. P. Sinha Leader, Sinhaconcluded tion sf,le.

NurturantTask LeadetNew "by and large,the nurturantand Theresuitswerereinforcedby a re- f 19801.The NurturantTask that, House.

Publishing middle Delhi:ConcePt participativestyles,and their derivatives cent studyon a sampleof.229

cares far hi*

their'

12

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Audit Management Frameworkfor Banks in India Indta'sbankingsystemwill have wth liberalizatton, to carue processes upgrade to betterutitizeresorffces, edge a competittve "fair" pictureofthe organireachingchangesin the productionand recordsgavea worldwide.In tum, olgani' zation'suue stateof affairs. sectors services However,financialauditsdid not in di zationshavegrown tremendously to an have evaluatesuchfactorsasadherence Companies tectedmarkets.Somehadevenmadethe versityand complexity. to used means policies, the productionand organization's large-scale blue-chipcategoryin the capitalmarket swunginto the decision-making of goodsand services,ably achieveits goals,andthe on the sfength of their flnancialresults' disuibution ear' Besides, and mechanisms. automation, processes In India'sshelteredand regulated supportedby sophisticated a have to tended tech- lier audit methodology did not haveto bother information,and communication markets,managers from negativeslant,focusingon devialions of their or- nologies. much aboutthe effectiveness normsandirreguluitiesin acorescribed has organizations Managingthese systemsasregardsdecisionganizational ratherthanon posicomplex.Authorityand iounting procedures making,resourceuse,productand serv- becomeequally to improveoveralleffective' are delegatedto both gen- tivemeasures ice quality,etc. The situationwas even responsibility functionalunits and ness. eral and specialized moreplonouncedin the publicsector' Older audit systemslackedan oPmustpiovidesila' Topmanagement breeze areas.

Now,with the iiberalization a firm's steerthedifferentfunctions erationaltool that would assess sweepingacrossthe country'most local tegicdirection, functioncapacityvis-a-visits andensure managerial notonly towaldsa commonpurpose, fumswillfaceintensecompetition aboutimprovements' bringing in units ing optimally. used are resoulces butalsofromnew thatavailable fiom foreigncompanies, wasmanagement emerged that tool One shareholdinvestors, Governments, localfirmssportinga modernoutlookand audit. been public have Most existingentitieswill be ers,andeventhegeneral technology. information,not onlyabout forcedto takea hardlook at theirbottom seekingmore but about What is ManagementAudit? healthofcompanies "management linesandmargins'andflnd waysto carve thefinancial auditisan "quality In general, as of management" well. In edge'In fact,some the acompetitive themselves operations oftheadmistrative interestin organizations' examination havealreadyaken tum, heightened corpolations progressive of a comarrangements organizational and bearof lot audit melitsanddemeritshashada management th. cre andestablished standards publicimage.Thus,firmshave pany,usingcommonlyaccepted 'goodmanagement systemsto periodicallyidentify possible ingontheir This evaluation'."r of rethe startedto feelthe needto look at meansof improvingthefuoperafons' to on the typeof aUdithasa futuristicdimension superimposed "Manage' India'sbankingsystemis caughtin sultsof operations func- it, asreiteratedby Washbrook: internalmanagement the samecurrentof change.Bankswill qualityof their auditis an indementandadministration and tions-a sortof audit. haveto betterutilizetheirresources of soundness of the pendent assessment the auditingfunction Traditionally, upgfadetheir systems,managerialprocunit anditsabilityto face'the had leanedtowardsthe thebusiness etc.In short,the time hascomefor in organizations esses, of the future."2 problems business accountingaspect'its primaryconcerns audit' banls to institutea management of the audit de' definitions other of the financial being the correctness of the compo' interrelationship the scribe recordsand the legitimacyof the activiTraditional Audit Wthering AwaY? approach);the (systems problem a of nents au' rapidtech- tiesreflectedtherein.At a laterstage' Forthepasttwo decades, with companyor professional whether financial compliance nologicaladvanceshave introducedfar- diting determined

lVIli'f#lH:.rffi#s,T

14

The AsianManagerlJuly-AugusVseptembeFOctober1997

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nSeueyyuetsVaqJ I L66I raqopo-raqrualdagTrsnEny_IJnf

slJaJaptods ol uonradso,rlur ieuaEeueur arl ur apPu lsli aJJnosal :uJals^s vd) uoBe)runuuo) aq11(rual rrpouadopol alpq ppo t $iueq,luauluoJ aq ol a^erJ(Suuueq,.3.a)sar4snpur arr sdsaql Eur;olruoru sapnlrur) spoEpuon -u,uaa,tqqaduordgErq pqualod e -AJas u1 -enue?rcalarr{Jpol sa6aleilspue sueld JoJ suonplrJrpou atepdolddv 'sq8ua4spr.raEeueu qlueqe sauqlno pod (sannqedeo luaura8e alqplinsSunloaa rualsds lsuondat aql ;o -aJlrpnpluaua8eueuy llneder -radalorissaro;d iuau -uewdol) uonpnlpa a,rJlnlaxE Suueu-uorsnap 0l aql sar -aEeueusr Jolsa^uralnradso.rde deru,s ,ssaualtraga -pnlslpnp luaruaEeueu pr.l plnoJlpql JollEJe ,JunolJe(sso1 pue 1r -pluatJoSuqa>1.reur) -a8eueu:;o4cnsp;edalnralqouy : loar,t sap5 .6 jo'td) pup acuepq dqlpaq taaqs dpua 1'94 dcuarcq;a uopJnpoJd.g lpnv luauateueryyo adocgaq1 'plldet JoJ -ledsueep saprsag ./ la)iJeuraql sanrlod IeJSTJ .g del ol paltadxa/{,ou a;e qrqrvr ,siueq (prcoq) s;olrarp dal aW salog Jo ,ilJielotuI .iolrasxqnd ol sanddeaurpsaqJ 'ssaualnJaJJa pue'1a.nai aq1 druan ltun 1e 'lrodar ., ltpneluauaEeueu -;aiuautdola^ap pup r;;aSuu,o.idurl Urr:ll? ul atIl luaua8eueru lsrsse .t Pu pallaualaqpp01!\ suall-luau:a3e lpql sJaploq{lols ol ssauJlpJ a)r Jas 0l $ lpne aql;o asodmdlipJa,rro aql .uou -ueur;osloadse arrnqrcnbaqlsalet(1uaurn4s -rp olu ar;1 qlleaH .t ,,s3uyuJpa,, pue ,uotelrunuruoJ uonelsuel] Jo -u1plder aq .rog dpo iuearuq?noqJl8olopo 'ssarord;o (uorsoap) saLnradslad arpuo4 -r{lau aql ,trua8epallpalJJp uedq pa1e,r aq -rn4s(leuonezrueBro) rtrroolfi .7 Eunluu-uorsiJap puaEeueu uoB)un; Jo o1aleqryg daql 'pauaalrs dpeprnsaJpspunJ ('l1a'auorur,saps aql saqord arlJ 'aloq.&L lpne e sedueduror 'uonrnpo,rdJ .l rc;talreu: aWol utn1leql suu1{ i4rdeJ suon)unJ JrruouolE aq11surc8e saulnJe lpuorlJunJJo slrun 'u0nPlll0de :uoqeztue8to up ur sazru pnprlrpur aanepurnr lredul ural-Buo1 Jo aql u0 uorsnapalrsuaqarduo)pup aln -nnl)sJotrpnpiuarua8eueru p (svd)) aql Eunenp.a.a :satdde lpql qreotdde sual lsaq -)alqoaloru e a{pu ol )iupq aql salqpua spaJp aluprrrJograd -sdsaq1'asuassrql u1 'saaqralqo da1 luau 0 I parJtuapr alerod dueduotaq1uopodarlpne luauaEeuuu -a8euery goalnlnsulupJrJaruv -;or aql Suu,aqre qsel ol alnoJ par,Ersse ua 'ssam;d V'paAIoAusaqurqedet aql ieuaEeueu lpne aql o1qreorddeluaJaJJrp aq1SurqsrrduoJJp ur slalal lualaJJrp lp '1ra[o.rd osp p]m{)a aW tnq d]fliqeil ,tpq8ls padolalap e sraJJo Jo qrqru, are daql ssaualntaJJa pr,la8eueu arero1pal6rsap puppnueug ,arueu;o;radpoo8 aq1l.1uo ssassp ol alpq 'snqJ lou dq;auueu pup aql Iool P sl lrpnetuaura8eupu daql 'psodordluarlaruequaJo uonlues ro; gndurpalaprsuoJ aquer quauoduor , ,,'sa!Il.DeJ IeJrs^qd ,mog ueol e ase.ldde slueq uaqrvr aq1'a1fis pue'qp4s !e1s,a;n1rn4s,srualprrerleurnqJo asns1rpue'zuoqelado;o sueau 'sacnre;dpuesarclod 'saa,r1rafqo ppou, -sds'safale4s'spo8 a.r,ordiu aleupto;adns qlorr,r. s11 pue sueld s]r..dueduor luaua8Bueuraql qllr{,/r qluvr1oo13uuo1 -aurp{ ar{l sruJalu paqrJJsap p uaaq puonezrueEJo s-l aJnl)nJls Jo aql Jo uoi1 Jo -ruouaAnJaJJa rjesepa^Jas a^pqru.a\llpne ppqsuonpzrueEJo'sarun -puluexa JaJIJpa ul pue alnJn4suoJ a.trsuaqa,iduror 'sanlpqedec aq1'sarnreldlrreJJaqp ail Joaruoslseallp Euryel pue,suonelrunur e $ lrpnp luau:a8eue14J,, Isr.l :lrpnpluau:aEe tq8llol tq8notqsdeqiada Er{ppolv\qupq -uroralelodror'8up4eut-uolsnap fuo ednn -ueruJouJaJuolluelroduruposlesrspua Suruaaq1u suon)uryluauaEeuuupury -led'uoneluauopo81no$iJaql a;npacord slr salaq)p uonenueS;o up 1y1,oH pueluaur1saluarlJo lrpnedlaupy aq1'sa,Lnrafqo quoqezueS;o uu Eurlaqre qr ssaursnq Eurrallaq u1luau ,,,'uoqrsod 'palPI0nuaaq -a8eueru pup sdemqlpr ol sueau lsrsse ppqteql-Jal1a1aq1dprussaJau jou-sail p,,Srlrpnpluaiu pauJa)uollool pJP,/v\JoJ ,saluelsur 'suo!l -11od go aql aq1 servr 'sp,lolvl lrrrds aruos 1r -aEeueru Jar{loul 'sdeqsnupqual ur 'dlpn1ry 'supau aql tou 1nq,a1q1spr, -cunl ,.3.a-apue -od Surprole lusu|efieuelu ,io; suonsaE8ns ala/il,spuaaql lprp os ,saroqod 'au11 a1e;odlor ,puealue alqua^nard e aues rleql aql 1e leurelu! ro Ar! ruo{ suonenaprneuralsds aq1ol luauaEe -tu,ro;tad -lBnb aJnlryJallaqspJe,A o >loo[noaln arfl pesod uo -ueu pauale (dot) usrupq)au oN -JnIsuoJe alpq ppoqslpne luarua8eueu s'ssau -urtredns suollEre ,q1urr -{eaftrueulnq'asJnoJ;o 'dpnuassE paldnor,qa luauaBeueupader ..'uopualle -do;o slldser eql -Aalile ]e uorsr,r,ladns pue -sa lo4uoJ IeuJal alpq spaJe ur leql ro; luaualordul -ura^qlaJJa ar{lol aallruruoJ ol Arpot JoaJuasqp lr {ool seaprdolalapol pupsassauieaan palrad uprxeJpleuef aq1.{qpare4ala.&\ sai1eiuoue peeu eql leet sr$rlJ -snsunJa o uJnl ol 'uoqelado;oaseqd aI{J 'lulod u aspl p aJa/y\ $iueq aruosuI pue'sailqod,sueld,spo8 fuaaa u sanu.Dlp palaloJsrp sanuep8arlar{J.lrpnpluau Euzdpuero; ssaro.ld psrcrddernsou8erp -a8eueup JoJol paauaql patJoJural alpq ueau ol ualpl sr Su6eueuruaq6 .Euri e,,seSunrpne luauaEeueusaurJap luau sreadmo; lsedaq1EurrnpauarsBuplueq -lo4uoJpue'Eune.r.rloru,Eurzue8ro,Euru -a8euery;o alnlnsulue)rJauvaql uerpulaql ui sluaudolaaap -ue1d;o snorJp1 'luauI suonruryprra8eueu puonrpe4 ro[ sr[rBgrrr -eu aql alenp^aosp UPJlrpnPar{J -aEeueu;o u:alsds Sunsxaaqllsnfpepue {pnv luauateusw,rog paalqpaErarug 'luauaa,ordurr paau pila8eueu seale leql pulJ a.nordur o1 sdeu, ol sar4 lrpneluau quonezue8;o lulodurdpuesuonelado ue -aEeueu'lelalg '4a I(.lo1reg finqrsuodsar puea.nnrsod aWqloq pnosl plrorvraprstnoaql qll \ sdqsuon J0salntpala.a,neEau ,{lpuapllsnu lrpneluaua8eueuV .slps -plara^rt)aJJa :(apuedruapr;a)tsot ts€al -aJruJal-uoqs patgures JoAeJ ur Euraq aql J0 slinsal urnurqdo lp Jo luaulalair{Jp aJpqsalalul uual-Euol Jar{lar{a.l sauru lluau:aSeupu aq1 aql dq paurelqoelep -;a1apssaroldlrpnp ar{J .Jla uoqpzipn aql asn aql pu? '&nqena.l'sprepuels Jo

luaua,roldul .roJsallu -nuoddo lpuapr o1 zuonezu€ro JelluISr.{ll/y\ 'ualauemdprppr suosuedruor 8uryeru ap-yvr in spual prreqa al arueuuopad quuge alp -npnasaqleotdde lpneluaua8eueu1y

The primarysourceof information and will havestructured Theprocess andcorrectthem.Theyneedtheexercise will have however, The basicdata ontheactualprocesses' components. to boostor, at ieast,sustaintheir market unstructured at obseruations auditors' from thefirmbeingaudited to come onthefunctioningof ratings. be cannot audit the Thus, valiouslevels.

AmongIndian banks,it was the is obtainedin the structuredcomponent. a totallystructuredprocedureat various taken are data business and financial The StateBankof India(SBI)that pioneered a structuredframefrominternalandpublishedsouces,while levels.Nevertheless, audit-a the applicationof management in a functional items gathered work identifyingthe conceptthat is not yet in voguein many somequalitativeaspectsare (open-and close- areathat requireinformationwould facilisetupallowsit throughquestionnaires firms.SBI'sorganizational Theputial$ sructuredcomponent tatethework of the auditteam.Thebroad audit ended). to regularlyconducta management throughinterviews functionalarcasto belookedintoinclude: banksand localhead is to be accomplished on their associate anddeveloPment I. Planning usingprevailinginformal and discussions, offlces. structureand II. Organizational anddecision. banks,India stylesof communication Amongnationalized develoPment The auditormust take Particular audit Bankhasconducteda management tunctions Personnel/HRD III. sigpificant was there wherein of someof its zonesand corporatedivi- noticeof cases N. Credit Therc' of targets. sions.In fact,thebankhasa management over-or underachievement Internationalbanking V. characteristics: following the port shouldhave structure. auditwing in its organizational andotherfi' Funds,investment, Vl. o point the to and Short A few othernationalizedbanks,suchas nancialmanagement o Shouldnotbeiaultfindinginnatue PuniabNationalBankand CanaraBank, Generaladministration VIL if anY; audit andpointoutabenatons, havealsointroduceda management andaudit InsPection VIII. o minor for give zuggestions Should in someform or another. many frameworkhas structured The solutions andaltemative rectifications auditorwill Themanagement advantages. for maiorproblems.

General Featuresof the Process be ableto coverall aspectsof eachfuncauditexerTheinitialmanagement tionalarea.Fora newauditorin theteam' for Banks cisecarriedout by J' Martindellon behalf SuggestedFramework au- the frameworkis an invaluableguide. eulie4amanagement Asdiscussed of theAmericanInstituteof Management The auditorneednot conductthe list of 301 quesflons.o dit probesthe effectivenesof a company's usedan extensive in the andutilizing procedurein the orderdesignated funcfonin gamedng The procedureattemptedto givethe or- managerial framework,andmayevenmakechanges tesources. andfinancial ganizationan overallrating,assigning human,physical, therein. strucIn a bank,whoseinstitutional weigbtsto the 10 KPAscited earlier.Of audit, In conductinga management funcbroad themaximumscoreof 10,000points,only ture is composedof various difgathered from to be has information and (from boththedelegation aspects. tionalareas 3,500pertainedto manageriai poins indicated the to cover sources fetent be would it perspectives), bYGreen- span-of-control adoPted Anewerexercise split the audit into two in the framework.The differentsources to convenient for questions: 203 wood involved375 the indi- tappedinclude: and170for managerial stages.The first stageevaluates auditingdecisions or oth' o Bankrecords'Published It did not ratetheorganization functions.T erwise were expectedto per se. The responses o Discussions andinterviews,held organifunctioning the castmorelight on andstaffandwith with bankmanagement zationin its components. customers haveshownthat studies Subsequent o Observations to be madewhile approach uniform no be therecanprobably relevantmeetattending flles; into looking audit.The in theconductofa management regional to branches, duringvisits and ings; processhasto be adaptedto the situaoffices,industrialunits. zonal or tion-a flexibiemix comPrising: WhencoilectingdatafromPrimary ino A studYof keYPerformance . : to sources'it is necessary and secondary dicatorsandtrends; anddiscusquestionnaires formats, design como A studyof organizational forms vidualfunctionalareaandthesecond,the sion notes.Suitableinformation andProcesses; munications audited being firm to the given in advance (largely r Directobservations throughthe coordinationand interfaceievel of theheadof theorgani- givesit enoughtimeto collecttherequired participationof auditor(s)in internal theresponsibility aatainsteadof havingto hand over the zationor unit). meetingsandconferencesl dataPiecemeal. the Sincethe basicaim is to audit . Personai interviewswith manaarevital to Similarly,questionnaires processes in and planningandcommunication basis); gerialfunctionuies(onasample higher with interviews and discussions nec. The administmtion of question' the differentunits,the exercisewill outquestionnaire A management. bank To essarilyhavegreaterqualitativefocus. naires. enthereby agenda, discussion the lines will getanoverallview of therationalebehind auditProcess Themanagement time' saving and coverage sufficient suring thepositionreflected invoiveboth subiectiveand objectiveas' thedecision-making, An auditorhasto havea fairundermust alsobe dimensions quantitative in reason' a pects,with the formerhaving when of the itemsin the agenda standing whereverfeasible: assessed ablvsizedrole. l6

The AsianManagerlJuly-AugusVseptemberOctober1997

notingdownhisobservations.

He hasto observe the proceedings, communicationstyle,level of participation, etc.in eachmeeting. Similarly,when sifting throughfiles, the auditormust observethe natureof developmentsthattakeplacein a given case,thestyleof corespondence, andthe time factorin takingdecisions.

Theauditingprocess ends with the preparation of a report, which discusses the inferences drawn from quantitativedata, observations madein meetings, anddiscussions heldat a various levelsin the bank'soperations.

Thereportmustalsoenumerate thecauses of functionaldeficienciesandalternativesolutionsfor them.

issuesto the surface.Oncethe reportis presented to thebank's top management, the action pointsdelineated in the report must be initiatedby the concerneddepartments.

B. Lastly,periodicprog ressmaybeascertained anddis cussedat the top management level.Thesuccess of theimplementationof the audit report largelydependson the depth, innovativeness andfeasibilityof the recommendations madeby theauditteam.Onceofficesaudited feel the importanceand utility of the observations, they oughtto bemotivatedto impiementtherecommendations.

Progrosis Management auditin Indianbanksis now gettingstabi Introducing the Process lized, althoughthere are still Thereareseveralstepsremanyconsftaints.Amongthem quiredto introducemanagement are the lack of awareness. the auditin banks,regardless of the country. ductingthemanagement audit.Oneway absence of the requiredtools,the lack of L The foremostprerequisite is en- is to train the teamso that they pick up clarityontheprocess, andthepoorresponse suringthe audit'sacceptability at the top boththeconceptual aspects andthetech- to theauditreportby thetopmanagement and awareness of it down the line, espe- niques.After the presoibedthree-year asregards impiementation. ciallyat the seniormanagement levels. period,it wouldbe goodto replaceonly It is hopedthat, in time, the kinks Directcommunication, business meetings, onememberof the teaminsteadof ail of wili be ironedout andbank will successffaining,and other formsof information them.In sodoing,thenewmemberpicks fullyimplementmanagement audit. dissemination arevitallyimportant. up the nuts and bolts initially as an ap2. Seiecting an effectiveauditteam prentice,thengraduates Endnotes: into the team.

1StephenR. Michael,Appraising follows.The leaderof the management 4. In currentprac.tice, all the units auditteammusthavea solidtrackrecord, of an organization Management Practicesand Performance, are subjectto audit, untaintedreputationandextensiveexpe- which is basically NewJersey: Prentice Hall,p. 23. a verificationauditfor a 2 H. Washbrook, rience.Theleaderoughtto be giventhe flnancialinstitution.Similarly,a veriflcaBoardandManagement Audit, London: fteedomto selecihisteammembers, Business Book. p. 4. who tion auditat the regional,zonal,andcorr American Institute must have divergentbackgrounds of Management. and poratelevelsmay be confinedto critical a F,E. Norebeck,et al, Operational specializations so that they are able to areassuchascredit,investrnents, revenue.

Auditingfor ManagementControl,Ameriunderstand andanalyze majorareasof the andexpenditure. canManagement Association. bank'soperations.

5. Afterdecidingwhich unitsto aus Committeeappointedby the ReThe size and compositionof the dit and at what fiequency,it is necessary serveBankof Indiato examineinegulari auditteamwoulddependon factorssuch to developsuitablequestionnaires, datafor- tiesin securities trading. as the time avaiiablefor completingthe mats,aratingqntem,etc.fortheexercise.

6JackonMartindell,TheScientific The procedure,and the size,structureand necessary informationmustbe givento the Appraisatof Managemenr, New yoik: business composition of the firm. Ideally, teammembers beforetheystartauditwork.

HarperandRow,1962. the auditmustbe completed within fwo iWlliam T Greenwood, 6. Theteamwill conducttheauditby Business or three months.Thus,for a bank with followinga specific framewor(thenprepare Policy,A ManagementAudit Approach, 12 zonalunits, a team of three to four a report.

NewYork Macmillan,1967. memberscanhandlefour zonalunitsin a 7. The success of the exercise lies year,sothateachofficeis auditedoncein in makingproperuseof the management Thisarticleis basedon thestuduconducted bu the threeyears. auditreport.Evenbeforethe reportis fi- a u t h o r a n d D r s . S a t y a n a i a y a na n d i . S .

Raainsankar, all of the Nationallnstitute of Bank 3. Oncetheteammembers areiden- nalized,theprocess itselfshould havebeen at Pune,India. tified,theyhaveto be equippedwith the found usefulto the officeunder audit, Management Dr. V. S.Kaaeriis Professor at the Nationallnstiprocess, concept, andskillsneeded in con- sincethe procedure would raisevarious tuteof BankManagenient, Pune,India.

July-August,/September-October 1997 | TheAsianManaper

17

ManagementEducation for the 2lst Century: Towardsa Values-Driven Paradigmfrom Asia managers the processof schoolingAsta's.

Transforming requiresreihtnkingways of teachingand learnlng, evenat theworkplace.

It believesthat hibitor,but popuiationgrowthwas con' tor eatsthe samefood. theblackboard technology, any than more sideredan inhibitorof positivechange. encourages and hierarchies eliminates Theseserveasthe backdroPof the Technical expression. and brainstorming of businessmanageinternationalization on the explained problems are process and ment and the inevitableinternationalizaprobiems are the solve to ideas board; education.These tion of management who of Regardless well. as there scribbled forcesare keenlyfelt in the region,and operating bringsthe ideasup, everyonelistensand and managers Asianmanagers to throwsin their own ideas. in Asia are balancingtheir responses in five With its 2,800 emPloYees themasonewouldtry pullingatthreelegs Maharashtra, production Bombay, in units of a tripod.Oneleg of that uipod is how Stirring Management Education: relatewith cornmunities; lnd Gularat,Excelhas won national businesses Asian Forcesof Change fair busi seizeoppor- awardsfor plant management, The findings from two recent the second,how businesses performance' export and practices, which I cite here ness studiesconductedby the UnitedNations tunitiesin cyberspace, the third, how It hasalsoput up its own Instituteof Techand technologies; mean to Institutefor SocialDevelopment Research immerseandmergecorporate nology,Environment,and Management' sixglobaltrends:the businesses identified {UNRISD) facilitatingits commitmentto supportforandvalues. integrationof the $obaleconomy,the in- valueswith Asiancultures mal andcontinuouseducationfor its emdominanceof marketforces,the creasing ployeesand their families-in keeping and Exemplarsof ResPonsiveAsian of productionsystems transformation with companyuadition. labor markets,rapid technologicalad- Management Koreab Anam Industrial Com' Indiab Excela chemicalcompany of mediaand vances,the ubiquitousness profltsandthird in sales pany, whlch todaycontrols40% of the consumerism,and the spreadof liberal rankedfirstin net semiconductor in all India,evolvesdozensof alternative world marketfor contract "nichedemocracY. of strategy a uses chemicals packaging, for manufacturing The SoutheastAsianMinistersof processes in one of six companies iden- without drawingon technicalassistance manship."Only (SEAMEO) EducationOrganization InAnam Group, Anam "encourag- fromforeignfirms.In fact,Exceltransfers theUS$i.5billion tified eight forcesconsidered packaging to otherIn- dustrialpursuedsemiconductor technoiogies ers" of positivechange:economicdevel- theseindigenous betechnology untested were industriali dianand foreigtlfirms.When asked,the evenif it explosion, "lf we opment,knowledge says' Kim JooJun andstaffsaidthe cause,as CEO management zation,the searchfor political stability' company's the aresuccessful, products the until wait comthis in technology indigenous gfeaternationalism,telecommunicauons key conglomerates) (large enterprise Everyofficehas chaebot andtransport,politicalwill, andtheinten- panyis the blackboard. considerto be will getthe business." they what including sificationof politicaland economiclink- one, "office"-the canwas Kim, a Ph.D.in economics important most wasnot the degradation ages.Environmental when university American or anin- teen-where eventheirManagingDirec- teachingat an aseitheran encourager classified

he bottom{inequestionconfrontinstiing mostAsianmanagement local should tutionstodaYis: How internagiven the be educated, managers management? tionalizationof business The answeris twofold. First,look at the forcesof changethat impingeon educationin Asia;and sec' management education. ond,rethinkmanagement

l8

The AsianManagerlJuly-August/SeptembeFOctobet1997

hisfatheraskedhim to lookinto semiconcommonandvitalto management educaductorpackaging.

Kim beganby quitting Asian managers are tion: (1) enffepreneurial education,(2) the academe and convertinghis garage strengthening educationand privatesecbalancinglfnir into an officewith a phoneand a telex tor linkages (business) (3) industry (4) râ&#x201A;ŹsponsGs to cfrangâ&#x201A;Ź machine-a one-manmarketingand encommunifyorganizations (5) regionalcoforoes as ono would gineeringbase.He graduallyevolvedcoroperationandcollaboration for education, porateengineering,automation,and try pulling at three and (6) self-motivated learning.The dii mechanization teamsin SouthKorea,Eulregs of a tripod, ferencein thethreescenarios isonlya matrope,andthe US. ter of relativeprioritization.Forour manTo keepAnamIndustrialon top of agementeducationinstitutionsand for technology development, helooksatboth expenseof relationships givesa net effect company-based management institutes, his customers andhis staff.He investsup of zero... Entrepreneurship is aboutfam- the choiceis ours-what to prioritize to 5% of the payrollon stafftrainingand ilyvaluesandrelationships.

Theywillcarry givenour lesources. education.

He alsokeepsin touchwith you throughanyoisis."

Substance- Assuming,therefore, hiscustomers regularlyinbothprofessional that Asianmanagement educationwill andsocialsettings.

SteeringManagementEducation: tackleall thesestrategicoplions,it will The Philippines' Manilapearl is Three-PointTo-DoList requirea radicalrethinkingof managea furniture businessrun by 34-yearold If Asianmanagement education is ment learningparadigms.

In the 1950s, Pangilinan, Joseph who bagged the 1995 t0 movetowardinternationalization and Gordon-Howell and Piersonstressed the WorldYoungBusiness AchieverAward.He seizethe leadingedgein educatingAsian conceptual andanaiytical, emphasizing the hadto turn his companyaroundat a time managers or managers operatingin Asia, behavioral sciences, appliedmathematics, when the Philippineeconomywas reel- it mustdevelopthreeSs:strategic options, and economics.

Threedecades later;the ing from the shocks.ln 1987,the com- substance, and support.What do these Porter-Mckibbin Reportstressed interdispany operatedat a loss.Its productivity examples imply aboutthe management ciplinarystudiesandtheexternalenvironwaslow,empioyee moralewaspoor,train- education needsof Asianmanagers? ment. Threeyearsafterthem, Steierading waslacking,qualitywasinconsistent, Communities areincreasingly being vocated a "paradigm of practicai inquiry" anddeliverywasunreliable. usedas "business units"andtreatedlike shiftingfrom the empirical-analytic to the Pangilinanbeganby gatheringthe constituencies (whoseconsentand con- practicalform of knowledge,and under'brightpeople'in thecompany, regardless sensus becomethegroundsfor corporate scoringthe integrationacrossfunctions, ofposition, to brainstorm on thetop 10of action-not theusualcommand chainand broadbasedcogritiveandcommunication everything-bestproducts, bestmaterials, authoritystructure).Thus,management skills,and entrepreneurship.

Today,in bestbuyers,worstcosts,greatest strengths, educationmustlookat alternative organi- Asia,we seevalues-driven management and biggest threats, among zationaland interorganizational arrange- thatgrounds itselfin communities, andthe others.Theexercise resulted in a consen- ments,and"learning to learn"competen- indigenization of cyberspace andcultures. susto cut 80%ofits products and80%of ciesandskillsin themanagement of interSupport - We cannot overemphaits paperwork.Spendingwas kept in faceswith community-based subcontrac- sizethe need to intensifythe forgingof tightrein,whilerelationship-building with tors,alongwith internationalpartners. ties with business,industry,thinktanks, employees, suppliers,customers, and Second, ascyberspace andtechnolo- and governmentto supporta numberof bankers wasgivenahighpremium.Healso giesarebeingindigenized, management management education initiatives. developed aweldingmachinethatcouldbe education shouldcontinuously monitordeFirst,we shouldsupportties that run continuously by hisemployees. velopmentsin businessand industry,re- pushfor SME (smalland mediumenter.

Today, the company exports search anddevelopment, andscience and prise)management andproductivityasa wrought-ironand rattanfurnitureto 17 technology; and coordinate closelywith priority. counttiesin Asia,North America,and institutionsthat propeltheseadvanceMalaysia, for example, hasa Human Europe.Its backbone is madeup of over ments.

Resources Development Fundwhich proI 00 community-based subcontractors, Third, as Asian culture drives videsfinancialassistance to companies for eachone employingthree to 20 people corporate culture,management education employee retrainingandskillsupgrading, to makeManilapearl products.

Thecom- shouldlookat cross-cultural management andsubsidizes up to B0%of theallowable panyprovidesthecapitalandthetechnol- and organizational cultures,and at the costsfor training. ogy. impactof ideologies and policieson TheAsiaSupporting IndustryAction Themaincriteriumfor selecting the competitiveness, liberalization, and of lapanis anotherform of assistance to pangilinan business communifypartners: character. facilitation. localindustries in developing economies. looks at honesty,reliability,enthusiasm, Strategic Options -TheSEAMEO The partnereconomyidentifiesmodel andthewillingness to learn.Everymonth, studyhasput togetherthreescenarios for enterprises in priority industrialsectors. the companyalsoholdsa "Leadman's educationalreformsin the region:the provides informationand oversees Japan Night,' whereworkersshareproblems, downbeat,themiddle-of-the-road, andthe theeffective implementation of assistance, needs,and aspirations.

Pangilinan's phi- upbeat.In all of three,emphasisshould which includescapital investment assist"Material iosophyis this: success at the beon sixkeystrategic optionswhichwere ance,the expansion of salesoutlets,the July-August/September-October1997 | The AsianManaper

19

and Water anddevelop- enedleadershipthat is proactivenot The Test of Fire promotionof R&D(research educamanagement of tripod The and functional; not HRD(hu reactive;inspired ment),andtheenhancementof shownus the arenasfor acIn bothcases' reachingbeyondcountryrace,religion, tion hasonly development)' manresource andlifestyle.Leadership tion from a shortto-dolist. Whethetthe be- culture,language, what is clearestis the coordinatlon "em- tripodwill successfully hold the cauldron but this in thecontextof globalgovernance, andgovernment, rweenbusiness question.

The is another of management infused awidehumanconstituency, canbe utilizedfurtherto extendto edu- braces Wherefrom water. and flre needs cauldron a and others with a senseof caringfor cationalinstitutions. senseof responsibilityto the global shallthesecome? tles support should we Second, abouttherediscovapropheqr Consider the recruitmentof man- neighborhood." that encourage water' about a and fire of ery among Puable in globalleadership Dialogue into teaching.This agementpractitioners when de Chardin, Teilhard Pierre point convergence of is thestarting meansreviewingour policieson the de- leaders be could his how asked PhilosoPhY developand the teach- betweenthe business ofmanagement sirablequalificailons "When man has prophesied: practiced, global, Western, or t0 ment managerand the ers:do we givepremiumto degrees the forcesof wind and sand, LatinAmerican,Aftican,andAsianman- harnessed experience? nature,he shall harnessfor gravity and century Third,we shouldsupportlinkages agerinto themanagerof the 21st of love. Then, for the energies the God and uP so as to buy for whom we are still setting research for management historyof mankind, in the time second who sffetchingthe triPod'siegs. the lime of expertsand specialists flIe." discovered have would man More than technicaland financial arecaughtin makingendsmeet,and to Deal, Terence and Bolman Lee research support,the activeandfrequentdialogue immersein ground-breaking disand authority the about asked when into bestpracticesand management acrossthe globehasbecomeimperative parable of a related boss, the of cretion for the leadersof big and smallbusinesbenchmarking. many around flowed had that the stream internationaiorganizaInterna- ses,govetnments, theCanadian ForexamPle, andstoppedwhenit arlivedat a andeventheNGOs obstacles associations, and tions has (CIDA) Agency tionalDevelopment streamtried to cross'but its The desert. andcomorganizations) of Deans (nongovernment linkedup with the Association in the sand.A voice disappeared waters that areincreasin$y AsianGraduateSchoolsof munityorgadzations of Southeast "Thewind crosses thedesert,socan said, (ADSGM)for two reasons: tappedby industry.Expertsandpractition"The Management protested, stream The stream." panthe andto support erscanformreviewandbrainstorming to encourage ioinuesearch keepingin mind wind can fly, I cannot'"The voice said, scenarios, Administra- elson emerging a regionalDoctorof Business "Let yourselfbe absorbedby the wind"' edution programthatbringstogetherstudents whatthecuttingedgeof management "l want to remain professionals,cationis at everyturn, andleuningcon- The streamrebelled, and faculty,management world thesamestreamI am."Thevoicelaughed, from participatingCana- tinuouslytobuildthebetter-managed and consultants "But youl essence canbe carriedawayin schoolsand we yeun for. dian and Southeast,Asian armsand becomea wind's the firms. again-have stream You forgotten Fourth,we shouldsupport how remembered The sffeam this?"

Education Management Steering interregionaipoliciesthat liberalize across wind the with flew vaPor its ang Up,Stretching,' Setting educationhurdles. management Tripod thedesert,to failin themountainsof the Legs the Strengthening This meansfacilitatingthe transfera new,but the samestream. coursecredabilig of management and With gainsin globalization its,andtheacoeditationof managethe response, practitioners' theAsian to ensurethebroadacmentschools upon are change of winds sandsand degrees. of management ceptance us.Aswe masterandmusterthem, DeWith theHumanResource ourenergies-ourcolletusharness from emerging Programs velopment lectivewill-to rediscoverthe esCooperatheAsiaPacificEconomic and renew senceof management, for tion {APEC),actionPrograms earth. the the faceof educationare beginmanagement We have to continue to Gapsin naningto besynchronized. education reinventmanagement tional policieshavebeenidentified andour' comPanies and,with it, our so as in the Plocess and addressed selves. to reducebarriersin professional qualifications acrosscountries.

Deliaeredduring the 29th International Fifth,we shouldsupportcons Genual Meetingof the PacificBasinEco' vuil(ilurlrlrer cyberspace among D C', U'S'A', tinuouslearningdiaiogues nomicCouncilin Washington 20,1996.

May leaders. of holdthecaldron thetripodwillsuccessfully Whether The Commissionon Globai we onwhether depends NM PresidentFelipeB, Alfonsois holder intothe2 1st century management Chair in Inter-. ourcompanies education, to theBrandt to reinvent of the William Soeryadiaya successor havethewherewithal Governance, Chairman of and Business national andourselves. in its underscored Commission, MERALCO.Email:<ft1@aim'edu'Ph>' 1995 Reportthe needfor enlight20

The AsianManagerlJuly'August/SeptemberOctober 1997

The Making andMolding of Entrepreneurs: the AIM Model As inventionandinnovationruleenterprise dynamtcs, creatlvtty andtechnicalsuperiortty wtttbeof utmosttmportance. inceitsinception in 1968,theAsian For thisreason,andbecause of the scar- reportorialjournalthananincisiveassessInstituteof Management hasalways cityof feasibility studytopics,theInstitute mentof theprocesses anddpramics of eninjectedtheconceptofenuepreneur- expanded its rangeof MRRtopics. trepreneurship. ship in its two-yearMasterin Business Meanwhile,theDEcourseusedless Thelatterpartof the l980s sawa Management (MBM)program.

A subject andlessof theratherrestrictiveMRRma- broadening anda deepening of AIM'sap.

"Development called of Enterprise" (DE) terialsandexpanded itsrepertoire of cases. proachto enterprise development.

Funded was one of the two requiredcoursesfor Still, the focuswaslargelyon smallstartby researchgrantsfiom the Konrad thesecond year.TheInstitutealsorequired up businesses and on the entrepreneurs Adenauer Foundation, Professors Eduardo studentsto submita ManagementRe- that ownedthem.

A. Morato,Jr.andOuintin G. Tanwrote searchReport(MRR),which was the Towardsthe end of the 1970s,an cases, notes,andreadings on thedevelopequivalent of a thesis. innovationwas introducedto the MBM ment of enterpriseand the development In theMRR,a studentsubmitted an pro$am. Insteadof doing a feasibility of exports.From this research underIndustryStudyfor the flrstpartanda Fea- studyor a corpotaking,Professor sibilityStudyfor the secondpart.TheIn- rate strategyfor Moratodeveloped dustryStudywas an opportunity-seekingthe MRR, stu" a model that exercise,while the FeasibilityStudyex- dentscouldactulookedat enteraminedthe viabilityof startinga new en- ally set up their prisedevelopment terprise.The DE coursesupportedthe own enterprises fiom two perspecMRRprocess by usingpastMRRsasteach- and write about tives:(1) thelifeof ing materials.

DEalsoincludedcases and their experience the enterprise exercises on settingup andrunningnew and performance from conception businesses.

(MRRVenture). to maturityto deThe emphasis ; clineand,if revitalEvolution of AIM's DE then was simply :: izedsoonenough, WhenAIM introduced its one-year to starta business to its rebirth;and Masterin Management programfor mid- and operateit profitably.Therewas not (2) the life forcesinfluencingand affectcareerexecutives, it wasobviousthatthese muchstresson the entrepreneurial man- ing the enterprise dynamics.

The model company-sponsored studentswouldhave agement process noron theinnovative and becamethe basisfor redesigning the ento write Corporate Strategy MRRSinstead creative aspects of enterprise development. tire Development of Enterprise course at for thebenefitof theircorporate sponsors. TheMRRVenturesubmission wasmorea AIM. Thenewresearch ouhutswereused.

July-August/September-October1997 | The AsianManaper 2l

applied MBM students mentEducation).

The MDM program corporate to learning academic their and teachingefforts Two research a two-monthintern' proiects.

Moreover, enrichedentrepreneurshipcoursesatAlM. Action consulrenamed Thistimetheimpetuscamenot fromthe ship-later the design.The into built MBMbutfromthenewMasterinDevel- tancy-was retained. was opmentManagement(MDM) program MRR theDE coursewas In the redesign' and in 1989.Theflrstresearch launched firstandthe sectne uotir straddle splitto teachingeffortwas creativityand Intui

T. *dry1i:s^lYj^ltj MoratoandJaime tion.Piofessors

"basics"of DE,whichincluded giventhe opportunitySeeking,Feasibilitystudy'and ventureStart-up'Theywerealsoadmincases istereda largedoseof inspirational and' entrepreneurs on highlysuccessful Life and cycle Life TheDE intrapreneurs.

