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# PLDT fhe lelqommunkationsComPnY
Rrblhh€r FelipeB. Alfonso
10 TheNewBoundarles of the 'Bomdaryless Company'
Edltor{l}Chlet MichaelA. Hamlin
8y LanyHirschhorn and ThomasGilmore WhanonCenterfor ApptiedResearch
M.n4hg Edhol lbana C. Gutierrez ArCltsnt Managlng Edho. Kin Gatbonton
25 FrornSwamp
to Summit:Ihe NewAsean
Dcslglt Dltrctot AlexanderBowie
8y AndreSaumier Chairman, Saumier FreresConseil
tu3oclrte EdltoE SalomeRores"Aldaba FedericoS. Esguena AletaA. Tabatba
n AFTA:A Win Wn Game
Coitdbutlng Edltors Bangladesh: Milon BikashPaut,MM '88. HongKong:StephenTangWingOn, '76. lvlBt4 India:JuzarKhorakiwala, MBM '75. Indonesia:Leonardo Tanubrata,MBM '78; ChristinaF. Ferreros,AIVIMP'82.Korea:HongSoo Lee, MM '79. Malaysia:Tan Sri Dat6 lr. TalhaHj. l\4ohd.Hashim,MM '76. Pakistan:lshtiaq AhmadQureshi,Bt\,tp '77. Philippines: JesliLapus,MBtVt'73. Singapore:GanCheongEng,t\rBM'82. Taiwan:Hsieh Lai Fa,TMP '82. Thailand:SomnukJetjiravat,BMp '81, Edltod.l Boerd GabinoA. Mendoza HoracioM. Bonomeo,Jr. SonnyB. Coloma
ByMariKondo Professor AsianInstitute of lVanagement
TheNewManagement Technology: AsianOElanLations ByGabinoA. lvendoza K.T.Li Protussor of Business Mana{ement
4l
&soclate Publlrbo.& Advo,tbltrg DlGctor- lnt.m.tlonrl levor A. Roberts Ae€oclat! Publleher& Adve bhg Dlrcctor- Phlllppln€s DeliaC. Gutienez AssoclatePuubhgr & C{rc||la{o|| DlFcto. MonettelturraldeLim Olrrcto. ior ODe|q'tloo3 Pinkyl. Gallegos Covr photo: @ Han! Wondr€r Th€ tmags Bank lHl() htofnrlion.l Aepr€sontatiE Ofi ic€. ASIA-PACIFIC:Hong Kong: Pameta Choy. pacitic Asia M€dia, 13q,361,363 Lockhaft Road, i/vanchai, Hong Konq. Tel. 834 6128, Fax. (85,a 834 59a0. Sangapor.: Teddy lan, PAM Modia Sdics€ Ae. Lrd . I lA EastCo6t R@d, Tay BuanGuanShoDeino C€ntre.S ngaporo 1542.T€t.3484495. Fd r6al44O 8760. Indi. Sub-Condndt Bh€€m Timitsina. Media So'nh Asia (P) Lid., Apadm€nr 14, r'lbhi-Anit Awas. Kanlipaih-Jamal,Kathmandu,Nepat. T€t. 221 576. T€r€x260,6M€DFEP NP, Fa (977-1) 227 336. Ko..a: Y.K. Cnun, FiBt Media S€dic€s Co|pohrion. CpO Box 7919, S€oul, Xor@. Iel. 738 3591/3592,Tetex FMS@RP K ?9137, Fax (02) 738 7970. r€||v n: J6nnif6.Wu, JR International Ltd_,5/F,2, No. 520, Min Chuan Ea{ Foad, Taipei, Taiwan, B.O.C. Tet. 717 2463,71996os,Fd. (02)71995a7.USA ConovsC. Brown, Conov€r Brcwn, Inc,, 21 Easr 4oth Str€et. Suile 1801,N6wYo.k.NY 1oo1O.U$\.Te4.2i38303. Far- 1212)481 5417 .