Moreotaught' wete ForcesFramework fieldstudver,the studentswereassigned ies. TheYwere

urt.o.r.r.u.r.,

ArM :lillil':::l: [:TJ:'ffJ1"'fii3"mth:start' :i:f,:::ffi:ffi"il:K1+i'$;Ji::H encOurag+o._ undtnlt-lllit-t^-d^t: has internationalnerworkofpractitionersand topic. vetgnm_e-nt_,c,1sl,sontrepr,en'urshtp inthesame interested academicians on Crea- earlieron' lhis ala course theyintroduced Later, among itS student'l "*:1|t"|":o,it; tiviryandlntuitionintheMDMprosram. rs* supported tras -lr}'l'r'r rri.{D anU arrfr the

;;"""'.";ri.;';;; i,,r"r. frun.nir. oi'..',ionr, uno llKe' vvoruly ffllilworthy me

t*pttit"ttt "i 'nt coufse. arequired of rechnology"tono yearMRRTheManagement -'*"] "*"^"t" students andteachingVenture research (MOT), thesecond firstyear th,e with Dean pushed former by field a was effort,

intoteachingma-

Thiswas expandedto a full etective,then

fessorsto share

th*.q with c.lealiYe and innovative ideas ;^l -^r-r-r:-r'r*^ aarrr new for establishing ;"d;;;:

si on s :,1::"'j converted were l::;i:":""""'" f:;1h:J:*:i;

P.Bernardo, Jr',who hadbeen students' Francisco ro pro',#*' The DE proin the Development Technology teaching the courseto in- vide moreinspiration'At the startof the ' MBM program.Jointlywith the univer- fessorsalsoredesigned their entrepfe- secondyear'the studentsdeepened cludemorecaseson successful andDe LaSalleUni sityof thephilippines planning, and analysis, lentrepre- skillsln enterprise on MOT neurs,cotporateintrapreneurs versity,AIM undertookresearch They were likewiseimwalls),andso- management. of neurswithinthecorporate of the Department underthe auspices who mersedin the clrlMAN course'Lastly' (entrepreneurs scienceand rechnology,with funding cial entrepreneurs suchas coop- theywerepreparedto tacklethe MRR' were help establishenterprises, fiom theWorldBank.Twentycases forless andlivelihoodassociations, proOu..Aby eachof the threeschools,or eratives "Es" The Three groups).

Fromthese60 cases, advantaged a totalof 60 cases.

While 60% of the studentunderthethreeinstitutionsdevelopedtheirown filsinsigfrlcamefiomstudyingenregulartwo-monthActioncon the went that realized Theprofessors Mor course.In AIM, the Mor was trepreneurs. sultanryprogram,thosewhooptedforthe of dosage DE shouldirive a higher lodgedin the MDM programasan elec- the .molivational"and "inspirational"iases MRRVenture wereallowedto usethetime tive.

"Es"ofventuring:Evaluathree dothe to on techniques to the researchand ratherthan management Subsequent andExperimentation' There were tion,Experiencing, trainingactivitiesof the MDM progam enterprisedevelopment. "businessing" mode' the stuEvaluation the In the in anougt]coulseson onthesetwonewareas,ProfessorMorato relevantto miffomarket the studied dents nurtulthe mergedthem into a simplecoursecalled iugM. what wasneededwas They concept' seryice product or their inIntuition,Tech- ing of whateverlatententrepreneurial CITIMANor Creativity, qrru ur 'urv Ysuvlr in andlnnovation ,: noiogy, rruru6vt i ::. tions,flnancing,and organizationalaspects Management' Later on'

clrlMAN wasincorpo'

. ,. , ., :Jlt|El;*rf8gc*triit,:,:;11.

1;,'i I ;11:.

?mong the students. '""'"'rn.

of their intended businessventure. They

an determined

TI"1t::T1=*r-ratedintotheDe v e l o p - : f f i . r e d e s i g n . ; : ; +DEl r 4.".s.0',o : ' : ' * * lfeasibilify , : i * : l and jlx":m: rr^

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courst mentof EnterPrise

of theMDMprogam' The MBM Redesigted

src.essful.

61â&#x201A;Źatf+g, irrnov*[lYtir

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aspecsol to leainthe technical courses

They their productand their business'

studentsusecrro :flT:lt-t-t^1T:T,t;'ilt::::1T:t}:l,Ti in the sametypeof venDursuetheMRR to entrepleneurs

of its ingametamorPhosis own.TheMBMPtogam mode' hadrisento about like' Lastiy,in the Experimental in the early1990sto re- lgg1,thepercentage wasredesigned productdevelopment' their began they 40%ofallstudents,andawhoppingB0% spondtochangingmarketc'onditions.The They madeprototypesor samples'then of all Filipinos should thoughtthattheMBM redesigrers protestedandimprovedon them' ,,learningby doing" technologies.

The new designof the MBM stress Bytheendof thetwo-monthperiod' to thelonger with businesscorporations $am wasdeemedbeneficial Partnerships Venturestudentswerereadyto MRR an MRRVen- the were forgedto launchPRIME(Partners gestationtime neededfor andinfusethe set legally up the business and Innovationin Manage- ture. In the first year,the studentswere in Relevance

ii*:f;;,-$ Hf;il{,,?T.,l,".,tHlj:X,*X:

22

The AsianManagerlJuly-August/SeptemberOctober1997

neededmoneyto buyequipment andbuild ganizations, but asnurturerof entrepre- preneursandnew enterprises.

Oneway workingcapital.Thestart-up business op- neursand cteative,innovative, and pio- is to partnerwith industryassociations, erationperiodextended fromOctoberto neeringentrepreneurial managers.

Down federations of cooperatives, specialecoFebruary.

At the end of that period,the the road,AIM visualizes beingtheAsian nomiczones,technology institutions, instudent(or studentssincetwo were al- educationand trainingcapitalfor entre- formationbanks, and fundingagencies lowed to do one venturetogether)de- preneurial managerc.

Buthow canthisvi committedto enterprise development.

The fendedhis or her MRRVenture.In this sionbe rcalized? ideais for ACE to be a majorplayerin defense, the studentwas supposed to First,AIM is investingsignificantly settingup "incubatorsystems" for entrepresenta revisedbusiness planwhich in- on an AsianEntrepreneurship program preneurs.Incubators are specificsites corporatedlearningsfrom the actualop- (AEP).Presently, fourfull-timeful1profes- whereentrepreneurs co-locate sotheycan erations,calibrations of the strategy,and sorshavebeenassigned to conductsub- haveaccess to:mentors(ftomboththeacachanges in the implementation schemes. stantive research on thesubject.

Theyare demeandindustrybetheyretiredor othIn the 1990s,the MRRVenturechanged complemented by a staffof research as- erwise),technology, markets,financing, its orientationftom simplyoneof putting sistants andthenecessary secretarial sup- andvital business information. up businesses andmakingprofitsto one port.

In thePhilippines, potential incubaof innovatingandapplyingsoundmanageSecond, AIM istakinga highprofile torssitesarethe CALABARZON (Carite. ment practices,and makinga difference approach to placeitselfon the gobalen- Z4guna, Batangas, Rzal,and, Auezon) area in theproductandmarketplace. trepreneurial mapquickly.Therearethree and the Clark-Subic corridor.Thereare waysto do this:(1) placingthe Institute alsogoodpotentialsfor incubators in MaAIM: Asia's Educationand Training on the cuttingedgeof researchon entre- iaysiaand Indonesia.Anotherway is to Capital for Entrepreneurial preneurshipby writing and publishing bring formalentrepreneurial coursesout Managers bookson Asianentrepreneurs; (2) estab- to wherethe practitioners actuallyare.

While entrepreneurship and enter- lishingthe AIM Centerfor Entrepreneur- ACE can startwith basiclearningmodprisedevelopment havebeenverymuch ship(ACE),whereactionlearningis the ulesfor entrepreneurs.

Lateron, we can partof theAIM curriculum,theInstitute's primarymethodology; and(3Jconverting visualizetheseentrepreneuls becoming mainthrustin the last28yearchasbeen its fieldresearch into verypowerfulclass- "masters," astheyrigorously applytheoto producecorporate business managers, room and out-of-classroom materials for ries,concepts, andmanagerial knowledge 0r more recently,institutionaldevelop- useby all traditionalAIM progams.This in their own enterprises.

At ACE, the "salary ment managers.

Today,the man- effortwill not be confinedto cases.It "master's degree"is not earnedbefore ager"is slll verymuchAIM'spearl. will includefieldexercises, creativity-en- fieldapplication.

Ratherit is earnedafter Butwhathasbecomeveryclearin hancingand intuition-building modules, field application; meaning,the entreprethe lastfour decades is thatAsia,particu- how to-doit manuals on productor serv- neurwouldhavesuccessfully proventhat larly EastAsiaand the PacificRim,is go- ices innovation,theory and practice a management theory conceptor knowling to be the areaof fastestgrowthin the [know-and-app1y) learningsets,andmany edgeactuallyworks througha guidedproccomingyears,propelledby impassioned more.Thus,AIM itselfwill be the institu- essby AIM. entrepreneurs and aggressive enterprise tional forum for showcasing the outputs Professor EduardoA. Morato,lr. is AIM's Gaston expansionon a globalbasis.More and of theACE. Z.OrtigasProfessor Management t'orDeaelopment more,inventionandinnovationwill rule Third,AIM, throughtheACE,must and is oneof the coret'acultAof the Deaelopment enterprise dynamics.

Moreandmore,crea- getout of therestrictivewallsof theclass- ManagementProgram,of zuhichhewaspreuiously tivity and technicalsuperioritywill be of roomandbringthe learningcloserto the AssociateDean.He was instrumentalin designing theone-yeardegree course,Masterin Deaeloputmostdemand.

Moreandmore,theex- fieid.The ACE is determined to experi mentManagement. "hard" ,,soft" cellentmanagement of and ment on new waysof developing entre- Email: <emorato@aim.e du.ph> technologies within the context of highly networked, highly interphasedorganizations will bea commondenominator ' ispermlssive yetsupportive ofthoseinpursuit of newtroduc{s ornswrraysd doingfrngs. of highlysuccessful enter|!y**:lt orunderground e,TtEmy, maintains such anenvironment prises. thatmakes it'fireseeoteo or ffiffiffi:t' AIM hasdecidedto ' Economk RelationsUps andI'letrc* ofResources. positonin thismilieuin a Entrepreneurs require economic retationshipg anda nehm* of resources to dwebp.

Their abitity to recognize ratherbig way.Down the fre rehtionships andresources, andb sollcit e)demd (i.e.,infonnation, assishnce material, road,AIM is strivingto be techrrology, market, furancial, influerce, andcornrnunity support) is a skillthey are trained recognizedthroughout toaquire. ' Entrepreneurial Expeience.

Asia,not iustasa breeder Experience istrredistinctive assetofanentrepreneur.

Translating anideaintoa prottuct isa leaming of corporateand instituexercise which, wtpnsuccessful, ofren leads towtfdiscovery.

Knowledge ilratisreirftrced tionaldeveiopment byracticegivs theenteprereur managtre confiderrce andskiilb repeat theprocess. ers working for largeorJuly-August,/September-October 1997 | TheAsianManaper

23

The AsianManager I July'AugusVseptembeFOctobet 1997

NETWORKAND SUPPORT SYSTEM COMPONENT A. Entrepreneurial Development Courses B. CaseResearch - CorporateEnvironnent - SmallandMedium Enterprises - Informal Sector . Subsistence . Livelihood . Micro C. Experiential Leaming Research - Hands{nExercises - Nonformal Leaming - Self-study D. Publications - Research Outpul

A. Private EquityFund

A. Internet

A. Student Business Ventures

B. Alumni/Enlrepreneurs - Workshops - Coaching/mentoring - Seminars andTraining - Roundtable meetings - Lectures - PlantVisits - Academ+basedCentens

B. Database Library

B. Fieldwork - Industry Study - Research Report(MRR) - Internship - Walkabout - MarketResearch - Opportunity Seeking

C.Technical andLegalServices - Patenting - Documentation - Registration - Accounting/Auditing - Taxation

C. Enhepreneurship Centers - IntemationalCenters - Regional Centers - Innovation Exercises D.Enhepreneurship Foundation - INTERMAN E. Enhepreneurship Programme Directories - Enhepreneun'Associations - Manufacturirg Subcons - TradeAssociations - Chambersof0ommerce - Foreign Buyerrs'Associations

D. Resource Faculty - Entrepreneurial Development - Developmentof Enterprise F. Service Linkages - Business - DesignCenter Finance Systems - MarketResearch - Tednology-basedOenter - TolalQuality - ProductTestingCenter Management - Nonformal Education - OrganizationalDevelopment - TeamBuilding - . Environmental Analysis

C. Incubator Experience - Start-ups - MarketDevelopment - OrganizationalDevelopment - Subcontracting D. Product Development E. Prototyping - TradeFairsandProduct Exhibits - Multilevel Marketing - Franchising

E.Business Center - BusinessCommunication - FinancialConsultancy - Business Consultancy

TheAIMCenterfor Entrepreneurship (ACE)is a research-based insti_ . Provide access to therelevanl information, markets, andtechnology tutiondedicated to assistindividuals translate a creative or innovative required forentrepreneurs; ideaintoa commercial product or newbusiness . Provide venture. equity financing tofundproduct development andsupport the entrepreneur fortheduration ofthedevelooment: TheCenter actsasa schoolthatmerges . Enterintopartnerships theorywithpractice, wherethe to setup incubator systems thatwouldallow entrepreneurial knowledge, skills,andattitudes thatareessenlial tosuctheuseofcommon service facirities forentrepreneurs andraboratories or cessinmanyundertakings areaquired.ACEalsoserves astheR&D workshops forproduct innovation; laboratory for thosewhodo nothavethefacilities . Linktheentrepreneur to do in-house reto a network of successful business entrepre_ searchandproduct development. neurs,corporate managers, andprofessors involved intheresearch and teaching of entrepreneurship; TheCenter isequipped to: . Provide a hostofentrepreneurial services, suchastheconduct ofmar. Research on howentrepreneurs aredeveloped andhowentreore- ketresearch, feasibility studies, andmarketteststo matchproduct feaneurial organizations arerun;andprovide a bodyof knowledge, learn- tureswithcustomer needs, aswellasdetermine thesuitable pricerangefor ingmaterials, concepts, andtermsonentrepreneurship andenterorise theproduct; and development; . Ingeneral, assist entrepreneurs inestablishing newbusiness ventures.

July-August/September-Octob er 1997 | TheAsian Manaser 25

The Asian EntrepreneurshipProgram (AEP) devells theprimaryengineof Asianeconomic Entrepreneurship can wand thata magic is not something opment.Butentrepreneurship into vicaniust pump-prime bureaucracy coniureor that government takestime to cultureandto nurtute,needlng brancy.Entrepreneurship threebasicingredientsto thrive andprosper: to flower,it musthavea fertileground 1. Forentrepreneurship

of thrivedthe mostandwhy.It will lookat thehistoricaldevelopment complex their and theirleadenterprises' economies, highlysuccessful macroeconomic busineses; medium-,andsmall-scale networkof large-, It will examinethe effectsof cu1policies;andmicrolevelsffategies. developand legalheritageon entrepreneurial tural, technological, andreeducational, of scientific, role the analyze ment.It will try to

on enuepreneurship. searchinslitutions fiomwhichtogrow.Somecallita..conduciveenvfonment.''Itmeans of Asia'The "common particular interestwill bethedragoneconomies Of indivlduals good,"encourages the whileseeking thatsociety, and the performers the baselineresearchwill compareand contrast todarepioneerinexciting,thoughuncertain,ventures'\{hilegovern" have seehow rentiereconomies failed Itwill, therefore, they arenot the main motivatorsfor nonperformers. ment incentivesare necessary asbreaknewground' to exploitandthe andwhy.It will reviewexistingliterature,aswell Theremustbe clearopportunities en[epreneuring.

DeveloPment.

EnterPrise promiseof a "levelplayingfield,"whereall venturescouldhustleand on Asian Second ingredienh Theoretical Constructs for Under' of favoredmonopoliesandcartels'and bustlewithout the stranglehold will askthe standingEntrepreneurialDevelopment'Theresearch thestiflingtentaclesof anubiquitouspublicsector'Theremustbeacces "Who What makesor entrepreneurs? atethe questionsl and markets.Theremustbe an educatedwork force fundamental top technologles How businessmen? them?Howdifferentaretheyfiom mere to run a highlycompetitiveenterprise' motivates with the skilisand competence undergo? they processdo capital-strappeddo they start?How do they grow?What to encourage financing Theremustbecheap,long-term factorsandcommonfailurepoints?"

What aretheirkeysuccess entrePreneus. will comeout with a typologyfor entrepreneurs' The research with a paslonto achieveand needsindividuals 2. Enfrepreneurship cultural,and racialsimilaritiesand geographical, potofgold' It will look at the theproverbial Whileenfepreneusmaybesearchingfor zucceed.

It will studythe wholerange entrepreneu$' amongAsian differences throughtheirproductor busines' ttreirimpetusisself-actualizaflon socialentrepreinffapreneurs, corporate Someof themue drivenby of businessenffepreneurs, It is not eisy to find suctrindividuals' the prime hlghlight will It entepreneurs. neurs,and developmental advenityandneceslty.othenue"gifted"withtheabilifftoexce]inanyproduced

by AIM "[ained" by a longprocess of leaminga craftor move$ of Asiaand the exemplaryenffepreneurs tiringtheydo. Someare by a captvatingvisionandself- education. asimilatinga science'Ottrenarepropelled Third ingredient Support and Reinforcement System'The mision. imposed who have researchwill build on the seminalworks of researchers Itisdificulttoctt]tureandnurturezuchindividualsinasocietythat busi Asian other "social and Indian, Chinese, ovelseas devl- lookedattheJapanese, ue doesnotmakeroomforthem.someof theseenhepreneun nesssystemsthathaveuniquesupportandreinforcementSystemscomants."InSchool,theymaybe..delinquents.''Atwolk,theyareboredwiththe ing from the clan,the corporatecommunlty,or a nurturingbureauchumdrumofficeroutines.lngroups,ttreystandoutas"different'"Ofcoutse' and institutionallinkages'It are"sfange."ouite a few arejust racy.It will studyenterprisenetworks thisis not to saythatall entlepreneurs will examineenterpriseclusters,villages,andestates' "odinarypeople"who sfiiveharderandfora muchlongertime' on enterprisedevelopment IL Research sysneedsa supportand reinforcement 3. Entrepreneurship of researchwill takeoff from the initial work level The next tem.A familyor clanthat eats,bleathes,andlivesentrepreneurship EduardoA. Morato,Jr'on the EnterpliseLifeCycle ad- doneby Professor togetheris morelikeiy to breedentepreneurs'Theygivesound andLife Fotces,wherehe identifiesthe differentstagesof enterprise vicebasedonyearsofexperience.Theyallowfailurestofosterlearn"techniques"and derielopment conuaction'rehabilitation' growth,expansion, {start-up, Theyshare ing.Theyprovidemonetaryassistance. life-giversandsusandthe five maiorenterprise andre-engineering) ..buslnessSecrets.''Theclanisa..petridish,'thatincubates..leanand tainers. culturedby fllia1familiarity' hungry"clansmen, and analYsts III. Documentation In somecountries'the clan is substitutedby a communityof ReseuchAgendawill docuEntrepreneurship Asian the Finally, like-mindedindividuals.An industrialcommunityis onesuchexamthe differentinsightsand abstract and on, elaborate and migant farmersare anothet'More recently,the ment, analyze, ple. Pioneering Centerfor EntrepreAIM the of business learningsgainedfrom the activities. havesponsored with big business, in partnershlp academes, eduentrepreneurial of art thescienceand are invited to co{ocatefor neurship.It will crystallize incubatorcenterswhere entrepreneurs work that cationandtraining.It will evaluatelearningmethodologies mutualreinforcement. of the andcritiquethe operations well andnot sowel1.It will assess PrlvateEquityFund,the incubatorsystems'andotherfieldintervenAceitpe oHAsnN ENrnppnsNeuRsHtp RssEARcH and of the Center.It will translateAIM's effortsinto classroom I. Basellneresearchon the three basicingredientsoJ entre- tions experienevaluational, the showcase It will materials. off-classroom preneurshiq tial,andexperimentalcomponentsofAlM'sState-of.the.arttechnolo.

Entrepre'A'sian on First ingredient BaselineResearch development' andenterprise has gieson entrepreneurship neurship. The researchvri1lestablishwhere entrepreneurship 26

1997 ManagerlJuly-August'/SeptemberOctobet TheAsian

Enterprise Development:Life Cycle and Life Forces Theenterprise undergoes its own lifecycle,whichbeginsfrom cOmmitresources andmanpowerto the operationalization of the en_ the cradleofventurenurturanceandendsin eitherintensiverehabili terprise. tationor ultimatelyexpiration.As theenterprise runsits life coume,it is governed by fivelife forces,startingwith the entrepreneur phase andpro- III. TheImplementation ceedingto includeenterprise operations, olganization, Tr h'w p ''y1e'rc'r..ion imnlpmontet the venture's phaseis wherelesoutcesareactuallydeproduct,andthe relevantenvironmentor world of the enterprise. ployedto establishthe enterprise.The organizers and beneficiarymembers0f the enterprlseget togetherto put in their shareof Sx Su,ceson rHe EurEnpRrsn Lrre Cycle the investment{or equity)in the economicventureand externaily I. Environment Scanningand OpportunityAssessment sourceout loansandgrantsto flnancethe shortfallin internalfinancIn setiingup an enterprise, thereis a needto scanthe enyiron_ ing. mentandassess the opportunities andpitfallspresentin the relevant Rulesand regulationsare formulatedto governthe manage_ marketor industryof theenterprise.

Thisis thefi$t stageof theenter_ ment,workingrelationships, andjob c0ntentof the enterprise.

Offic_ priselifecycle. ersareelectedandassignments, givenout. Theorganizational strucEnvironmentscanningrequiresa historical,current,andpro_ ture andoperatingsystems put are in place. spectiveexaminationof a givenindustrywithin a specifiedmirket In the implementalionphase,there are the critical aspects area.In this scanning,the analpt eyaluates the potentialandactuai of purchasingthe right machineryand equipment;designing demandandsupplyof the productsor servicesgenerated by the en_ the bestplant or officelayout;determiningproperwork flows, terprise.Opportunities for marketpenetration or exploitation arethen cashand inventoryleveis,and oedit policles;devisingpay plans, derivedfiom thedemand-supply analysis. i n c e n t i v es c h e m e sp, e r f o r m a n c e c r i t e r l a ,a n d c o n t r o l m e In opportunity-seeking, it is very importnntfor enrerpnses to cha-nisms; establishing soundmanagement guidelindsand the know the organizations or individualswho controlthe indusfy at scopeof work, authorities,responsibi.lities, and accountabili_ variouslinksof the productor servicechain.Thereasonfdr thisis t0 ties;targetingthe rightmarkets;andstartingon the right operational identifythemainthreatsandobstacies to actualizing perceived oppor. footing. tunities.Environmentscanningpinpolntsthe criticalsuccess oi failIn someinstances, a pilot projectmay be undertakenbefore ure factorsin the production,marketing,andfinancingof the social full commercial operations ue carriedout. In others,preoperating or productsor services. enterprise Thisis to determinethepush-and.pull subcommercial testrunsaremadebeforegoingfull blastto iron out factorsthat governthe viabilityandsustainability of the enterprise. kinksanddebugthe system.

In thefina1analysis, theobjectiveof enyironmental scanning is to clearlydetermineopportuniiles andto highlightthe rlsksin estab- IV. CommercialOperations iishingan enterprise.

If an enterprise is not aborted,its birth pangswili leadto fuIl commercial operations in the fourthstageof the enterprise llfe cycle.

II. Evaluationof Alternatives In thisstap, productiongoesinto full gear.Rawmateriilsaresoulced, In exploitinga particularopportunity,it is necessary to evalu- processed, convertedinto finishedgoods,and sold.The marketfor atethe variousalternatives openfor takingadvantage of the opportu- theenterprise's productsor seryices is exploitedthroughthefivepsof nity.Theremaybedifferenttechnology options,productionprocesses, themarketingmix: pricing,promotion,packaging, place,andpeople. marketsegments, industryentry points,and organizational modes Flnds are mobilizedand managedaccordingto operationalneeds open.Thesealternatives canbelinedup in a decisiontreeformatand and workingcapitalflows. The efficiency levelsof the work force evaluated accordingto the highestexpectedmonetaryvalues andes- eventuallyrisein consonance with thef learningcurve,asmoreouttimatedbenefitsto enterprise owners. putsareextractedfiom the inputsinjected.The enterprise's product The decisiontree is a very helpft.rltool for determiningthe or seryiceitselfmaygraduate ftom the difficultphaseof inuoductory feasibilityof puttingup an enterprise.

In a feasibilitystudy,the usual promotionsto the next level- marketacceptance,_{4 quite if sucaspects to be considered shouldinclude:(1) the presence ofa good cessful,marketdominance. market,its size,andthesalespricesandvolumesexpectedto be real. ized; (2) the productioncapacityof the enterprisefictory or service V Expansion,Integ ration,Contraction,and Consolidation facilirytheappropriate technology, andthe operational processes to Depending on thequalityof theproduct,service,andmanagebe used;{3) the amountoffinancingneededfor bothfixedassets and ment of the enterprise, and on the industryor markettrâ&#x201A;Źnds,four working capital,the sourceof financing,and the cost of capital; oossible scenarios emelgein thefifth stageof theenterpdse iifecycle.

(4) the organization andlegalsffucturesto be adopted,linkageiand Oneposslbllityis theexpansion plant of or servicecapacityto servea networksforrned,and technicalassistance required;(5) the overall biggermarketbecause of the demandthatwascreated,or the easing enterprise ratesof retum,cashflows,andincomebreak-even points, out of lessefficientcompetitors.

Anotherpossibility is theopportunitf andthe abilltyto payfor loanamortizations, if any;(6Jthe benefitsto providedby integratingbackwardto controlthe sources ofsupply,oi the individualmembersof the enterprise; and(7) the enyironmental integrating forwardto downstream processing or end_consumer marimpactof enterprise operadons. keting.Therationalehereis to increasethe value-added ' 'lfthe of the orodenterprise alreadyexistsandis beingevaiuated for acqui- uct or seryiceandto controlthe verticalandhorizontaltint<sof ttre sitionpurposes, it wouldbehelpfulto assess theworth andlifespanof industrychain.The third possibilityis the contractionof enterprise its assets, pastoperatingperformance, and obtainablevalues,based O p e r a t i o nbse c a u s eo f i n c r e a s e dc o m p e t i t i o n or enterprise on ptoiectedresults. diseconomies.

Thefourthposslbilityis enterprise consolidation to reThefinaltaskin the secondstageof the enterprise life cycleis moveexcessfat,streamline operations, andtransformthe firm into a the investmentdecisionprocess.Here,the enuepreneurdecidesto leanerbut meaner organization.

July-August,/September-Octob er 1997 7heAsianManager 27

. quality . quantity . price& costing . positioning . delivery . timing . sourcing of materials

'acceptance

Su Existinq

. Proximity & Accessibility

t

. Product Preference & Loyalty . Personal Values & Attitudes . Present & Probable Usage& FrequencY

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-l Land Fixed Plant Manpower ProductionMaterials Buildings TechnoloqvAssets LayoutComplementSchedulingneouireoJ & Machinery Required Equipment

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& Finance I casna Administration I otherAssets

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Planning Organizing lmplementingMotivating Evaluating & Mobilizing & Directing & Controlling& Rewarding

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Operating Profits Marketable Securities andInvestments

lncome Non-Operating

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Equals: NetProfits Less: Taxes Dividends

PLANS/GOALS/PERFORMANCE TUNCTIONNI ANDIMPLEMENTATION FORMULATION STNNTCCV

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Nisi-n-l 28

The AsianManagerlJuly-August'/'septemberoctober1997

VL Reorientation, Reorganization and Rehabilitatwn Not all thingscometo a gioriousend.Failures do happen.Even success begetsits own inefficiencies, bureaucracies, andstignation.

Thereis that stage,experienced sooneror iater,when the en_ terprisefindsit necessary to reorientitself.Thisis doneby eitherrepositioningtheenterprise's productor redefiningits markei.Duringt:nis stage,the enterprise embraces reorganization asthe cureto its many shortcomings.

Headsroll, stucturesareredrawn,authoritiesareredefined,andmanagement is redeployed.

In exteme cases, rehabilitative measures aretakenwhile eiternalassistance andnew capitarare sought.If nothingwork, the enterprise is givena decentburial.The sixthstagemaythereforeleadto a new life cyclefor the enterprise or culminatein bankruptcy.

Fws Llrr FoncBsor run Erurpnprusp Theenterprise sustains itselfthrough theinterplayoffiveforces: theentrepreneur, enterprise operations, theorganizition,itsproducts or services, andits relevantworld enyironment.

tute the spiritualengineof growth.Bothmanagers andworkersare boundby their organizational networkto strivefor perfection.

Goodleadership, soundmanagement, workercommitment, and peopleperformance makeor breakthe enterprise.Seiflessness and accountability from thosewith authorityand responsibility en_ surethe integrityof the firm. Thebeliefin a commoncauseand the willingness to sacrifice instilldisciplineandassuretheperformance of the enterprise.If thesetraltsarepresent,the organization itselfbecomesan intrapreneur.

Managersandworkersinnovateasin-house enffepreneuls to bringthe enterprise to higher,morecomplexlevels of investments.

Theydeviseskucturesand mechanisms for institutionalizingcontinuous environmental scanning andoppoftunityseek_ ing.

IV TheProductor Service:TheVisibleLife Theenterprise eitherprocesse, u prldu.t or rendersa service. _ Thisproductor serviceis the manifestation of its work-the essence of the enterprise.

If the enterprise is successful in deiiveringthisout_ put, it justifiesits existenceandsustainability.

At the enyironmentalscanningand opportunityassessment stage,the focusof all effortsis to expl0rethe marketanddetermlne theneedsof targetclients.Manyproductformsandconcepts maybe entertainedto meet thoseneeds.Theseideasare screened.

Those thatsurvivethescreening areput to theevaluatlon phasewhereproduct tests,marketsurveys andbusiness analysis aredone.Wnenne choiceis made,thebusinesis executedthroughthe actualdesign of theproduct,fieldtrials,andproductlaunchingl As the productor servicegainsacceptance, it enterscommercialoperations.

It maybedifferentiated intovariousforms,sizes,packages,malketniches,etc. It undergoes fuither productivityenhance_ ment schemes asthe pencilis sharpened to determinethe cost-volume-profltcontributionandthe rightproductor servicemix.

The visible life force may be challengedat the fifth stage of expansion, integration,contraction,andconsolidation.

At thisp-oint, a carefulproductlifecycleanalysis is necessary to determinecompetitive positioningand to introducemarket.respcnsive improvements.

Theanalysis mayleadto productredesign or phaseout.

In eithercase. one must calculatewhat is the leastpainfirlroute,or compute the highestterminalvaluesfor the enterpiisestakeholders.

L TheEntrepreneur:Theprimordial Life Force The entrepreneur-thelife giverof an enterprise_isdriven by greatdesireto achieveandsucceed.

More thanmakingthe busi nessprosper, the entrepreneur strivesto upliftthe qualifyof life of his or her wotkersandcustomers.

Tt enffepreneur goesthroughthe differentstages bf the en. terpriselife cyclewith differentrolesandfunctions.At the environment scanningand opportunityassessment phase,he or sheis im_ buedwith a personaldesireto attainbusiness objectives, essentially motivatedby hisor her values,expertise,expedence, andresources.

Usually,informalresearchprocesses are used,unlessthe enfepre_ neur is a professional; in which case,more formalprocedures are employed.

At the evaluationstage,the entrepreneur linesup the criteria for opportunityassessment carryingwith him his own biases,atti_ tudes,andinclinationsto makethe investmentdecision.

Thecommercial stageis the testingpointfor theenuepreneur.

Many arenot reallymanagers; theydo noi carefor details.Thevare moreof leadersandvisionaries ratherthanorganizational pl0ooers.

Theirentrepreneurial spirit becomestheir own undoing.It may be advisable, therefore,to transferoperational contol to administrators.

Enterprise growthcreatesnew challenges.

The entrepreneur v rhe Relevantworld,s:Theouter Life Force needsto managechangeandcomplexity'\'vhilesizehasthe advanTheenterprise sourceof externalenergyis its relevantworld. tageof scaleeconomics, it hasthe disadvantage of bureaucratization. Thisis the sameassayingits relevant industry,felevantmarket,relMoreover,theenterprise hasthetendencyto Jxplorefieldsbeyond.its .uuni gou.rrrenq relevanten\rirolmentalconditions,and relevant competence'whenthishappens,theenterprisefallsbyitsownweight. variablisand factorsthat influencethe fate of the enterprise.

The At thispoint' the enterprise hasto.rekindieits enuepreneurial talent reieyantworld is the outerlife forcebecause it is the externaisusfor paintingnew yistasandmanagingtouch.and-go iituations. hiner or destroyerof the enterprise.

The enterprisesurvivesand expandsif it is ableto attuneit_ II. EntrepriseOperations:TheRegenerative Life Force selfto environmental changes that influenceits actions.It canpros_ The secondlife forceemanates fromenterprise operations, as perif it is ableto matchthe powerforcesoutsidethe enterpriseThe money,markets,machines, facilities,andotherproductionor service enterprisecan endureif it minimizesthe powerplayswithin itself. resourcesare combined.Whetherit is a furnitureshopor a food If not, then the enterpriseweakens.ThisihiftJ oiganizational ener_ processing factorytheveryfacilities, equipment, andfinancialresources giestowardsseekingexternalsupport.

It thentriesio conserve what_ depioyedprovidephysicallife to the enterprise.

Withoutthem,there everbargaining poweror leverageit hasretainedvis-a.visthe envi. can be no activity,no wherewithalto run the firm. As such, enter_ ronment. priseoperations canbe termedasthe regenerative life force-the reproductivesystemof the enterprise.

Txe ENrEnprusB eNopnotscr Evlr_uarrouMoorr

IILrheorganiT,ation: rhernner Life Force

*rrul"r'f,3::ffi3rT.ttrTHilA;:n:rTffifffffiT

whlle money, ^beget L^^^* -- c!- .irity *o direclionof the enterprise pr'ject. markets, machines, andfacilities profits or At thetop is the andbenefits' thepropeller of enterprise operations is theorginiza .nuiro*.ntal scanning andanalysis process thatlaysthefoundation tion'ortheinnerlifeforce'Thepeople manning theenterprise consti- for viabiiity.

At theboitomarethevrsion-mission-obiectives of the July-August,/September-Octob er 1997 I TheAsianManaser

29

settingdi' enterpriseor proiect,which are the guidingprlnciplesfor rection.

Theenvironmentalscanningandanalysissectionhasthreemacompetitionandsubsututeproductanalyjor activites:demandanalysis, anatlisis. sis, ' andzuppty pat' In-isiessingdemand,one has to considerpopulation that segments speciftc the of those terns (demographiis),especially at look to need is a there Next, clientele. enterpnse ttri t pr.tant on time' influence which havean mit<et proximity andaccessibility, Then,the productpre' liness,iosts, and customerresponsiveness' alongwith their ascertained' be must of clients terenieand loyalty the present calculate must one Finally, interests. and attitudes, values, product or serv' and piobableusageand frequencyof the enterprise

The muketing and productionplansprovidethe basisfor or' ganizingthe enterpriseor proiect.The overallstucture is designed maninc urit n down into the usualfunctionalareasof enterprise appro' The administration' and finance, sales, production, agemenl arealsoinstalled'Theseue planning' processes piiatemanagement directing,motivating'controlirganizing,irobilizing'implementing, rewarding. and ling, evaluating, To integrateeverything,a financialplan is laid out to accom' modatethe mirketing, production,andorganizationalrequirements' equity Capitalis raised.Thiiincludeslong'andshort-termloansand caneitherbefinancialinstitu' Loansources (oiowner'scontribution).

tionsor suPPliers.' or prolecttogetheris the ba' Wirii notOsthe entireenterprise vision,mission,andobiec' the on is anchored that thrust sic suategic ice. the unifying theme,specific is thrust This tie organization. of tiv., Forthe competitionandsubstituteproductanalysis,the evaluwhich the enterprise competence and superiorityof positioning,an-ddistinctiveareaof ator must determinethe size,clout, acceptance, are is pushing. ' the sigrrificantcompetitorsand substitutes'Existingsuppliers 'th Th; diagramalsopresentst]le vuious flnancialindicatorsthat popotential suppliers' and consumption; match;dwitll actual At the left sideof the ta' suppli' measuteenterfriseor prblectperformance' t nUut.ontu*ption. The relativebargainingpowerof vuious by the incomestatecaptured are which these ble are the operatingflows ersandbuyersihould bestudied.Theenterpriseshouldexamine in sales'Theproduc' resuit eventually marteeting of Ps market *.ni. ffr. nve .o*p.titiu" forcesand their effectson lts immediatetarget The Uonpro..rr., incur productioncosts(i'e', costof goodssold)' clientele. andsecondary gen' expenses operating [i'e'' into overheadtranslates organizational Supplyanalysisentailsthe thoroughscrutinyof productor serv' expenses). administrative and eral should andysis The costs' prices, and icequality,asweliasthequantity, equa$oper' expenses production costslessoperating less Sales pinpointthe industrypositioningof suppliers,their deliverysystems' in' nonoperating the add ating profits. However,the evaluatormust materials' i..a 1ot the from ' lag)times,andtheirsourcingof emanating expenses nonoperating comi'and subtact the Environmentalscanningleadsto two basicconclusions:the financessourcedand invested.operating profits plus nonoperating strengths relative the and industry, in the opportuniuesand threats in' incomelessnonoperatingexpensesequalsnet profit' Takeaway or anhweaknesesof the enterpriseor proiectvis'a'visits competitors dividends away Take taxes' profit after cometaxesandyou havenef substitutes. retained' andyou haveearnings formulate then can proiect evaluator or The enterplise At the dght asoundmuketsideof the tableue ing plan (or the balancesheet market Peraccountswhich reformanceanalY' sult from the in' sis)on the basis vestment Plan. of the environSaleslead to the mental scan. balancesheetitem The compo' feceiv' of accounts nents of the able.Rawmaterials muketing Plan andunsoldProducare the five Ps tion becomeinven" of marketing* tory. Next are the pricing,Promoof land, flxedassets tion,place,Peobuildings,machin' ple,andPackag' ery, and equiPinywhichare ment,whichue esthe basicsales sentialfor Produc' strategiesto be tion.Theliquid as' adopted. sets needed to A clear maintain operapicture of the tions are PrimarilY target market kept in cash.Ex' enablest}te encess funds are terprise or placedin marketproiectto deterablesecuritiesand mine the right income' which providenonoperating productionfaciiities,plant layout,and manpowercom' investments technology, but succinct modelis actuallya comprehensive The evaluation scheduiproceed to.producton' can pf.*.nt i.quited. Fromthis,one 'enterprise' proiect or a of development and analysis production tool for the ing, materialslisting, and materiaissourcing'Finallythe subiectedto quality pti.." canbegin'iroducts are manufactured, contol, and madereadyfor marketdelivery' 30

1997 ManagerlJuly'AugusVseptembelOctober TheAsian

ManagingInnovation in Thai Firms Giventherapidchanges in technology andcompetition, innovat[on is thekeyto artrm'ssuccess.

he innovativebehaviorof firms in developing countriesis conprerequisite sideredbotha to and a reflectionof economicprogress.

While differentmodelsof development accord varyingemphases, thereappearsto be a unanimitythatthegeneration of scarceresources requiresentrepreneurial stimulation throughnew productactivities.

For developing nations,suchas Thailand,the importanceof innovationis underscored by the growingchaliengeof diversifyingexportsand $obal competitiveness.

Thecapabilityfor localdevelop ment of new productsand processes is crilical,giventhat multinationalcorporations(MNCs)tendto concentrate keyR&D aclivitiesat theirhomebases.

Thus,Thai firms that displaythe sophistication and maturityneededto managecomplex multifunctionaltasksinvolvedin new productactivityare likelyto succeed in the domesticandglobalmarkets,andaccelerate the development of theirrespective nations.

The Mark of Innovation To determinewhat constitutesappropriateinnovativeprocesses (i.e.,a decisionsupportfiameworkfor Thai

companies), it is necessary to analyze expractices tant and relatethem to performance.Unfortunately, micro-level or firm-specificinvestigations are scarce, thus precludinga systematicanalysisto arriveat preceptsthat can be general-

tivebehaviorof firmsin deveioping countriesneedto lie within an overallanalyticalftamework,with programmatic empiricalresearch directedatconstituent relationships.

While the role of innovationin facilitatingindusuialgrowthis oftenrecognizedin policydocuments, thereisa need to studythemicrodimensions of theprocess,especially point from the managerial of view.Thailand,an emergingindustrial basein Southeast Asia,mayserveasa startingpointin identifyinga relevantdecisionsupportfiamework.

Literature on Innovation The issueof innovationhas receivedattenlionin diversetypesof literature, suchas marketing,organizational policyanddesign,macroeconomics, and (seeReferences). technology Generally, the approachhasbeento identifycontingenized.The analysisis undoubtedly com- ciesthat precipitateinnovativeactions plex,involvingmacroeconomic, market- within firms, the processof strategic based,andorganizational aspects.

In ad- choice,implementation, andperformance dition to studyingconditionsthat influ- evaiuation. enceinnovativebehavior,strategyforWhile distinctionsare sometimes mulationand implementation processes madebetweeninnovationand other alsowarrantcriticalattention.Clearly, formsofnewproductactivity(e.g.,desigr the contextualidiosyncracies of innova- adaptation), both varietiesare consid1997 | TheAsianManager 3l July-August,/September-October

the aspectsfrom the afore' lation,materiaicost,inventions,andcus- incorporating was then preformulations stra- mentioned tomer requests.The management's to the factorsis viewed sented. tegicresponse in terms of two classesof innovation and reactive.The Suwey Results sffategies-proactive mailedto Outof 102questionnaires and formerincludesrelianceon research 78 Bangkok, in metropolitan a managers develoPment, flnedfor our marketanalYsis (76%)returnedusableresponses' p u r p o s e tso each Initiating factors. For domestic Understanding of oPPortunities, includecritientrePreneurial firmsin the goodssectoqthe key initiatin calchanges step of a new policy' orientation,and ing factorwas the firm'sbusiness a firm'sstrate' th. acquisition of On the otherhand,domesticcompanies ust'$ gic and funcnew Products in the serviceindustryconsideredexistt i o n a l likelY will process potentialsalesascriticalinitiating : fromotherfirms. ing and behavior, In the latter,in- factors,asdid foreignfirms(iointventures leadingto the reveal afeas of overin thegoodssectors' andsubsidiaries) novationstrate- [JVsl introduction conandcompetitor customer giesare viewed Meanwhile, sight and Potential of hitherto firms foreign in to be eithel de- cernsspurredinnovations unoffered in services. fensive(i.e.,the thatwereengaged p r o d u c t so r newproductinigoods sector, the In of an adaPtation The services. companies foreigt and ilationin domestic uponthe choseninno- existingproduct),imitative,or anchored latter,depending "second wasmostaffectedby the impactof indus' productsthat are couldeitherieadto brands on developing vationstrategy, themain sector, trialpolicy.In theservices at lev- but better." that servedifferentfunctionalities bankwere firms of types both for Thechoicebetweenthe fivo strate- initiators els that vary from thoseavailablein the Given policies. import and is seenasnormativelyCe- ing,financial, dynami- gic alternatives (i.e.,discontinuous, marketplace of servimportcomponent signifficant the growth opporsix-criteria cally continuous'oI continuousinnova- rived,basedon the firm: the availabilityof icesofferedby JVsand subsidiaries, tions)or thosethatimitateexislingbrands' tunitiesfacedby a critical policy also is import the government's on organizations-whe- plotectionfor innovation,the scaleof Pressures the for this sector. product, and marketopento theinnovative (suchasconsumer thermarket-based wasthe dominant Marketresearch riskiness perceived competitivefactorsthat leadto perceived stanceof competitols, competitor-related and customer of aspect macroenviron- of the venture,andthe firm'spositionin threatsor opportunities), initiatorsin all ln theregulatory the distribumental(suchaschanges flrm andindusstructurel,andinternal(e.g.'management tion system. types. try aspirations)-1ead to Particular Within the However,imitowardsinnovation'In turn, f r a m e w o r k , orientations tatingcompetiin the theprescribed themselves manifest theorientations torswasglven or growth decisionsteps choiceof specificcompetitive low imPorandor- are available structuraladaptations; strategies; tance.BY and processes suchas:control for proactive ganizational large,market motivationbuildingpro innovations. mechanisms, andbrand-sale T o modalities' gams,andconflictresolution conexpansion havebeenfuither study the invariables Organizational ditions were intotheattitudesandvaluesheld n o v a t i v e classified viewed as imand intrafirm proc- behavior of by top management portantsdmuli in- flrms in Thai to generate suchasthecapacity esses, for innovation. communi l a n d , i t w a s novatlveideas,interfunctional The failto to necessary resistance cationand coordination, as an acts also targets sales ideas locatethe issueswithin a generalframe- ure to meet andtheabiliryto transform change, services the (or initiatingfac initiatorfor domesticfirmsin work of contingencies intoproiects. in the andassociated sector,andfor JVsandsubsidiaries alternatives, A similarframeworkcomingfrom tors),strategic productivity the Increasing goods sector. and intrafirmprocesses, variabies, pos- decision on newproducts literature marketing of the salesforceis oftenseenasa prime coniuncin that, outcomes theflnancialgoals performance itsnineinitiatingfactors: poli' domainof innovative initiatorrelatedto a flrm'sbusiness of a firm, salesgrowth,competitiveposi- tion, describethe madeby the salesand fiamework cy. Suggestions regu- behavior.An organizational technoiogy' tion, productlife cyc1e,

ered to reflect similar maturingand within firmsin devellearningprocesses o p m e n tl i t e r a t u r eT. h u s ,e x c e p tf o r or (suchasin repackaging minorchanges an innovaline additions), nonsignificant de is broadly product activity or new tion

32

The AsianManagerlJuly-August'/SeptemberOctober1997

Elementsof Research Questions In view of the suggestedframework, the foltowingresearchquestionswere proposedfor firms basedin Thailand: ' Whatare the key initiatingfactorsthatleadto innovation in firmsthatare basedin developing countries? ' Whataretheidominantinnovation strategies adoptedby thefirmsandhowaretheseinfluenced by the criteriafor choice? ' Whatarethespecificmarketing decisionstepsadoptedby thefirmsin implementing innovation strategies? . How does the adoption of specific innovative actions relate to firm performance*specifically,

the innovations related to market advantage?

' Howdo the innovation characteristics listedabovedifferby typeof industry - -'' (e.g., expofiand \domestic,industrial, consumer, and service)?

Methodology Giventhediversityof Thaiorganizations andtheconcomitant varietyin structures andprocesses, a representative list of targetfirmswas investigated to identifythe goalsof the analysis.The listwas sourcedfromthe Thai Marketing Association, the ThaiChamberof Commerce, the Ministryof Commerce,the SmaflManufacturers Association, andthe listingsof varioustradeorganizations.

Qbsetvationprocedures.Giventheexploratory natureof thestudy,abouiaofirmswereinvestigated,and in-depthinterviews withmanagers, conducted.

Thepreliminary investigation wasexpected to generateinsightsinto innovationprocessesand yieldthe appropriate dimenJionsfor a full-scale surveyin thefuture.

Datacallectionand analysis.The activityincludedcodingresponses, developing a database, and drawinginterpretations with respectto the suggestedframeworkfor innovation.

Preparationof researchrepods. The researchwas positionedwithinthreescholarly(andpublication)domains;marketing, international business,andstrategy.Theexpectedoutputincludedjournal articles,conferencepresentations, and a monograph.ln addition,the pedagogical usageof the 'sector-specific outputwasexpectedin twoareas:thedevelopment of guidelines for managersinvolved in new-productactivityand casereportsfor classroomuse.

marketingdepartments areoftenconsid- velopment stage, a lackofconcept sueen- sector.Whiledomesticfirmsin the servered criticalinputsfor new product ing wasreported in rheservices sector. icesector declared a low incidence of test intitiation.

Therewasalsogreater evidence of theuse marketing, both firm tl,pesin the goods The pricesand availability of raw of formalcriteriafor screening when the sectorciteda higherincidence of testmarmaterials and components likewisein- latterdld occurln bothtypesof firmsand keting. duceinnovation in bothsectors andfirm sectors.

JVsand subsidiaries carriedout types.

With respect to concepttesting, morenationallaunches thandomestic Innovating strategies. For both therewas low useof externalmarket firmsin bothindustry sectors. firm rypesand sectors, proactive strate research compared to in housetesting, a Perfo rmance management. Key gies(i.e.,thosebased on markerresearchl fair incidenceof informaltestingwithin findings: were moreprevalentthanreaclivestrate- eachsectorandfirm type,andsignificant r Therewere morefirmsin both gies(i.e.,thosethatimitatedcompetitors, reportingof nontesting.

A very similar sectorsthat citedexplicitperformance actlonsl. patternwas in evidence in prototype objectives thanthosewith implicitor no New product development testing,exceptthat therewas a greater objectives. process.Whilemultipleideasweremost useof externaimarketresearch . Companies agents in bothsectors relied frequentiy considered ar rheconcept de- by JVsand subsidiaries in the services moreheavilyon sales, marketshare,and July-August,zSeptember-Octob er 1997 | TheAsianManaper

33

(Performance . ScaledeveloPment of newventures) assessment . In depthcasestudies[atsectoral or firm leve1s) of . Consumer studies(adoPtion

of Firm SectorlType

newproducts)

References: 1. BoozAllen & Hamilton'Inc' the l QBOs' NewProductManagementfor Inc', Hamilton, & New York:Booz-Allen 1982.

2. Bureauof PublicEnterPrises' Services Marketingin MOU.New Delhi:Ministry sales andPotential 'Domestic Existing of India,1992' of IndustryGovernment "FocusGtouP government of . Foreign Theimpact 3. Calder,BobbYJ. Reseatch'" andthe Natureof Oualitative &subsidiaries (jorntventr:res } 4 [August' 1 Researcft JournatofMarketing 364.

1977):353 S. TamerandJohnR' 4.

Cavusgil, of the advanbecause profitabilitytargetsthan on other indica- tic firms,probably "The Stateof the Art in InternaTheasessment Nevin. of scale. tagesof economies tOIS. In ReAn Assessment." skewedto- tionalMarketing: sharply was performance . Therewas $eatel reportlngof of & Enis of Marketing'Edrtedby Ben c0ngluence' wardssales,marketshare,andprofitability view performance.expectations AmericanMarketingAssoKenRoering. measues. ciaflon,1981. to: areadvised manage$ Therefore, and ManagerialRecommendations Flavia.Thekchnocratic 5. Derossi, potential fac evaluate 1. Thorougily FutureResearch Lnc.,7982. takingcareto Ittusion.M.E.SharPe for innovatlon torsthatcouldspurinnovation, The keYincentives "Marketing Nikhilesh.

Dnolakia, 6. on givenconot oveneliance andfinan- avoidoversigfrt werefoundto betheindustrial Its Nature Countries: in LessDeveloped malket ditions; of the government, cial policies Developlng in Marketing to formal andProspects," 2. Accordgeateremphasis thecompanies'brand $owth,brandsaies, S.Kindra'

by Gurpreet Edited Countries. their within mar- izingthe new productprocess productivity' sales concelns, portfolio 1984' Helm, and Croom attentionon screening ketinginputs,andthepricesandavailabil- flrms,with special SusanP.and CraigC' 7. Douglas, procedures; tesdng ig of rawmaterials. involvement Samuel.InternationalMarketingRe 3. Seekamoresubstantial tend lnternainewproductprocesses 1983' Ha11' Prentice (e.g.' marketresearch); search.NewJersey: to bemorelnformalthanformal;theserv- of extemalagents in P. and Wind Susan Douglas, B. fewerprelaunch and icessectorundertakes "Envitonmental andMarFactors 4 . A d o P tm o r e c o m p r e h e n s i v eYoram.

Thismaybe testingthanthegoodssector. of ketingPractices."EuropeanJournalof for trackingtheper-formance to con- measures risksreiated to perceived attributed 7(3){ 1973):155-169.

Marketing "ls fidentialityand to imitationby compett- a newproducl.

Hamid. Marketing 9.

Etemad, maYbe doneon: Furtherresearch tors.

Development in theEconomic (mullicountry theCatalyst o Domainextension repoftandsubsidiaries Jointventures " Marketing in DeveloP Process? investigations) thandid domes- andmultibrand ed morenalionallaunches o C o n - ing Countries.Editedby GurpreetS' ceptualdeveloP- Kindra.CroomHe1m,1984.

10. Ettlie,E. and W. P.Btidges' ment (exPloring "Environrhental andOrganiUncertainfy the stages of IEEETrans Policy."

Technology zational productinnova'lmpactofgovernment PolicY 29 Management Engineering tion in a market) actionsin

Goods . Domestic Thefirm'sbusiness PolicY sales andPotential . Foreign Existing &subsidiades) fointventrres

. Customer inPuts andcomPetitor . Existing sales andPotential . Profit goals andsales . Firm's business PolicY . Organizational comPulsions . Dependence andsuppliers onrawmaterials

34

1997 ManagerLJuly-August'/September-Octobet 7heA,sian

r Methrefineodological ments(studYing the "failures"as "sucwell asthe cesses" )

(i)(1e82).

WilliamA. andJackN' 11.Fischer, "The Coordination of Foreign Behrman.

CorporaTransnational by R&DActivities lsons."Journatof InternationalBusiness Studies10(3)(Winter,1979):28 35'

"Designing "Performance 12. Galbraith, 24.Lecraw, JayR. Donald J. the InnovatingOrganization."in Orga- of Transnational Corporations in LessDenizationalDynamics(Winter):5-25. velopedCountries."Journalof Interna 13. Gerstenfeld, Arthur and H. tional BusinessStudies14[1) (Spring/ Lawrence Wortzel."Strategies for Innova- Summer, 1983):15-33. tionin Developing Countries."

SloanMan25. Lincoln,YvonnaS.andEgonG. PHILIPPINES agement Review(Fa11, 1977):57.68.

Guba.NaturalisticI nquiry.NewYork Sage GOVERNMENT 14. Ghoshal,Sumantraand A. Publications, 1985.

DIRECTOtr ChristopherBarlett."Creatiolr,Adoption With an index, this direclory conlains names, 26. Patel,Pari and Pavitt Keith. addressss, fil and phone numbers of otfies in ths andDiffusionof Innovations

by Subsidiar- "LargeFirmsin the Productionof the thrae brancheso, govsrnment,includingprovincial, crty,municipalauthoriliEs,embassiesand @nsulates iesof Multinational Corporations."

19(3) World'sTechnology: An ImportantCase o l i h e P h i l i p p i n e s ,g o v e r n m e n t c o r p o r a t i o n s , 'Non"globalization'." constitulionalbodies,siate @lleges and universities.

(Fall,l9BB):365-388. of in Journatof In P550e copy In the Philtpptn$. US$30a rcpy tor overseasorde6, inclusive ol mailing and handling.

15.Gillespie, KateandAldenDana. temational Business Studies22(l) (19911: " Consumer ProductExportOpportunities 1 - 2 1 .

1996DIPLOMATIC & to LiberalizingLDCs:A Life-CycleAp2T.Porter,Michael CONSULAR E. TheCompeti.

DIRECTORY OttlhepressJune 10, 1996 withtu&lelephone proach."Joumalof International Business tiveAdvantage of Nations.NewYorkThe numbe6, ihis comptehensive64-page directory conlains updated lists ol l) embassies, onsulates, ( Studies 20(1) 1989):93 112.

FreePress, 1990. international organizalions in Metro Manila, 2) "lndusffialization 16. Glade,Mlliam P.,Mlliam A. embassios,consulales,honotaryconsulatesof ihe 28.Schmitz, Hubert.

Philippines,3) DFA otticiats,DFA attachedagencies, Strang,andJonG. Udall. fiarketing in a Suategies in Les Developed otlices in ths provines; and 4) ambassadorial Countries: Some rssures. " DevelopingCountry:The Competitive lesonsofHistoricExperience.

JoumalofDeInclud6sthe Dlplomrllc Socht U.rg€, a guide tor U. S. Bepresentativesand theirtamiliespublished Behavior of Peruvian Industry."Lexington, velopment Studies 21(1)l9}a): 2.2t. by the Foreign Service Institute, U. S. Slale Department,Washington O. C. This proiocol guide Mass.:D.C.Health,1970.

29. Sengupta, NitishK. unshaking may also be uselul to other diplomats, governmenl 17.Hayes, RobertH. andWlliamJ. of Indian Industry.New Delhi: Vision ofticials, international business executives, school otficials,teachers and studentsof foreign serutce.

"Managing Abernathy. our Way to Eco- B o o k s , 1 9 9 2 .

P250a copy In the philtpptnes.US$1S a copy foroverseasorderc,inclusivaof mailingand handlinj. nomicDemise."Readings in theManage 30.Tiwari,R.S. India'sExportper1996AD.MEDI.A.PR ment of Innovation.Editedby M.L. formance: FactorsInfluencingExports DIRECTORY Tushmanand WL. Moore.Cambridge, and PolicyDirections.New Delhi: Deep With an index, this is a g6-page directoryof triMass.:BallingerPublishingCompany, & DeepPublications, media and allied organizationsin the philippines, 1986. includingFilipinotri-mediabased in oth6r6untries.

1982.

31. Urban,GlenL. andJohnR. P350r copy In the philtpptnes.USg21a copy "standarditoroverseasordec, inclusiveol mailingand handling, tr8.Jain,Subhash C. Hauser.Designand Marketing of New zationof InternationalMarketingStra- Products.EnglewoodCliffs.New Jersey: THE DlPLOlr/1A16pg51 This is a monthly seruice nswspaDerihal tegy:SomeResearch Hypotheses." /our- Prentice-Hall, Inc..1980. publishesuseful intotmtion about other @untries ,ncluding visa regulations,directori€s,bulletinsand "lnternanal of Marketing53 (January, 1989): 32. Walters,PeterG.P. scholaFhiDs. P20Oannull .ub3crlpilon In the phillpptne3.

70-79. tionalMarkelingPolicy:A Discussion of US$20for overseassub€crigtiss.

19. Karagozoglu, Neemi."lnnova- theStandardization Construct anditsRelFor overseasorders Paymentshouldbe reminedthroughtelegraphic tive Behaviorof Firmsin a Developing evancefor Corporate Policy."Journatof transferto U. S. DollarA@ount Number 5294_OOOS_ ,{4,The DiplomaticPostPublishingCorporation, Country:An EmpiricalStudy."Engineer- InternationalBusinessStudies 17(2j Bpl FamilyBank,EDSA,MalibayBranch,16 C. JoseSt. ingManagementInternational5 (1988): f 1986): pasay corner EDSA, Malibay, 55-69.

City, Metro Manila 1300Philippinss.

121-128. ' 33. Wilkie,WilliamL. Consumer phillppines For orders In the 20. Kaynak,Erdener.Marketingin Behavior.New York JohnWiley& Sons, Please add P60 to cover prie lor miling and handling.Paymentmay be in 1) demand drattto The the ThirdWorld NewYork:Praeger, 7982. I 990.

DiplomaticPost PublishingCorporation,p.O. Box 4246 IIErcPO'1282, Makati Cttyi o( Z) tEtegraphic 21. Khandwalla, PradipN. Fourth 34. Zaltman,GeraldR., Robert transler to Ac@uni Number 529-90-5556-6. The OiplomaticPost PublishingCorporation,Bpt iamilv Eye:Excellence ThroughCreativity. 2nd Duncan,andJohnnyHolbek.Innovation Ban( MafibayBranch,l6 C. Jose St. @rner EDSA. Malibay, PasayCity,MetroManital gOOphitippines.

Edition.A.H.Wheeler& Co.privatelim- and Organizarlon.

New York:JohnWiley Alao rval lab le ln Matro lltn I le boo k sto tss, hotels. ited.1988. tlrpottt end othar ouilats tncludtng 7g2 F, Cruz & Sons,1973.

St., tleilbay, Pasey Clty.

22. Kim, LinsuandKim Youngbae.

What to do after payment is sent "lnnovation Fax lo 833-3858or e-mail (ldpOmoz6m.com) in a Newly Industrializing title of publications ordered and copy ol }ank Country:A Multiple DiscriminantAnalyremitlancelothe Circulation Manager.Upon recelpt ot.remlttrnce, cople3 wlll be malled lmmedlateiy is Directorof theDoctoral sis."Management Science31(3) (March, Dr. CuntaleeWechasara wllh otllchl tecclpt. Foreign orde6 allow two to P r o g r a m i n B u s i n e s sA d m i n i s t r aito n a t lhree weeks delivery.Local ordeB onetotwo w6eks.

1985):312-322.

Chulalongkorn Unittersity,Bangkok, Thailand ; and For inquiries 23. Kinsey,Joanna."The Roleof Dr Kunal Basu,AssociateProfessor of Marketing, Call:(632)833-2glO,g33kes8 . Frx: 033-3g50 is Directorof the Centrefor International MaiE-mall : TDpOmozcom.com Marketingin EconomicDevelopment." or yrflie P.O,Bor 4246UCPO1282,l|lkril Ctty. agementStudiesat McGilI Uniaesitv,Montrcal, Vblt our homepageon th€ Intern€t EuropeanJournal of Marketing 16(61 Canada.

Http ://www.mozcom.conyu3erndp/home.html (l9BA:64-77.

July-August,/September-Octob er 1997 | TheAsianManaper

35

The Managerasa Man of Letters:The Need for New Management Initiativesin the AsiaPacificRegion with theexciting needto continueto learn."WhileDrucker speechof FelipeB. Alfunso,President all maiorcitiesin India. now in India,I'd like to spokeof his experiencein the United i7 ,n, eiio, Instituteof Management developments and Europe,I am witnessto this (eml, beforethe GeneialAssemblyof think that AIM, throughyou, its alumni, States happeningin Asia.Let me cite a few extheAlMAlumniCtuboflndiaonishelping,nay,ieading,inmakingthese amples: positivechanges' decisive, 27, 1996.

September . In lulls betweenmeetingswith for the PaciflcBasin in CEOs preparation The Asian Manager as a Man of Preliminary Remarks Meetingin (PBEC) Council Economic for me to be Letters It is alwaysa Pleasure AIM is which and 1997, MaY in helPor Manila Buthow doesonemanager with alumniof our school.I find out first talk they do what coordinate, to My favoritementorand helping havefared. leadin change? handhow well our graduates good to is that play concert or The wasaskedonceiust about?

At thesametime,I learnaboutwhatmore friend,PeterDrucker, night; Fdday on family their with he thoughtmostof us are' watch \Mecando to keepat the cuttingedgeof how educated theypracwith societyand the the new martialartsexercises dealing of in terms educationin Asia' management a strong has which taekwondo, like that we tice, As you know, .Asia,1nc' has iust workplaceof the future.He said community the component; Youngpeoplein meditation comeoutwith itsTop25 AsiaPacificBusi havea peculiarsituation. associaor business but' projecttheircompany humanities the over get excited school nessSchools,and your almamater,the the town; lahar-stricken in a are tion started these(thehumanities) is at third aftergraduation, AsianInstituteof Management' courses enrichment executive ori- interesting in favorof a morevocationai slot, one slot higherthan its positionin rejected or seminarsthey can attendor haveatthe hand, other the On iustentation. lastyear'ssurvey.This is a sigr of contiguru they who started tended;the next management managers, nuousimprovementand the Institute's turned45-year-old the company; their to speak to comebackto areinviting competitivepush.Butit is aisoasa signof out20 yearsago,ultimately "Now,we needto discussion^group the in on participate they continuingsupportand successby its theirschoolsandsay, do they things about talk and Internet.They a little bit aboutourselves alumni.It hasbeensaid:Showmea gradu- understand enand leam to and withfriends family ateof a school,and I can tell you about aboutlife!" joy moreof what life hasto ofer and, in work one's that idea the the In Past, that school. betTo- theprocess,get to know themselves wasa non-issue.

AIM has beenreachingout into hadto bemeaningful "more andmorepeo- tet from India day,Druckersays, SouthAsiamore.Graduates . In AIM alone,a good50%of our that their demand and ple expect simply alonehavemorethandoubledin lessthan in thepastNvoyearscomefrom He revenues jobsbe meaningfui." two years.Where before,most of the work and their "the andenterprise development educatedperson ourexecutive alumniwerebasedin NewDelhiandBom- tellsus furtherthat the average with programs' the management who realizes bay,mostof you now comefromvirtually of thefutureis somebody 36

TheAsianManagerlJuly-August/September-Octobet1997

age'ofour studentsin theseprogramsin a "renaissance man." Indeed,the Asian posedthe chailenge of totalhumandevel_ the midcareerdecadeof 35-45 yearsof managerof todayisamanof letterc.

Forit opmenrto management professionais, age.Onebankingexecutiveevensaidthat is preciselyhisdiverseinterests prethat andso,to AIM. sta"rting off with theRural shecamefor the opportunityto interact pare him for crosscurturar team- DevelopmentManagerientprogram,with candidlywith her peers,as the case worktng,to recognbeand sehe change faculty strategizin! with farmers and methodallowsfor this "disciplinedspon- opportunities the "subtle" to the fisherfolk,the center for Development from taneity"-far from the maddingcrowdof "shuttle"nuancesof diptomacy and ad- Management evolvedits own degreeprostrategists.

Theygo backto school,pay- vocacy. gram,the Masterin Development Man_ ing their own way or getting their comIn my talk with you today,then, agement.

Thecoursebuilt on thebestfeapany to sponsorthem, as time of to re- let us examinetogether the need for turesof theMBAandMM programs, barflect on whattheyhaveaccomplished as new management initiativesin the Asia- ancingrigor with ardorfoi tne uptirt ot managers and whattheyhavebecomeas Pacificregion.To do this, ret me share the plight of the poor.After the people persons. with you how AIM is respondingto the powerRevorutioninthephilippines, AIM o In the first BusinessResearch callfor innovations in fuian management tooka moreactiveroleasa policyprocesConference in Southeast Asiasponsored practice.For,aswe enterthe Asia-pacific sorand sowedthe seedsof the policyFo_ by the Association of Deansof Southeast centurywith the blurringof the line berum. Theciearobjectivewasto heighten AsianGraduate Schools ofManagement- tweenthe world of work and the worid the senseof ethicsandsocialresponsibilwhich AIM chairs-of about200 partici. of life, the Asianmanager's educationto- ity amongmanagement professionals-be pantsfromAsiaandNorthAmeric a,20% dayis moreand morethat of a man of theyinbusinerr,-gou.rnr.nt,ornonprofit were businessmen.Another 40y" letters. organizations. were businessmen who were part-time o But today,into the 1990sandat MBA or DBAstudents,takingthreeor six AIM's Odysseyinto Asian the portalsof the 21st centurir,with the units while continuingtheir seniorlevel Management collapse of theBerlinWall,manymore buresponsibilities.

In thepreliminarybusiness Howdoesonemanagement educa_ riersarecrumblingdown:the barriersof research agendatheydrewup, therewas tionalinstitutionhelp or leadin chanse? theNorth-South divide;tariffandnontariff a cleardemandfor trainingand manage- Takea briefjourneybackin time with te bariers,with theGATT-WTO, ApEC.and menteducation linkedwith industryneeds to how AIM began.

AFIA at ourheels;andthebarriers ofspace andglobaltrends,on themesthat ranged r In the 1960s,thedaysanddaze andtime dueto inroadsinto theinfoimafrommarketingto socialresponsibility and of boomchallenged efficiencyin produc- tion highway. policyadvocacy.

Theinterestin poticyad- tion. The "management theoryjungle" McDonald'sselishamburgers in vocacyis new and quite unexpected.

As waslaggingbehindthemanagement prac_ Moscow,the Philippines'Jollibee,in Jathey recognize the need to bridge the tice that saw firms like GeneralMotors karta.Ford'scar components comefrom worldsof businessand theacademe,they takea systemsapproachlinking units in all over:seats,windshields, and fueltank alsoseethe needto bridgethoseofOuif. thecompanyanddeveloping processes for fromMexico;shockabsorbers fromJapan; ness,goyemment,and nonprofitorgani- massproduclion.It wasan erathat ush- electronicenginecontrolsfrom Spain; zations. Clearllt,to better respond to a eredin the virtuesof economies of scale antilockbrakesystems,from Germany. rapidly changingenvironment,both per- andtechnicalproficiencyin thefunctional SGV& Co.is now themultinational SGV sonaland institutional commitmentsare areasof management.

To respond,AIM Groupof Companies, the leading professeenas critical. cameinto beingby adoptingAmerican sionalservices firm in Asiaandfirst manTakentogether,thesethreeexam- MBAmodelsfor its degreeprograms: first, agementconsultingand auditingflrm to plesshowus that the Asianmanagerto- the two-yearMBA andthentheyearlong getanISO9000certification, with worldday is consciously seekingavenuesto Masterin Management {MM). The firsi wide presence-fromChinato Chicaso. broadenhis personalperspectives aswell two presidents ofAIM werefromHarvard, TataIndustriesmanages morethan30inashis firm'sand his industry'shorizons. andthestyleandtradiilonof thisacademic dustries,with productsrangingfromsteel Not somuchbecause he needsit for Dro- meccafound its way into the first to sait,andhasinternationaltradingpartmotionor profitsfor his firm. He doeiso caserooms in Asia.Theciearobiective was ners-from Indiato Indiana. to becomeabettelmorewell-rounded per- to createmoretechnicailyqualifiedman.

Clearly, with barierscomingdown, son who is more responsive to changes agerslrom Asia. andvirtualorganizations andaliiances risaroundhim, andmoredecisive . By the late 1970sand lg80s, ing, in positiontheclamorfor changein management ing his companyin a largercompetitive with the onslaught of an unprecedentededucationand AIM is thereagain.How arena,fteeof countryor industrybounda- world economicrecession-not brought arewe responding? ries.TheAsianmanagermaybeentrepre- aboutby war, but by a battlefor critical neurial,but he or shealsohasa healthy resources-it becameevident that the Competitivenessand The Demands respectfor learning.He may havebeen managercouldnot manage his firm in iso- for Asian Managers? trainedasa "technician,"adeptin man- lation.WhentheNorthcountries sneeze.

Let us look at the currentAsia-paagementtoolsand techniques.

But he is thesouthcountries catchtheflu. Thede- cificscenario. alsoin touchwith histotalperson, exposed livery of services,especiallyto the o TheAsia-Pacific Management Fot0 artandhistorysportsandtechnology- marginalized sectorsof the population, rumofJuly1996reportsthatthedemand July-August/September-Octob er 1997| TheAsianManaser 3T

projecttheir banksas The companyis now pafi of the portunity to also for executiveshasincreased34%in the billion. partnersin develop' and people-friendly territory'sbenchmarkHangSengIndex' Asia-Paciflc.

Lim Thian ment. r We have MalaYsia's Rer ThelatestHaYComPensation tell us?At least Whatdothesecases known becoming years old, 35 port notedsalaryleapsin nine tiget and Kiat,only First,an innoinnovation.

-tiger-cul of raidingandwhite knight threetypes with real ex' for hiscorporate Asianeconomies, In the approach' old-rich the on he vation Politicallywell-connected, and eJutivesalarygrowthbeinghighestin Sin- maneuvers. began companies successful neariymoribundKamunting past,the gapore at 77o,followedby 6.1%and5'8% inheritedthe trom support financial by Tin Dredgingfromhisfatherbut wasable were sustained in MalaysiaandSouthKorea. equityto old rich famiiies.Gradually,thesefamily o In the 1995WorldComPetitive- to reviveit by seliing7l% of its broughtin professional Angkasain 1987.Within tlvo years' corporations nessReport,threeofthetopfiveslotswere Seri porilonsof theirbusimanage to out managers TheUnited he regainedmaioritycontrol,buying occupiedbyAsianeconomies' managprofessional see we Sri Alu, the brother ness.Today, HongKong, anothershareholder, wasfirst,butSingapore, reStates raising of thick the into eIS getting flnanceminister. and andJaPmfollowedsuit.India,Indonesia, of the families rich old both Hisnext movewasto buYthe trou- souriet from and the Philippinesrankedcloseto eacn themselves MultiPurposeHold- funding institutions,and mismanaged other,at 39th, 33rd,and 35th slots'Ma- bled, in business' shares own group 15 timeshis firm's size, puttingin their laysia,SouthKorea,and Thailandwere ings,a relations. were mostlycoope- government togetherat 2 1st, 24tb,md 26th whoseshareholders clustered aninnovationon thepolitiSecond, Chineseen' represent to rativescreated ranks.

In the past'a interests.By 1992, lhe cai connectionsapproach.

Shouldit then be a surPriseif we ffepreneurial to aligr with be would Holdingsgroup ticket to success com- Kamunting-Multi-Purpose find moreandmoreAsianmanagers concesto obtain powerfui theOuekandKuokgroups the politically infor' ing backto Asia?Evenmoreareplacing hadsurpassed get inside or one sioni or cheapmonies in totalmarketcapitalization-easily also their bes andstayingon in Asia' we Today, deals. for business of of the mostprofitablecorporateholdings mation After all, with the globalization interorgaof professionalization stockexchange,owninga signifi- seethe financeandthe riseof virtualproduction on the contribpolitics-businessmen nizational includfirms, listed theone cantinterestin several outsourcing, centersandstrategic opportuseizing or FrenchBank,Malaysian utingto policymaking Malaysian thing that wili make the differencebe- ingthe business-govBandarRayaDevelopments' nitiesprovidedbycongenial tweena companythat makesit and one Plantations, Estates,MagnumCorporation' ernmentrelations. that doesn'tis the peoplerunningit' And, Dunlop Third, an innovationon the entreManagement' when in Asia,onemustdo asthe Asians andLeisure In the past'success o The BankersAssociationof the preneurialapproach. do. Letme cite someillusffativecases: of all private couldalsobe spelledby ruggedindividu(BAP),composed . WehaveFirstPacific'sFour'Fisted Philippines With an manager' the country,haslinkedup with alismandthe hands-on product Strategyof trading,telecommunications, nanfJin a and Bankof the Philippines ideawhosetime hadcome property,andbanking.At thebottom,this the Development hiscor' sought organiza- to market,theenftepreneur deal' and an NGO (nongovernment crosscultural and L aitrategyotrelentless more we see Initia- ner in the skY.TodaY, Development in fl' tionl. theAlternative making,ioupledwith transparency associations "Developdrent Solu- moretheneedto alignor ioin to launchthe nances.After all, Manny Pangilinan'its tives, to bettelinfluencepolicy,andcreatewith poverty Progam" to help eradicate Filipinofounder15yearsago,beganwith tions and rivals a climatemost uplandsand supportthe socialre- policymakers start-upfundsfromthe Salimfamilyof In' in the Thispro- conduciveto business'Today,business who were formagendaof the government' andclose-instrategists donesia, havebecomemole opento pro' associadons He hassteeredthe com- gramis not theusualdole-out/grants AIM graduates. philanthtophyinto that is market'drivenand redefiningcorporate punyio placeits betson both traditional gram,but one in the gainingmileage Is first compo- socialresponsibility, propefiyoe- emDowerment-oriented.. time, andnontraditionalbusinesses: same Reforesta' broaderpubliceyeand,at the Sustainable it th. TreeBank mean' velopmentandtradingon the onehand, nent in involved gettingtheirexecutives andbankingon tion Systemcurrentlybeingimplemented andtelecommunications bondsof developing while causes, ingful an tribeshaveforged Indigenous the other.He hasalsoforgedformidable in Abia. and to refor' fiiendshipwith potentialclients industhe Association with virtuallyeveryone-includ' agleementwith alliances andevencompetitors' of denudedmoun- try' suppolters, Cor- .Jt som. 500 hectares andTelephone ing NipponTelegraph the innovationssPell word, a li-t Philip' in northern in the Cordilleras tains Link' giant;Asia telecom po-ration, Japan's Thefactthatthedemand pines,while BAPwill assistin mobilizing competitiveness.

Chi' the operator; cellulu Kong Hong . is on the riseleitelatesue effort,aswell for managers for the reforestation capital of third a owns which gouern.ent, nes. andsocialresponlivelihoodproiectslike vaiueofprofessionalism forest'based FirstFacificBank;a ffactorgroupin In- asfor Competition sibilityfor competitiveness' based coffeeandrice,by unden'witingP15milif it is' dia;andtradingpartner-companies coilaboration to anathema not is offlcbonds'BAP of TreeBank in Ausffaliaand the Netherlands'This lion worth forlevellingtheplayof them CEOsor COOsof keY afterali,collaboration ers-all load debt Paciflc's First Kong-based Hong rich familiesor polititake turns partneringwith ing field.Tiesto old banks-shali earnings its but equity, its of.

76% le may becomingmorethe add-on NGOandcommunityleadersin caileadersare the both year' to last increase 40% a to rocketed quanonthatwill spur the implementationof the ratherthanthesine overseeing revenues with million, US$152 reach innovation' op' management US$5'2 ploiect.Most of them seethis as an iumpingup bymorethanathirdto 38

The AsianManagerlJuly'August/SeptemberOctober

1997

Competitiveness,Core Competeno Consider,too, our potentialfor flectedin a sterling fashionthe needfor cies, and Asian Management greaterexpansionand consolidation management initiative.For,at the end of Education when we openthe AIM Centerfor Con- the day,aswe all know too well, it is the Paradigms areshiftingat the speed tinuingExecutive Education Development leader-manager's judgmentcall. Are we of change.Functional,subject-based,(ACCEED) in theheartofMakari,tfrl nusi educatingenoughfor initiativeandjudgteacher-centered classroom educationis nessdistrict,andmanageto thefuliestthe ment? out. Lifelong,learner-centered education Baguiocampus,which is closeto the Ouestionslike theseaffirm to me is in. Leadingin thischangerequiresa dif- emerginggrowth centersin the North. that AIM's odyssey is not overyet. From ferentstrategy.

Shouldanyonethenwon- Already,executiveeducationprograms uainingtheprofessional business manager derwhy AIM todaytakeson a strategyof haveenlargedtheir menuof customized to shapingthe developmentmanagerto simultaneous expansionand consolida- programs-amostrecentonefocusingon respondingto the globalmanagerthese tion?

TOM (totai qualitymanagement) in the pastthreedecades, it facesyetits greatest o Considersomeof our expansion manufacturingsector.

They have also challenge: thecontinuingeducation ofthe initiatives.The50.person-strong facultyof broughttheh programsfrom Baguioto leader-manager, therenaissance managel AIM approvedthis year the Executive Bhutan.With the ACCEEDand Basuio the manager asa manofletterswho brings MBA programin Malaysiaandthe Center facilities,both with five-starh6tel his total personinto management situafor Entrepreneurship.

The Centerfor De- accomodations; moreexecutives canavail tionsrequiringhisinitiativeandjudgment. velopmentManagement is in the thick themselvesof faining and refresher He who will not trust only when trusted parlnershipprogramswith the National courses aspartof sabbaticals or short-haul is deserved, learnonly when learningis EconomicsUniversityin Vietnamand business visits. profitable,loveonlywhenloveis assured. otherprojectsin Cambodia andLaos.The He who will managebecause it is meanCenterfor Technology hasjust beenput Educationfor Initiative and ingfulandhumanizingto doso. Theneed togetherwith the UnitedStates'National Judgment for newmanagement initiativein theAsiaScience Foundation.

ThedesignandarchiWhat,then,is so innovativeabout Pacificis preciselythe call for the Asian tectureof thevirtualAIM classroom is also theseinstitutionalinnovations?

Do core managerto be this man of letters,unbri done and is set on its journeyinto competencies guarantee competitiveness diedby professional andinstitutionalobli cyberspace within theyear.Thisis expan- andmanagers who leadchange?

Who are gations,he seeksand finds his senseof sionat its fullesl into new countryterri- we to sayhow organizations will evolve self-the core of his Asianidentity-aftories,aswell asinto new fieldsof man- in the future?Will theytakethe routeof firms,andasserts it. agementknowledge. verticaldisintegration of the Korean o Consider someof our consolida- " chaebull' iike Samsung,Hyundaiand Concluding Remarks tion initiatives.TheflagshipMBM program Daewoo?Or will theygo the way of TaiI beganthis talk by expressing the hasbeenredesigned, with unanimousap- wan'sAcer Inc.-"global brand,local learningvalue of beingwith alumni,asI provalfrom the faculty.PhaseI was ex- touch"?Or will they go the way of agile seeflrsthandhow thingsaregoingforyou. tendedfrom 30 weeksto 34 weeksto alliances,as the agreementforgedby Wethenreflectedon howAIM hasseized enhancelearningin financeandquantita- Hitachiwith IBM to buythelatter'smainandcontinuesto seizeopportunities in its tive analysis; phaseII wastightenedfrom frametechnologyandcomputersystems, environment.

With thebarriersdownand 20 week to 12 week for sharperfocus, andsellthemin Japanunderthe Hitachi competitiveness intensifiTing, thequestion to allow a sffong GeneralManagement logo?If thereareno easyanswers,then is no longer"Whatshouldthefuian manstreamand to includea CareerManage- how do we know what corecompetenagerdo?"Neitherisit "WhohastheAsian mentstream;andphaseIII wasexpanded ciesto cultivate? managerbecome?"Rather,it is *Who do fromsixweeksto 20 weeksandelectives The workshopAIM conductedin we want the Asianmanagerto be?"Recwere increasedfrom 5 to 1i, most of KualaLumpurthis September with lead. ognizingthe pathsyou havechosenfor which look into the business appiications ing HRDpraclitionerswas instructiveof yourself, I ampassionately optimisticabout of IT (information technology), anda con- the stirringsof reinventingAsianmanage- who the Asianmanagerin Indiawill be. curent MRRstreamwas infoduced for ment education.Givena turbulentexterAs I ponderyourvastcountry,your bettermanagement of the learningproc- nal environmentwherecompetitioncon- expandingmarket,your steady$owth ess.TheMM programhasalsoidentified tinuesto be intense,and corporatesuatrate, your highly innovativeentreprebenchmarks forits skills-centered program egy focusedbut continuouslychanging, neurialbase,your pool of 20 million sci and has enhancedits Leadership skills theHRDleadersclamoredfor mulilskilled entificallyand technicallyqualified mancomponent.

Moreintegativecourses and andvision-driven managers in flexibleor- power,I thinktooofMahatmaGandhiand activitiesare beingintroduced-ranging ganizations.

Of 15 managerialskills,IT Mother Teresa.I think, too, of the Taj fromtheAnnualManagement Conference drivenandmultifunctionalcompetencies Majal,andhow thiswonder of the world to PolicyForumdialoguesopento both wereon the top of theirlist. Of 15 trends is a testamentto the spirit that is India. the facultyand students.More iob fairs in management development programs, An Upanishad mantraringsin my ears:,,A andcompanyinternshiparrangements are their top threewere thosedealingwith manbecomes whathe think." Indiawill beingforgedto betterensurethatstudents motivationalleadership, teambuilding, bewhat its managers think.Theinitiative landin the workplacerunning. and crossculturalawareness.

They re- andthe iudgementcall areyours.