GrcwingMad(etShate ThroughValueAddedPrcdubts
ByJosel\4.Faustino Goodyear TifeandRubber Professor of Business [4anagement
45
MakintChangB Work ByTeofiloR. Asuncion. J.. Principal, Andersen Consulting
47 Ihallandin the Year2020 By lbafiaC. cutiefiez lVanaging Editor
34 Attractlng ForcignInvestunent 8yFrancisco L.Roman, Jr. oonAndres So ano Distinguished Professor of Eusiness Management
49 Reslllentlhailald: Re$ngonhs Be6t-lvlanaged Conpanies By Kn Gatbonton AssistantManaging Editor
5:l lhailand'sCornpetitive Advantage: E0ric,Educatlon, andOpportunlty ByHistucellency PrivyCouncior ceneratprem Tinsulanonda, FomerPrimetvinister.Thailand
4 Fromthe Editor 59 A Beter Way
62 InBetween Classes
55 BookReview 56 Feedback
60 AsA Matterof Fax 64 TravelNotes
coort'ght r 992 ov !h€ as an Ma..ge' Ar nghrsresrued neoo,oo" " ai*-* r .r.r. o, pai " Ma'as€' \ pubrishedb' mo.rh,vbv lhe asan rrsri ra nr ManasF€.r Fo'r;' arand br'ce Fou'dd on Jo*Dh n McM ct ns campus, r 23 Pas de Forai. r,,t.t.ri. uer.J v.'ir., dwn,s,ns ir'irpizu -inJa.r""i;i, eurced by n€ ArM L'D,ary pnnr.d by r,m6 p d6 A€ Lrd , sinsapo..
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communicotions svstemsworldwide.
AlcotelPhilippines Inc. G & A Building GroundFloor,2303Posons Tomo Ext.Mokoti,MetroMonilo,Philippines.
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continuing Gaby's search...
theAsian Seekins ManagEr
H
"The AsianManageris a man who makes sure that all thosearound him - his colleagues, his subordinates- are given the chanceto becomethe bestthey can be."
mila-Cl€byMfjtdloza coni:ibuiesthe leadartide for our coverfocus on tends in maragement eclurology,glo,balorganizations,tsadeandinvestnst Author ofMorugenvnt: TIEAsianW,Gaby hasbeenstudying Asian managementstyles-and searldry for the AsianManaga-ftxweraquarb c€nnny As dean- and later deanard president concurrendv - of the esia" Itutlt rte of Irianagemmt from i|5 inceptionuntil l ,C,aW hashadanexcellmtvantagepoint ftom which to conduct his seaEh. In the early '80s,he wrote his students, "And who is this Asian Manager that you must discover and develop, you may well aslc And again, I submit to you that this Asian Manaser that we seek -is you. In a wiy, you might say that you arethe searchersand you arc what we s€ek." By February 1989,Gaby's concept of the Asian Manager had beendistilled to manifestspecfic, critical characteristics:"First, the pofessional manager is a rnan who usesall of his talents to becomethe bestmanagerthat hecan be: one who is continua-ly leaming; endlesslygrowing. "Second, he is a man who
makes sure that all those around him-his colleagues,his subordinates - ar€ given the drance to becomethe best that they canbe. ln so doin& he ensur€sthat his olganization is continuaily leaming endlesslygrowing. 'Third, heis a manvvtn dreams geat drcanq lre Ealizesthat only by mking inspirinS plans can he d|annel the oeativity of his meru ignite their imagination and rmleashthepowqof theirmthusiasrn "And 6aally, he is a responsiblernar; onewho thinks greadyof his calling, who lives by a code that eschewsDettvself-inter€st. Gabv savi tr,i tras ouservea these cham&eristics in.the Sreat Asian Managen he hasobserved over his car€er. Among thes€ manageE is Kim woo Choong, founder of Daewoo Corporation, Soinvolved.washe in his massive organization that Kim, according to Gaby, "often slept at the factory'' when Daewoo took over a failed manufacturing firm, taking personal responsibility for turning the acquisition arcurd. A second rnodel is Akio Morita, who Gabv noteshasb€en seen "physically' helping to unload 30,000radio seb ftom several trucks and storing them ina warchouse ftom mid-moming up to the late hours of the night." "Grc of the exemplarsin Asia of the professionai manager," Gaby has written, "is Tur Ismail bin Mohamed AIi... what makes him truly stand out... is his geat prcbity, his integrity, his unsu[ied reputation asan honestpublic official... (he is) a sourceof inspimtior! a model for emulation." Another exemDlarv Asian Manager is Washfigto; Sycip, chairmanof one of Asia's original multinationals, The SGV Group. Sycip "frequently causes consternation among his junior partneF with his encyclopedic knowledge of whaf s going on in
the company," Gaby says. "^rou get the feeling that he knows every client personally, reads every report, and remembe$ every detail,"' a partner is rs. ported to have rcmarked. But what is univenal in all the€e manageE is not so much that they arc inspirational personalitie - whidr they are - but that they lead theil organizations by tryh8 to be what they hope otherswill becomq an examDle. SyCip - rccently named the 192 RamonMagsaysayawardee in intemational undeFtanding has long bem an example of the benefitsof do6er cooFration and a boundaryles Asia. His SGV Group introduced professional accounting and management consulting servicesto the region. nM thag 'tsesidesthe kiRM Philippire, where the goup has 15@ employees,SGVaffliae art amongthe targestacmunting6nru inlndoneia(2ffi statr),Taiwan(650) andThailand(50). Theirdient list readslike thewho's who ofbusin€ss in tho6ecoutries." On the recenttrend toward re gional trade liberalization and increasedintra-A6€an cooperatio& Sycip asks"lsn't this rcalty rcturt ing to the earlierand more sersible years before passports werc in(vented? There w"asa time when anyone from lvlanila aould go to I Chinawith a boadoadof goods. "He would then come back with producls of China without documentation and without having to passthJough customs and immigation authorities. All this was perfectly legal and proper. While this trade may still be carriedoutnowitissometinescalled 'smuggling."' Gaby's continuing search for the Asian marager - and our accompanyingartides - suggest that Asia aswell asits enterpris€s may soon be borderless and
bourdarylessaswell.