July-August/September-October 1997| TheAsianManager 39

in IndiaToday DoingBusiness

Indianalummassesstheir economyand Juzar definetheirrolesin theglobalarena' '75, President of Kitorakiwata,MBM the AIM Alumni Associationof India' is ExecutiveDirector of Wockhard '72, is Chair Ltd; RameshGelli,MBM man of GlobatTrustBank and ffavels in the region;MohanPhadke, frequently '80, is VicePresidentof Ballapur MM Industries,Ltd.; and Ashok Sharma, MBM'83 andMDM'q4, is CreditAdvisor of CooperationInternationalepour le et la Sotidarite(CIDSE) Developpement Wetnam. in assigned and

that is Thlrd, softwarecaPabilitY of in lndiais a reflection beingdeveioped basethat and engineering the scientific Our advantage. givesus a competitive of over200 million gowlng middle-c1ass of over950 mi1 people(1na population market domestic large a provides Iion) Indian for a springboard as serves which comPete to industries 91oba1lY. ln lts Fourth,indiais morediverse l l f e s t y L easn,d c l o t h i n g , f o o d , culture, put toEurope of whole the than thought culdeallng"wth to used are We sether.

tural diversitywithin our own counily' whichmakesusmoreculturallysensitive whendealingwlth the restof theworld' "softer"sideof This,I would say'is the advantage.

India'scomPetitive ASHOKSHARMA hardworking,entlepreEducated, and alsomaterialistic neurial,ambitious, markets'An Immense humanresources. a demowithin system legal established cutrent our comprise polity.

These cralic with Coupled advantages. competitive

What do You think is India's competitive advantage todaY? JUZAR KHORAKMALA and Indiahasthelargestscientific fuits for base resource human managerial speak English big, This turedevelopment. at a relaing poolof peopleis available standards' Western by tiveiylow cost experlence India'seconomlc A1so, it to entaught years has past 50 in the self"reliance' and couageindigenisation class Wehavebreda largeentrepreneurial pres" the for ready are who of managers astheyareusedto suresof giobalization' our country' within severecompetition busicommon a is Further,sinceEngiish over advantage nesslanguage-adistinct very a have China-lndianbusinessmen world' the of rest goodlinkageto the 40

Humanresources base . scientific and managerial ' educated,hardworking,entrepreneurial, ambitious ecCInomi* . highly-skilled.

English-speaking, cally-conscious SoftwarecapabilitY legalsystem Excellent Globallyrecognized CulturaldiversitY Largemarketwaitingto be served

1997 lJuly-August/September-October TheAsianManager

other factorsof productionwhich the countryhasin abundance, andthe ongoingpolicyof economic liberalization, these advantages holdgeat promise.

work, anda diversebut interactive soci RAMESHGELLI efy.Thelargenumberof Indiansworking Indiais rightlydescribed asa sleepin variouspartsof Asia-includingIndo inggiant.Beinga large,successfui democ-lingual,and nesia,Malaysia, andHongKong-further racy with multi-religious, strengthens thebondbetweenIndiansand -ethnicsocieties anda strongchampion of MOHAN M. PHADKE therestof Asia. nonalignment, the countryhasan imporAn excellentlega1systemand I definitely seea broader tradepact tantpoliticalroieamongtheemerging and procedures accounting that are globally with theAsia-Pacific regionin thenext10 maturingnations.However,India'sown recognized.

Abundanttrainedmanpower. yearsor so,with Indiaasepicenter of eco- politicalideologyof evolvinga socialistic population.atleast150 l t u t l l l L d L L l v l L y , Themiddleclass society hascaused it to missopportunities miilionstrong-is a largemarketfor goods on the economicfront.Only since1992 andservices waitingto be served.

ASHOK SHARMA hasIndiastartedeconomic restructuring.

Thefutureof SouthAsiancountries, In the next 10years,the countrywill asRAMESHGETTI as with other regionsof the continent sumetheroleofaneconomic powerhouse A largepoolof highlyskilled,Eng andthewor1d,is inextricably linked.Be dueto itsstrongengineering andresearch proficienthuman ing the largesteconomyin SouthAsia, base. lish-speaking technically resources that is alsoeconomically con- Indiahasto playa leadrole in fostering scious.A largemiddle-class of over250 cooperation amongtheregion's countries 3. What would you advise a millionnow. andin promoting tradeandcommerce.

In foreigner who would like to do busitheeconomic sphere, Indiaalsohasto en- nessin India?

What do you see to be Indiab role in surethattherecentmomentum generated Asia? by improvedeconomlc tieswith Chinais JUZAR KHORAKMALA maintained and enhanced well into the The first thingI would teil him is future.Theeconomic tiesbetweenthese that Indiais a truly democratic JUZAR KHORAKMALA country The World Bankprojectsthat by two majorAsiancountrieshavea lot of but, by virtueof its entrenched bureauc2020 India will be the third largest synergywhich hasremalnedlargelyun- racy,thingsdo not movevery fast.Thus, economyin the world. If this provesto explored. onehasto bepatient,cautious, andrealisbe true, India will certainlyhavea very tic in approaching a largemarketthathas dominanteconomicrole to playin Asia. MOHAN M. PHADKE greatlong-term potential.

Moneycannot Today,Asiacanlook to Indiaasa source Indiawill playa leadroleasa mod- bemadein Indiaveryeasilyandveryfast. of democralicstability.Thecontinentcan eratorin the bodyof nationsin the Asian Thereis tremendous domesticcompetialsopickup a fewlessons fromthecoun- context,andasan interface for thewest- tion,sothatculturalandpoliticalsensitivtry'sdemocratic institutions, legalframe- p r n h p m i c n h a r p ity isneeded projects. whenimplementing India'ssituationis quitedifferentfiom that of China,wherea1littakesisaneconomic orderor ruleto getthingsdoneveryfast.

In India,onehasto interactwith various institutions,therebysiowingdown the process.

However,a very good legalinfrastructureand safeguards are in placeto protectforeigntradeand investments. tion of the lndian economy Nevertheless, foreigninvestors mustexWill continueto prosper as businessacuercisegreatcareandpalience in choosing theirIndianpartners.

-^ffii^

^^+i-,ik,

runsacrossall levelsof Indiansoci-

ff" reform process trepreneurial splrit,particularlyin lT,software engineering and biomedical fields.

'

ASHOKSHARMA TheIndiaof mythandthe Indiain realityaretwo differententities.Separatingthesetwo wouldbea goodidea.First, a foreigninvestormustdo thoroughresearchon the chosensectorandregion.

Selectingan established loca1partner wouldcomesecond.

Beyond themetropolises.theconntrvhasa numberof strategicallylocatedmedium-sized citiesoffering atffacLive opportunities at sigrificantly lowercosts.Finallv. theinvestormustnot

1997 July-August,/September-October

TheAsianManager 41

theirhorizonsoutsideof andexpanding beaffected MOHAN M' PHADKE decisions 1ethisorherbusiness India. b y p o l i t i c a l c h a n g e s , a s l h e r e i s a g e n e r a l B u s i n e s s a c u m e n rare u n s a c r o Customs s s a l l l eduties v - andtariffsarecomentlepreneurs society-the els of Indian across reforms oneconomic consensus country.A duty of over the andwitl continueto do s0 in ing down in prospering politicalspectrum.

150%,whichwe usedto PaYfiveYears lndia. ago,is now down to 30%.ImPortsare MOHAN M. R A M E S H fieelyallowedat low costand therefore The recent liberalizaPHADKE Indianproductshaveto approximate GELLI C o m e if theywantto stayin the Being worldstandards tion of lndia has Put with an open anenuepre- market.The situationputs tremendous pressure mind. Consider tremendous onthequalityandnatureofwork neurialna- pressure to theadvantages tion, India within our own organization. on firms to redirect ensurethat Your has been ventureis Profit a successful ASHOK SHARMA change their focus and a b 1 e .D o n o t SinceI am workingfor a develglobaltrad comefor shortwith the ing country opmentbank,I am associated their methods of worktermga1ns. finanrural of development historicallY. institutional comthe more wlth am be I ing to [ { o w e v er , cial entities.Currently, R A M E S H rural the through50 groupworkingon restructuring petitive and to gloGELLI yearsof so- iinancialinstitutionsas part of financial The best a cialistdem- sectorreformsand helpingprepare balize their operations thing to do is go performtheir ocraticPoli- fiameworkfor monitoring througha local as fast tical Philo ance. as Possiblepartner.Prefers o p h y ,e n ably, choosea trepreneur' MOHAN M. PHADKE with professional A great satisfying' Professionally the andsomeln- ship got throttled.Only now, with at least10yearsexperience era new the to contributeto will we seethe Opportunity Takethe medium- openingof the economy, exposure. ternational andrevivalof the lndianen- of growth. blossoming termview andbe Patient. in IT (in spirit,particularly trepreneurial englneer- MMESH CELLI software technology), India has been described as a bus- formation a new MYwork dealswith creating have Indlans thebiomedicalfields. tling entrepreneurial society' Do you ing,and competiin a highly abilityandaregener- kind of organization risk-taking agrce with this view? What for You a natural with foreignparttandem in industry ilve societhanmanyother aggressive i tn" 1urur" of entrePreneurshiPin allyless nichesthatbuilda comsocial ners.Identlfying ties.ln view of theirindigenous India? has andensuresuccess silucture,Indianscangetaiongwell with petitiveadvantage The andexciting' Hence,I see Leenbothchallenging anysocietyandcommunity.

JUZAR KHORAKTWALA to spotopportuability the job summons the goingglobalin I definiteiYagreewith the view manyIndianbusinesses stratesuccessful towards work to nities entrepreneurialnext10to 15Years. that lndiais a bustling andbusiknowledge giesandtnseparable earlier' ln fact,as I mentioned society. cunent nessskills. will gain momentum How woutdYou describeYour entrepreneurship of the Indian work in Indk? with the globalization ASHOK SHARMA economy.

SinceAPrl11996,i havebeenon a Indianshavelearnedto compete JUZARKHORAKMALA a c r e d l ta d v i s o rt o a I havebeenlnvolvedin the Phar- d e p u t a t i o na s athomeoverthelast50years veryfiercely of development consottium industryin Indiafor the last Brussels-based thechallenges maceutical Today, of itsindependence.

ChiMinh City' Ho at Assigned institutions. isnowaround turnover Oursales in Indiaincludeupgrad- 20years. for entrepreneurs to adviseon creditand is function my andquality,andbe- US$100million. ing theirtechnology of lndia financefor all the projectsof the consorThe recentliberalization andmarketconsumercomingextremely At on compa- tium in Vietnam,Laos,andCambodia' pressure hasput tremendous friendiy. creating on working am I moment, the nieslike mine to redirectour focusand banksout of exlstingproiects changeour methodsof workingso asto smalirural ASHOK SHARMA some in our opPartsof Vietnam. andto giobalize of a classof entrepre- be competitive, Theexistence Currently, in thecountry erationsas fastas possible. neurshasbeenrecognized our in- MOHAN M. PHADKE from comes business our of history'The 20ok fromasfar backasrecorded of communiSinceindia'slanguage This was not so operations. logicaland probableoutcomeof the re- ternational thecounEnglish, predominantly ls a reflec- cation lsanenvlronment elghtyearsago.Theuendis lust underway formprocess and industry for base excellent an offers in Indiato- try andentrepreneur- tion of what is happening in whichentrepreneurs global Partners. are fast reachingout business dav.Companies shlpwill Prosper.

42

1997 The AsianManager1July-August/SeptemberOctober

ftarel lfotes Oh! Calcutta 0h! Calcutta 'l'he.'t' stuge,wn tho hure n?r(r s('(n.t'ou.

The.t'film .un Io infirnt thc uvrld. rho knou. t'qu

ol,

'l'lte,t' defend.utur repululion: I lare the.t'

fought.nntrpnin'!

I tn slnnd, nrussit,cnnring rit,t' In .nnr griqf rtul .nrur y!lor.r'.

A lomb nnl tcntple,queenarul lepen mother and nonster, ut enigma!

Prot'essorNishikant K. Mukerji is Prot'essor of theMasterin Business Ma agemenl (MBM) Programot th?AsianInstituteof Management.

He wasMBM Progratn Directorlor Schooly.at'1996 1997.

Enail: <N ishi@aim.cdu.ph >

1997 July.August/SeptembeFoctober

TheAsianManager 43

ftavel lVotes

Oh! Calcutttt!

Vllhomn knou.ytu? Whowill ktue1nu?

How mary applaudytu? I(fu uill bind.vour uounds?

Yourbeautdulbuiklings?Monuments from

ryah!

Thoseof a purpletimeandpurple age, Buildingsof todayand tomorrou. lour uflsletpansiaegrcens,traeesof paradisein Sotlom,friend of theuind' thosewhoseekthcgreen'sintimact', Whichcaresscs and carriestheir laughteracrossitsface, As a simplesymbolof pnfound achieaement' Happiness!

44

The AsianManager I July-Aug$t/SeptembeFoctober

1997

e

llvvel llotes

lour clubsand night spotsof theEast, of entertainment, cuisineandcolor, Yourpointsofftrcusfor themuscs,which thri ueuibrantly, resplendently !

All thesecoursethroughyour aeins,in one side ofyour body.

Ilhat of thepeoplein your bosom?

Hdw manycareenough?

Yourbeautifulerpensiaeuomen,likeflouers on a dung-heap Yourrich opulentmen,uulgar working millions, prophetpoliticians, scholar rcaolutionaries, All theseand othersin your kaleido.scopic patterns, Do theyknow ThePain!

ThePassion!

TheProsperity!

TheSuccour!

TheSalaation!

TheCiailization!

That is bornfrom sufficientreal caring?

Juty-August/September-October 1997 | TheAsianManaEet 45

lluvel llotcs

Definers Whatol|rtur muimctlsubhumuns? like of humnnity,of ull agcs'races,diseases, in skullsonpirateflags' or parchcrlskeletons the sandsalir:c!

Chiklrenof Coduith ftrcesof detils, rlirt!

Their clothingin all seasons Ignorantin thebinarr age.

Oneword searetlb.t'bkning u:anl ucrosslheir bcins,HUNG'ER! Whatof thesethen?Are lhe.t'kxt razcd to care?Canthescutre?

Seethoscfactoryfunnels,like barsucntssthe sun, Arc ther brokenlimbsProtruding?

Seetheindustriulsmoke, Is it from thefunerulprre of.wrurmillions?

If so theGunges flous near,

46

The AsianManager I July-AugusyseptembeFoctober 1997

+t

lluvel lVotes

I'etthcreis beaut.t' and uchieaement, and in thedarknessthereis hope.

Thatglimmerin.tttur durk despuiring caDerns, thalflashingrazor of effitrt.

Thelight thereret is small,the darknes;' magnitudeimmeusunthle.

Still perhapsthelight uill grou,andshineuith lhe brightnessof u thousandsunsetploding!

Perhap.s pxryresslike a bride sht'ly hides behindsmoke-ueils from factnrl'funnels Maybeproteston themurch,is n signthat peoplecarc, Xlaybelhe industries'smokeandfire are incense to theCods,uith humanplodgesof endeawtr Marbe all will 1'etflower, fitr thegordeners are al u:ork,undtheseason fast approaching.

Oh! Calcutta,Oh! Calcuttn!

Somanystandenquiringin uonder!

Soman.r'upplaud.vourglories, Whilsttaiting, to celcbratc, Thefirst blossoms of redemption.

1997 | TheAsianManager 47 July-Augusysâ&#x201A;Źptember-October

EastandSouthAsia: A Convergence of Interests to openmarketcompetition; remaincommitted If leaders if poticiesrema[nrightandarecarriedoutrtght' ispossible' of integration measure a significant

highly disciplined,and Ughtlyknit. Few if any,arelike that' otherAsiansocieties, Moteover,it soonbecameevident ofJapan thattheWesterntradingpartners andSouthKoreawould not-except fof theirexport'led. politicalreasons-tolerate sowth. policies forvery rading import-resuicdve of the world, the In the perception overtaken being after not par[cularly, pri' long; Miracleis assoclated AsianEconomic Koreain individualin' madly with EastAsia-initially with the byJipanandSouth power'andexperlindus[ial and comes region'snortheastcornel dencits. tlade huge encing Risinglrom theruinsof wa! flrstjaT h e p r o f e s s i o n asl u c c e s so f t h e pan and then yet again affirms AIM the Indianalumniof S o u t h K o r e a The New Tigers and Dragons the reputatlon of exponents Thus,the succeeding achievedProdi' whichthe school of plural societies in the miracle-the Asian giesof indusffi- the n"r."".jr."'ts.rr. TodaY, we something to do Asia-had alizauonbY sin' Southeast of numbâ&#x201A;Źr Thelarge PhilippineS See andtladg l e - m i n d e d l Y more.Tobesure,thet economic trom AIM alumni But. export'led. became also p r o m o t i n ge x - ing strategy open to had they Korea, and portswhile zeal' unlikeJapan influence COntinUing rOle tO reachind aswell as ouslyprotecting their marketsto international that ofaninstituuon comFortunately, competition. home markets, domesuc weak' than rather petition invigorated, by followingPur' in.4s1an name-an SOUth ASia, bUt andtheir enterpdses poseii industdal ened,theircorporate sututeof managewhole. a a as policies,and bY economies also in Asia as ment. of islaldeconomies Theftee'trading c u l t i v a t i n gi n whole.

Singapore and Kong Pioneered thet Peo- Hong tensely Makersof the export-led in in this outward-oriented, ple's learning AsianEconomic

by Taiwan, followed were They strategy. scienceand technology' Miracle a nd,more T h a i l a n d ; a n d No otherpsianeconomycouldeas' M a l a y s i a , We from the Philippinesare proud and the China, lndonesia, recently,by to assertthat the Asianlnstitute of Man' ily replicatethis strategy'which presupPhilippines. agementand the superiormen andwo- posesa societyall at oncehomogenous, 1997 IJuly-AugusvseptenbeFoctober Managet 48 TheAs{an

Fidel V Speechof HisExcellencY Ranos,PresidentoI the Re\ublicoI thePhilippines,beforetheAsianIn' lAlMlAlumni s tuteof Management the Cham' and Indla of Association duing the berof IndianIndustrialists' statevisit to India on President's March4, 19Q7.

menit hasturnedout havebeena crucial "Asian in$edientin what is calledtie it is worldEconomicMiracle."Because classprofessionalmanagementthat our con nent'samazing madepossible

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Thisdl'namicstategyhasprovedso And it is in thislight that I now pro- transportationhasmadesuchdivisionsa1effective thatits resultshavebeencalleda posethatEastAsia,on the onehand,and mostinelevantlor purposes of regionalseprac- Indiaandothercountdesof SouthAsia, curity-no lessthan for the movementof veritablemiracle;andits successful titionershavebeen called"tigers" and 0n the othel beginto exploreintensively goods,capital,services, andpeople. "dragons."Indeed,an exportorientation measures to link thet marketsandeconoMoreover,thedals of ideologicaldihasbecomethe economicnorm, replac- miesmuchmoreclosely. visions,politicalalignments, andmilitary ing the conventionalwisdom of the Somesuchmeasures couldtak€the blocsin confiontation arcover.

I 960swhich counselled autarky-4evel- formof bringingdowncross-regional barDuing the ColdWar,India'spostopmentin isolation-for the poorcoun- riersto tradein a mannerconsistent with independence leade$,in theirwjsdomand ules. the rulesof theWorldTradeOrganization. foresight, espoused thecauseofnonaligngowth Otherstepscouldbeworkedout to facili ment. They urgedthe formercolonized Althoughoutward-orieirted hasbeenlargelyassociated with EastAsia, tate two-waytradeand investrnent-by countdesto reiectpower-bloc politicsand Indiaandthe othercountdesof SouthAsia meanssimilarto thosethat havealready proposedindependent consultationand progress havenot beenleft out of it. Theyarenot madesubstantial in APEC. dialogueamongthem.And muchof the to be left behind.

Wemightalsosrepupoureconomic "ThirdWorld"lisrened andfollowed.

India,aswe know hasdecidedto andtechnicalcooperation.

And lcooperaThe Philippines, constrained by takethesamerouteof geography, exports,liberaliza' fetteredby histion, deregulation, toly, ano swept p r i v a t i z a t i o na , nd by the nighty competitionto selff o r c e so f c o n sustainingdevelopt e n d i n gb l o c s , m e n t . H e r ei n t h e proposes Presrdent Ramos exploring moreintensively thefollowing measures: waspushedonto s u b c o n t i n e n tt h e a differentroad. strategyis beginning . Sringing Now, of downcross-regional barriers totrade, consistent withWTO to achievea similar course, thereis a rules result. new configura. Facilltating two-way tradeandinvestmenl, similar tothoseusedin tion of security APEC In Development and power in . Stepping upeconomic andtechnical cooperation, including cooperaTerms,Only One Asia and in the Asia tronIn world. The PhilIn termsof deippinesitielf has S&T velopment categones, becomean ac. Collaboratlng inprotecting theenvironment rnAsia indeed,it is lessand tive memberof . Expanding airandshlpping links lesspossible to distin' the non-aligned . intensifying cultural exchanges andinteraction among guish betweenEast movement jourrialists, parliamentaries, educators. andyouth andSouthAsia.

(NAM).Ther€is Thoro mev ha . Regular consullations among ministers forplanning, flnance, now a fluid and trade anASEANFreeTrade f I e x i b I e agriculture.

Area(AFTAI,anAsia' configuration,in PaclflcEconomic Cowhich the apoperation(APEC)and an Asia-Europe tionlin science andtechnology.

Wecould prcachto international relations advocated Meetlng {ASEM).And there may be a collaborate in waysto protecttheenviron- by Indiahasnot onlybeenvindicated but SouthAsial Foundation for Regional Co- mentintheAsiancontinent.

Wecouldex- alsoaccepted for universalapplication. operationanda Southlsian Preferential pandair andshippinglinl$.

This approachdid not-and does TradingAgreement.

OurMinisters forPlaffring,Finance, not-entail a policyof weakness or backButthe $owing convergence of the andTradecouldconsultregularly.Socould sliding.It is one of glvingmutual accom, marketsof Eastand SouthAsiaand the ourMinistersofAgriculture.

Wecouldin. modation, conciliaton,dialogue, andconpolicies, confluence of theirliberalizing as tensifyculturalchangesand interaction sultationa chancebeforearly resortto well astheadvances in transportation and amongour parliamentarians, educators, arms. communications, couldleadto a signifl- iournalists, andyouthgoups.

Today, we in the Philippines seeIncantmeasure of integration.

If leadersfediaashavinga continuingroleto playnot maincommittedto openmarketcompeti- A Vital Role for India in Asia as a only in SouthAsia,but alsoin Asiaas a tion. If policiesremainright andare car- Whole whole. ded out dght.

Similarly, in termsof regionalsecu' Weseesucha roleforIndianotonly It wasin recognition of thispoten- rity,it is no longerpossible to divideAsia becauseits advocacyof nonalignment tia.lthat lndiasought-and ASEANageed behveenEastandSouth.The tbchnologi- and nonconfiontationhas found univer, partnership. cal revolutionin communicationsand salmeritandapplicability to accordit-full dialogue in today's world.

1997 | TheAsianManaget 49 July-August/Sept€mbeFoctober

for the poor mentthat hasa compassion that ln everyregionalcouncil,we mustspeak we recognize Wedosobecause aframe' peoples; our among weak fair play,and mutualre' andtie moderation, porenIndia,with its politicalinfluence,its dip- for ule has that actionbeginswith a work for development "towipe economic spect.And cohesive itsgrowing experience. lomarjc words.

Nehru's of the communityof our stra' dal,inJawahallal weight,andindeed,its sheersize'nasto recognition everytearfromeveryeye." interests." be ifactor in the affairsof all of Asla,in' tegic ln the end, it is the democratlc in a different lf I saidthispreviously cludingtastAsia.of whichIndiaisanim' our peoplestogetherthat settingandin anothercontexl my rcmarK valuesbinding mediateneighbor. to strengtlenthe to lndiatodayaswell. Forln- imDelus,their leaders, This is why the PhilipPinessup' couldapply andmake nations oul in the powerof its relationsbetween portedthe admissionof India in the dia is secondto none andin its capacityfor moralpersua' themendure.

ASEANdiaioguestructure-first as a ideas My messageto You here-and sion.In the councils andthenasa peoplesectoral, of the world, India throughyou to the greatlndian full dialoguePartner. your counuy on has alwaysbeenan is Dlainandsimple.I call When lndia's in the This is why we en and in Asia of modera- to takeup thevitalrole advocate India'sParticipadorsed circum' its by government tion, fair PlaY,and worldto whichit is entitled ton in the ASEANRestances. mutuairespecL speaks and gionalForum(ARFI. to e IndianParlialn hisaddress we of thePhil' And this is why we Nehru acts, one can i p p i n e sr e c o g n l z e menton theeveof independence, genera' nowfavorlndia'smem' heroic feel the weight with lndiaa commu- sDokeof the dreamshis bershipin theAsia-Eurheworld, nify of strategicinter' tionot I047 hadior lndiaand of the ropeMeeilng(ASEM). and to labor as he urgedhis peopleto ests.

H e r e a g a i n' regive them Indian peoPle I havereferred work-and work hard-to thereis much that . to lndia'sPolitical, ality: "Those themselves.

ASEANand Indiacan dreams{Nehrudeclared) diplomatlcand eco' do together alsofor the nomic weight and are for India, but they are The Philippines peoples and vltal world, for all the nations politicaldialogues the country'ssizeasentitlingit to a supportsthe proposed knit togethertodayforanya forcefulvoicein the affairsof aretooclosely betweenseniorotficialsandministersof role and one of them to imaginethat it can live Asia.

ASEANandIndia.Webelievethat,in ad' all of Thereis oneothertling-Perhaps aDarI. ditionto theannualASEANpostministerial P e a c eh a s b e e n s a i d t o b e atfiibutes(PMC)in which lndia now more importantthan these conferences sois freedom'sois prospenty resonance' indivisible; givesIndia'svoicea special takespart, lndia'sForeignMinisterand tiat is disasterin this one actions,a specialimportance' now and so also thoseof AsEAN-biiaterallyand as a andIndia's canno longerbe splitinto iso' that is the powerof India'sexample world that And dis' ranging wide conducl should $oupWhenlndia'sgov' latedftaArnents." when' asa livingdemocracy' iussionson regionalsecurityissues te world in which Nehru'sIndia andacts,onecanfeeltlxe speaks ernment can. they ever 50 yearsago Indianpeoplethemselves awoketo life and lreedom Our DefenseMinisterscouldhave weightof the was ironicallyon The Philurge l future the in discussions similar the vergeof breakandIndia ippines t h e i n a c t i v e a n t a k e P a r t t o India ingupintotwo hos' and IndiFilipinos somelmes have minis' the in forum Regional ASEAN tile camps. acti' beenderidedfor in the intersessional ans are confident tedalmeetings, OnlYnow are of slowness the experts'wolking the $oups' in and vities, we truly closeto re' that our respective d e c i s i o n ' t h e i r benefit would Forum the and Bothlndia alizingthe dream democratic sYsfrom India'sacdveparticipa- m a k i n g ; t h e immensely our post'independc o m p l e x i t Yo f imtron. however ence leadelsnul' tems, their Political tured through the perfect, give our p r o c e s s e st h; e A Concert of Middle Powets longnightofcoloni' ineffienduring ln Ausffalia,a Yearanda halfago,I perceived societies alism.The burden formationofanAslan ciencyof their ofthepossible sDoke andthegloryofcre' stabilitY. .on..tt oftiddl. po*ers,throughwhich, tespresenlatlve a t i n ga P e a c e f u l , "Thoseof us in the middlecanbe s y s t e m s - t h e I said, ald fiee prosperous, " m e s s "w h i c h ilnot in eco' players, activeandsigniflcant the me and shoulders, our on falls Asia at times,makeof things. nomic and military might, then in the they, But we Filiplnosand lndiansare is now. powerof ideasand in the areaof morai And as thisconlnent'sleaders-in' democratic confldentthat our respective Dersuasion... to seeto your responsibility howeverimperfect'giveour so- waitlng,it is BYsfengtheningour own linkages systems, not fade,that the does dream the it that an endudngstability. andpoolingour own talents,capabilities' cieties ap0- dreamls madeflesh,andthatthe dream offersourcounffles Democracy voice we canhavea strong andiesources, of Asia'sPeoples. effectiveframeworkfor develop- liveson forall in shapingthe futureof the Asia-Pacif,c' tentially 50

1997 TheAsianManagetI July-Aug$yseptembeFoctober

MEMORANDUM OF UNDERSTANDING BETWEEN ASIAN INSTITUTE OF MANAGEMENTALUMNIASSOCIATION (INDIA) AND THE DEPARTMENT OF TRADE & INDUSTRY OF THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES AND THE ASIAN INSTITUTE OF MANAGEMENT, PHILIPPINES THIS MEMORANDUM OF UNDERSTANDING(MOU) is executed on March4,199'7at NewDelhi,India,in the augustpresence of His Excellency FidelV. Ramos,President of theRepublicof thePhilippines.

I

BETWEEN l. THE ASIAN INSTITUTE OF MANAGEMENT ALUMNI ASSOCIATION (INDIA) (AIMAAI), a Registered Societyhavingits Officeat Readymoney Terrace,Worli Naka,Mumbai,andrepresented by its President.

1

AND 2. T]HEDEPARTMENT OF TRADE & INDUSTRY bT THN GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, andrepresented by the Secretaryof Trade& Industry.

AND 3. THE ASIAN INSTITUTE OF MANAGEMENT, PHILIPPINBS, a Registered Societyhavingits HeadOfficein Makati City, Philippines,andrepresented by its President.

WHEREAS: a) Asian Instituteof ManagementAlumni Association(lndia) (AIMAA (I)) is desirousof providing assistanceby the way of information, follow-up, etc. for the promotion of trade and investmentbetween the Republic of India and the Republic of the Philippines. b) The Department of Trade & Industry is the mandated agency of the government of the Republic of the Philippines to promotetrade & investments. c) The Asian Institute of Management (AIM), having interest in the entire Asian region, is also desirous of promoting and strengtheningrelations between the Republic of India and the Republic of the Philippines.

NOW THEREFORE IN CONSIDERATION OF THE MUTUAL INTERESTS indicated above, the parties hereby agree that: l. They will fully collaborate and supporl each other to achieve the common objective of strengtheningtrade and industry relations between the Republic of India and the Republic of the Philippines.

2. The AIMAA(I) offers to provide the necessaryassistancefor any visiting trade/industry delegation or Company or Firm in pursuing its interests in India within the domain of law and regulation of the country, and further provide all necessaryand possible information to parties desirousof seekingsuch information. The cost of such servicesextendedby AIMAA(I) shall be paid by the entitiesutilizing such services.

3. Where possible, the AIMAA(I) will provide guidance and help to such trade/industrial delegation or Company or Firm throughits membersor other agencies.

4. AIM hereby agreesto provide the necessarysupport to AIMAA(I) and liaise with such delegationsor companiesdesirousof establishinga relationshipin India/Philippines.

5. The Departmentof Trade & Industry of the Governmentof Philippines hereby acceptsthis offer on behalf of the Government of Philippinesand of Filipino businessentities,and further agreesto assistany Indian businessentity seekingto do businessin the Philippines,and 6. This MOU shall take effect on the date hereto and shall continue until a detailed and elaborate asreement is executed between the parties on the broad terms and conditions set above.

IN WITNESS WHEREOF the parties hereto set their respectivehands this day, the 4th of March, 1997 in New Delhi, India.

tJr***

-l', *--'( -''--

JUZAR KHORAKIWALA

CESARB. BAUTISTA

President Asian Instituteof Management Alumni Association(India)

Secretary Departmentof Trade& Industry Govemmentof Philippines

>%^-^-12-,/ FELIPEB. ALFONSO

President Asian Institute of Management

1997 | TheAsianManager July-AugusVSeptember-October

51

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TheAsianManager 53

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lIs{il|,iluru TheAsian Manager's

PREVIEW

(-,ol1lr)t'ate

( livil \\ tu's Bv Professor vlctor S. Ltmllngan

he corporatebattlesbeing waged bv the Ctrrcia b r o t h e r s a m o n g t h e m s e l v e sf o r c o n t r o l o f I Cnemphilarebut the Iatestin the corporatecivil wars rvhicharc quiteendemicin the lrhilippineshr lact'

to one businessman has told me in iest that he t'anted I'orth build a business empire so big that it I'ould bc fighting for by his children, and so sturdv as to survive their fratricidal warfare.

This phenomenot.t seems to be in contradiction to the Filipinoialucs of closefamily ties (pngmnnnlnlntrttg tttgn (/ltrtrli kapnriri),harmonv (rt'rrlnn.g 3r;/o) ancl discretion nilnlnhnsnngLlumisi ntnLlltt).

We suggest three factors which u'ould force the Filipino buiinessmen to act contrarv to their cultural values and engage in corPorate civil lvars These are: a) the structure of the business cmpire bequeathed bv the founder; b) the absenceof a business regent; and c) the aversion to public listing of the familv corporation The presenceof all these three factors are a sure srgn ol an irnpending civil war' Some businessmen, for understandable business reasons, create a monolithic organizational structurc Under tl.ris structure, ;rll the rnultifarious businesses ot the founder are concentratedin a single company This enableshim to consolidate his managerial and financial resourccs, to be flexible in shifting from one business to anothet and to take advantageof economiesof scale lnto this monolithic structure, the founder then, positions all his children in the expectation that lvith such a single formiclable corPorate vehicle managed by his welleducated and highlv motivated children, his business success will or-rtive him Alas, the children sudder.rlv realize that instead of commanding a business empire' thev have been sentenced to a corporate prison and fated to be thrown into a business arena rt'here thev are forced to fight like gladiators among themselves' tn the firit place, the children realize that the bulk of their inheritance is sunk into this one company lf calamitv befalls the company, thev coulcl lose practically all ln the

second place, thev discover that despite this vast $'ealth attachec] to their name, the sole source of their regular as subsistence is the salary they drau' from the companv declare not does norv elder their father then and their anv cashdividends. While their salarv mav be munificent by our standards,it is picavune relative to their lifcstvle' The reaction of the children to their dilemma goes t h r o u g h s e v e r . t l s t . r F el-n t h e f i r ' t ' l ' l g e , t h e y t h ' r ' e l f t e r this hiqhei titles and multiple positions in the hope that this Unfortunately' package inireases their compensation (usually the. sibling by told is usually tl.rwarteJ by being that draws the highest salary) that as o!\'ners tllev are e r t t i t l e d h , o n l y o n t ! t ' m P e n s a t t o nf r o m u n c e r e t u t i v e position. Next, they seek to milk the comPany by setting un dummy corporations to supPly the companv ot io act as dummy dealers supported by ,"!ri."*"tlir, non-interest bearing, non-collectible loans from the familv f i r m . N e r t , t h ( . v \ t , r r t s e t t t n Bu P \ e P a r a t ec o r P o r a t i o n : _ owned solely by them but using the executive talent ot the familv firm to do project studies, initiate joint ventures' and even run the cOmpanies rt'hile Setting these e\ecu ti\ e\ lo dra \v t heir pav frum the ldmilv corp('r'rtion Finally, they resort to using company facilities' company'resources and even company funds to produce w h e r e t h e i n c ( ) m e g , o e =f o t h e i r p e r s o n a l nroir.i, .n-oonv ond the.'rpetr'e:..trecharged to fht' tamily firnt Tie iepth of the fraternal love of the family members can be gauged by how far the other siblings n'ill allow their enterprising brothers to milk the company ttrm

Illus*atiae of thesecorporatebattlesis the struSSleamongthe heirs of ,Chemph.il S.Garcia*thefian who founier,Dr. Eusebio 'started industryand thePhilippinechemical whosebusinessinterestsrangefrom toexuutiaeair traoel. agribusiness

;tsflE 4ilffiidilffiil

ily corporations strong competitiveedge?

Flexibilitymergedwith "noblesseoblige."

The solution to the above problem may be found in the Filipino housing compound system. The family members should not be forced to live in one corporate house,but shouldbeassignedtheirown corporatehouse in a corporate housing compound. Examples of such Filipino corporate structuresare the restaurant firmsAristocrat,BarrioFiesta,Milky Way,etc.-where branches are owned solely by a family member while purchases and other common servicesare pooled to takeadvantage of economiesof scale.

In a monarchy and in Philippine politics, when the king or patriarch dies, the wife usually acts as rggent to assurethe smooth transfer of the political empire to the children.Moreover,oncethetransiiionperiodis over,she c o n t i n u e .[ o a c t d 5 a d v i s e ra n d c o n i i d a n t et o d l l t h e children. In the businessworld, the assumption of the role ofregent by the wife is rarely dgne.Unlike in politics, conjugal partnershipsare not widespread in ihe Philippinebusiness setting.Business wivesusually know p r a c t i c d l l yn o t h i n g o f t h e i r h u s b a n d s ,b u s i n e s s operations.Thus, when the businesspatriarch dies. the wife is not preparedto performthecrucialroleof interim president or even the ceremonialrole of chairwoman of the board.

It will not also do for the patriarch to designatethe olde.,tor favorite son .]s the regent.For bv this act oI [avoritism.the patriarchsetsthe stagefor tie corporate civil war. The other children, who used to acceptsuch "un[airness" i n t h e i r f a t h e r ' sl i f e t i m e s, u d d e n l yr e a l i z e they har e the votesto negatethis choice.And as there are more disappoinied children than the chosenone, the regentis quickly dethroned.Oncethat happens,therewill be so much corporate intrigue and so many cabals surrounding the corporatethrone as to put a Byzantine Court to shame.

The role of regent cannot also be perforned bv ihe m o s t t r u s t e de \ e c u t i v eo t t h e p a t r i a r c h .A s h i s i o y a l h e n c h m a nh,e h a sn o d o u b te a r n e dt h ei r ea n de n m i t vo f the children. For his part, retiremenlor departurefor anotherfirm ratherthan furtherservicein theia milv firm is thepreferredoption.As onetrustederecutiveconfided, "I am too old a dog to servea new masterespeciallyone who as a boy usedto wet my officecarpet.', If the wife is unable, the chosen son unacceptable, and the trusted e\ecutive unwilling-who then should handle

the transition?Ideally, thefounder should be undertaking the transitionwhile still alive.But then,few men woulJ so openly admit to their mortality and their dispensability whichsuchtransitions imply.Thebestpossibte alrernative seemsto be to entrust the role of regent to a loyal and competentbusinessfriend. Bui such advice must be tempered with the admonition that the friend must be really trustworthy. There have been too many casesof children losing their businessinheritanceto their father,s "trusted" friend.

What ifthe foundermakesno provisionfora transition to power in his businessempire?What can the heirs do?

One solution was that recounted by former philippine CongressmanJoaquin ',Titong,,Roces.When his iather died, he went to his brother and sold his shareat a hefty d i s c o u n t .I n h i s w o r d s , h e , , w i s h e d t o p r e s e r v et h e brotherlylove they bore for eachother',and so would rather depart from a torcedbusinesspartneiship.His brother made the equally noble move of mortgaging all his assetsto raisethe neededfunds to pay him. Forln a family corporation,no outsiderwould considerbuying the shareof one brother as that would leave him in ihe position of a minority non-family stockholder,just a notch above the loyal executive.Thus, the only wav a familv firm canraisemoneyis through debt or reiainedearnings.

This is one of the reasonswhy famiiy firms are highly leveraged,i.e.,highly indebted.

The sacrificeof "Titong" Rocesand the risk{aking by _ his brother would not be necessary, if the familv firm had beenpublicly listed.In addition t;the tax beneiits,public listing convertsa forcedpartnershipof family members rnto a consciouscorporate union. Moreover, it allows outsidersto confidentlybuy into the company.Thus, when Don AndresSoriano,Sr, lresident of San Vieuel Corporationdied, his empire was divided betweenhis two sons:Andres,Jr,whobecamePresidentofSanMieuel Corporation and JoseMaria who becamepresident of Atlas Mining Corporation. Later on, when fose Maria decidedto go on his own and move to the United States, he was able to liquidate his inheritance in the form of sharesin the publicly listed Philippine corporationswith minimal loss and disruDtion.

It is this flexibility oi the public corporation merged with "noblesse oblige,"or senseof responsibility inherent in the family corporation,that givessuchtirms a strong competitiveedge.As pointedout in a study cited by the J BritishBroadcasting Corpordtion,publiclv-listedfamily corporations have consistently outperformed publicly- |. listed corporationsmanagedby professionals.

Professor VictorS. Limlinganis theLurloFounl.ation prot'essor of Business Matlagement.

Lmatl : < cict otsl@a i n.edu.ph>

t

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The Law CanWork for the Environrneotthe IndianExperience Enforcement protection of environmental a basicrightof eachcitizen:activismls key pro-environment for pro-people, iudiciatirocess. pollutionandenvi Evenitsmostsaoedriver,theGanges,has Deadlypesticides oday'smassive that.havebeen ronmentaldegradation endanger not beenspared. venerated by peopleof bannedin the unitedstatesandEurope humankind.Our slobehasbeen yorewhoofferedmilk, incense,andflow- areexportedto India,wheretheycontamibattered by droughts, desertification, acid ersassymbolsof respect,the Ganges is natethe s011, water,andultimately, food. rain,thedepletion ofthe ozonelayer,and murkedbyrefuse, rubbish, andpoisonous Toxicdumpshaveaddedto the contamiclimaticchanges. pollutedair, effluents Webreathe that arethrowninto her sacred nation,posingmajorhealthhazards to all drink contaminated water,and eat junk waters. formsof life. foodladenwith pesticides, pleservatives, FromGangotrito Calcutta,over Due to ecological destruction and andcarcinogens all in thenameof de- 5,000 mediumand largeindustriesdis- urbanization, groundwater resources velopment andmodernization. gorgethousands of tonsof toxic effluents havedeclined almost10times.Withover Environmental degradation hasas- intotheGanges.

Morethan300townships 1.7 milliontubewellsdug everyyear, sumeda differentandanevenmoredan- in the Ganges Basindumpthousands of the warertableis fallingin manyareas. gerousdimension for developing nations. tonsof sewage intothisarterialriver.Many At present, thereare231 "dark"blocks, Thinkingthat rapidgowth will eventu- of the river'sstretches havebecome 12 Talukas (districts),and six mandals ally trickle down and eradicatepoverty, dead-the waterisunfitfordrinking,bath- (areas) showingcriticallevelsof groundthe ThirdWorldhasblindlyadoptedrhe ing, washing,andirrigation.Similarly,all waterdepletion.

Westerndevelopment model-capital- otherrivers,lakes,and waterbodiesin In ancient rimes,rainfall usedto be and resource"intensive industrialization; Indiahavebecomepo11uted. storedin tanksandponds.However, but urbanization; mechanization; and the S o i l e r o s i o ni s a n o t h e rm a i o r thispractice wasabandoned in theeagerchemicalization of a$iculture. human-induced environmental problem. nessof the plannersto mechanizeand Development thatdoesnot respect Worldwide,an estimated 20 billiontons modernlze.

As a result,storage hasbeen natureexactsa heavyprice.It rebounds of topsoilis eitherwashedawayor blown reducedto barely10%by now. on humankindand resultsin exhausted off croplandseveryyear.More than resources, collapsed ecosystems, the ex- 3 biliionhectares areexposed to the risk Vehicular Pollution tinctionof variousanimalandplantspe- of erosion.Thebanefulpracticeof using In India,thenumberofvehicles has cies,andthreatsto people's lives,health, the soilasa dustbinfor all kindsof waste, climbedsteepiy.

In 1990,thecountryhad andlivelihood.

Socialand moralvalues are includinghazardous andtoxicwaste,has 21.35 millionvehiclesagainsta mere sacrificed in the racefor materialism, for- beenspreading fast.

300,000in 1951-an average annualingettingthatthepurposes of deveiopment shouldservethepeople's welfare.Instead lrvon ts RnpDLyDETERJoRATTNG tNToA vASTwAsrEt-AruD: of eradicating poverty,the shortsighted . million and150miilion hectares of tandhaveatready been goalsofindustriaiization andurbanization ff9fi?L100 ' Deforestation areerodingtheplanet's supportsystems. causesabout1.smillionhectaresmoreto turnbanenevervvear. . Some8.53millionhectareshavebecornewaterbsoed. ' 3"58millionhectaressufiarfromalkatinity]-S.eO rnillionhestare$, Environmental Problems from milf in mostpartsof India,almostallthe riversand lakeshavebecomepolluted.

';-,ffi i;,ffiff.1i.'.l;',il9.fi *lTiflJJ,#iim:versra #;:J,ruIfi TheAsianManagerlJuly-August/September-October1997

59

piesof StatePolicyunderthe Constitution rightsin pubiic to enforceenvironmental to the fundamental as Held cases. interest directive the protection, country, the of governance in thefieldof environmental in legalactivism a pioneer considered acnumerous won has alsoapplyto the respective principles Mehta chander Mahesh activist environmental and lndianlawver and legislative, iudiciissues' tionsof executive, Courtonantinature Supreme India's before legalpetitions ,- :,^h4 ...1^ne whenr.^ in thiscontextthatthe 1983' is in It crusade branches. ary conservation plunqed his environmental into Mehta the ambit masterplece' Supreme Courthasexpanded a camp;gnto savetheTajMahal,lndia'sprizedarchitectural launched to a safe right 'whose medlcal the and include to scien_tific of Article21 documentary hadtumeddarkandflaky.Gathering marble environme making agalnst Court andhealthyenvironment, fileda caseintheSupreme Mehta ofpollution, ontheeffects evidence a enforcement mental Protection deterioratton. totheTajMahal's thatcontributed industries 'oollutinq in: resulted decisions iusticiableright. inirteenvearslater,thehighcourt's powerplantand500factories; . Thecloiureofa coal_fired thermal 1u'4uu whichencompasses Environmental Legislation . Acoaland theTajMahalTrepezium, cokebanwithin effortsin environIndianlegislative monuments; historical other 255 and kilometers souare been mostly have residents' protection ofover10,000 mental tothehomes . Theprovision gasconnections ofcooking international generators; on bycontemporary of diesel spurred theusage to prevent powersupply andof unintenupted Stockholm the by inspired developments. .Theconstructionofahospitaltoaccommodate-andtreatres.?iraloy.flm:lE; and the Water{Prevention Declaration, heavytrafficawayfromtheTajMahal's . Theerection of a bypassto redirect PolAit the and Act Controlof Pollution) 1974 passed in theTrapezium;. lution ControlAct were withing vehictes gasotine .ffilh ofunteaded bytransport andother refinery and 1981.The Centraland StatePolluatthepekoleum devices . Theinstallation control of pollution and wereestablished tionControlBoards, and factories; against act powers to with wereinvested theTajMahal' . Thepropagation around of treeplanting pollutingindustries.

TheBhoPalffagedyled to the PassAct of Protection thevictims ing of the Environment of 10.6%.Theglobalrateis iusta systemitself,whichcandeter crease govemment thecentral iniusticeto seeklegal 1986.Thisenables of environmental littlemorethanhalf at5.9%. polin controlling measures designate to experiment recent a However, for remedy. citiesaccount Fourmeffopolitan protec- lution and protectingthe environment' 35%of the totalcarpopulation'a figure usingthelaw for environmental evento theextentof closingdowndelinreasonbe proven to to doubleby the year tion andiusticehas that is expected quentindustries.

2000.At the turn of the century,diesel abiysuccessful. variousitemsof legislation' Despite to double; arelikewisepredicted vehicles pollutioncontrol effective no though, populations' Constitutional Provisions andfvvo-andthree-wheeler hasyetbeenputin place'This contains mechanism The IndianConstitution to jump fourfoldand reach36 million iackadaisi on th'efunda- is mainlydueto government's the followingprovisions units. protecenvironmental towards attltude cal redirectly in vehiclesmaY mentalrightsanddutiesthat TheraPidincrease tion.

Protection: be takenby someas a signof progress' lateto environmental "No Thecentralandstategovernments shall Underfuticle21.

Person pollution the enormous But considering by the dubiousdi liberty' of India,confounded of hislifeor personal fromvehicularffafflcandthecon- bedeprived resulting "economyversus have ecology"' established lemmaof to procedure and exceptaccordlng to theenvironment damage sequent polluters.Erring industrial on soft been re-evaluationby law." health,a serious to people's "TheStatesha1l with mere havesofar escaped regard companies Article47. necessary. becomes of priorities treatment effluent install io warnings and the raisingof the levelof nutrltion devices' confio1 pollution air plants and people and of livingof its the standard LegalRemedies continue laws environmâ&#x201A;Źntal Meanwhile, of thepublichealth." a Periodin his- theimprovement Thecountryreached "The Stateshall to be violated;in fact' manyindustries 4B-A. Article prudent more torywhenit mustexercise propersafetyandpoltheen- havenotyetadopted to protectandimprove consequencesendeavor carefor the environmental against Helpless the forests lutioncoqtrolmeasures. envi- vironmentand to safeguard In thegivenscenario, of itsactions. political-bureaucratic-induspowerful the ronmentalprotectionlawsand their en- andwildlife of the country." "lt shal1be the in most agencies trialnexus,enforcement Article51 A [g).

There r01es. significant assume forcement enviperpetrate to opted have instances protect limitatlons duty of everycitizenof Indiato blocks:the1aw's arestumbling crimes' ronmental incomplexi' andimprovethenaturalenvironment withthewiderangrng in dealing lakes,rivers,andwildlife issues; cludingforests, theenvironmental tiesunderlying for livingcrea- Judicial Efforts compassion to have and andpolitlcaldynamics thesocioeconomlc " The Indian SuPremeCourt has canuseto turn the tules. rhatvestedinterests oflawsand thestrictenforcement stressed the IndianSuPreme Furthermore, and 1awinto aninstrumentof domination; people's of savior the become thus has structureof the legal Courthasreliedon the DirectivePrincithe veryformalistic 'GreenWarriors'SaveWonderof theWorld - How

60

lJuly-August'/SeptemberoctoberT99T TheAsianManager

rights.Throughits positiveinterpretation ronmenta_l damage.

Recently, theSupreme ciesthathavedisappeared frommanyparts of fundamentalrights,the Court has Courthasusedthe "polluterpaysprinci- of theworld dueto manmade ecological obligedthestateto executeits dutiesun- ple" to recoverthe costof ecological res- disasters. der the DirectivePrinciples.

Thehighest torationfrom offendingindustries.The With the unprecedented and retribunal'sstancehasinspiredstateagen- tribunalhasalsogiveneffectto interna- markabledevelopments in india'sdevelciesto enforceenvironmental rights. tionaldoctrines,suchasthe "publictrust opmental jurisprudence, the futureof Unfortunately, a majorityof Indian docffine"and "precautionary principie," environmental litigationis quitebright.Locitizensareeitherilliterateandthusigno- to preventenvironmental abuseanddeg- cal environmentalgroupsall over the rant of their rights,or too pool to go to radation.The Supreme Courthasdevel- countryareenteringinto legalbattleson the courts.Whileaccess to iuSticeis the opedenvironmental to the natureissues,havingrcalizedthe potenlurisprudence foremosthumanright,theSupreme Court extentthatthecommoncittzennowfeels tial of thelaw'sapplication in thisfie1d. hasevolvedwaysand meansto takeius- more assuredof gettingenvironmental However, neitherthecourtsnor the tice to the victims.The Court has ex- justicethroughthe courts. government alonecanprotectthe envi pandedthescopeof Article21 to include ronment.Theremustbe a stronggrasst h e r i g h t t o a s a f e a n d h e a l t h y BalancingRights and Duties rootsmovement andpeoplemustbecome environmentin the right to life, and A numberof otherSupreme Court awareof their environmental rightsand $anted locusstandito a crusadingper- andhighcourtiudgements havesimilarly duties.In thissense, extra-judicial efforts sonor organization thatactsin publicin- madesignificantcontributionsto the en- in environmental awareness andactivism tetest. vironment's cause.Reformis stillpossible will be key factorsin crystallizinga proOrdinadly,it is very difficult for a for most of India'sdysfunctional human peopleandpro-environment tudicialproc citizento go to courtfor environmental institutions,and injuriesstemming C S S . reliefunderexistinglaws.Butundercon- therefromcan be set right. Yet,it is not Thearticle was takent'rom Mr. Mehta;spresenlntion stitutionalprovisions, it becamepossible possible to restorea pollutedriveror a deat the Ramon Magsaysay Awardees' Forum in for environmentalists and voluntaryor- nudedmduntainto its pristineglory or Manila on September2, 1997, where he receiued ganizations to movethecourtsforiudicial bring backthe rain forestsand rare spe- the RM Award Public Seruice. for relief.Theviolationof futicle21 meritsjudicialintervention, whlle tuticles 32 and226 providerhe meansto judicialrelief. to Uphddof Environmental In the environmental context, judicialrelief throughwrit sa SMast ftfunderofitscitizens' jurisdiction fundamental riohts. hasencompassed not environfiBnt. lt has enacted sveral landmark decisl'rons onlyinjunctivemeasures, suchas tsc{F,asblknrs: closingpollutinginriustries,but 51-A(g),thshighcourtordered its alsoremedialmeasures 'Dehadrun thatpromines. vide compensation to victimsof and191o$rerindustries inUttarPradesh, ard Eilter.Thecourtalsoimposed environmental the damage.Therenmrtrof-devices, andhasbeenmonitoring fore,the Supreme Courthasnot hesitatedin developingand â&#x201A;ŹfrurFntumsdfiected gasdine b supdyurileaded moldingthelaw in thebestintero he entireIndian continent.

Catalvtic converters estsof thepublic. inpiv# automobiles, gwernmeni vehicles, and As JusticeP.N.Bhagwati hassaid:"A Judgeis not a miEntralandstategovemments wereenioined mic. The$eatnessof the Bench r in$cluols,broadcast media, filmand-video. liesin itscreativity...When a law envirffirnental studies arcalsorequired in comesbeforea Judge,he hasto ildthinfte TajTnapezium wâ&#x201A;Źrebanned, investit with meaningandconwith ffid-H!ffifvs b fuling irdustrbs, suchasrights toworkers' ryryHonqqgffi ilssNFbll@ tent and,in the process of interpretation,he makesthe law. It is therefore, to my mind,essential that a Judgebe in tune with the socialneedsand requirement..."

In extremecases,the SupremeCourthasevenimposed "absoiute liability"uponhazardousindustriesasregardsthepayment of compensation for envi';-,.!+iilrii rr-..rir.. ' i..:r'::i.:: ::,...:. 1 .

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TheAsianManagerlJuly-August,/September-October 1997

6l

The One-MinuteGandhi:

Thisis a nonverbal animation cae thatrurs automatically on powerpoint pleae usirgpicturcs, sounds, andmusic. visttthe AIM website to viewtheentirecae.Reprcduced hereareonly theslidesof pictures sourced throughtheIntemet,withusefut tntemet sites.

Tools A Strateglst'si

By Dr Patricia L. lontoc

Comment: Near Death: The Strateg;yis the Strategist ByIB Ramos,PhtlipptneAir Force

rcr rait The One-Minute Gandhi: A Strategist'sTools ,,.,."..,...1".

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The AsianManagerlJuly'August/SeptemberOctober 1997

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AfterstudyingSunTzu,Machiavelli,porte4andAustin,andthen,beingexposed to Gan. dhi in strategicmanagement classthroughthis case,my first reflectionis this: Can we really separate the strategist from his strategy?

The caseunfoldedbeforemy eyeslike a near-death experience.

It wasiikeseeingbitsand piecesof my life,too..Where do I getthetoolsthematerial-to suategize in themilitaryaswell as in the cotporateworld?My education,my contacts, mychosen"battlefuonts"whereI demonstratethe efficacyof my strategy.

But Gandhi takesit further.He bringsin his lifestyle-nay, hisvalues.Hisconcernfor futuregenerationsasthatpowerfulsnapshot when at the endof it all,he letshimselfbeled by a childby the coastline.

Thestrategicmanagement ftameworkhe presents is the "model"as"exemplar."

Thetest of the superiorstrategyis not so much its sustainability but whatit doesto a person.Soall thesegenericstrategies we learn,we have to pushfurtherto askwhat theydo to our values, to our visionof a humanbeing.

Recalling the historyof management; we sawhow time and motionstudieshavealmost dehumanized manin theassemblyline.

Costeffective,maybe,but havewe tappedall that we canof thehumanspirit?I think thisis thegreat. est lessonof Gandhiasstrategislyou haveto subjectstrategyto a valuestest,to whetheror not it celebrates and sustainshumanizingvaluesor not.

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Comment: HRx StrategicHuman Resources Management BySannyLeviste,MDM '90, Assistant Dean, La Salle-Ltpa Whatarethestrategist's tools?Humanresources.

Thisis,to my mind,whatclearlycomes out of thiscase.

From the first part where We seehow Gandhitried to disciplinehimselfto what I see asthe secondpartof the casewherehe triedto mentorothersto learnwith him his discipline of "soul-force," Strategyis a lifelongjourney.To position a companyor a countryat anygiventime, the key is to empowerpeople.This can be done in variousways.Gandhidefinedseverallevels of his constituency: primaryand secondary actors.

The primaryactorswere thoseof influenceandleadership-andyou canseehow he relatedwith them:neveradversarial.

Hewanted to sharehis visionwith them so that theymay be enlightened andtakeappropriate steps.

The "secondary" actorswere the mass support-the sourceof a "showof force."In the sameway,he mentoredthem.

I don't think he ever had any clearanswersto crisissituations.

Buthe knewthat,TOGETHERwith primaryand secondaryactors, they can all find the answers-theycanall respondto challenges in the environment.

Thisis a dimensionin strategicpianningthat we tend to forget.Weshouldinvolveimplementors from thebeginning.

Theyknowbestthekindsofstrategiesfor which they are willing to put them. selveson the line.

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Associate DeanLontocteaches publicadministration,and internationalrelationsandIT in MBM, CDM andMDp. Email:<plontoc@aim.edu.ph> July-August/SeptembeFOctober1997 | TheAsianManager

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Industrial in SEA EntrepreneurshiP SoutheastAsia hasno high-techIndustry andwhateverexistsls ownedbyforeigners

Thebigshift ManYhavethemistakennotionthat oroductionhadbeendifficult.

Asia(SEA)indusuialenJ n Southeast began.Why industrializaflon when iame is not asstrongasen- Koreahas been a developednation for I trepreneurship do the How successful? more sometime.Not so.Koreahadverylow in- wasKorea in theservicesectorI trepreneurship todaY? comPare 1960s,Iowereven two countries finance,trade,real estatedevelopment' comesin the 1950sand Bangkokis dottedwith manYimonly in the late It was Thailand's. than and construction-whichis far moredypressive shoppingcentersand restau1960sthatKoreacaughtupwith Thailand. namicandcomPetitive. in industriali rants.One can changeforeigncurrency effortsin theregion Thereason:greatersuccess Industrialization evenat night. Thailandhas all kinds of startedwith the productionof drinks' ce- zation. industry Whenthe two countries'economic serviceindustries.The hotel ment, consumerproducts,etc. SubseThani good: Dusit very is example, industialization activitywasstill mostlyagriculttual,Thai for quently,import-substitution only the and hotel modern becauseits topi- was the ftrst ledto a competitiveposturewhich success- land had an advantage In 1972. in Thailand in goodfor agriculturalpro- tall building fullypusheditslaborintensiveproductsonto cal climatewas many have not does Thailandhad vast' contrast,Korea the internationalmarketplace.However,duction.In addition, one Theonlynoticeable centers. with Korea'stem' shopping But land. thereis no high-techindustryin SEA;if unexplored Store, Department Lotte perateclimate,very coldwinters,andto- in Seoulis the thereis anY,it is foreign'owned.

This is in sothat lim- which is not very impressive.

What then are the imPlicationsof pography(verymountainous' impres' has which agricultural contmstto Thailand, is itedlandisleftfor cultivation), this?Whenindustrialentrepreneurship lagsand incomes weak,industrialization Per caPita GNP Korean suffer.

GNP per caPita

Ttrai

ContrastingKorea and Thailand the incomedifFigure1 compares Thailandand Korea between ferences product gross national per capita i.e.,the per capita by divided was Korea of [GNP) one below quotient of A Thailand.

GNPof income, highet a had Thailand that means whilea quotientaboveonemeansthatKorea had a higherincome.At more than per capitaincome Korea's US$10,000, asThailand'sat times four todayis about

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TheAsianManagerlJuly-August/SeptemberOctobet1997

1- Per

196() CaPita

r99() 1980 19^/o GNP: Korea vs- Thailand

siveshopping centersandall kindsof servProtonSagawasalsoa jointventure causeits majorexportis semiconductors. iceindustries. between Malaysia andMitsubishi Motors, But the only thing Malaysiadoesin this But when it comesto industry,the with the formerowninga controllingin- industryis assemble semiconductors.

The only Thaiindustrialgoodsyou hearabout terest.After 10years,Malaysiastiilhadto value-added is not very high. Malaysia are textilesand import50% ofthe wantsto gointo waferfabricatiorywhere garments.It is parts,especially the value-added is high,but it cannotdo Noting Japan's not unlike the from Japan.Pro- so because it lacksthe neededscientiflc Philippines ton Sagawasnot manpower. strategic domiwhich may also well known outSteelindustryAnotherexampleis havesomehigh side Malaysia, steelwhich is not asdifficultto produce nance, Korea devalue-added which couldnot as automobiles and semiconductors. products but cided to concenexportthecarbe- Southeast Asiancountries havesteelcommostly textiles causethe skill panies:Indonesia-Krakatau Steel;Thaitrate instead on and otherlaborbuildingwasvery land-Sirivijaya;Mdaysia-Perwafa;and lntensiveprodslow Malaysian the Philippines-National Steel.Noneof countries with level ucts. Korean Prime Minister thesecompanies are doingwe11,except productsare anMahathirblamed perhaps playing fields. in thedomesticmarket.Krakatau other story.The the Japanese for Steelclaimsto havean exportcapacity, H y u n d a i , limitins thpir but oniyif it did not haveto deductthe Samsung, Kia,andDaewoobrandsarefast technologytransfer. moneyinvestedin machinery.

Theprice becoming household namesin theregion.

But technological transferis not a washigherthanthevariable costif it did TheKoreanindustryhasa verydy- passivewaitinggame.Thetrickisto gofor not attemptto recoupthe investment in namicpresence asa Southeast Asianin- whatyouw.antaggressively.

Stealthetechnol- the machinery.Thus, the export of vestor.

NotingJapan's strategic dominance ogy,but getthetechnology andtheskillsyou Krakatau steelwasnot sustainable. in the region,Koreadecidedto concen- need.Southeast Asiansdo that to someexThailanddoesnot havean intetrateinsteadon countrieswith levelplay- tent,butnotin theautoindusny. gratedsteelmill, but Indonesia andMaingfields.In \tetnam,forinstance, Korean TextileIndustryIn 1960,therewas laysiado. Althoughthe Thai steelmill companies are betterknown thanJapa- notmuchofa Thaitextileindustryto speak startedwith scrapiron, it is now quite nesecompanies. of,sotheJapanese companies wereasked advanced.

Yet the Thai steelindustryis Thailandand Koreahavedlfferent to investin Thailand.

ManyJapanese tex- askingfor all kindsof protection because stlengths.The formeris strongerin the tile companies obligedsincethey were it cannotevencompetein the domestic servicesector,while the lattercaruies facingdifficultiesat homedue to rising market.Thailand doesnothaveveryhigh weightin industry.In Japan,theonlyThai wagesobliged.TheJapanese were we1- tariff barriers,and Thai steelcompanies goodsoneseesaretextiles.

As for Korean comein Thailandin the 1960s,but not aresayingthattheywouldgobankruptin companies, thereis POSCO(PohanSteel forlong.Sincethetextileindustrydid not a few yearsunlessthe governmentdoes Co.),which hassuccessfully penefated requiretoomuchtechnology, theThaisfelt something for them. the Japanese steelmarket.SomeKorean that they could alreadytake over from Again,the Thai situationpalesin companies now advertise onJapanese tel- Japanese.

TheJapanese leftwith somebit- comparison to thatof Korea,whichsetup evision.Forexample, Samsung haspitted terness. '" the itselfagainstSanyoandSharpon thetube. l::9o This shows that technology The Korean Model for Southeast canbeabsorbed afAsia ter goingfor it agSo,why can'tSoutheastAsian coun- gressively andcona passive waiting ;";;;. \iow. triesfollowKorea's example? sistently.This is Automobileindustty.A goodcom- where Koreaexparisonis ProtonSaga,Malaysia's national cels.In the autocarproject,andHyundaiof Korea.In 1975, mobiie industry, Hyundaiwantedto build a nationalcar. thetechnology and want aggre$Sively. iirppon Steei.

Sinceit did not haveenoughtechnology, skillsinvolvedare Hyundaitied up with Japan'sMitsubishi moredifficultthan Motors.By 1985,Koreawasproducing al- thosein thetextileindustry.

Thus,Korea's be ascompetitive asNipponsteel. most100%of theneeded autoparts.Thus, success depended on theirgreaterdeterMeanwhile,noneof thecompanies in 10 years,Hyundaiphased outits techni minationto acqulrethe necessary skills in SEAcanexportsteelto Japan.Steelis calagreement with MitsubishiMotorsand andtechnologies. not very difficultto produce.Al1onehas started exportingca$ to Canada, theUnited semiconductor IndusUy. Dr. to do is to buy steelequipment, put raw States,and othercountries.Hyundalhad Mahathirtakespridein thebeliefthatMa- materials in oneend,andtheproductcomes become internationally competitive. laysiais an advanced industrialnationbe- out the other.It maybe harderto succeed _ _ _ _ ^ ^_ " ' b

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July-August,/September-October lg97 | TheAsianManaper

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': technoiogY butit isnota terri- a fewskills.On the in steelthanin lextiles, rapidlY. changes ln SEA, it is hard to bly hightech industry.However,despite otherhand,forthe technolToday's maSoutheast steelindustrY, abundantmineralresources' be ob' may ogy :: technical upgrade arenot yet interna- chines,raw mate' Asiansteelcompanies soletenextYear, r i a l s ,a n d s k i l l s tionallycomPetitive' because capaeity so that constant be- a r e a m u s t .l n e About 10 Yea$ago'Indonesia upgrading is in steelproduction problemin SEAis not rrnrch atterrtioll camemoreaggressive necessary-a which that therearenot thinplates, to produce anddecided capacity that hard given to is andcars' enoughskills. appliances areusedin household Malaysiadoes Textile What lt had beenproducingbeforewas teclrand sciefiee nothave.Thisis plants can have .. materials. steelfor construction MalaYsia why was service agreeTroublestartedwhereprecision go into cannot leaves mentswith engirequired.A thin plate'sthickness fabricawafer little roomfor error.For example,if the n e e r i n gc o m p a to startop- tion andR&D.If it wantsto goupstream' shouldbeabout0.2millimeters' niesfor machinerepair.Thus, thickness companies onedoesnot needskillsasIong it asksforeignsemiconductor makingit 0.3 millimetersmeansa 50% erations, in. come to are on Thus,onehasto beverycare- as machinesand raw materials difference. engian of services the However, hand. of steelequipful aboutthe maintenance The DifficultY in UPgrading exPensive. be can company neering ment.Whenthe thin plateenterprise' Whenit comesto the automobile TechnicalCaPabilitY which startedout asa privateendeavor, In SEA,not muchattentionis being importantthan in tumedoutto beunviable,thegovernment industry skill is more eduhardscienceandtechnology given to skillsare emtookover.Now it is partof KrakatauSteel' steelproduction.Different are sciences sociai and Humanities cation. industriaiiza- ployedin carmaking.Theautocompany In the 1960s,Korea's comof a lot on based are that By the 7970s, (e.g.,Toyota)only performsassembly subiects tion was labor-intensive. andbusiness asareeconomics ship- work,asa bigbulkgoesto partssuppliers' monsense, petrochemicals, theywereintostee1, difficultto too not is it so But unlessthe partsare of goodqualify adminisffation, building,andto someextent'cats. gap in the The areas. these in up carwill not catch Shipbuitdingindustry.lnSEA,the and the pricesareright, the that ls not sciences social and Thus,in theautoindustry,assembling humanities companies sel1. shipbuilding oniycompetitive examFor nonexistent. almost is al- big, it andKeppel'In islessimportantthanpartsproduction, Sembawan areSingapore's ls ple.the AsianInstituteof Management good manufacture to ability the of though andimportance spiteof the necessity East the in school MBA best probably the vari Partsrequires ships,one does Asia.Japandoesnothavea goodbusiness i skills. ous notfindinternaThis Prob- school(maybeKeiois the only one,but I tionallycomPetThe Japanese say Ma- don'treallyknow how it is doing).Maybe lemconfronts tiveshipbuilders "if you sit on a laysia,thus inhib- AIM'sonlycompetitoris theNationalUni in the region. iting the Proton versityof SingaPore. is Shipbuilding andtechWhenit comesto science three for rock Sagafiom being more difflcult picture' different entirely an i n t e r n a t i o n a l l Y nology,it is thansteelor Petyears, eventually it lookfor will if multinationals competitive.In Forexample, berochemicals they countries, in developing Korea,HYundai engineers becomes vualm." c a u s e ,a s i n Chi Although SEA. not tells subcontrac- wii go to China, buildinghouses' developed, that not are That is, if You do torswhatPartsare neseindustries it invoivesa lot andengineern e e d e df o r t h e theyhaveverygoodscience of skillsthatdefY go to Kosomething Persistalso will next stageof Pro- ing faculties.Investors mechanizatlon. almaYbe and JaPan, ductionor for the rei and Taiwan, ently cnough, then A pootly built expensive. next car. Korean thoughJapanis too ship would be faculThe scienceandengineering aGGOmyou GAn s u b c o n tat ct o r s wreckedat sea least at standard, draw ties in SEAare below canprobablY by a typhoon. knowlThe Korea. in up designsand comparedto those hasto be andtechnology producePartsac- edgein science Inadequate stepby time, over systematically c o r d i n g t o d e - acquired Skills and signs.But in Malaysia,it is very hard to step.

TechnicalKnow-How: Barriers to a JaPaIn a seminarin Indonesia' that candrawup defind subcontractors Further Indusffialization very work must one of the auto neseoncesaidthat In industrial Youneed sigpsaccordingto the needs Production, provquoted a He hardto acquireskills. andparts,engi- asemblen. raw materials machines, erb:"lf there'sa will, thereis a way"'He engineering For semiconductors, 'lfyou sit on a "The neeringknowhow,andskills.Someindussay, Japanese are added, caPabilities R&D and know-how need manufacturing, textile uies,suchas it becomes semiconductor rockfor threeyears,eventually because especially only raw materials,parts,machines,and needed

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TheAsianManagerlJuly'August'/SeptemberOctobet1997

warm.'Thatis, if you do something persistentlyenough,thenyoucanaccomplish it. Any difficultycanbe overcomeif you persist."Then,an Indonesian participant said,"ln ourcountly,we don'tsitonsomething for threeyears.If we sit on it for fwo weeks,thatis enough."

that a decadeago,therewasno interest goneup in Thailandand only unskilled in physicsasa majorfieldof studysavefor laboris available.

Foreigncompanies are studentswho wantedto takephysicsasa not investing muchin Thailandanymore. prerequisite for computerscienceand Theygoto othercountries wherelaboris otherdisciplines.

In orderto increase the cheaper.

Thus,in 1996,Thailandhadalnumberof physicsmaiots,the university mostzero exportgrowth.Its economic changedthe intakesystemandthe phys- growthwasstill6%,butthe countrywili icsdepartment got20 students.

Afterthe havea moredifficulttime thisyear.

International Competition in Skills secondyearallstudents disappeared.

They By depending on foreigncompaTraining and ScienceEducation eitherwent to otherfacultiesor theytook niesand technology without upgrading The Thai-Korean comparison is entrance examsin otheruniversities.

The skillsandS&Tcapabiiity, onecanprogress againa goodcasein point.Expertise in chairmancomplained thatthedepartment only up to a certainpolnt.Beyondthat historyandmanagement cannotbe com- hasbecomea very goodtutorialinstitu- point,growthgreatlyslowsdown.If a per pared,but skillsandscientiflcknowledge tion for otherfaculties anduniversities. capitaincomeof US$2,000.US$4,000 is canbe.Thisistheareawhereintemational Thereis an international skillcom- satisfactory thebeststrategy ls to openup comparisons makea difference. petitionin whichmanycountries havepar- the country.The Phillppines cando that The traditionalknowledgebasein ticipatedsincethe 1950s.KoreaandTai to someextentbecause of its unemscience (S&T)is weakin wan havebeenparticipatingin this Skill ploirment,poverryand other economic andtechnology SEA.The S&Tbasehad to be built from Olympicsfor a longtime.In the 1960s, problems. almostzero. Knowledge-building went japandidverywell;Koreahadiuststarted Openingup a countryto foreigninsmoothlyintheareas to compete. vestmentis oneway to development.

To where a product For the past sustaingrowth,onewill haveto upgrade couldnot be substi2 0 y e a r s , skillsandbuild up technological capabil tutedfor technology. though,Ko- ily. Thatis the difficultpart.

If a countryneeded rea has been Anotherquickway to progress is medicaltechnology, winningmost to import technicaland scientificmanforexample, mu$t be put in importof themedals. power.We havemanyskilledworkersin ing (American or EuP a r a n t l r r Japanwho areunderemployed or unemropean doctors) even Thai- p l o y e db e c a u sm e a n yc o m p a n i easr e wouldbetooexpenland, Malay- movingabroad.Theproductionof sma11 more than l,(XX, sive,so it buildsup sia,andIndo- and medlumcompanies is goingdown, medicalscience. sldff standards tests.

But nesiahavebe- and theyhavehad to 1ayoff workersbein physics, importing gunto partici cause parentcompanles placed insufficient Japan has 2,(XXl. a physicist isnotnecpate. orders. essaryasknowledge A bo u t Metnamhasmanygoodscientists in physicsisincorpoa c o u p l eo f who studiedin EasternEuropean counratedinto machineswhich can be im- yearsago,Newsweekreportedthat, out tries,suchas Czechoslovakia, EastGerported.Thisis unfortunatebecause phys- of the41 countries thathadparticipated, many,andRussia.

Theyhavemoremathicsis themostimportantdisciplinein elec- the top fivein the mathandsciencecom- ematicians thanThailandwhich is thinktronicsand other high-techindusfies. petitionwereSingapore, Czechoslovakia,ing of importingCzechs, Eastern EuropeSince,physicshashadthe lowestpriority Japan, SouthKorea,andBulgaria.

Thailand ans,andVietnamese asscience teachers. in SEA,the regionis weakin physics. rankedabovethe UnitedStates.The US A systemfor upgrading skilismust Thailandis weakin science.

How- wasin themiddle,occupying No.20 spot beputin place.Koreahasmorethan1,000 ever,it is strongerin medicine,biology, or sooutof the 41 countries. ski11 standards tests; Japanhas2,000.The andchemistrybecause thesewereimportestsaregoodbecause afterpassing one tant to the medicalfleld and to agricul- Importing Foreign Skilled Workers level,one movesto the next, better-pay ture.Southeast Asiancountries haveto set and Scientists:A TemporaryMeasure ing levelby upgrading skillsandtheoretitheirprioritiesandbuildup knowledgein The questionnow is what to do. cal knowledge.Ski1lsimprovement also highpriorityareas.

Southeast Asiahastwo optionsif it wants raisesone'schances for promotion.This In 1970,whenThailandandKorea to forgeahead:(1) Forgetnationalism and is how a Japanese company operates. did not havemuchdifference in income, rely on foreignflrms and technology;or Perhaps, thereason Southeast Asian Koreahad200physicists with PhDs,while (2) importtechnicaland scientificman- countries arenotinclinedto particiDate in Thailandhadonlynvo.Now Thailandhas power. theskillscompetition isthattheyareafiaid 100 physicists with PhDs,but manyare LetAmericans andJapanese come, to causea nationaldlsgrace if theydo not involvedin administration and teaching if acqulringtechnological know-howis so do well.Froma differentperspective, the anddo verylittle research. difficult.Thisis whatThailanddid andit SkillsOlympics isa goodwayof determinThechairmanof thephysicsdepart- experienced very high gtowth. Now the ing the competency in strategic skills ment in Chulalongkorn Universitysaid countryis payingthe price.Wageshave whichtheregionsorelyneeds. rr

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July-August/September-Octobet1997 | TheAsianManaper

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ROUNDTABLE DISCUSSION thatis fine.Butyou basedon theieepney, caalsohaveto buildgreatertechnological pabillty.I fully agreewith you that the technology, indigenous represents Dr.Yoshihara:LetmesaYa couPle jeepney Prof. O.uintin Tan [EntrePreversatility. proud that of you be can and the in more time neurshipJ:I amnot intimldatedby what of thingsfirst I spend that. go beyond you to have point is The in thanin any othercountry by our neighbors Philippines is beingaccomplished than hasitsownunique SEA.And I havemorefiiendshere thePhilippines because P r o f . strengthswhich could be a very sfiong in anyotherPlace Chua Ronald Unfortunately, in SEA.I reallY basisfor industrialization. imPormost The financ[Micro or hope that the thesehavenot beenfully developed ingJzIn termsof Philippinescan known. is for thing tant needto fill in the I am talkingaboutthe PhiliPPine restoreits former gaps,please the people to have yes- positionin Asiaa In histalkto the Canadians leepney. a little elaborate ago. referredto it asa vil- few decades terday,the President what on more idence' bit self-conf appre lageproiect.But thereis not enoughcor- I especially your expelience to indicatethesizeof the ciatethe friendli rectinformation And the question hasbeenwith reeffort.Letmeiuslmakesome nessshownto me production gardto workable is how to build it. factsknown: Thereis no viiiage,north, evenafter I Pub-. strategiesat the that lisheda book on in thePhilippines south,or anywhere Yoeftihara firm levei.Partof Kunio Dr. Thereis no vi1- the Philippines doesnot havea ieepney. thatYou theissues thatdoes and Thailand, lageanywherein thePhilippines haveto will raised not havea welder,mechanic,tinsmith, whichwascritical policy in government by addressed or painterin the of thiscountry.My intentionwasto stimu- be electrician hydraulicsman, these But etc. education, basic of But we have late thinking aboutwhat development terms whole of the Philippines. in impactandrequirevery my frank arelonger-term neverhad a schoolfor automotlveengl- shouldbe, andmaybe,through changes. goodhere verybasic Wehave views,conffibuteto something mechanics. neersor automotive At the firm level,for someonein a countries.

Asian Southeast in other and many examplesof Filipinoskil1sbeing firm, assembly electronics I ioint-venture But, goingbackto the ieepney, in manyindustrialfields. demonstrated strategies workable the be is fol what would Thisis not beinginPuttedinto anY think the most importantthing the to fill the gap?one of the thlngsthat And self-confidence' people have to you particularlyin yours,when reseatch, counlries is thatdeveloped It did not questionis how to build it. That is why comesto mind aboutthe sciences. mentioned Kotea example, For historybecomesimportant.You haveto hasthe lesources. skil1s. capturethe indigenous in reabout How R&D. in historybecause couldinvest do not know that the havea lot of nationalistic ManYPeoPIe It countries? developing proud source-starved jeepney wasbom out of a necessity-be- you haveto havesomethingto be exit an is neither though who canbecom- is not aseasy, causetherewere manyplaceswithout of.It couldbeLapu-lapu Or it couldbe cuse.Theinterestis on firmlevelstratehero. parable Roman to a areusefulin roads.To thisday,ieepneys gieswhichworkedandwhichcanbe ap.thejeepneY. the countryside.

Asian Howevet, plicableto Filipinoand Southeast Many times,beas I saidin the firms.

I think all business causethe ieePneY lectute,prideis is overloaded, You development is a Dr. Yoshihara:Thatisverydifflcult not enough.The may not seethe jeepney hasto be- to answer.I thinkyouhavea point.I think vehicle,but You subset of greater is a subsetof development comepartof the all business will seethe Pasis thesubBusiness of in- $eaterdevelopment. bandwagon development. sengersand the cando business what dustrialization. setof a nationand cargocomingat - Dr. KunioYoshihaa And I environment. by the And thequestion is constrained you on very very in filess maybe is is how to do it. If think the constraint poorroads.It isthe individual when is youwill not go nanceandsoon.That only vehiclein the world that can carry you endwith theieepney, important.If you are to produce ingenuitybecomes skills have must You morethan its capacityandwhich canbe very far. innovative,you makea lot future goodsthat can competein the intema- ingeniousand whereit is built.Perhaps, repaired the marketis of money.But that is moredifficultin in researchthat capturessomeof these tionalmarket.Thatis what confidence dustry,unlessyou havea 1otof connecindigenousski1lswhich could be the about.And if you can build

mightbeworthAIMfaculty basisfor industrialization indicate (Editor's note:Brackets while. expertise.J

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TheAsianManagerlJuly-August/SeptemberOctober1997

tionsor askthegovernment for a monopo- to createalternatives to industrialization? againis that of humanwelfare.The husly, protectionfrom tariffs,and all sortsof I am not sayingthis is correct,but the band or the wife is awayfor a numberof facilities.

Philippines hasa very largetradedeficit. years.It is nice to havea job nearone's But that is not the kind of industri On the other hand,we have a positive home.

Second, therightsof manyof those alizationyou want. In a subsector, you balanceof payments fuelledby a service who sendmoneyhome are sometimes can be engineers, motivatepeopie,and economywhich is servicingthe rest of abused.

Third,I thinkthetrendisto tighten haveverysuccessful enterprises.

Industrial the world. If we were to categorizethe immigrationlaws,especially in industrial enterprise is moredifficultbecause what skillswhich we sendoverseas asexports, ized countries.I do not know aboutthe youcandoisiimwe might end up MiddleEast,but theirmoneyis disappearited by thework- ', : with a trade sur- ing. er'stechnologicai plus.I amnot talkI thinkit wastheCongressman who know-howingaboutdomestic saidthat development is not linear,that whichtakestime helpers;I am talk- anythingcan happen.But if you have to buildup. ing aboutskilied skiiledworkerswho canwork in theMidOne can w o r k e r s - t h e dle East,why not here?Of course,you . talk aboutJapaweidersin Saudi sayyou work abroadbecauseyou make nese manageArabia,all of the moremoneythere.Butwhenyourskilled ,. mentwhich, inci. , Middle East,and workersgoabroad, nothingis lefthere.If dentaiiy,is now .

Japan.EvenMa- you hadjob openingsfor skilledworkers, m otsrepute. lne laysiais importing manypeoplewouldstayhere.

J a p a n e s ec o m ,: skilledworkersto Thecrux of the matter.isthatyou panyis not doing ,, fuei their export haveto broaden theskilibase.Manvpeoaswell asAmeriprocessing zones pie talk aboutscience-thisis imporiant cancompanies.