I
.IHE 1992 ASIANMANAGERNOVEMBER/DECEMBER
TheNewManaementTechn o
aTlons
Asian By Gablm A. Mondoua K.T.Li Professorof BusinessManagement More than o thausnd yfirs ago,a Ainese ?@t naume:dtlu inmitability ol dufl4e with thev imrrcrtal Trnrds: "Thne was no holding the yestedays. Drato a knife and cat the uratcr, yet tlt uatetflmrs." wenty years ago, the Japanesefundamenta y transformedthe principles and I the practice of management.Sinc€I do I I not have the eenius of Li Tai-Poto communicate the sicnificance of this inevitable chaneein afew,well chosen,pithy wordq I shall have"to do so in several tiund'red everyday words. Whm. in the mid-70s, we fi$t discovercd the radically new way theJaPanesewerc manaeins their factories,we focusedon what to us the ;ere- the 'oddities" in their system morninq ceremony,the ringislro,the work-besotted ilaryman," tife-long employment and the slowly rising marugerial escalatorthat Prcmoted classmat€sall at thesametirne.Japanese academicswere quick topoint out how all the6e things werc rcod in their culh.ue.We agr€ed with-thembecausetheir exolanationsfitted our first impr€ssionssonicety.Everything did look soJapanes€.
T
I
F 9
g
]th g ilodomlrayGonghis The first rcaction to the effecs of Japanese management technology was const€rnation. They were invading and caphrring exPortma!kets Likemodemday Tamerlanesand Genghis Khans. With their low Priced, hiShnuality goodg they were sweepingeverything in sight and taking noprisoner. Whatwas morcalarm"lock" thejapaneses€emed ins to somewas the to"harreon mattagementtechnoiogy.Only they cou.tduse it. The wide-spread view was that it woutd work only in Japanand not anywhere else becauseit was culture-bot[d. This view, .howwer, wasquicklydispelled inthemid:70s. Sony set up their own plant in San Dego Califomia. Wthin months, the Sony Plant wa5
producing world-class products using the Japanese management system. Sanyotook over the moribund Warwick TV plant in Fonest Ciry Arkansas. Within two months, Sanyo - using the sameWarwick worken and the same equip ment - had slashedthe defu rate ftom 30% to 5E. Matsushita bought the Motorcla TV plant in Franklin Park, Illinois. Over a longer period, they achievedeven more dramatic results. Motorola had had a defect rate of 150to 180per 100 TV sets; Matsushita brought this down to only 3or4 per 100TVsets. What is more, the American workers took to the Japanesesystem enthusiastically. They particularly liked the system's participative ways and its total dedication to quality. As more and more laDanesefirms set up factories in the United -stites using;apaneseinanagment technolqgy, then high{uality, lowtost oPerations very quickly surpassedthat of their Americar competitors.In selfdefence,a numberofUS compai'tios decided d*id"d to t , Fy w out *rt the Japanese lapanesemethods. nies In 1978,in aneffort to leam how theJaPanese were producing zuch hiSh quality carsat such low costs, Ceneral Motors which once, as "besde the would have put it, Sha-kespeare world like a Colossus,"humblv entercd inboa bint ventue with Toyotato producecarsin the United State6.They cnmpletely tumed over tlreir plant in Ftemont, Califomia, to the JaPanese io marnge in their own way. It was, as '"The Saddam Hussein would have put it