Thecriticismis thatJapa- because it doesnot haveskilledworkers. in broadening the skillbase.To nuitOttre nesemanagement is sopaternalistic that, So, insteadof industryfollowing skills,youdo not haveto goto theuniverwhen changesare necessary, it cannot iabor,we havelaborfollowingindustry.It sity; the vocationalhigh schoolsare readilyadapt.Americans flrepeoplemore is a differentmodel in the sensethat a enough.That is an important areayou easilyso that downsizingis easierto do. countryis beingdeveloped on the skill of have to think of. "Exporting"people TheJapanese systemis verydifferent.But its people.Thesepeopieare ,,exported," soundslike a humanfleshtrade.If my if the companies had someleeway,and I but they comeback.Money,at least, daughterhad go to out ofJapanbecause thinkmanyJapanese companies herethink comesbackmostof thetime.I think it is a shecouldnot find a job there, I would thatway,theycaninvestin skillstraining. differentbasewhere, hopefully,the feelvery unhappy.i think manyFilipino It helpscorporateprofitsif peoplestayon economywiil be channelingwealthinto familiesfeelthe sameway.Tome that alafterbeingfained. I do not know if this moreproductive areas.It is a typeof de- ternativeis not veryviable. happensin SEA.I am not surewhether velopmentthatis management Japanese wili work hereor not fuelledcomCongressnot. That is why I am not too optimistic pletelybyindustri man Felicito aboutwhat onecando at the enterDrise alization.

I do not , Payumo (Balevel. knowif it is possi- , taan, Philipbleto sustainit, or i pines): When I Prof. Chito Salazar[Competitive- if it is possible to . was working for nessl Regarding your premiseon indus- takeadvantage of Engineering Equiptialization-l was readingan articiein it. In otherwords, mentInc.,we pioAsiaweekwhich,basically, questioned the it is alreadyhapn e e r e di n c o n pathsof differentAsian countries now,and structionwork.As the factthat theyareagainsta wall. Eve early as then, we ryonewho investedin pefochemicalsis use this rather already hada lot of facinga glutwhichis drivingpricesdown. than try to developanotherindigenous skiiledmaleworkersabroadand we did Thesameis truewith electronics andin- Philippinecar and competewith all the not think therewouldbe a problem.

But tegratedcircuits,andwafers.Everyoneis othercarsbeingdeveioped in otherparts (their)wives (would)oftencometo ussayenteringthesamemarkets,heavyinto in- of Asia.In otherwords,it is a moreserving, "(Please) let my husbandcome dustrializingtheir economy. ice-based, ratherthanindustry-based. de- home."Wewouldask,"Why?He'searnThequestion is:Themodelofbuild- velopment. ingfourtimesasmuchashewouldmake ing development on a strongindustrial here and he comeshome everysix baseas in Korea,Taiwan,or JapanhapDn Yoshihara:Thatisaninterestinq months?Theirfypicalreplywas,"l canpenedaboutthreedecades ago.Is it time idea.First,I think the questionthat ulsei not be a fatherand a mother to my chil-

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July-August,/September-October 1997 | TheAsianManaper

69

wasmorelenientin this (gtossdomesticproduct);and on (ChunDoo-Hwan dren.Theyhavelow grades,theygointo GDP etc.werebuiltl respect). of a fatherfigurewas how manyroads,bridges, drugs."Theabsence Suharto's But evenin technologY, can How You technology. on not but identakingis toll.Theirsonswerehaving seemsto be thatwhen he goesinto and improveon somethingyou do not meas- idea Thatwasin themid-1970s tity crises. andmore petrochemicals, -impressive.it mustbebigger ure? early1980s.

It is the sign of national MaYbethis is the reasonfor our Now we have a situationwhere is not a militarypersonpel He progress. sci' in termsof the hard workingoverseas' backwardness therearemorefemales is not doingany- se;he wasnot trainedasan officer' government We may havea situationwhereboth fa' ences.The he In the caseof ParkChung-hee, in this area.Maybebether and motherare out and, therefore, thing significant stuone of the leaders'background-many was exceptional.He was their childrenarebeingrearedby grand- causeof out dentsadmitted parentsor otherpeople.And, if it is true of themue lawYers into the Japan men' thatwe have4.5 millionworkersabroad, and military NormalSchool. few are thenthataffectsabout12miilionfamilies, but very Later, he be' who may eitherhavea motheror father engineers. camea teacher. or bothout of the country.

Thenhe gotfed Dr. Yoshi- ., When do we PaYthe socialcosts? ,P with the men ,i.,.

And it is not alwaysuue that they earn hara Miiitary "decent" Japanese Princi ,,:, for ex- can be FlorContemplacion, moreabroad. pal.At the NorI remem- ,. i ample,was earningthe equivalentof a leaders. mal school,his wasdur- .i it that ber minimumPhilippinewage.Shewasthere teacherwas a of Park not to quadrupleher salarybut because ingthetime verymucn' him liked who officer military that Koreabecamevery serlChung-hee backhome' of lackof opportunities opened government the When Japanese ousin buiidingup industial skills. he apAcademy, Military Manchuria the Maybetherearetwo thingsto this: Prof. ReneDomingo ftokl Qual' years' two after that, well so did and olied andhiscommiffnent ity Managementlz I do agreewith you thetypeof leadership acadmilitary elite an to transferred *ut However,the ir. shouldnot betransferred, to economicdevelopment. ttrattechnology a had he man, military a As Tokyo. in buthemustalso emy becommitted but shouidbe acquiredor stolen-your leadermay education' in good background very to movetowardseconomicde- very terms.Whatis not clearis who shoulddo knowhow TheTokyoMilitaryAcademywasan elitit? Shouidit be the firm or the govern- velopment.

Patk,becauseof his militaryback' ist institution. ment?

But in the caseof Suharto,I doubt ground, knew that men wereimportant If you lookat the historyof JaPan' what economicdevel' had if he understands wasstartedby the for fighting.He alsoknew that they technologyacquisition He is a very pleased about' is all time, theY opment notbyMitsubishi,Sony to havegoodweaPons,For a Meiiigovernment, like progress national of signs on the UnitedStatesfor weap- to seethe de- depended TheMeiiigovernment or Matsushita. developeconomic But cars. and camea timewhentheyhad factories cided it wantedto developthe whole oni, but there production' to producetheir mentisabouthowto organize counffy,soit sent economic of kind What own weapons. anddistribution' government is an inpulsues country a They became development schoiarsto Euresuits' all ale you see what very verYseri- visiblething; ropeto stealthe govthe if in coffee produce Japan ousabouttech- Youcan of the technologY can You protection' gives enough nology,not iust ernment Dutch,French, you not do if factory fot weaPons' havea petrochemical Getmans, and important is What money. but alsofor in- mind its losing British. It was dus[ialization. is that you have the signsof national governmentled, waY' in a comPetitive F o r e x - progress and I seeit haPto Goingback Yourquestion'gov' a m p l e ,I s e e peningagainin up people like ernmentis importantin building SouthKoreaand level' skill a on Suharto.I amnot oitical of him technologicalcapability to President Taiwan.Theyaskthe big corporations importantto he burnedmy book,but thereare And skillswere especially to the countryand because sendtheir technicians skills vocational he doesthat I do not under- Park.He resfuctured thencomeback.My pointis this:I do not somethings system' examination hestutedthisnational training,set up an Asiangov- stand.Forexample, in Southeast seethathappening Koreanworkersto gofor carproiect.ThenI foundout that he let thenencouraged ernments. competitionand gaveaddi our hissonwork on it. If youareseriousabout international If you lookat our government' weil' you do not let your son tionalpayasan incentivefor doing tech- industrialization' indicatorsdo not measure success compabig all order neveraskedhis Whathe did wasto Chung-hee nologicalacquisition.It is alwaysfo- do it. PaIk train' additionai go into businessand politics' niesto setasidemoneyfor cusedon GNP (grossnationaiproduct); family to

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1997 The AsianManagerI July-August'/SeptemberOctober

ing-for themselves or for peopleoutside.

Thiswasmandatory for bigKoreancompanies.

Thethirdimportantthingis people.

Peoplehaveto be motivatedandinterested in skillsaquisition.

Companies haveto giveincentivesfor peopleto acquire skills.

I think it takesgovemmeng corporations, and peopleto promote industialization.

etc.we neverhadthat stageof industrial discipline.

WhatI amsayingis thatwe had a basisfor industrializatton, and this was throughthe skillsacquisitionoccasioned by that vehicle,the jeepney. .

I also ,:' agee with the 'r1 Professor's observationthat, i l. unfortunater., ly, we nevet L^r ltau

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Second,I also agreewith Dr. Yoshiharawhen he said that what was essentialfor development was Park Chung-hee's vision.For example,not manypeopleknow-and I learnedmy policyfrom him-that planning business isnot asimportantasimplementation.

Implementalion comesfirstevenif youhave plans. inadequate Parkwantedto build a highway fromSeoulto Pusanbecause the seawas in PusanandSeoulwasin the middleof the mountains.The World Bank told him it wasnot feasible.

Hesaid,"lt is not feasiblebut I needit." So he built that highwaywith very crudetoois,little as. sistance, and littie supportfrom developedeconomies.

Hebuiltthatwith sheer manpower.If you go there now you will seea monumentdedicated to those who diedwhile helpingbuild.that highway.

Thereis reallya needfor industrial disciplineandintermediary industries.

Ko. reahada veryclearplan.Theyknewthat they had manpowerso they went into woodandotherlabor-intensive industries.

In thePhilippines we lackthis.Wedid not havethat activityanddid not developindustriaidiscipline.

It couldhavebeenin. troducedthroughindustrieslike textiles.

Now,asfor the jeepney,I thoughtit providedskills,but maybenotwhatisneeded for industrialdiscipline.

ment intervention here.The jeepneyindustry istotallyunP r o f . .,' derground, and '; Leonardo Silos it is tolerated [Management ]: . in a permissive PhilosophyJ: l .,. environment. think jeepneys There are no and OCWs are such thingsas but copingmechanisms because we can safetymeasures;nobodychecksthe not domore,we usethejeepney.

ButI do brakes,the lights,whetherthe driverhas not think they serveastechnicalmodels a license,etc. But that is alsoan advanto build technology.

Thejeepneydoesre. tage.We havedevelopeda very big unveal certainquaiitiesof the Filipino;for derground economywhichhasprovided instance, hisinventiveness, resiliency, etc. empioyment.

But sincenot onejeepneyis the sameas I agreethat there shouldbe gov another,it is veryhardto makeit a model ernmentintervention.

Letme iustaddto for technologicai development. whatwassaidaboutKorea.I wasthereat Sending thepeopleabroadto work that time when Park Chung-hee was at isneithertheidealmodeifordevelopment. his best.Let me just give two examples It doesshowanotheraspectof thecharac- aboutinteruention.

First,he had in his ter of the Filipino-how he or sheis able mind what developmentreallywas. He to do thingsin spiteof the problems. askedUS PresidentJohnsonfor enough Prof. Francisco Roman /Ecomoneyto setup nomicAnalJtsi* Prof. Tan: I wasthinkingthat you aninstituteofsci My questionredo not jumpfiom onetypeof economyto ence and tech"There is latesto whatProf. a shift, an industrialeconomywithout passing nology. They Tanraisedearlier throughsomechanges.This stageI call broughtbackto even in institutions aboutthe farmer industrialdiscipline.

I donotthinkyoucan Korea176PhDs versusthe induslike OECF,towards get such disciplinefiom farmers.There working in GE trial worker.It is mustbeanintermediate activity,andthere ( G e n e r aE l lecdifficult forskillsto increasing investareindustriesthat areideaifor this,such tric), the NASA be transferred imasthe textileor tile industries.

(NationalAeroment in social mediately.l donot Thefirstand,incidentaily, mostsuc- nautics and havestatistcal evicapital,cessfultime they put a textilefactoryin SpaceAdminisdence,but I feel Koreawasin the middleof a farm.Thatis uation),etc. to - Prof. Patricia thatit isverydiffiwhere they learnedwhat I call their in- put up technicai cultto ffansfer hudustrialdiscipline: comingon time, not laboratories.

This man-based techwaitingfor the sunto rise,etc. wascontracttechnology.

In otherwords, nologicalskills.Onceyou makea decision I alsonoticedthat in a tile factory if you neededan industrialproduct,you to gointo a certaintechnoiogy, you tendto you startoffwith the soilandmix it with wouldgo to themandcommitto pay 10 bestuckwithit. Therefore, I amsomewhat clay,then run it throughthat whole in- million won, and then theywill develop pessimistic aboutthePhilippines' becoming dustrialprocess of beingbaked,cooked, it for you. anotherSouthKorea.

July-August,/September-October 1997 | TheAsianManaper

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Prof. Silos: I would like to menOverseasEconomicCooPeration Prof. Tan:Thebestmodelfor this ideaof bringingin skilledworkThey Fund (OECF):In termsof development tion the in iapanisMatsushita' development whichtheAmeri priodty ersaspartof a company, a verygoodmodelfor re- aid,whatshouldthegovemment's havedeveloped cansdid. It was evenfundedbY some TheyhaveB0subcontractorsbe? lationships.

Thatis how techAmericaninstitutions' is so Matsushita whom they developed. noiogywasttansferedsomehow.

Dr. Yoshihara:I think the mostel proudofwhatit hasdeveloped-amodel huis which can- fectivetypeof aid for the Philippines interdependency of complete Prof. Patricia Lontoc: Oneof the whichmayinclude mancapitalformation, not fail. emphasizes which Prof'Yoshihara things is this Maybe andotheraspects.

But such a relationshipmay not education leadershipgovernment is work his in can govemment of anueawheretheJapanese because flourishin the Philippines not iust the kind or degreeof intervenhow. know not do I but help, the And of) strongunion. the (presence If Japan tion. But thereis a shift,evenin instituunionsthought investmore tionslikeOECF,towardsincreasing becomes that the word caPltai. in social ment " subcontlacting" would CongressmanPaYtrmo:Thereare get nevet two thingsthat I havelearnedfrom Dr' here.A passed Oneisthatanyeventor develYoshihara. better word opmentcannotbe atfiibutedto a single would be outcome with technology' mrsisanarea factor.Most of the time,it is duenot to sourcing,linkoneor evena setof factors,but to many aging,or jointmanagerial skills, and likeraising Pointingto something factors. i;;-;;,;; ventule Partcoffect of development, level people's the JitjArlapanin' other gooO stuff.nering. alone institution educational an or Co- oolicies, temational In a redevelopTypically, adequate. be not o p e r a t i o n may cent confermentis a resultof all these.

Agenoidoesit FelicitoPaYwrc encesponsored thathistoryis not I learned Second, by the ILO (lnfor example, tennis, like sports In linear. ternational lastpoint is the until finished is nothing effort' I madethe mistake isno concerted LaborOrganization), thatisalso zag,and and zig "subcontracting"l It maynot evenbeaid.If the Philip- won.Fortunes allthe of usingtheterm develoPment. economic Asiangovern- truefor to it. They pinesor anotherSoutheast unionleaderswere opposed book'we have Fromthe Professot's for skilled market the up opens as a way of breaking ment seesubcontracting wasaheadof Philippines the that canhavea learnedthat up a company,thus breakingup the un- workersandtechnicians, ago'Now decades of couple beneficialeffectbecausethey can talk Thailanda ion. investment' of leveis in ahead skilledworkersor ob- Thaiiandis therehavebeensomanY with the Japanese In JaPan, Thai aresomanyJapa- exports,GNP,andthelike.Similarly, There work. their Iawscreatedto supportsubcontracting' serve Korea now and Korea, of wasahead must pay neseskilledworkerswho areunemployed land One of them is that suppliers of Thailand.But the realstoryis is ahead of out moving are companies big on time.And, since because theirsubcontractors with its GDPbeingonly a laws, Japan.This is an areawhere privatear- Japanwhich, incentives then,theyhavedeveloped pointin the can be madeif the govern- third of GreatBritain'sat one etc. We do not havea singlerelatedlaw rangements mayeven and Britain, ofbringingin workersfrom past,hasoutstripped of theunions.Wecouldnot mentapproves herebecause But linear. were history if matchthe US casesin the Phil- abroad. write on subcontracting producUS in resurgence a thereis now ippines even if it is PracticedbY inJapanese malaise tivityanda perceptible YoshiDr. Limlingan: Vic Prof. in themanufacturIndustries Concepcion certaln believe to are we if productivity, Theventurewould hara'sbook on the Philippinesand Thai ingof airconditioners. the reasonindustri- oeriodicals. not be competitivewereit not for the re- landpointedout that Butthe thesisthaueallycaughtmy wasthat the succeeded not lationshipwhere peopleare paid by the alizationhas versushardsciwassoftscience thehigh- Philippinegovemmentintervenedmore attention piece.Evenin theUnitedStates, literacyrate' high a have ence.True,we in the bestcompany' and,wotse,intervenedclumsily.I think estpaidemployees else' something is literacy now but functional arepaidbythepiece,iust thereasonwhy theeconomyisbetter LincolnElectric, service bigger a has now The US less,andinterof theunions.In thePhilippines' is thattheyareintervening because or will havea biggerservicesector plead sector to like would I wisely. veningmore they are trying to usedifferentwordsis that necessat"big brother,""smallbrother,"and "cen- with theOECFnotto givethegovernment thanwastraditional.But we Philippines, the In will givethem the tool to i1ygoodor bad? tralized."Theyaretryingsomanywords more aid that The well' as havetalkedof leap-frogging but havenot intervenemoreandoeatemoreproblems "pole-vaulting"' to developthe relationships eventermedit President private sector. for the far. gonevery

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1997 TheAsianManagerI July-August'/September'Octobet

Doesthat meanwe musthavethe hard coupsthat followedcreatedmuchinstaWhatsurprises me is the factthat scienceto propelus?Technology is very bility. aithoughyou havehad a lot of opportuimportant,but i wonderlf we musttake I was readinga columnjust this nity to actuallybringup the so-called unthe samegrowthpathasthe othercoun- morningaboutcountries with highliteracy derdeveloped Southeast Asiannationsto ffies--{onstructing steelmillsor goinginto ratesandwith gooddatabases in science a stateof highlydeveloped technology, shipbuilding.

Or canwe justutilizewhat andarithmetic, whichwe wouldwantto Japanhastendedto shyawayfiom that othersreferto ascomparative advantage emulateandreplicate.

A caveatwas men- role.I wondernow,what rolewouldJaandfind out how we canleap-fiogto our tionedhowever.

It said,"Japanese educa- panplayin helpingthesecountries reach niche,whateverthat is? For example, tionemphasizes rotememorization of ex- the statewhichyouweretalkingabout? when I saythat hlstoryis not iinear,I am traordinaryvolumes ofdata.Thedatafeed I am alsodisturbedby what fou hopingthatthePhilippines will retakethe ingsystem hasevolvedinto a largelyindi- impressed on usregarding themannerof placeit hadin theearly1960s.

AndI wish vidualactivitywith few opportunities for technology transfer-in a way thisshows the Professor wouldalsolookup andre- socialinteracdon."

I thinkthearticlewants theweakpositionof a countryiikeMaiay view the performance of the Philippines to saythat,withoutothersafeguards, the sia.Whileweweretryingto seekthetransfrom 1990to today,sincethecomparison signsarehappening asfollows: ferof technology fiomJapan, youencour"...Youth hasbeenmainlyfromthe 1960sto 1990. tauntandharmtheweak, ageus to beg,borrow,or stealour skill.

I think it wasin 1990when we took a the poor,and the homeless; high school Butwe alsochoseotheroptionslikemovdivergentpath.So,we cansaythat there $r1swillln$yprostitute themselves to buy ing elsewhere.

For example, while we wasa dichotomy fiom 1990andback,and designerclothesand to buy expensive failedwith rheProronSaga, we wereinfiom 1990to thepresent. meals.Childrenexpectnot to takecare deedsuccessful with otherProtons, espeNow I cometo the international of agingparents underanycircumstances.ciallywhenwe movedtowardsFrance. openness whichtheProfessor mentioned. Intelligentyoungadultsjoin bogusreli WhatI amtryingto driveat is that, I cannotbuttotallyagree.

Thatis thepath giousorganizations andvoluntarilycom- whilewe arequiteweakin certainareas, we tookwhenwe liberalized andopened mit murder,evensuicide.Youngmen we lookupontheleadership of countries our economy,dismantled monopolies, fa1lln love with femalecartooncharac- likeJapanor Koreawhichhavehadcrises deregulated industries, and privatized tersbecause theyfind relatingto realgirls asmodelsfor development.

I am talking economies.

Foreign directinvestment has too difficult.Wves gamblein pachinko aboutKorea,sinceshipbuilding andsteelnow reached 33%of totalinvestment, ac- parlors,leavingtheirinfantsstuckin the makingindustries, anda1lthat,happened cordingto the LehmanBrothers periodi- backseatsof theircars.Students aredriven asfollow-ups of crises.

Korea,technicalhr, cal I wasreading.And foreigndirectin- t o s u i c i d eb e is at war today. vesffnents rarelycomevisitingalone.They .ur;";i;;; Whatbetterway comewith technology, managerial skills, bullying amons lf you only gO f{}r to maintainsuch and other goodstuff. Perhaps,that path industries ascomcanbetakenin thedirectionthatwe had nerprl fn nthar begunto takein 1992andcontinueto do Southeast Asian soup to the present. countries which On softsciences versusmathemat- rne.imoiicadons with you. But if you arefairlypeaceful ics and physics,I cannotbut agreethat in nature?I seek we arevery1owin thehardsciences.

This your comments is what we havebeendecryingin our a n d. r ealize the andadvice. ther e is som ethino stateuniversities andcolleges.

Teachers in l n a o e q u a c t eosI the gradeschooland high schoollevels a n e d u c a t i o n a t V V f O n g , t O O .

Dr. Yoshiwho are goodin math and scienceget hara:Therearea promotedto supervisory or administracoupleof thlngsI tivepositions.

Theyarealreadysofew,yet ficient supel want to bringup. : theyhaveto bein administration in order economy,but Softscience is as to bepromoted.

Wewantedto havea di- not a humanesociety." importantashardscience; afterall, softvergentalternative pathfor goodteachers ware ls as importantas computerhard_ sotheywouldalsogetpayincreases withstudentMynameisBen,fromtheware.But on the otherhand,whenwe out havingto bepromotedto administra- Masterin Management Program.I am talkaboutindustrialization, I thinktheten tors. fiom Malaysia. when youcameupwith a dencyin Southeast Asiaandalsoin other When I saidthat historyhaszigs coupleof pointerswith regardto Malay' developing countdes is to opt for softsciandzags,I thinkwe haveto considerthat, sia'sneedfor advanced technology, i was encebecause hardscienceis dlfficultto under martiallaw, our businessand remindedofJapan's questfor globalization tackle.Sotheyopt for the easyway,and economywere reallycaughtin an iron in the 1990s,whereyouwouldbewant- keeptalkingaboutsoftscience andaltergrip. The croniesproliferated,and the ing to playa leader's rolein theworld. nativedevelopment andsoon. To me,it

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development andeconomic Whatwe have dustrialization If you reallywantto ln societycreateprobiems. is like daydreaming. andgetout of pov- to do is to createa new man,a new man in thisregion. pushindustrialization erty,you haveto do the hardpart.Going who knowshow to usethe environment Prof. HoracioBorromeo:I think if youonly skillsis anda betterincome.Of course, into hard scienceor developing as because, devel- go for money,then thingsgo wrong.At this iecturewasvery timely economic difficultto avoidbecause parthe AsiaPacificregion, aboutdolngsome" thesametime,thematerialbaseis anim- we all know, opmentis essentially hasbeenthefocusof much SEA, ticularly thingotherpeoplefind difficultto do.As I portantpartof our welfare. years.Rlghtnow we recent in interest role: question aboutJaPan's On the is the easypart.Aslong said,softscience Ministerin town Prime Canadian the have President John asyou do onlythe easypart,yournatlon I am remindedof what "Think leadinga hordeof 400Canadian business1960s: Kennedysaidin the early will not progress. his own of them one each men, PaYing not country' We lookat the US,JaPan'andKo- of what you can do for the MinisterPrime the to way-according you."

People it had whatthecountrycando for rea.The US is differentbecause usedto believe and,therefore,not charginganythingto naturalresources. for Butthereason taxpayer. i n G o d . N o w theCanadian But the reason not Likewise, obvious. very is visit their in believe they Soft science is as why Japan,Koa tremeng o v e r n mnet ; too long ago,we experienced Thailand rea,and as hard important by theAPEC(Asia trafflciamcaused dous is government is that developed summit.

Cooperation) to do PacificEconomic supposed science; after all people discithe that Dr. therefore, fitting, is It for something plined themis as imof cauword ssftware a sounded lecture Yoshihara's them. Develto learnthe selves hype; and euphoria the all of amidst tion opedcountries, portant as Gomputer basic,hard scientrepreneurship, industrial that namely, theY because enceskiils.It is al1 hardware, is not very estimation, , are rlcner,are in Dr.Yoshihara's right to keePin set our should this and in SEA, strong do to - Dr. Kunio Vdlihara supposed mind the imthinking. minds for something portanceof soft Further,Dr. Yoshihara Providedus develoPing s c i e n c e .H o w for inrequirements fundamental the with thatif you opt for it and countries.Thatis true,thereis an obligaever,remember knowlpointed the out He dustrialization. yournatlonmaynot tion for industrializedcountriesto do ignorehardscience, and aboutthepoveffyin theworld. edgegapsthat we needto address, something progress verymuch. on suggestions few a he offeted finallv.

Butdonotexpecttoomuchbecause The secondthing is that,Yes'we do. might we asgovernments what government, notjust theJapanese areaftermakingahumanesociety' I would like to Pointout that the It is problems. its own has all countries, in a not Phimoremoney.But while I am hasbeen isimpor- very difficultto comeup with very effec- AsianInstituteof Management I think industrialization losopher, to make certaininitiatives Of coutse,theASEAN[As undertaking tant to promoteeconomicdevelopment' tiveprograms. can lrfationa) the Asian filling to Southeast of conffibute sociation we happithat sure whichis veryimportantto human to pressure on put Japan get and working together been go for has you gaps.

AIM only knowledge nessor humanwelfare.If courses' is wrongwith do somethingeffectivefor the Asianre- veryhardat developing several money,I think something "Manageyou might approach is an that gion.

I think there you.Butif youdo not havemoney, In the MBM program,we offer effec"Asian is somethingwlong, too. Humanwelfare take,and which may be the most and in Globalization" mentIssues is what ilme, same the at But way. tive we of these.Thatiswhat isa combination these In developing Systems."

Business importantisthatyouhaveto dosomething haveto keePin mind. muchsupport we havereceived courses, I havea lot of difflcultieswith left" yourselftoacquirenew skills.1'hehelp As a further Foundation. the from Japan 1s istsor liberaipeoplewho saythatpeople from an industrialcountrylike Japan disroundtable the from inputs partof initiative, Themostimportant countriesarehappyasthey onlymarginal. in developing Yoshihara, Dr. and with thefaculty capabilitycomes cussion areandthattheydo not haveto deveiop buildingtechnological out courses. in upgrading used be will inside. fiom atis bad.I once materialism because Asian other with * get you at AIM together If a seminar irt Dr.KunioYoshihara'slecture in Koreawhichwas tendeda conference jointltlotganized you u'as u'hich 16,1997, pressure on and Japan--can countries lanuary do#rinatedby liberalswho were arguing Progtnm Morngernent tlv Misterin Busincss of in- reallyarguethat Japanshift its develop- bv areunhappybecause Crouls' Stlslems that Koreans oi the AIM, the .AsisttBusiness Thegovernment ind theInternationalRelntions Croup(AIM), with dustrializationand economicdevelop- mentaidto technology? projects the generotrs supportof thelapnnFotmdation' ment.i toldthemI do not think I amun- wantsto haveits infrastructure effective most at theCenterfor Southme, the to is Professor But, Yoshihara financed.

Dr. happierthan my fatherwas becausewe Jnpan' His Studiesin KyotoLlrtirrersity, Asian east aid Technical aid. is technical aid I havemoreop- Japanese havedifferentproblems. booksreferredto in the article are: The Rise tuo effortto heip the of ErsatzCapitalistnirt South-EsstAsiaand PhilportunitiesandaslqngasI know how to is a very concentrated I think that is the ippineIndustrializatiort:Foreignnnd Domesttc And of SEA. I amhappier.I fuily technology usethe opportunities, to in- Caoital of contribuling way effective and changes most agreethat industdalization

74

TheAsianManagerlJuly'August/September-October1997

TheJapanese BigBang Byyear2001;PrimeMtnisterHashimoto envtstons afree, fai4 andgloballocalfinanclalsectot:Butwtil it bea Wmbledon-type or aJ-league typeoffinancialmarket?

J n the midstof woridwideeconomic andliberalization, Japan I deregulation I is undertakingcomprehensive and majorfinancialsectorreformstermedas the "Japanese Big Bang." Gearedto revolutionizecurrentJapanese flnancial sectorpractices,this actioninitiatedby PrimeMinisterRyutaroHashimoto will be groundedon market principlesand implemented accordingto international standards.Inspiredby the United popularflnancialsectorreform Kingdom's programin 1986, it is hopedthat the vaflousmeasuesto beexecuted underthe "Big Bang" will be fully integratedwith the recentftend towarddirectfinancing rather than indirect bank financing schemes.This is a shift that has been observedin Asianfinancialmarketsand elsewhere.

ing in variouscategories of financialop- failures.This practicewas further erations.Evenwithin the bankingsector discredited by themuch-publicized Daiwa itself,thereis a distinctdivisionbetween Bankincident,which resultedin the ordinary(short-and medium-term) and forfeitureof its licenseto oDeratein the long-termbanking,eachgoverned by a dif- UnitedStates. ferentset of policiesand guidelines.For example,the issuance of financialdeben- The Road to Revitalization turesfor fund-raisingis allowedonly to TheJapanese economy isrecovering long-termcreditbanlabut not to ordinary very slowly from a long period of bank. stagnation, followingthe dramaticburst TheJapanese financialsectoris also of its economicbubblein theearly1990s. characterized by theMinistryof Finance's Eventhe Bankof Japan's(CentralBank) (MOF)subtleyet powertulhold on the unprecedented low discount rateof 0.5% industry.The so-called"Gos1sendan pel annum,sustainedover a two-year H1shiki" (literaltranslationfor "convoy period,hasnot helpedmuchto stimulate system")is the termwidelyusedin Japan domesticinvestment.Theappreciation of to referto thisuniquepractice.

Theconvoy the yen merelyaggravated the exodusof worksin sucha way that doesnot cause Japanese manufacturing industriesto evena sin$evessel(bank)to dropout (fail) Asia'sdeveloping countries as Iong as thesevessels(banks)in the Accordingto a surveyconducted by convoyconsistently adhereto regulations a well-knownJapanese research institute, The JapaneseFinancial System set by the MOF. Consequently, this Singaporewill soon overtakeTokyoin After the SecondWorld War, the practiceis said to have discouraged terms of the number of financiai reestablished a financialsystem competitionamongbank.

Japanese institutionsoperatingand the volumeof patternedafterthe UnitedStatesBanking As a matter of fact, all Japanese transactions generated.

In fact,the Tokyo Act of 1933,or the Glass-Steagal Act. Fi- bankshaveappliedsimilarinterestrates marketislosinggroundasamajorfinancial nancialactivities werecompartmentalized payableon depositseven after the centerbecauseof numerousregulations into differentcategories likebanking,trust liberalization of restrictions for suchrates. andcontols, highertaxation,high living banking,securities,and insurance-in Thissystemis now beingrepudiated after costs,high office rentals,and reporting sharpcontrastto the universalbanking the recentwholesalefailure of housing requirements in Nippongo,amongothers. practiceof a singlebankingentityengag- flnancecompanies andseverallocaibank The hollowing out phenomenonis 1997 | TheAsianManaser 75 July-August,/September-Octobet

financialsector in theJapanese happening aswell.

Cleuly,PrimeMinisterHashimoto's BigBang ultimatepulposefortheJapanese market financial Tokyo the is to reactivate and par London with to it up and bring New York.

difierent fencesseparating oPerations tvpesoffinancial securities, duchasbanking, etc. insurance,

GearedUp for Big Bang foreign Thedieiscast.Theamended Diet passed by the been has law exchange three of the and the recommendations committeeson banking,securities,and insurancehave beensubmittedto the and MOF Minister for consideration for Summary) (see Table implementation.

The kind of financialmarketthat will emergein JaPanafter the full of theBigBangin theyear implementation 2001 is a very interestingquestion.It is individualshold estimatedthat Japanese whileiapanhas assets, overUS$10 trillion foreign invested in closeto US$2trittion assets.

There are two PredictionsbY financialexperts:a) it will Japanese market, becomea Wimbledon-type meaningthat it will be dominatedby foreignplaYers;or a J League-tYPe (analogous to a iapaneseprofessional soccerleaguewhere each team is composedof JaPanese PlaYersPIus importedstarPerformers). guess For now, it is iust anYbodY's asto which predictionwill turn out to be the the futuremarketscenario.Perhaps, gauge the main criterionwith which to or failureof the BigBangis futuresuccess whether or not TokYowill be a more attractive,world'classflnancialarenafor andforeignparticipants. bothJapanese of InterAkbaTsusakais AlM'sVisiting Professot nationalFinancefrom the lJniaersityof Marketin Kobe,lapan and ing and Distribution Sciences is concurrentlySeniorAdoisorat the Centerfor (CFED) FinancialEngineeringand Deaelopment on, D.C., U.S.A. He wast'ounding diit\ Washingt aicepresidentof theAsian Firectorandexecutizte Corporation(AFIO' He had nanceandlnztestment impressiaeworking stintsat the Asian DeoelopMonetaryFund mentBank(ADB),International UMD, Bankof lapanGOl, and theIntet-AmericanInuestmentCorporation(lIC).

76

bYthesamefinancial handled the through institution of subsidiariesestablishment undertheumbrella and/or company. ofa holding

. Theordinary willbe banks to issuecorPorate allowed and/orcommercial debentures of lending. papersforthePurpose . Securities willbe companies to createa newfinancial allowed product whichwillbeveryclose bankdePosit' to anordinary maYaccePt Thisnewproduct proceeds of thesaleof securities andmakePayments andsalaries; andforthe charges utility forpublic of creditcard settlement transactions. . Liberalization of theexisting fees of brokerage fixedschedule (Thiswas forstocktransactions.-States donein 1975intheUnited Kingdorn.) andin1986intre United . Liberalization offundmanagement activities

offinancial suoervision institutions .Abandonment ofMOFconvoysystem controlled . Str;engthening of disclosure requirements . Moreemphasis on selfaccountabilitY ofthe andattractiveness markets financial Jaoanese

. Introduction of of newtYPes fundssuchascomPanY mutual funds. typeandprivatelY'Placed . Aoolication of moretransParent rulesandregulations . Establishment oftheFinancial AgencY Supervisory . Stricter control trading overinsider

dealers exchange foreign (sofarrestricted to authorized banksonly)andcertaintYPes transactions*** 6lchange offoreign . Application of international standards accounting . Review witha view of taxation thelevelsoftaxation of bringing comParable to internationallY levels . Closercooperation with organizations international . to banksuPervlslon oertaininq ratio,etc. adequacY bndcapit--at

banksand subsidiaries,.as Since 1993,bankshavebeenallowed to establishsecuritiescompany so far, banks' securitiescompany securitiesfirms havebeenpermittedto set up trust bank subsidiaries.But pertainingto issuanceof new stocks' subsidiariesarenot allowed ,o.ngug" in t.y segments(e.g.,operations trust bank subsidiariesare not company-owned securities' and Bin-ks' dealings). and brok"rug", .t*k are expectedto be removedby the year allowedto engagein the penstonbusiness.Howevertheserestrictions 2001. +* Liberalizationwill irc implementedin two stages' *** 11r"6pgning6lyen andforeigncurrencydeposits-withforeignbankswill no longerbe subjectto reshictions' *

"The Tsusakatranslatedinto lapanese Professor Nadler by Insti.tutions" MoineyMarket and it.s " Hellerand Shipman,and A MonetaryReformfor "The Dollar and World the World Economy"and Mr.Tsusakaearned Liquidity" by RobertV.Roosa. hisMBA from N ew YorkUniaersitY.

canbe businesses insurance

The AsianManagerlJuly-AugusVseptemberOctober1997

What JapanCan Learn fromEntrepreneurship in America Howto bullda climateconducive to entrepreneurship _from earlyeducation to lPO-friendly stockmarkets to strong academe-business partnerships.

Lecture del[veredat the UniversityoJ Marketing and Disffibution Sciences, Kobe,Japan,May 21,19Q7;and usedas the basisfora roundtablediscussionwith AIM faculty duringthe author'scampus visit. et me beginby sayingthat I am a greatadmirerof Japan,a country that has arousedmy nostalgic andfriendlyfeelings.

My personal contact with Japanstartedthirfy yearsago.I was then a visitingyoungassistant professor fromHarvardBusiness Schoolwhoheaded a groupof Harvardfacultymembersthat helpedfoundtheAsianInstituteof Management.

Sincethattime,I havebeenback on manyoccasions, bothfor pleasure and workwith theJapanese academic andbusi nesscommunities.

One of my mostcherished friendshipsin Japanhasbeenwith President Ichiro Kataokaof the Universityof MarketingandDistribution Services.

I firstmet President Kataoka manyyearsagowhen he wasDeanof KeioUniversity's School of Business andwe havebeengoodfriends eversince.Sowhenhe invitedme to deliverthislecture,I wasmosthappyto accept.

I ampleased to beherein thecompanyof Chairman Nakauchiof Daieiand President Nishi of Ascii,two of Japan's

most outstanding and famousentrepre- activityin thefuture,its abilityto oeatea neurs.They are living examplesof our healthyemployment pictureanda healthy main topic which is obviouslyall about economywili be at risk. entrepreneurship.

A T\rpologyof Enterprises Impact of Entrepreneurship Entrepreneurship takesdifferent Entrepreneurship liesattheveryheart forms.Themostimportantandhighlyreof America's competitiveness.

It generated spected Americanenfepreneurs arethose significantnumbersof new employment who createan enterprise basedon an enopportunities which resultedin a healthy tirely new product,serviceor concept; economicgrowth. Entrepreneurship has or who reinventan existingbusiness conbecome America's secretweapon. cept.Theseincludethelikesof HenryFord, understanding of entrepre- Dr.EdwinLand,BillGates, Japan's FrederickSmith, neurshipis equallyimportant.UnlessJa- RayIftoc,andSamWalton. panstepsup its enUepreneurial venture Otherentrepreneurs expendcapital and energyand risk their reputationto form a new enterprise in an alreadyexisting businesscategory.This involvesless More and rrxlre creativityand innovationand more risk large companies taking.Examples of thesearefranchise opare beginning to eratolsof McDonald's,KentuckyFried rely oil on atrategic Chicken,BudgetRent-a-Cd or automobile dealers.Realestatedevelopers, alliances with oil-well drilling operators, ffavel agents and found" smaller entreersof localplumbingcompanies also fall preneuriaf firms within thiscategory. to gain acces$ Those engagedin so-called "lntlapreneurship"practice to new products entrepreneurship within the context of a large comand to pioneerpany0r organization.

Thispromotes creaing research and tivity and innovationon the part of indidevelopment. vidualsor smallteamswithin the organizationwho successfuliy developand inJuly-August,/September-October 1997 | The AsianManaser

Z7

are Moreandmorelargecompanles alliances strategic on rely to thusbeginning firmsto gain with smallerentrepreneurial pioneering to and products to new access p*r*rrrObykeenforesightandacreativespirit'thesencnsqnfiear@"*ry example, For development. and research software thewaywelivetodaY: computer to acquireinnovalive strainto entered has IBM Complrv andhardware, Forruun Apintel, Microsoft, with tegicalliances auhmobile Produdlon FordMotorComPanY Nlass Ma' Thinking HenryFotd Stratus, instant ple, Lotus,Novell, sunglasses, CorPoration Potarized Polaroid anda number Dr.EdwinLand thines,Borland,Exabyte, phobgradtY asentrepreout started of otherfirmsthat Complersoftrare Mierosoft BillGates neurialventures. of letersor delivery Ovemight Express Federal Smith Frederick Weatth creation. One startling packages, anyfiere is Micosoft.In mid-l996,its toexample Fastfuodresburants McDonald's had grown to RayKroc tal marketcapitalization retailing Massdisfibutkrn Wal-Mart SarnWalton c o m P a r e dt o i u s t U S $ 7 0 . 5b i l l i o n BiotechndogY Genentmh was Swanson Microsoft Robert US$58billion for IBM.2 Sporbstmes NiKE startPhilKnight nothingbut a smallentrepreneulial Safdyramls ComPanY Gillette KirgGillette up companywaYbackin 1980when it Computers Wbtson and revenues Thomas had merely38 employees KenOlson of onlyUS$l8 million.By 1995,Micro' MarcAndressen soft had salesof US$5.9billion and In 1996,Bill Gates, 20,600employees'3 had a net worth of firms Microsoftcofounder, entrepreneurial fast-growing or enter America's or services troducenewproducts US$18.5billion,makinghim the richest andthe havebeenthe country'ssalvationin taking The3M company newbusinesses. manin the world. areheldup up the employmentslackas a result of Corporation Thermo-Electron is While Microsoft'sexPerience intrapreneurship'downsizing. asmodelsof successful fact the it would appearthat unusual,it is unique.Consider Unfortunately, approach A variationof Thermo-Eiectron's eightweli-known notyethavea robustentlepre- thatby 1996,America's canhaveparticuid relevanceherein Ja- Japandoes firmshad grownto the are neurialsectorcapableof flexiblycreating enuepreneurial pan,whete somanylargecompanies there poinf where theY rankedamongthe oeativity and new iobs.To my understanding, ilnOingwaysto encourage in terms largestcompanies havebeenveryfewnew iobsformedhere world's100 innovation. of marketvalue and combinedemploy' in recentyears. one millionpeople' Accordingto the Bank of JaPan' ment of morethan EntrepreneurshiPLeadsthe WaY in Japanwas62.5mil- (seeTable2). firmsin America' totalemployment Entrepreneurial ofwealthcreation '1995,this Anothermeasure are lion in 1990.In Januaryof not thelargeFortune500 companies, canbe found entrepreneurs American by fiveat 63'4 million, a net leadingthe way in iob creation,innova- figurestood annuallistingsof yearincreaseof only 900 thousandiobs' in ForbesMagazine's tion, andwealthgeneration.

400 wealthiestindividuals'In or 1.4%.MY view is that moreentre- America's and 1979 Between creation Job on the Forbes400 list and new venturecleation 1984,only 40o/o Fortune500 companies preneurship 1996,America's to cre- were self'mademen and women' The lost morethan four million will be requiredin orderfor Japan collectively familyor in"downsizing" of new iobsin the fu' remaining60%represented ot "hol- ate an abundance iobs.In a waveof heritedwealth.By 1994,the numberof iowing out," their total employmentfell ture. on the Forbeslist Innovation. small entlepreneur- self-madeindividuals 16millionto lessthan fromapproximately to B0%.4 doubled had for ap' beenresponsible 12 million.The Fortune500 accounted ial firms have in innovations all of 50% proximately for about20%of the total USworkforce Who are the EntrePreneurs? nearly and II War Worid since US ifre in'1980.By 1990,theselargeorganizawho is someone An entrepreneur (see radicalinnovations' tionscapturedonly7%of totalUSemploy- 95%of all or enterprise'He business new a creates TableI ). ment. and createsan Studiesindicatedthat smallentre- perceivesan opportunity s Meanwhile,smaliandgrowingenHe maybe a pursue it." to brganization firmsgenerate:r firmscreatedapproximately preneurial trepreneurial enterpriser' venture a or enterpriser new o Two timesas manyinnovations 25 miliionnew iobsfrom 1979to 1996' of the entrePreneurs founding The versusthe giants; " gazelle"companies David Birch, presidentof the employ- per R&Ddollar which fast-growing o Two timesas manyinnovations Inc.,citedthat ment datafirm Cognetics, havecreatedso manynew iobsfall into and scientist; oer 5% of theseyoung the fastest-growing "gaze1les"--{le. Twenty-fourtimesasmanYinno- severaicategories: " BoY wonders." Theseare indi companies-theso-called R&Ddollu versusfirms every for vations while 1980's, the in new of ated77% iobs at vidualswho havefoundedcompanies 94%of'new iobs' with morethan10,000emPloYees' 15%of.them generated

c.orp Rm;:,r*nt ll['ffmf,,*,"

78

1997 The AstanManagerI July-August'/September'October

an extremelyearlyageand who would venture,ExabyteCorporation, on whose StanfordUniversityto helpfoundSilicon otherwisenot havebeentakenseriously boardof directorsI now serve.It hasbe- Graphics. by the businessor financialcommuni- comea leaderin the fieldof tapedrives Other typeshavebeenindividuals tiesin Japan,Europeor the rest of the and memoriesfor computers.

More re- who aregoodat startinga new enterprise world.Bill Gates,for example, wasonly cently,Rodriguez left Exabyteandhelped but arenot alwaysvery goodat develop19 when he droppedout of Harvard startfour new companies: Sweetwater, ing an organization or growingthe enterUniversityto start Mlcrosoftwith his Datasonix, Ecrix,and Colorlink.Mean- prisebeyondthe one-person leadership boyhoodfiiend PaulAllen. Llke them, whi1e,he hasa half-timeappointment as stage.This type of person,promptedby therehavebeenotherswho, in their a professor at the University of Colorado boredomor restlessness or conflict,often 20's,foundedtheirrespective companies wherehe teaches enffepreneurship-an departsthe companyhe or shehascre(seeTable3). par excellence. entrepreneur, atedandmoveson to startothernewvenMostof these"boywonder"entreAnothercorporate entrepreneurial tures.HowardHead,theinventorof Head preneurs havepioneered in theemerging transplant is TomStemberg.

He left Star SkisandPrinceTennisRackets wouldbe industries of tomorrowsuchassoftware, Market,a groceryretail chain,to helpstart an exampleof this typeof entrepreneur. computers, telecommunications, andbio- Staples,the largestretailerof officesuptechnology.

Commonly,they grew up in pliesin America.

Elements of a Climate Conduciveto anagewhereintensetechnology changes Thus,largeestablished companies Entrepreneurship havetakenplace. in theUSoftenserveasincubators or trainWhy is Americaquite goodat enCorp orate transp knts. Theseare ing groundsfor futureentrepreneurs.

In trepreneurship?

Whataretheelements or individualswho receivetrainingand ex- thismanner,theyperforma vital function conditions thathaveenabled Americato perience in corporate giantssuchasIBM, in the Americaneconomy. excel at enUepreneurship?

After idenHewlettPackard or GeneralElectricand Other cksses.Therearethe mid- tifyingtheseelements,perhapswe can thenleaveto setup theirown companies. life entrepreneurs suchas RayKroc.He takea look at conditions in Japanto see While working for w h a t n e e d st o b e the organization, changed ifJapanis to they developnew heightenits level of products,concepts enffepreneurial activor ideasonlyto find Geoge Hatsopoulis, founder ity. ofThermoElectron pioneered Corporation, a out later that the concept whereentrepreneurial indivlduals withinthecompany Early Educaareencouraged to companyis not increate newbusinesses, whicharethen"spun tionalSystem.

Amerout'oftheparent organizatbn in terested in thenew theformofinitialpublicstockofferings (lPos).underthisapproach, ica nurtures a president culture the c o n c e p to r i d e a . ofthespin+utfirmandhisentrepreneurial and an educational granted team are z-z% equityoffre pmnlnrroa Thp tPo. systemthatmoidchilleaves,often with Meanwhile, theparentcompany dren to be independretains majority ownership, as the his formeremployremaining shares aresoldtothepublic. ent-thinking Thepresidents and riskofthespinoutfinnsreport er'sblessing andlor totheiroumboardofdirectors, butmaintah taking individuais. a.dofred-line relationship withsenior financialsupport,to parent company executives. so far,Therm+Elec{ron Thoughit maysound hassuccessfully spunout set up his or her 16companbs, whiciin 1995,hadaggregate like a clichd,throughrevenuâ&#x201A;Źs of US$2.63 billion; the new venture. parent company madâ&#x201A;Źlessrevenues-us$2.27 out our historywe biflion. outofsome2uzsyo ot Thereusually the14,400 Ttrermo employees whoholdstockoptions, have tendedto placea 17o/o ownoptions valued is no stigma atatus$1million ormorc.These provide high options value clearly on "rugged management incentives to tachedto the deemployees whothinkandactlikeowners individualism." orentrepreneurs. partingindlvidual.

I havebeentold It ismy understandthat thereis a saying ingthatthisis notexactlythecaseherein was in his mid fiftieswhen he created herethat goes:"The nail that sticksup is Japan.

McDonald's, afterspendingmanyyears hammered down."Itis myimpression that Examples of thistypeof corporate seilingmalted-milk machlnes.

Thereare japanese childrenaretaughtbothin school transplants fiom the stateof Colorado women entrepreneurs such as sandra andat hometo work harmoniously aspart would be JesseAweida and Juan Kurtzig,who created ASKcomputer sys- of a groupor team.Thosewith muchof Rodriguez, two engineers who left IBM tems. There are sportsentrepreneurs an independent streakarefiownedupon afteryearsofemplopnenttostartupStorsuch as MichaelJordan,the chicago andostracized. ageTechnology corporation.

Storage Tech, Bul1sbasketball player,andriger woods, Americanschools, particularly the whichnowhasmorethanuS$2billionin America's latest21 yearold golf sensa- goodones,encoutage students to excelas annualsales, hassincebecome a leaderin tion,who arebuildingmarketing empires individuals.

Therearealsoorganizations the manufacture and marketingof com- basedon commercial endorsements and such asJuniorAchievement,Outward puter memories. subse- a varietyof entrepreneurial JuanRodriguez investments. Bound,theNationalOutdoorLeadership quentlyleft Storage Technology in themid And thereare the universitytransplants School,andtheBoyScoutsandGirlScouts 1980sto createa secondentrepreneurial suchasjim Clark,who left the facultyat whichteachchildrento beself-reliant and July-August/September-October 1997 | TheAsianManaper

Z9

returns.In enuepreneurial interesting theory this factorshouldnot be a signifientrepreneur' cantobstacleto successful shipin Japan.

ReadY AvailabilitY of Venture sPeakers Helicopter susPension Acoustical Capitat.Thereare two main sourcesof "informal"or radio Heterodyne can Aerosol capitalfunding,namelythe comPuter "visible" capacity High "invisible" Ahconditioning venturecapi andthe Hydrarlicbrake Airplane tal markets. machine Leaming Artificialskin o Informal/Invisible Venture Link trainer line AssemblY Capital Market. Americahasan abunresoffmce Nuclsarrnagnetic nri.ttt't itutccutting fornewventures' danceof capitalavailable devices electrical Piezo equiPment transfer Automatic isperenffepreneur thewould-be orovided cameras Pdaroid Bakelite ieivedto beapersonofqualitywith a good housing Prefabricated insulin BiosYnthetic plan.Thesecapiideaanda soundbusiness PressuresensitivecelloPhane cracking CatalYtic Petroleum tal fund soutcesconsistof the entrepreQuick*ozenfoods casting Continuous from commitments neur'sown savings, Rotaryoildrillingbit Cotton from Pickers familyandftiends,andinvestments Safetyrazots "angelinvestors." meter Fluidflor,rr so-cal1ed Sixaxisrobotarm fireairinguisher Fosin An angelinvestoris a high net'worth Ssoftcontactlens dome Geodosic individualwiilingto makearisky,euly stage Sonarfishmonitoring GyrocomPass in the hopeof realizinga very invesffnent gird Spedrographic valve Heart eventulugegainwhenthenewenterprise Stereographicimagecensoring H;;i;;;';' allygoespublicor issold.Whattheseangel tendto lookatmorethananything investors qualityof the individualor the is else includingSoichiro academy, While teamplayand coop- to Babson's independent. teamin whomtheyue inenterpreneurial we Hondaand KYocerafounderKazuo ue supported, erationin theseactivities under$ingnew venconcept The vesting. to thosewho InamorifromJapan. tendto givespecialrecogrrition important,asis the obviously is also tures llke Fortune, SimilarlY,magazines thinkandactindependently.

But formulated. been plan has that progams business Kidsue eveninclinedto learnthe Forbes,Inc., and Successhave of the caiiber the is it experience, in my enffepreneurs' by settingup lemonade that recogrizeoutstanding ropesof business is the that team her or his and regululy enterpreneur Americantelevision byhavingapapelrouteor byselling achievements. stands, investor's angel in an element critical publicityto entrepreneurial most Also,manychildren givesfavorable Girl Scoutcookies. of whetheror not to invest. decision as well. leaders a busi grew up in familieswhere thereis largeis the informaiventure How On the othersideof the coin,very to the ideaof ness,makingthemexposed Accurateestimatesare market? to individuals capital throughouttheir early littlesocialstigmais attached enuepreneurship One 1989 study'estiby. come who gobankrupt.In fact,theseindividuals had to lives.

US, 720,000Private the in that suc- mated As a resultof all theseearlYinflu- ue oftenableto stdt alloveragainand 489'000 equity made investors createsecondor third new ven- equity encesandof havingplentyof rolemodeis, cessfuliy year' valuedat an per investments capital manyAmericanchildrengrowup to have tufes. additional An billion.6 us$32.7 "entrepteneurial Thls all addsuP to a culturethat is estimated This in personalities." the brought capital in debt billion entrepreneurial US$22.9 turn makesthemmorelikelyto startbusi- not onlyvery receptive.to capital venture informal of thisactivity total estimate talent,but activelyencourages nesswhentheYbecomeadults. to an annualtotalof us$55.6billion'of career attractive as an Path.

A Culture That Honors Entreangel aboutUS$250,000 Large Domestic Market. With a this amount, preneurship. Americansociety,by and "ale conservatively estimated peopleand a investors large,honorsand reveresits entrepre- populationof.263 million (GDP) of US$7.7 to supplybetweenUS$10billion and product gros domestic neuts.Inoeasingly,its nationalheroes largedomes- US$20biliioneveryYear"'7 are peoplelike Bill Gates,Phil Knight, trillion, the US has a very . Visible Venture CaPital Market' tic marketin which to test,launch,and SamWalton,RaYKroc,andSteveJobs. madeupofmorettran500ven entrepreneur $ow new products.As a result,if a new Thismarketis Beinga successful thesefunds potentialdo- ture capitalfunds.Collectively, bringsstatus,respect,and recognition' productor servicecatcheson, which billion US$50 pool about of a manage which hasa leadingen- mesticsalescanbe suficientlyluge to iustiCollege, Babson sources. various from [see raised programin the United fy startup costsandresultin veryattractjve hasbeen trepreneurship 4).

Table returns. hascreatedthe Academyof Dis- long-term '90s,the venturecaPiStates, Duringthe domesticmarketis While Japan's which publicly tinguishedEntrepreneurs with a populationof tal firms (or VCs)managingthesefunds smaller, honorsup to five outstandingentrepre- considerably trillion, typicallyinvestedUS$2biilion to US$3 neursfrom all overthe world eachyear' 125millionanda GDPof US$4.3 bi3 enoughto provide biilion per vear in about 1,000firms'8 havebeennamed it is nevertheless Todate,60 individuals 80

TheAsianManagerlJuly-August/SeptemberOctober1997

In 1996,this figurereportedlyjumped sureto realizerefrns andprovideliquid. ableto would-be entrepreneurs with good up to almostUS$10billion.e According ify for thefuinvestors.

Theycanbetempted ideas. to TheEconomistmagazine, 70%of the to forcean earlyinitial publicstockofferMany new venturesin America, vcs investments in 1995went to tech- ing (lPO)or a saleof the companyt0 a particularly in high-tech andblotechcomnologycompanies, two-thirdsof those corporate buyer.In eithercase,thefounder panies,arepartiallyfinancedby nonequity were in informationtechnology, mostly maynot feelit to bein hisor her bestin- R&Dinvestments fiom iargecorporations computerhardware,softwareand net- terestor in that of his otherinvestorsto seekingstrategic partnersor equityinvestworkingequipment-all industriesof the do so. mentsin particular fields. future. The remaininginvestmentshave Notwithstanding theseconcetns, Althoughthe US currentlyhas a tendedto bein biotechnology (Genentech, Americais blessed to havea robustcom- muchlargerpooi of capitalavailable for Genzyme),retailing(starbucksCoffee, munity of venturecapitalists who have ventureinvesting, thereis no reason why BostonChicken, WholeFoodsMarketfor clearlypiayeda key role in fosteringen- a lackof venturecapltaiin Japanbhould naturalfoods)or in otherserviceindus- trepreneurship in America. be an obstacleto a greatlysteppedup tries.

By contrast, according to MITI, far flow of new ventureinvestments in the In the pasttwo or threeyears,the fewerventurecapitalfirmsexistin Japan.r0 future.Thisis particularly trueif oneconteturnsto the limitedpartnersin these Onlysince1982haveventurecapitalfirms siderstherole thatJapanese bankscould venturefundshaveaveragedup to 50% beenpermittedin Japan.As a conse- play in providing both debt and equity or higherannually. quence,thereare only 123Japanese VC capitalto new businesses if theychoose Asidefiom suppiying neededcapi- firmsin Japanandall but nineareowned to do so. talto newcompanies, venturecapitalfirms by bigcorporations.

I PO-Friendly Stock Markets. The canbeaninvaluable source ofhelp,knowIn 1994,the Japanese VC firms readyavaiiabilify of capitalmarketsaswell how,advice,experience, andcontacts for controlled a venturepoolof onlyUS$8.5 asof willing corporatebuyersto facilitate entepreneurs.

Because of theirnetworks billion(compared to US$34.1 billionin rhe an "exitstrategy," allowstheentrepreneur andcredibility, venturecapitallsts canbe US),andiflvestedonlyUS$1.5billionin andhisventurebackers to "cashout" and of greatassistance in recruitingtalented new ventures(compared with 3.5 times harvesttheir investment.

In this regard, managers andoutsidedirectorsto thenew that muchin the US).Two thirdsof the Americaremainsfar aheadof Japan. firm. Theycanalsohelplineup goodlaw- Japanese investment poolwascontrolled With a robustover-the-counter yers,accountants, flnancialexperts,and by just 10 firms,with 25% accounted (OTC)stockmarket(NASDAO), theNew venture"landlords" who maybewillingto for by a singlefirm, JapanAssociated Fi- YorkStockExchange, andseveral smaller rr I amtoldthatsince regional tradetheirservices in returnfor an equity nanceCo.(JAFCO). exchanges, entrepreneurial enterstakein thestart-upcompany.

1995,venturecapitalhasbecomemore priseshaveavailable opportunities to go However,ventule capitalistscan readilyavailable inJapanastheimportance pubiicwithin four to tenyearsafterbeing sometimes be meddlesome andoccasion- of encouraging the formatlonof new en- founded. ally end up in conflictwith the founder. terprises hasbecomemoreevident.It is Between1984andi 993,therewas When this happens,foundershavebeen my understanding that almostall of an average of 637 new listingsannually knownto losecontrolandconsequentlv be Japan's47 prefectureshave established for IPO's,while japan averagedonty44 forcedoutof theircompanies. venturefundsand,/orsetup programsto IPO'seachyearduringthe sameperiod.

Entrepreneurs canalsobesuspicious fosterentrepreneurship. in addition,anew In 1996,thisjumpedup to 844.Themar. of venturecapitalists because of fearof AngelInvestorsClub hasrecentlybeen ket valueof theseofferings wasUS$48.2 beingforcedto go public prematureiy. formed.Somelargecorporations suchas bi1lion.

Venturecapitaiists, areusuallyunderpres- Toyota,haveset up venturefundsavailin theUS,companies thatgopublic fypicallydo soin four to ten years.In Japan,wherethe OTC marketor JASDAO is still relativelynew,estimates showthat it takes17 to 30 yearsfor a japanese firm to go public.Thisis partlybecause firms were requiredtwo consecutive yearsof Camrurv Snes Rnrx Menxer VArue Fsclt.Yrm 1095 positive profitability before permitbeing Microsoft 12 US$70.5billion US$5,9billion ted to launch an IPO. Fortunately, thisrelntel 14 61.7billion 16.2billion striction has now been relaxed.

Wal-Mart Stores 19 55.0billion 82,5billion Because of a varietyof factors, only WdtDisney 39 38.6biltion 18.9billion 698 firms with a market value of US$ 145 CiscoSystems 56 32,7billion 2.0billion biilion were raded on the OTC Japanese McDonald's s?

32.4billion 9.8billion marketIn 1994. This compares with Oracle 74 26.2billion 3.0billion American NASDAO market 5,122 firms Fforne Depot 87 24.1billion 12,5billion with a market value of US$ 1 trillion ,160 Torar.

US$341.3 billion U$$15{1.8 billion weretraded.r2 Moreover, for manyyears, Americahashad a healthy,secondary July-August,/September-Octobet l9g7 | TheAsianManaper

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in 600 companies to resignin order MIT havedeveloped hadthecourage having stocks' OTC capitalization small for Calimarket and230 in Northern they Massachussetts setup a newbusiness, successfully Sucha marketwasonly createdin Japan to nine of the 10 biotechnology, In fornia. insteadoftenmadeto feeia senseof are in 1993. biotechdrugsin 1994were thus, stigmatizedfor life' best-selling shame, deep exit Another BuY'Oufs' of Ease that were by the companies developed alumnior silategythat is readilyavailableto entreMIT by cofounded or founded preneurialfirms in Americais the sale compabiotechnology Forty-five faculty.

Shaping the to a competitoror Thesecomof smallenterprises niesin theUSareMlT-related.

In 1995,95 venture entrePreneurial largercorporation. paniesemploynearly10,000peopleand compaother to sold were basedfirms annualtevenuesoI emanates produceaggregate spirit LargeAmeriniesforaboutUS$5billion.'3 a quarterof thetotal almost littion, US$3 from a cultural to seekingout can firmsare accustomed billion)of all (US$12.7 revenues annual compaMIT is not and buyingsmaller,fast-growing environment that And firms.ls USbiotechnology access relalionof niesto gaininnovativetechnology' kinds these oeating in alone fosters is to new marketsor othersffategicadvanAmerica Clearly, indusffy' with ships are independence, thesetransactions that partnership tages.Sometimes strong the by bleised for stock'Thiscan commufoicashandsometimes andbusiness creativity, bindsits academic to going be a very attractivealternative nities.'o leadership' and firms publicfor thoseentrepreneurial regardto entrepreneulWith specific seekingto harvesttheir investmentano industriousness' to note that more significant is ship,it gainliquiditY. business university-related 400 thins bYcontrast,it would aPIn JaPan, estabhave States United the in practicesdie slowly, schools pearthat thistypeof saleto anothercom- Sinceold habitsand entreprein pro$ams or a while beforethis situation lishedcourses panyis still quite difficultand muchless it may be neuriaistudies.Some'such as Babson in JaPan. of readilyavailable changes .orn.non.Theabsence whole centers established Stro ng Univ ers itY/ Busine ss College,have Babson's exit vehiclesstil1is a sigriificantimpedientrepreneurship' of hasalsohelpedspur forthestudy first mentto a highlevelof entrepreneurshipPartnerships.What ranked cunently is in the US is the c]ose center,which enffepreneurship a carries in Japan.

US, the in programs betweenuniversities amongail Large Firms as Incubators' fu- workingreiationship classincluding activities of communityplusthe ex- wide range in Americagaininvalu- andthe business internships' UIe entrepreneurs fieldproiects, programsin entrepre- roomcourses, trainingatiargeestablished istenceof formal semina6' ableon-the-iob research plan writing, schools,particularly business like IBM, GeneralElectricor neurshipin many ftom companies memben faculty help to andprograms hundreds when it comesto science,engineering, Afterspending teach better Hewlett-Packard. to how leam otireibusinessctroots transfer' andtechnology of dollarson trainingin engi medicine, of thousands Notably,the ToyotaMo entepleneurship.lT aimost that It is bYno coincidence neering,R&D,salesor finance-employthe ToyotaDistinhot spotsin the tor Companyestablished the entlepreneulial eesleaveto set up his or her own busi- all of for thestudy Babson at Profesonhip re- guished isnotvery US are very proximalto outstllnding in Japanness.Whilethelargecompany of entepreneunhip universities'SiliconValleyin Cali- andpromotion out ot thriiled to losetheir talentedengineers' search coming Graduates Univer- andthe FarEast. theyusuallyaccept forniais locatedcloseto Stanford or managers' busiother scientists from those programand Route128in Massachu- Babson's caleermoves sityandBerkeley. employees' mark their thesedeparting make arebeginningto schools settsis closeto MII Harvard,anda host nes with goodgrace.

Amongbusinesschool entrepreneunhip. in universities' asa of outstandingcollegesand Laidoff from their comPanies Trianglein North Caroseniorlevelexecu- Research resultof a downsizing, and com- linaiscloseto DukeUniversity tivesmoveon to taketheirseverance CaroOne to the UniversitYof North andstartnew companies' oensation areensen- lina. Universityprofessors all of i...nt studyshowedthat 11% gntt W*t obwho had beenlaid couragedto establishtiesand ior level executives $hrcAndtesPon provided grantsfiom industry lridlaetDelt off inJ995 did iustthis.laOftenthenew tain by the laid-offem- certainguidelinesare foliowed' $bi6 Jobs established businesses I who developoriginalin&$teve\Abzn+sk with hisor Professors ployeeendsup doingbusiness roypropertycansharein MlhhK@r tellectuai her formeremPloYer. PhllXn{$t fiom returns flnancial other or alty thatwith Ja Butit is mYimPression ts$,rinl.and oi patentsthat are ganted. . JofqtlbekaY pan'slongtraditionof lifetimeemplolnnent any develoP facultYor graduates ten, one's Crabta$.aw : andextriordinarilystrongloyaltyto businesses entrepreneurial new ememployer,it is not very easyfot an seedcapi theintellectual ployeeto leavein orderto setup a new basedon fsOsalEmmss, universifY' the at develoPed tal Suchanact,I amtold,is often Csrâ&#x201A;Źnb$ Lnterprise. graduTo gle an examPle, to be the heightof disloyaity' considered and facultYmembersfrom Ratherthanbeingregardedasheroesfor ates

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1997 TheAsianManagerI July'August'zSeptemberOctober

students in theuStoday, en be thosehavingto do trepreneurship ranls neu with deeplyheld cu1 thetopin termsof student tural attitudesand trainterest. ditions, particularly Meanwhile, in JaPrRcenrncs or Cnpmru. (evsounce) thoserelatingto the pan,suchcourses orproeducational systemand Limited Partner Type 1995 1996 gramsareonlystartingto to society's attitudes toPension Funds get underway.

In 1992, r*% AM wardentrepreneurship. lnsurance Co.'sandBanks 1lYo YoshitoHori, a young iYo But given the rewards Endowments andFoundations 220/0 graduate 21Yo of KyotoUniver' derived from a healthy Familles andInstitutions 17Yo 6% sityandtheHarvardBusi and vibrant er\trepreCorporations 2Yo 17Yo nessSchool,left Sumineurial sector combined FundofFunds 1o/o SYo tomoCorporation to start pastrecord withJapan's 0o/o \Yo Globis, a privatebusiness ofdeterminatlon andacZYo 2o/o schoolwith emphasis on complishment, there is Torru 100% 6o% entrepreneurship.

It curno doubt that your rentiyhas3000students. countrywill besuccessAs of lastyear,therehavebeensimilar Meanwhile,in Japan,it is my im- ful in thisendeavor, justasit hasbeensucprogamsexistingat the universities of pression that the formationof new busi- cessfulin so many other national Keio, waseda, Hosei, Kobe, Tama, nesses hasoftenstifledin thepastbyoverly endeavors in thepast.

Ritsumeikan, Risho,Toyohashishouzou,rigidregulations andlaws,suchasthose andTohoku. regulating IPOs,foreignexchange, retail- Endnotes: Anotherrecentsignof changein ing, and many other sectorsof the I NationalScience Foundation, USDepartmentof Commerce.

Japanls that universityprofessors have economy. beenallowedto work on thesidefor pri In a recentop-edpagearticlein the 2 AsofJuly31, 1996.WallStreetJournal, vate companies.

Professors are now per- NewyorkfrmeqShoichiroToyoda,Chair (September 26, 1996),p. R27. mittedto filefor patentsundertheirown man of royota and of the Keidanren, ' forlune5uu.

4 "The Forbes400," ForbesMagazine, namesandto benefitfromroyalties asso- stated: "Japan ciatedwith thosepatents. mustshiftfromaneconomy 1984and1996. s Thewindsof changearetherefore burdened byregulations andbureaucracy VVilliamD. Bygrave,ThePortabteMBA beginning to blowwith respect to thede- to one in which the prlvatesectorcan in Entrepreneurship,(New York:john veiopment of a moresynergistic Wiley& Sons,1994),p. 2. relation- operate unfettered."

"The shipbetweenacademe and indusffi.InI believethat Dr. Toyodais right. If 6 R.J.Gastou, Scale of InformalCapideed,oneof thebestevidences of thatis Japanis to flourish,it hasto deregufite in tal Markets,"SmallBusinessEconomlcs at the Universityof MarketingandDistri order to encouragethe creationof new ( 1 9 8 9 p ) ,. 2 2 3 .

7 butionServices whichneverwouldhave investments, William Welzel.,"DispellingEntreprebusinesses, andiobs. beenformedhadit not beenfor the suoStrong Patent and Copyright neurialMyths," VentureCapitalJournal portof Daiei,andits cEo, IsaoNakauchi. system.The existence p.53.

1995), of a strong,fair, (August clearly,somestepsarebeingtakenin the and enforceablesystemof patenl and 8 MITI, VentureEconomlcs. right direction.However,much sti1lre- copyrightprotectionenablesentrepre- e "VentureCapitalists:A ReallyBigAdvenmainsto be doneto achievea true part- neursto reapthe rewardsof their inven- trste,"TheEconomist, (lanuary25, 1997), nershipbetweentheacademic p.21. andenffe- tions. roMITI,Venture preneurial communities.

Economics.

Japanand the united Statesare I I MITI, Nihonkeisai-shimbun.

Free Regulatory climate. The on a relativeequalfooting, althoughit existenceof a regulatoryclimatethat is possiblytrue that the parenrprocess 12MITI,Smailand MediumEnterprise is relativelyfriendlytowardnew ventures in both counffiesis still too costly,com- Agency. l3"VentureCapitalists," andentrepreneuriaistart-upsisvital.Many plex,and lengthy.somestleamlining TheEconomist, in government regulations (January clearlyexistand administration 1992),p.22. and enforcement would la businesspeoplefiequentlycomplain bewelcome (May8,1997),p.1. in bothcountries.

However, WallStreetJournat, "Wil1Venture loudly aboutthem. Still, the fact of the this maynot be easy,giventhe complex- 'sRayK. Tschiyama, Busimatter is that most new enterprises ity of someof the new issues arisingin nessesEver Flourishin Japan?"The haveplentyof roomto succeed (February or failon the fieldsof telecommunications, 26 1996),p. 7. com- NIKKEIWeekly, toUSNewsand WorldReport. theirown merits.Thecostof compliance puters,software,and biotechnology in 17USNewsand WorldReport. with the laws is by and large quite particular. reasonable.

On the positiveside,start-up Oneof thepioneering"t'oundingfathers"of AIM, companies can oftenget tax breaksde. Never Too Late probabry signedto improvetheir chancesof sucthemost elemenrs gi.fficutr ?;,tff;';:;:,:::'!#:,f!';ii;,'Ly:;::,3":f ceeding. to changein the Japaneseequattonwill Clotorado'sClollegeof Business

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July-August,/September-October 1997 | TheAsianManaper

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GrowingPainsof SMEs in the PhiliPPines on the interestrate,which averEastAsean pressure wasdubbed Indonesia-Mdaysia-Philippines n 1996,the Philippines movingin tandemwith plusgrowth aged12.5%whi1e Growthtuea (BIMP-EAGA) I Asia'snew tiger.With goodreason: and Clark,the former inflation.

I ffre countryhasbeenoneof thefast- centerslike Subic decisionto The government's USnavalandair bases;andthe Calambain theregion' estgrowingeconomies its debt pt ovinces repayrathel than reschedule has gown remarK- Lagma-B aangasft zal Ouezon The economY inter' healthy to the ParisClub revealed ably sincethe Philippines2000 strategy (CALABARZON). twice or of US$128' Substantialinvestmentsin the natlonallesewes waslaunchedfour yearsago.Investment debt service-toThe level.

1991 the elecgrowing while unemploy- manufacturingsectorand and exportsincreased, from 40%durexportscontributedgreatlyto exportsratio hasdropped ment rate and povertyincidencewent tronics yearsto onlyabout11%in the 6.8%growth in the grossnational ing ttreMarcos down. therebyalleviatingthe 1996.

Theenvironmenthaschangedcon- product(GNP), However,for the countryto susthe sugarindustry-the tradisiderablywith the implementationof a irisis in everysecits paceof development' the tional mainstayof Philippingexports' tain broadrangeof reforms-privatization, tor of theeconomy surged liberalizationof tradeand capitalflows, Exportfigures mustcontributeits of the primarilydue to the of keysectors andthederegulation share-a challenge relocations economy,suchas telecommunications,wave of thathasbeenmade thc of shipping' from the megabanking,aviation,andinterisland more difficultbY of the envilonmentmade growthAsianeconoThe openness the new demanos possible' mies to the Philipaccomplishments the economic broughtaboutbY Thehostingof the AsiaPacificEco- pines.Total investthe thrust to giosummitmeet- mentsfor the Year (APEC) nomicCooperation b a l i z e .I n r e c e n t the reachedP395billion l ing in November1996 showcased times,boththegovthe countryas one of the most attracilve ( B ) ,s u r P a s s i n g ernmentand the in the world' The Boardof Investments' emergingeconomies privatesectorhad ' B. $aGtof. meetingalsohighlightedthe need to targetof P3B0 ioinedhandsto sort The inflation thecountry'sabilityto compete strenglhen out the imPedi8.4%, rate averaged in the globalmarketPlace. economicsectors' the growth of to ments topricehikeimplemented ihe ManilaAction Planfor APEC despitethe oil majoreconomic generated efforts Their of theyear.Theinoeasein (MAPA),which wasapprovedduringthe wardsthe end in laws and embodied are policies that by the implepriceswascushioned summit,detailedtheprimaryareaswhich pump intendOrders presidential Executive in the will focuson to achieve mentationof a new law deregulating APECmembers countryof well-being the improve io ed oil industry,which allowedthe the Bogortargetsof freeandopenuade domestic of refinedpetro- side and barangaybusinessenterplises importation by 2010 and 2020. The countrYonlY unrestricted smalland cottageindustries, (CBBEs), on thevital stepsln- leumproducts. needsto concentrate and large (SMEs), enterprises require- medium A reductionin thereserve dicatedin theplan,asitwas alreadyahead helpedeasethe industries. anci with growth gatewayslike the Brunei mentin January iulY f

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1997 TheAsianManagerlJuly-August'/SeptemberOctober

Conributions of the Economic enousskillsand useraw materialsindig- promotethe 1aw.Anotherreasonwasthe Sectors enousto thecommunity. inadequacy particularly of benefits, with . TheInformal Sector Over time, somehavegown into regardto creditassistance.

ManyalsocomThe Philippines'bright economic SMEs;othershaveremained astheywere, plainedof theexorbitantfees,assomehad pictureis only a reflectionof what is hap- perpetuating a traditionaloaft with dwin- to paythe equivalentof what theywould peningto the wholeof Asia.Theregion's dlingraw materials, andcateringto a very havespenton taxesand fees.Moreover, unprecedented economic boomcanmost limitedmarket. manylocalgovernment unitsstilirequired probablybe attributedto its largepooiof theCBBEs to obtainmayor'spermits,from . Countryside enhepreneurs. andBarangay Business En- whichthelaw hadexempted them.

A commonfeatureof the develop- terprises A bill is now beingprepared to exing economiesin the regionis the Recogtizing thevalueof anunham- tendthelifeof theoriginallaw for another exsistenceof a large,dynamicunder- peredinformalsector,thegovernment has fiveyears,with modifications to address ground sector,remadeit a policyto its defects. ferredto astheinforp r o m o t eC B B E s . mal ot shadow RepublicAct (RA) . CottageIndustries economy, whichhas :,, Mostcottageindustries arecommubeenacknowledged Lawof 20,wasen- nify-based and region-specific, whoseori as "the seedbedof : 1 actedon luly 24, gins extendfrom way back-blankets entrepreneurship." ..

1g 8 q a n d r e - fiom Vigan,broomsand basketsfrom .

Note that , malneom effectlor Benguet,shoesfrom Marikina,slippers many successful fiveyears.

RA6810 from Laguna,matsfrom Negros,guitars iarge and welldefinedCBBEsas fiom Cebu,cutleryfrom Bicol,brassware ': knownlocalcompaenterprises having from Marawi,etc. A majorifyare in the J9niestracetheirroots ,., assets l of P500,000 informalsectorandareoperated asliveli to the underground ServGs. and below Upon hood,wheretheincomeof thehousehold sector. registration, CBBEs workeris basedon the numberof pieces The informal were requiredto produced. sectorisanimportantsourceofmanyprod- pay to the municipalor city treasurera Theraw materials area criticalreuctsfor bothexportanddomestic use.In feeof aboutP1,000for everyP100,000 source(e.g.clayforceramic wareproducthe Philippines, a numberof dominant worth of assets. ers,rattan and wood for furnituremaklocalindustries,suchas garments,furniThe law,which becameknown as ers,capizshe11s for the sheilcraft industure, gifts,and housewares, ale depend- Kalakalan20, offeredincenlivesto busi- try),manyof whicharebecoming scarce ent on the informalsector.Majorexports nessentities, associalions, or cooperatives or already depleted.

Somematerials, such of othercountries, suchasjewelrycarpets, with 20 or lessemployees.

CBBEs enjoyed as the narrahardwood,havebeenovercutlery surgical,anddentalinsuuments, the absence of bureaucratic restrictions depletedand are,therefore,bannedfor arelikewiseproducedin theinformalsec- andexemption ftomgovernment rulesand use. tor. regulations regardingassets, income,and Cottageindustriesdiffer fiom the Theunderground economy churns otheracitivitiesconnected with theenter- technology-based, stable SMEs,whichare out goodsand servicesthat are not le- prise. established for profit,andwhoseproducts flectedin the accountingof a country's After the law expiredin 1995,a can conformto international standards.

GNP.Thesector's activities rangefromsub- surveyconductedto The supportmany sistence income-generating endeavors- analyzethe results cottageindustries usuallyassociated with thepoor-to com- showedthat there requirewouldthus mercialventuresthat areestablished and w e r e o n l y 6 , 0 8 5 be different.For successful.

Many smallbusinesses that registered CBBEs, many years,the shouldalreadybelongto the formalsec- 70% of which had now-defunctNator benefitfiom beinginformal:Because P100,000 in assets. tional CottageInthey are unregistered, they remainun- Kalakalan20 rcally dustriesDeveloptaxed. is happening to addressed thesmallment Authority Most of the microenterprises and est of the cBBEs, (NACIDA) prothe whole of Asia. cottageindustriesknown asCountryside and would have videdassistance to and BarangayBusinessEnterprises hada greaterfollowthissector.

(CBBEs) beiongto theinformalsecror.

Of- ing were it not for a numberof shortRaw materialprocurementand ten,thesearehome-based concerns in the comings. processing were identifiedasamongthe urbanareasandcommunity-based, in the An impactsurveyshowedthat one more importantservicesneededby cotcountryside.

Someserveonly asintermit- reasonfor the low numberof registrants tageenterprises to sustaintheiroperations. tent or supplementary sourcesof liveli was the lack of information,mainly be- Common-service facilitiesin procurement hood. Theseenterprises employindig- causelocalgovernments didnot effectively may providean all.year-round sourceof

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ZoneActof 1995, Economic definition' ortheSpecial By the government's thusexinvestrnents smallindustriesincludelivelihoodopera- tookeffect.Aggregate cot- ceededthe 1994levelby 446%,thereby tionsin the informalsector,CBBES, andexports directemployment increasing andsmallentelplises' tageindustries, 56%. and 33% by total about99%of SMEscomPrise of the exPortProcessThe success in thecountry,numbering establishments lawsledto theexearlier under zones inq 494,962asofAugust1996.Theyemploy of the ecopansion about 55% of the concept zone nomic country'stotal labol industrial include to forceand contribute Small firms are tourismand estates; of totalsales some25% to consubiect recreation comvolume. p l e x e s f; r e e t r a d e straints that In the PhiliPzones;and investpines,theSMEsarein prevent them ment, commetciai, and rethe wholesale attaining banking,and finanfrom tail trade(42.5%),ln cialcenters' soclal'and communitY, administrative lo date'tnere (30%)' relatedservices of economies in 64 ecozones are and in manufacturing of four countrY, the scale.

(19.8%).

SMEshavea : NACIDA. are governwhich to attend greaterconcentration of anagencY Theabsence TheY ment-owned. to their needsafterNACIDAsabolition in theNationalCaPital island maior three the ovet scattered to tum Regionand in the SouthernTagalogRe are promptedthe cottageenterprises theVisayas, GALABAMONeconomic goups:49 inLuzon,sevenin to the regionalofficesof the Department gion,wherethe Mindanao. in eight and of TradeandIndustry(DTI),whichwete zoneis located. fueasaroundthe zonesarelneutamandatedprimarilyto assistin the develsetup asmorecompanies developed bly Off from the SPecial opmentof SMEs.Sincethe regionaiDTI SMEs:Taking estabinfiastructure from tting benefi shop, and EconomicZones hadlimitedsnffandresources, offices telutilities' zone-public the for befweenthe lished TheclosePartnershiP cottageindustrieshad extensiverequirefatransportation and andtheprivatesectorthathas ecommunications, train- government ments-Iaw materials,technology' serving enterprises Meanwhile, resultsin theestablishment cilities. ing, flnancing,and marketing-the DTI showntangible economic worker needsare alsoattractedto the of thespecial officeshad to reducethe attentiongiven anddevelopment belongmainlyto threeimpor- zones.The companies zones.Thesezonesaddress to the SMEs. (e.g., housing,food, sector countryside the service therearefour tant concelns:employment, however, At present, and laundryentertainment, others). andexPortearnings. lelatedto the development, pendingbills in Congress The challengenow is to comeuP bYtheeconomic ThePerksdangled of NACIDA,whichwill ie-establishment thatwouldenpolicies andprograms and tech- with with morerefinedincentives, zoneslure foreigninvestments beequipped that are difirms nologyinto thecoun- couragemanufacturing suchastheexemPtion to set market world the to to both rectly linked tly. Incentives of workersin these link and zones the outside andinves- up operations developers The region's from the enterprises firms large and small, up with the medium torsencourage minimum wage iaw. unprecodented large within. and medium, Thenew NACIDAis economiG form to flrms Partnerto have alsoproPosed and shipsand to set uP Philippine SMEs:Their Needs most can boom covetage' a broader new venturesto op- Problems which will inciude probablY be Theneedsof SMEshaveremained eratein the zones. cottageindusuiesin andpracticallythe sameover The Build-OP- predictable attributed to its otherfields(e.g.,agro(BOT) the years,but the contextof theirneeds erate-Transfer fisheties). large pool of Today' schemeof the gov- andthet criticalityhavechanged' acwith concerned ernmenthasaisosuc- SMEscontinueto be and information, ceededin attracting cessto creditfacilities, SMEsare acmarketing. "engines" of economic investmentsin infrastructuredevelopasthe knowledged enterof their size,sma11 Because the of variations afeem- ment. NoW with more growth.Amongtheircontributions reduce that poolof building'construc- prisesareproneto constraints ployment,equitablegrowth,industrydis- BOI a wider riskflexibilityandpreventthemfiom develop- tion,andrelatedflrmshasbeendrawnto their persal,balancedaglo-industflal of economies attainingadministrative tech- suchprolects. development, ment,humanresource strength were scale.SMEslackthe bargaining SomeP52Bin investments anduse,andvaluenologicaldevelopment the marketpriceof eitherin influencing 7916' RA year that in the first registered resources. addedon loca1

raw materials(e.g.,cottonyarnfor weavers and rattanpolesfor canefurniture canproducer Thesmallcottage makers). not affordto stockup raw materials,but thesemust be immediatelyavailablefor andprochim or herto beableto accept essan order.On the otherhand,a commonclaymixeror blenderfor thecottage or a woodkiln dryer ceramicproducers, for thefurnituremaker,mayimprovethe qualityof their productsand help maintain their markets.

A fewYearsago,NACIDAwasabolfelt ished-at a timewhensomequarters that the incentivesbeingprovidedby the benefiNACiDA only encouraged ciariesto remainsmallandweak' It was continenterprises notedthat successful with ued to maintaintheir membership

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1997 TheAsianManagerlJuly-August'/September-October

theirproductsor services, or in buyingin- donor agencies is developed with the sentativesfor Luzon, Visayas,and puts.Neithercanthey takeadvantage of popularparticipationof beneficiaries, but Mindanaowerealsoappointed to thecomtheeconomies of volumeproduction,pur- it is mainlydirectedtowardsfulfillingthe mittees. chasing,transporting, andmarketing. organization's mission.Government assistSBGFCprovides, promotes, develHowever,changesin technology anceprograms, on theotler hand,arede- ops,and widensthe scopeand service andmarketdemands havebeenaltering pendenton budgetary allocations andcol- of variousalternativemodesof financing the pictureby reducingthe advantages of laboration with otheragencies. for smallentrepreneurs.

Basically, it proeconomies of scale.SMEscannow penGovernmentorganizations mainly videsguarantees for SMEsthat secure etratemarketswith new goodsor serv- providefinancialservices, techno-manage-loansfiom variousfinancinginstitutions ices that larger rial ftainingpro- which,ordinuiiy,wouldrequirecollaterai. .k firms would find I g.ams,and infor- Financialsupportfor over 2,500 SMEs unprofitable to mation services. had thus significantlyincreased,from make (due to Out of the 79 onlyP5.4million(M) in 1992toP2.7B longeror costlier agencies involved by May 1996. p r o d u c t i o n )O . f withSMEs,2ldiSGBFChasalreadyenjoinedpartcourse,the SMEs rectly assistthe nerships with 121banksandotherlend. mustbeawarethat SME sector inginstitulions-ruralbanks,commercial arG a technological throughtechno- and development banks,savingsand edgecouldbehad, managerialtrain- loan associations, savingsand mortgage and be ableto acmgprograms and banks,specializedgovernmentbanks, cessit. informationserv- and nonbankfinancialintermediaries.

Theinformaices- Financial Half of SGBFC's 121 partnersare rurai tionneedsof SMEs servlcesare pro- banks. arevastandvaried. videdby 19 govAs mandatedby laq the Bangko Thebasicconcerns ue information onpoii ernmentagencies, covering1I I creditpro- Sentralng Pilipinasrequiredail publicand cies,legalguidelines,opportunities, and grams. privatelendinginstitutionsto setaside8% services.Likewise,SMEsneedto know The government's effortsto better of their loan portfoliosfor SMEsfor the thecriticalchanges in theirbusiness envi serveSMEshavealsobeencapturedin RA nextsixyears. ronment,andhow theycancopeor take 6977-known as the Magna Cartafor The Boardof Investments (BOI), advantage of them.At present, economic SMEs-which waspassedonlanuary24, on the other hand,providesassistance reforms,suchasliberalization andderegu- 1991.Thelandmarklaw providedthree to SMESthroughits Enfepreneurial Delationhavealreadyalteredthe landscape maiorcomponents: the creationof the velopmentServices Department, which significantly.

SmallandMediumEnterprises Develop- focusesits activitieson entrepreneurial Changes policiesand ment(SMED)Council,thecreation in government of the development, supportindustriesdeveiproblemsin their implementation also SmallBusiness Guarantee FundCorpora- opment,assistance to SME investors, haveadverseeffectson SMEs.Forexam- tion (SBGFC), andthemandatory annual and the developmentof specialworkple, the absenceof an agencylike the allocationof loanablefundsfor smallen- ableprogramsor projectsthat would enNACIDA,which wasresponsible for cot- terprisesby banks. hanceand stabilizethe growth of the tageindustries, leavesa bigsegment of the The SMEDCouncilis the highest sector. economyunattended.

CBBEsthus have policymakng bodyandtheprimaryagency TheBOI'smajorprograms: limitedaccess to creditfacilities andother responsible o BackwardLinkage Programfor thepromotion,growth,and services compuedwith SMEs,whichhave development of SMEsin the country.It is strengthens the linkagesbetweenassembeenprovided numerous andoverlapping taskedto rationalizeall existingSMEpro- bler-users and localsupplycompanies in programs assistance thatarenow beingra- gramsandagencies. relationto the assembler-users' subcontionalized.

TheSecretary of the Departmentof tractingrequirements The0ansformation of thelocalbusi TradeandIndustrychairsthe Council.Its o CenterSatelliteDemonstration nessscene-liberalizedand opento for- memberagencies arethe Departments of Project- develops andestablishes subconeigninstitutions-maypresentcertaindif- ScienceandTechnology, Agriculture,En- tractingrelationships betweenlargefirms ficultiesthat,if not accorded immediate vironmentand NaturalResources, and andnumerousup-,mid-or downstream attention,wouldcloakSMEsin anatrnos- LaborandEmployment; theNationalEco- SMEs phereof uncertainty. . Kabuhayan nomic and Development Authority;and 2000-reintegrates retheSmallBusiness Guarantee andFinance turningoverseas workersthroughentreHelping Hands for SMEs Corporation. preneurialservices, viableinvestmentopVarioustypesof organizations assist The SMEDCouncilhasorganized portunities, andhumanresource developSMEs:govemment organizations, nongov- two committees-Policyand Research, ment. ernmentorganizations, donoragencies, and Piansand Programs-whichare o YoungFilipinoEntrepreneur Proindustryassociations, andthe privatesec- bothchairedby privatesectorrepresenta- gram- offersfwo-yearUainingprogams tor in general.Assistance comingfrom tives.Threeregionalprivate-sector repre- in Taiwan.

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growth.

July-August/September-October1997 l TheAsianManaser

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ln viabilityof a venturecapitalschemethat ketingactivities,inffeasedinvestments Problemsof ImPlementation and inintensified infrastructure, will raisefundsusingthe mutualfund countryside ResultingPolicYChanges andthestren$hdissemination, formation on only not proiects focus These SMEshaveneedsthatareseparate concept. on the eningof SMEinstitutions. and uniqueto their sizes.By definition the financingaspect,but also PCCIandtheSMEDCounciliointlY capitalventure of services cottageindustriesare nonfinancial (basedon assets), and implementedflagship developed managers' private fund Thus, istsand undersmallenterprises. subsumed with projectssuchas the SMETradeHouse SBGFC RA8289hasinvested programsand servicesfor cotassistance to the private are a wider mandatein sourcingandadopt- (whichhasbeendelegated tageindustriesand smallenterprises the SMEData for management), ineffective-aproblemthat ing developmentinitiativesfor SMEsin sector oftenrendered production, base,the SMECenter,the Big Brotheris currentlybeingstudied.An amendment termsof finance,technology, linkages. SmallBrotherProgram,andthe SMEAcbusiness and re- management, to theMagnaCartawill beintroduced cessto Financto cleariydistin- Meanwhile,a new i'-',' definingsmallenterprises ing.

Fur- law has amended guishthem fiom largerenterprises. ' Planscall specify RA6977,expanding amendmentwill , ther,theproposed creation the for the incentivesand benefitsexclusiveto its areaof coverage Small the of to mediumentersmallenterPrises.

PromoBusiness in theim- prises.The amend- ,,,: TherewerealsoProblems tions Center.A plementationof the mandatorycredital- mentadds10 years private sectot locationfor SMEs.Somebanksusedalter- to the . provision , :., theCenagency, ': suchas ac- mandatingPrivate nativemodesof compliance suPPlewill ter fi- '1, in lieuof actual and government of commitment ceptance government loans.Thisproblemmaybe attributedto nancialinstitutions i ment and Prithe factthat manybankswould consider to set asidepart of themarat strengthening efforts sector present' vate for SMEs.At smallborrowersasaliensto the bankand theirioanportfolios is vital which of SMEs, capability keting of 6% viceversa,asbanksandfinancialinstitu- financialinstitutionsmust devote as will agency The time. this at them for tionshavemore experiencein servicing their loanportfoliosto smallenterprises, technical and preparing feasibility in years sist Ten Theriskfac- and2%,formediumenterprises. mediumandlargeenterprises. promofinancing, and studiesfor prototypes, banks the give both to expected are to lending in considered torsperennially transtechnology in marketing; and tions, train- the smallborrowersmoretime to better SMEsarethek lackof organization, of provision in the and training; and fer and technicalassist- know eachother. ing, marketaccess, by a singlebody. informationservices ance. old laws Participationof SMEsin their Own theseconcerns, Toaddress ChangingRolesof SMEs Developmcnt arerevisedandnew of The long-termcomPetitiveness I he Pnillppine onesare takenuP, much very is enterpdses luge and medium C h a m b e or I L o m with the correinputs on the value-adding and lndustry dependent merce spondingimPlemen- tutions must aet will dependence The firms. small fiom i: (PCCI) had entation mechanisms. agmore a take SMEs of as 8olo inoease, likely aside sector hanced Private In this regard,the components providing in gressive role in SME participation their loan Port' SMEDCounciihas to largefirmsthatareexportdevel- andservices promotion and inueasedits Private SMEg for folios PCCI,in co- or domestic-oriented. opment. sectorparlicipation At present,SMEsare alsomaking (6% with the ordination small for to includethe acato technological contributions SMEDCouncil,runs substantial deme and SME firms and Zslo that aresubiect indusilies in its SME Assistance innovations ownerswho Partici change' technological rapid Proiect,which regu to patein the PolicySMEscontinue In the PhiliPPines, holdsbusiness larlv and makingprocess for the taloutlets productive provide to conlerences. in the preparation, independenterprising of energies and In last Year's ents drafting, and renotfind would whom of people, many of the SMEYear,PCCIpre- ent for enact- celebration viewingof bills recommended elsewhere' opportunities actions empioyment strategic Ramos sentedto President ment. which SMEsoftenflourishby servinglimitedor global competitiveness, SME for to hasbeenmandated TheSBGFC thatarenotatfiactive markets weredraftedduringtheflrstSMENational specialized providevariousalternalivemodesof fi The sectorls both a enterprises. included to large Summit.Thestrategies nancingfor SMEs,which includethe set- Leaders talentand a entrepreneuriai for educa- seedbed ting up of a stockexchangefor SMEs the integrationof entrepreneurial industries. ground for ofhumanresources testing (SMEX).Thisplanpromptedthe Philip- tion,theenhancement andenhance SMEsiniectdYnamism of accessto facilitation the training, putting and pine StockExchangeto consider They economy. the within the railonalizationof flnanc- competition up a similarfacility.Theprivatesectot'in technology, harm less do promote stability, community marpaftnershipwith SBGFC,is studyingthe ing, the developmentof aggressive

that are

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The AsianManagerlJuly-August/Septembetoctober 1997

to the physicalenvironmentthan some for example.Originaliy,the law mandatIargeenterprises, stimulatepersonalsav- ed banksto set aside5%-10%of their ings, promoteagro-industrial linkages, loanportfoliosfor thesector.Comeimpleimproverural welfare,and,in general, mentationtime, however,someadlustraisethe levelof popularparticipationin mentshadto be made.It becamenecesthe economy. saryto specifythat6%of thefundsshould Whiieadjusilngto thenewbusiness be dedicatedto smailfirms and 2%, to environment, the SMEs absorb medium-sized firms. the shocksbroughtaboutby changes It hasbeenobservedthat a close

Thisarena,whereflexibilityandinnovationabound,is thedomainof SMEs. In this scenario,largefirms may be relegatedto simplybeingassemblers or moversof their output.

Strengthin Partnerships It hasbecomeevidentthat the differentsegments of the smallenterprise sector-the informalsector,cottageindustries,microenterprises, andsmallbusi ' becomevictimsof ernment andthe nesses-havedistinctstrengths, aswell as the government's 11;ith privatesectorre- specialrequirements, to becomeviable. r i b e r a r i z ati o n rh ;; iult, in eco For them to surviveand eventuallyconi l ;;;;; "'- "'. measures, u! l9T! nomicgrowth, tributeto nationalgrowthin an emerging :'::'l-1:Yl ganfZfftlOn, during:h-einitiai tfaanaslongasboth borderless environment, it maybeprudent pe.rroih the:r for them to link themseives ing' malftet to eachother, acees$, ::-*',..1'^'^i to mediumindustries,and ultimately,to largefirms.Eachsegmentwili contribute an input thatwill addvalueto the output ':': j.:] of theotherin succession, wherethefinal ,....". . ;:.- .ii.:.:1::',.-.-r .:: i::r-.:ruri:i; rent ioreign ex_ aj'tiveparticipa- outputof the linkageis a productor servchange fluctuations by increasing the tion of the privatesector,sufficientincen- ice for the domesticor exportmarket. pricesof theirproducts. tives,and tlear governmentpolicydirecForpoliciesandprograms intended At thesametime,sMEsarebenefi- tions,success is inevitable.

A clearproof to benefitthesmaliandmediumenterprise ciariesof thebigenterprises thatmustnow of the premisecanbe seenin the special sector,policymakers and implementing outsourceproductsfrom smailfirms to ecozones.

New firms-mostly with for_ agencies maybewell advisedto segregate reducecostsand maintaincompetitive- eignalliances-locatedthemselves in the incentivesthat are exclusivelyfor small ness. zoneand,in turn,newventures sprouted firmsfiom thosefor mediumenterprises. in the communitiesaroundt}le zonesto Butfirst,thesmallenterprise sector InsightsGainedin Policymakingand servicethe needsof thosewithin the needsfurther categorization, asthegeneric Implementation z0nes. definitionof smallenterprises in the phil.

Now that ampletime and experiIn an inoeasin$yborderless envi ippinesis:firmswith assets worthbetween encehavebeenspenton theimplementa- ronment,companies, particularly SMEs, P15M to P60M. Thisdefinitionincludes tion of programsfor SME development, will haveto be highlyspecialized andca- medium-sized firms,which arelikely cafocushasshiftedto theclarification of defi- pableof manufacturing qual- pableof takingcareof themselves. world-class nitionsand the identificationof the vari ityproducts or components atcompetitive Mediumcompanies havethe funcouseconomicsectors.

Actually,thisactiv- costs. tionalmanagement staffand resources, ity shouldhavebeena prioritybeforeany Beingspecialized meansthat com- suchasthe capacityto providecollaterals policywas enacted.The purposeof cat- panies will bedependent on othercompa- for bankloans;canusuallyqualifyfor BOI egorization isto describe eachsector's busi nies'specialization.

Wheninterdependent incentives;andcanparticipate in the spenessand nonbusiness characteristics: fi- relationships, networks,confederations, or cialeconomic zones. nancial,production, marketing, andman- associations of firmsareformed,eachfirm Smallfirms do not havethe capaagementcapacities andlimitations;finan- is committedandunderpressure to suc- bilitiesof mediumfirms and would thus cial and gowth objectives,and typesof ceed,asthe alternativemaybe failurefor greatly benefitfrom varioustypesof asbusiness linkages;management priorities all. sistanceand incentives.Unfortunately, andpreferences; andothercharacteristics.

A cultureof collaboration, rather manyseemin$ysuccessful programsfor The definitionwould haveclearlyshown thancompetition, becomes morerelevant SMEsmay havebenefittedmostlyme. policymakers what lawswereneededto as the world marketexpandsand new dium firms. Hence,programs for the promoteand developthe sectorscon- marketnichesemerge.Fast-changing smallenterprises shouldbestatedassuch cerned. "for the technologyand the far-reaching commu- andnot in the all-encompassing Sincethe categorization of eco- nicationsprovidethe impetusfor the SME_s." nomic sectorswas not previouslyunder- creationof new productswith new techtaken, the implementationof dev- nologiesto servethe needsof a growing elopmentprogramsand their respective segmentof the market.This emerging ProfessorQuintin G. Tanis theholderof theCanagoverninglaws had to be revised.Take marketrequiresmorepersonalized prod- dian ProfessorialChair of BusinessManagement the experience derivedduringthe imple- ucts than thoseproducedfor the mass and Directorof theAIM Centerfor EntrepreneurshiptACD of theAsianInstitut'e of Management. mentationof the MagnaCartafor SMEs, market.

Email: qtan@aim.e du.ph

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July-August,/September-October l99T l TheAsianManaser

g9

Careful,Careful assoclates? byyourbuslness wantto beunderstood Beclearanddirectin youruseof words. simply ife is difficult enoughwithout mediatelesponse,the other may stickingyour foot in Yourmouth. be filedawaY. Words, as we all know' are You'll Idioms. In the PhiliPPines, powerful tools we use to convey you someask if probably understood be or affirmation displeasure, acceptance, "Open another the liglrt." But in a business one to And,especiallyin disagreement. youmaygetpeoplescramsetting, cultural your words sure make setting,youwantto light flxture itself. hit their markeverytime.Howevet,there bling to dismantlethe "Let'sdo lunch" may arewordsthatwe needto becarefulwith TheL.A.expression it is,in fact,done. becausethey sow confusion and makesomewonderhow"Catch you later" contributenothing in terms of positive In New Yorkparlance, Yorkerwho feedbackand clearerunderstanding may confusea non-New In SamDeep'sand doesn'tthink he is in anyparticulardanbetweenassociates.

SmartMoveqten typesof gerof falling.At the very least,usingidiLyleSussman's an outside words we should use carefullYin a oms from childhoodor from impression a negative in result can culture or written businesssetting,whether of you. verbal,arehighlighted: Jargon. Jargoninvolvestechnical terms, and technicallingo is confusing for thosewho are not living in that section of the building.When You say' "Look,all we needto do is bumpup the OD'sin orderto makeroomfor the FC's and then move ovel the TPG'sinto anyou are probably other quasi-sector," alienatingyour listenerswho are fran' ticallysearchingtheir memoryfor every aclonymthat hascometheir way.At the veryleast,they'llaskyouwhatyournean' At the very worst, they'Il think you are inconsiderate.

Euphemisms. Using softer,more verboselanguageto glossover negative situations,which mostpoliticallycorrect jargondoes,or to downplaymore vivid images,resultsin a lossof precisecombetween Noticethedifference munication. "angry"and"upset."Ifoneis angrybutis "upset,"this maysenda difdesoibedas to the listeneraboutthe ferentmessage "urgent" currentstateof mind.Or nerson's "important."Oneindicatesan imversus 90

Slang.I had an officematewho said "CoolBeans"everytimea geat account colleague cameher way. Our Japanese thoughtshewassimplyfocusingon what to havefor lunch and askedme one day why she liked beansso much. Words which arenot in thedictionaryor asseen on MTV,shouldalsogenerallybeavoided setting.Unlessyou work in in a business an officewhereeveryoneis wearingred, "Yourpreshightopsandloosejeans,then entationwastotallyrazzin'!"is unforgivable,if not inappropriate.

ienatingaswell. If you reallycan'tspeak plainEnglishat that pointin time,it may be a goodideato just headbackto the offlceandtalk to someonethere.

Red Flag Words. AgainpoliticallyCallfallinto thiscategory' correctphrases "girl" or a usinga racial ing a womana slur are probablyno-no's.Rule number one:If you aren'tsure,don't.

Vague or Abstract Language.Try Ifyou say to be clearasoftenaspossible.

"Couldyou getthisbackto me quickly?" thismaymeanwithin the next minuteor on therewithin thenextyear,depending Instead, workflow. or cipient'sperception "l needthatbackby 2:30p.m' try saylng, next MondaY." Overly ComPlexWords. Do not be pompousand think big wordsarebetter "Bad" hits the mark as than smal1ones. "egregious," and what'smore,it well as saveson timespenthavingto lookit up in the dictionary.

Clich6s. Enoughwith the wom-out phrases like "Hecan'thavehiscake'.."or "That'sthe way the cookie..."or even "Youwin some..."Beoriginal.

If youcan't a clichâ&#x201A;Ź' to resort to have and be original "Youcan't teach right. get them at least won't cut ProfanitY.ImPact,maybe.ResPect, an old dogto drink watel" iust in it. maybenot. Profanityis risky,especially So,checkYourlanguagebeforeYou your a muiticulturalsetting.Besides, go into the boardroomor into a business motherraisedyou betterthanthat. enougltwithmeeting.Lifeis complicated unwittingly we verbiage tiresome Office or ComPanY'SPecific out the ll other. each Phrases.This happensto workaholics inflict upon duringtheirleisuretime' Whensomeone T. Garciais the Executioe asksthem what they do, they saythings ProfessorMilaxros of thi ManagementAwards of Asia Diiector "Well, I'm in the HRD-COM12 and teaches Corporate Communications iike, with hyper- and Adztertising in the MBM program' I dealspecifically and branch du.Ph>' and al- Email: <mgarcia@aim.e inconsiderate It's issues." fallout

The AsianManager I July-August/SeptemberOctober 1997

TheForemost Filipino Entrepreneurial Family

tartingwith the formidablematri only to find that her father had died and beinga revolutionary; in fact,ofbeingthe arch,MargaritaRoxasde Ayala,a hadbeenburiedwhileshewasjn Spain. secretleader of the Katipunan.He was succession of Roxas,Ayala,Zobel A year after her father'sdeath, eventually acquittedof thischarge. women,bychoosing entrepreneudal hus- MargaritaRoxasmarriedAntoniodeAyala, At even more colorfr.rlpersonality bands,spawneda business dl'nastythat her father'spartner.Despitethe demands wasJacobo ZobelyZangoniz.In addition hasperduredfor morethana centuryand ofmotherhood arlda full soclal,civic,and to beinga businessman, he wasa scientist a hal[.These womens judicious decisions philanthropiccalendar,Margaritare- and"the mostnotable(Manila)mayorof havesustained Ayalathroughthe Philip. mainedactivein busineils.Sheran the Spanish times.",ln1887,heorganized the pines'mostturbulentyeamand madeit DestileiaAyal4settp ald managed ntpa Companiade los Tranviasde Fitipinas, the oldestbusiness housein the country. plantations in Pampanga andCapizto pro- which operatedthe first steetcarsystem ducethealcoholthatthedistilleryneeded, in the country.HisUamcars were 12.pasThe l9th Century: Beginnings and operated coalminesin Camafines, sengerwoodencarriages, eachdrawl by In 1834,DomingoRoxasformeda Cebu,andTayabas for fuel.rOn theother only one horse.The system,with plaza partnership with AntoniodeAyala.Roxas, hand,her husbandengaged in bankingand SanGabrielin the cirys cenral business a capitalist,and de Ayala,the industrial insurance,the two Iieldsthat would be district as its hub, had five routes: paftner,foundedthe country'slirstdistilf CasadeAyaldsmainstays in thenext cen. I n t r a m u r o s ,M a l a t e , M a l a c a i a n g , ery Startingoffwith a primitivestillmade rury.

Sampaloc, andTondo.JacoboZobelmanof timber and bamboo,they eventually Worthysuccessors to thef mother agedthe systemuntil his deathin 1896, developed a sophisticated plantthat pro. were Carmenand Trinidadde Ayalay justsix weeksbefore the outbreakof the ducedrum, cognac,whiskey,chartreuse, Roxas.Like her, they pickedmen with rcvolution.

In 1903,theCompania de los anis,anisette, andthegin thatup to today innovativespirit. Carmenmarriedher Tranviasde Filiptnaswas sold to the Mais widely soughtafter-Clrebra San cousin,PedroPabloRoxas, whileTrinidad nila ElectdcRailwayandLightCompany Mtguel. tookJacobo Zobely Zangonizasher hus- (MERALCOI. In 1842,DomingoRoxas, suspected band.

Margarita,a daughterof Carmen (forthethlrdtimelof fomenting rebellion, PedroPabloRoxassetup anoil fac. Ayalade Roxasand PedroPabloRoxas, was tirowr] into jail by the Spanishau. tory anda deepseanshingcompany.

He marriedEduardoSoriano.Their son, thorities.Hisdaughter, Margarita, hu ied participated in thefoundingofSan Miguel AndresSoriano,becamethe Philippines' off to Spainto pleadhis casewith Oueen Breweryand CompankMaritima,a ship- most successful entrepreneurHe exIsabela.After obtainingan orderfor his ping company.Like his grandfather, panded his$andfather'sSanMiguelBrew. release, sherushedbackro thePhiLippines,DomingoRoxas,he was alsoaccusedof ery into the country'slargestand most July-Au8usvsâ&#x201A;Źptember-Oclober l9g7 | TheAsknManaper gl

have aimedat the mid- lutionarytimes.Our historians,however, con" meter.LatersubdMsions andfoodproducts prof,table beverage the prior the revoludon. to In less pointedout that. wereprlcedmuchhigher'3 glomerate.Under the aegisof his own dle'class Spaniards were as Filipinos known s!'stematr- only ones cornpany,ANSCOR,he alsofoundeda than 25 years,McMicking had born in the Philippines,the insu/areslike MakatiintoGreaterManila's DomingoRoxas,MalgaritaRoxasde Ayala, in a callydeveloped companies grearmanysigni[icant plethoraof industries.TheseincludeAt- flnancialand businesscenter,sunounded T nidadAyaladeZobel,andCarmenAyalade a copperminingcom' by sevenof the country'smostup-market Roxaswho were the controllingownersof las Consolidated, villages.

Ayala.It wasFilipinonationalheroJoseRizal, Airlines,thecounfy'sflag residential pany;Philippine family business nearthe turn of the centurywho claimedthe Filipino other No es canier;AtiasFertilizer;PaperIndust "Filipinoforthe lndtos-the "sonsofthe Phelps goup canmatchthenumberofsignificalt name of the Philippines; Cofporation revolutionaries. thattheAyalashaveestabljshed soil,"the na ve MalaysIhe andRamieTextiles. companies DodgePhilippines; and EmiljoAguinaldo' Bonifacio like Andles Anotherdaughterof CarmenAYala dudngthe lastcenturyanda half.4 not asFilipinosbut as thoughtof themselves d e R o x a sa n d P e d r o P a b l o R o x a s , Endnotes: Tagalogs.

C o n s u e l om , a r r i e da c o u s i nn a m e d I IL 1924,thedistillery wassoldto Carlos On theotherhand,thereis no questionthat generationof Jacobo Seventl the postrevolutionary it LaTondena EnriqueZobelde Ayala.Their daughter' Palanca, whorenamed Ayalay Roxas' Zobelde Alfonso ftomthePalancas ZobelyRoxas, latel,it wasacquiled MercedesZobelde Ayalay Roxas,drew years were born McMicking Zobel Mercedes and into thefamilystill anotherenbepreneurial bySanMiguelCorporation. cavalry a career was ' fact, In Filipinos.

Jacobo Craig.

Austin historian Per son-inlawJosephMcMicking'who was "...wesoldour officerand an aide-de-camp of President r explanation: McMicking's for moldingMakatiinto the responsible landinitiallybelowthe pricewe wantedto ManuelL. Ouezon;his son,Enrique,was a disfiict. country'scental business Air Force.Finally,Jaime forthewholeareaand,automatically,majorin thePhilippine the average Roxas. ln 185I , JoseBonifacio weresold, Zobelde Ayala,who tookoverfrom[nrique meters afterX numberof square older brotherof the originalmatriarch' we raised lots.In asAyala'sCEOin the l980sandearly1990s' thepriceon theremaining to the Court MargadtaRoxasde Ayala,andthe father thisway.asa rewafdfortheirfaiti. Iheorigl- was the PhjlippineAmbassador boughtthe 1,616- nalbuyers cus- of SaintJames in I972 of PedroPabloRoxas, madea profitand,assatisfied advertising thebestpossible hecrareHaciendaMakarrtor 52.800pe tome$,became sos.For a hundredyearsthe Ayalasdid foroul land." is theKT Li CabinoA Mendoza thosewhomaycauL Professor sellbitsand a Thereare,of coufse, littlewith theiac&ndaexcept of lnternatioal Ma agemetlL' particu P/ofessor but Spanish, is not Filipino Ayala that p i e c e so f i t o n a n u n P l a n n ebda s i s . h> "sa- larlythosein thefamilywholivedin prerevo- Email: <gab!@aim.etlu.P it asthe McMickinglater described lami approach,much Iike the way a HeslicesofJasmuch butchersellsbaloney. he seilsthatmuchto buy: you to want as aboutit.Thefirstslice youandthenforgets andthelastcutajewofthaboutthesame."

I

The 20th Century: Makati Rises In 1946,justaftertheendof World remained Il, war onlyabout900hectares to extact decided McMicking with Ayala. it bY f r o m v a l u e the maximum "deliberately build[ing]the finestrealesin thePhilippines...fuliy tatedevelopment drainunderground roads, pavedfull-width landelaborate system, good water age,a the use of the on scaping,restrictions Forbes developlng off by iand."Hestarted Parkat the far end of the property.The and residences Ayalasbuilt thet personal went to live in Forbes.

McMickingtheninvitedthe multinationalcomparfesto buildhomesfor their FordMotor Co.wasthe CEOsin Forbes.

JohnMan' fiJstto buya lot forits President, and theManila Club ning.TheManilaPolo pe$uaded to movet0 GolfClubwere also known quicKy became very theuea.Forbes in orlronically, asthe millionaires'village. cfl t0 very derto makeit atuactvefor the priced initial the settlein Forbes,theAyalas persquare lotsthattheysoldatonlyslxpesos 92

lJuly-AuSusyseptembeFoctobe' TheAsianManager

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The l''lBA Career Guide 46 Delancey Street, United KinSdom Fax +/A l0) l7l a67 1941 'REEINFOR/!{TfOl{ AVA|L,.DIIONL'(TOMBAGU\DEsUBscR'aERs

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BlueBird SPreads Its Wings ipline' Driven byspirited teamworl9hardworN honesty,.disc as itsingredients for achievement courtesy andcustomer

a

BlueBirdhascaNedfor itself Editor'sNote:TAMbeginsa newsection in Jakarta, kee7aheadwith uniqueplacein the heartof the business on how com\anies capl Indonesla's rcci7ientof Management and toudstactivitiesof BtueBtrd, peo' Manage tal,abustlingmetopolisof 12million Awardsof Aslafor Operations p1e. mentin 1qq5. rangeand large

With its complete numberofvehicles(allunitsbeingcompany' o the outsider,the name BIueBirdGroupcanbe conBird" evokesimagesof a soaring owned],the companyof its kind in largest the Blue sidered airline.But to lndonesians, with its dynamlc As1a.

Bird is aptlyassociated for isfamous Althoughthecompany fleetselvandreliablelandtransportation linousine its Iakarta, laxiin fie BlueBird monthly' ins wo miliionpassengers service,GoldenBird,enioysa virtualmo1972 in From modestbeginnings dfivencars provideschauffeur -with only 25 taxi cabs-the Blue noDolv.lt five-star and four all at ,nd li.oriin.t BirdGroup'sfleetnow hasover5,500ve' and Bali, and hotelsin mefopolitanJakarta hicles.The companyoffersservlces Intemational oftheJakarta at allterminals rangingfrom taxis,executivetaxis,limAirport.

Io conLainer of buses. andailsizes ousines, trucks.

Landuanspor' tation is still Blue Bird'score business ard identitytoday,a]thoughthe company has three other divi' sions:lndusby,ProPefiy,aIIdSeNices.{see TableI ) "Blue

Market Leader: How TheY Do It Having estab- Frcm 2Staxicabsin lisheditsheadqudters to containet trucks 94

1gg2, BtueBird today maintainsa

I 997 ManagerIJuly-Augusyseptember'Octobe' me Asian

may success Partof the company's cus' stress poiicies that be atuibutedto d r iver a n d l o m e rs e r v i c em, a n a g e m e n t r'ntocondnuous a commitmenl uaining. in infrastruc andinvestment provement, ture.(seeTable2J

Infrastructure:The Invisible Services is Whal is visibleto LhPcustomer is There iceberg. of the lip the reallyonly backup and structures gamut of a whole facilitiesto supportthe fronUineopera' tions.Someof thesefacilitiesare24'hour seNicestationsat all depots;ninecarand locatedinJakarta; busdepotsstrategically outletsat maior hotelsin Jakarta,Bali, Lombok,and Bandung;and a 24'hovr computeflzeo telephonereservatlon system, which is thelifebloodof its customer seNlceoperations.

B l u e Bird was the first company to in lndonesia use a compu' terizedreserfleetof 5'5OOvehiclesfron taxis vationsystem,

Values-diven divers: They are treated as menbers of the 'family.,'

LandTranspottation Recurm Tnxrs . BlueBirdTaxi . Gamya Taxi . Morante JayaTaxi . Cendrawasih Taxi . BaliTaxi . Lombok Taxi . Surabaya Taxi ExecurrvE Tuts . Silver Bird Lrvousrnes . Golden Bird-Limousine Service . Golden BirdBali-Limousine Service Buses . BigBird-Bus Service ComnnEn Tneusponr Senvrce . lronBird . Angkutan Kontenindo Antarmoda Prcpetty . Holiday InnResort Lombok . Pusaka CitraDjokosoetono-Condominiums lndustry . Restu lbu-BusBodyManufacturer . Ziegler-Fire & Rescue Truck Manufacturer . Everlite -Vehicle LightBulbManufacturer Se/yices . RikaKonnas Freight CenterCargo Forwarding andContainer Depot . GasBiru- CNGGasInstallation andFilling . JasaAlam - Petrol& CNGStation

Tvp:or VrHrcu

Nuugen or VeHrcles (Asof Sept.1, 1997)

Regular Taxis (Jakarta) BlueBird Gamya l\4orante Jaya Cendrawasih Regular Taxis (outside Jakarta) BaliTaxi Lombok Taxi Surabaya Taxi

1,600 500 500 250 300 50 100

0therVehicles Silver BirdExecutive Taxi Golden BirdLimousines BigBirdBuses AKA& lronBirdTrucks

740 1,200 500 120

TotalVehicles

5,860

July-August/SeptembeFoctober 1997 | TheAsian Manager gs

Thedepotshave groupingsof drive$, of 15eachconsisting 18 drivers.All of the groupsarcheadedbya groupleaderandhave fwo seniorddversat eachdepot.

Theseniordriv' erswelcomeard assist any driver who has problems, and facili' tate communication betweenthe depot stalf and drivers.A communityspirit is fosteredat everydepot, wheresocialand Servlce: Customer The invisibleand beyondthe US$2millioncomputersystem:Suryriseand delightthe eventsare religious Surpriseand customer! for the drivers held Delight their families. act in and philoso' it would rather company, but the In explainingthe company's T h e d r i v e r so f B l u eB i r da r e a p ' thandisof thecustomer phy,Directorof Operations Dr Purnomo thebestinterests "There perform' ' ^ h ^ i n i h i m ^ r h o r praised monthlyandexemplary dif' is afundamental Prawiro,says, quarterly ceremony in a ance is recognized lerencebetweentranspottattonandtrans "ModelDriversAwards andat theannual is iust Driver Training: Blue Bird Family portationseN[ces.Transportation and certificates Theyreceive that the major Ceremonies."

Prawirostresses frompointA to pointB; takingsomeone play' prizes, radio'cassette as bicycles, such it doesn'tmatterhow you getthere.The differencebehveenBlue Bird and othef Driverswho had accounts. lies in the management ers,or savings services"impliesa taxi companies term "transportation "The to fre depotsanybelongings driveris not consid' surrendered ofBlue of its drivers. wholerargeofthings.Themission left in their cabsare also Bird is to providequalitytransportation ereda subcontjaclor twherethe driver that customers but an rewarded. rentsthe taxi hom the company), serr'tces." havealsobeenacBlueBirddrivers Bird of the Blue and a member proper employee give to customer attention To public in the commu' recognition corded family."

Response a Customer needsandconcerns, and honesty.The their integdty provides nify for Bird comprehensive Blue (CRC) to answer hasbeensetup Center and theMinistry Regulation Board Traffic instiard has successfully driver training left andhelptracebelongings complaints to indi' have awarded of Transportation t0 en' appropriate systems tuted culturally The in thevehicles. behindbypassengers "Jakarta's Public Trans' Best drivers performance its vidual ftom highest within two couragethe CRCpromisesa response port and 1994'19q7,and in 1992 Ddver" hoursofthereport,andadefiniteresponse drivers. "lndonesian's BestDriver" in 1992 and A new driver'strainingincludes within 48 hours.If the informationre' 1 9 9 6 . is usu- customerseruice;spiritualor religious ceivedis complete,the response guidelines teachings: aboutwork per' allyposilive. formanceand discipline;the utilization Still Soaring BlueBirddriversareknownfor tieir To supportthe toudstboomin In' to the depotany of the radio'sAutomaticNumberIdenti' honestyin sunendedng foundin theirtaxis.Partof the fication(ANI bid) and securitysystem; donesia,BlueBird hasexpandedits taxi belongrngs suchas sta' servicesto populardestinations policyof "surprisinge cus- fte utilizationof the depotsereice company's followedby outlets. Baliandthe LombokIslands, to tion;andoptimizingthecompany tomer"is bringingtheirlostbelongings For Baldung. and in Surabaya operations and taining departnent The company's theirhomeor office. me toufist development, to its contnbution managand operaUons its senior ddvers customer valid reason, the If, forany prestig' the feceived has twice company the neoin instructing collaborate the ers with BlueBird'sseruice, is notsatisfied Awardfrom the Ja' iousAdikaryonama companywill try to offsetthe disappoint' phltes.

1994and 1995. tourism Board-in in' karta fie oaining laler stages of The or refund,or a discounl menrby offering heightsfor the the as it scaled where dfivdiscussions, Just givinga complimentary service.In cases volve interactive years, will continueto past Bitd 25 Blue manager about misses a fli8htbecause erscan ta.lkwith a senior wherea passenger quality providing landtranspace prcby set the problems theyfacewith operational of a problemwith the limousineor taxi, any pogressive port Indonesia. for a seffices Orientationsare ananges a booking ceduresor regulations.

BlueBirdimmediately in anotherairlineor buys a new plane givenby tle JakartaPoliceDepartment Melindalane is a writet basedin JaknrLa ticket.It may meana heftyexpensefor abouttrafflc regulations.

wheretelephonists receiveftom 6,000to 7,000callsdaily.The systemmaintainsa databankof 400,000 r e g u l a rc u s t o m e r s , storingdetailssuch as their names,adandpreferred dresses, service.Thecompany us$2 million invested for u:recomputersys. tem as part oI their commltmentto pro' vidingbettercustomer seff1ces.

96

*vn:.

1997 l.July'Augusyseptemberoctober Manager me Asian

^a

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Oneday,I toldmy manage$to devise a planthatwouldput our firm out of busi yielded10 session ness.Thebrainstorming and cor' waysto put us out of business, rectingthe problemtookussix months.

Blind Spots of $owth, but is enamoured Business is reducingtheriskof earlystart-uplosses usuallyoverlooked.Hidng an expertor two dudngthe planningstagecan sidestepthoseearlypidalls.In otherwords, the costof hi ng the peoplewho matter dis' to potentiallosses is minutecompared guisedasstart'upcosts.

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It is vital to educatethe whole com' pany,keepit in the leamingandinnovatingmode.Youneedgoodteachers-your managers. we werelookingat business Recently, I told the planningteamto teams. audit ald buyallthe visittheIntemetbookstore We endedup with audit. on business titles In a US$300. about books worth 20 week'stime,our planningteam,who had audit,were knownnothingaboutbusiness a curefor discovered like they had talking AIDS. areunwilling Many smallcompanles (read:spend on early to do simplethings majorheadthem would save a little)that 98

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ity is strainedto themaximum.Theytllen "the collectiveIO offersthe realizethat potential." greatest Haveyou ever been stumpedby a knotty problem?Try asking20 business for inputs.Theycouidgiveyou associates helpandareoftenverywilling enormous to do so' Peoplehave differentexperiences,knowledge,andcontacts;tapping oughtto getprob' 20 differentperspectives lemssolved.

Deciding Backward To Stay Ahead. . . "reversedeA simpleconcept,called First,a morselto chew on: About logjam unclog the sevenyearsago to cision,"is designed 50%of the jobsavailable yourself pending this way: imagine It works decisions. of no longerexist. Now field put and chosen approval Your up for \4/henan itemis sull a collegestudent. you analythe time basic it is supportedbythenecessary could becomeextinct by isimmediateliapproved. graduate. ses,theproposal starBeightdaysafterap' for that powerfulidea:the Searching Implementarion officer simplebut can provalis given.Thechiefexecutive onethatlooksdeceptively period grace aheadof the others.

(CEO)thushasan eight-day put your company proposal's goal.I think this back' your primary within which to digup the shouldbe job proponent), groundle.g.,talKngto the of everyleader shouldbe the Hereis a to-dolist for tiat quest: find out if it passesmuster,and decide "reverse is good.The 1. Tapcollectiveintellect. whethertheproposal decision"conceptlaysthe burdenon the 2. Workhardto makeYourbusiness obsolete.

CEOto maketimelydecisions.

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TheAsianManager I July-AugusyseptembeFoctober 1997

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