ho the fact that in these companies,everyone ments about the natue of Japanesemanage_ ftom.top nutnagementto the workeE is dedilmenttechnolqiyandourerplarutiorrsfortlieir "maishaling cated to resour(es for continual I success.The re"litiv. "u* *ith *hi.h th" lup"_ raPid imFovement." They have adopted nesecompaniesinuoduced their marugemimt flig as I k4,zer the driving philosophy that ties tG I technologyin both the indusbiar unitea $ates gether,that animatesall their efforts. and in- orir l"ss induseialized countries sug_ In SoutheastAsia, the spread of Japanee ] eos ttut perhaps the technology is not is I rranagement tec.hno.logy _!as followed, the cultu€-bo6d as we first thoughi: The initial same_patternasthat in the Unid States.F-irst, ] successes tlut indigenow comfrnies aswell as wholly-owned Japanesesubsidiaries like ]I American muttinitionats in'southeast Asia loyotaMotor(Thailand),Ornron MalaysiaSdn. have experimced the useofJapanesemanage_ I Tosjem Co. Ltd. and japanese ment technology - often r,,,itlout .;apanfu IIqlha^ttang ,orntventureslikePrccisionElectnonicscorp.in I help _ may evei lmpty that peftaps th'etechthePhilippines,PhilippineFuji-Xeroxandihai notiryy isculturc-fteeuila uni"ersai. Arrow IMucts Co. Ltd. established th€mLilheearly 190C,beginningwith Frcderick I
'r' corngiesand a8r,"iofr -r*g" fly,es 9ur $an toinkoduceI fayto.,tneari.rericans tnell marEgement systems.Our initial
"rrt
repti- ] technol%y basedon the rimdfic mJthod, a cism was quickly dissipated by their wide- | mahod ihat relied on rational, logical, linear thinkin& one that was congnrdt with the P*i9*:F:-qtducing.worlddassgoods. l'Tecrsronhlectlorucstodatforexample,manu- | minds€t ofAmerican civilization. This enabled factures a full line of Mabushita's' products and exports a subotantial --"The
fartoritsoutpuitoyip*.
expedenceof the last
yearc hasgvenuscause n"ff"*Ti.3ltl"'ijTffn$*: fffteen
"p,eaa,.i"dig-to revlewour eaily ptejudgements
l:sefll l"-",!T enously-owned and managedfirms likeAutomated vi.r."r&t"-*
about the natule of Japanese
;il""ilE lil;;lFh#;1ffi"i
management"'
Inc., owned by the Ayalasof Makati, even the American multinational Johnson & Johnson (Philippines) mother of all sunenders." Frcm the very beginning Nummi (the name the of ioint ventur);chieved the highestqualiw pnrduction of anv GM plant TrcopsofGM ,ri"il"n"rs *"t rotit"a diol,sh the plant so that tliev could teamftomtovoia. Wtreirin tS88 GM pui up a $1 billion plant to produce the Sah.dn,they shove to bui.ld into ii e*,erything thev had linrned ftom the JaPanese.A GM "I{ummi has taught us executive remarked, peopleale important commodiry the most that Satuh witl trave Uorir the feopte side and the manuJacturingtechniquesof Nummi.' fn fS78. FLttev-Oi"idson, the makers of those monster bikis, found themselvesbeing driven out of businessby their JaPanesecom-
THEASIANI qMGER
petiJos. Theysued theJapanesefor durnping... and lost. During the court proceedings,however,they fouldthat their competitors opemrrng ca6ts were 30Volower tltan theirs. Thev attributed this differenceto quality cir€les,tha useof statisticalproc€ssconbbls to ens,.,teconsistently high quaity, ana just-in-time techniques.Theyqu.icklyadoptedthesemethodsin $eir _operations. By the mid-'80s, HarleyDavidson was again a Fofitable business. Richard Sclronberger,who vrrcts.larynese Manulacturing Techniquesand World Class Manufactuing, cites Hewleft-Packard (computers) and Oma* (sawsand drills) most advanced in the use of both iust-in-time and qua.lity improvement. He aedits their success
NOVEMBER/DECEMBER 1992
thentogreatlysucceedindevelopingforthem_ F.3.a,,*J"p.""o"_managemmttechnology rn tneu operahons. Nowadays, as you walk I selve a powerfirl indwtrial establshment, through their plants you hear people discuss- ] tn tlie midr30s, with the Hawthorne experiments on industrial tighting, they Iq^t"IJ"-t"IThtrgsandlshikawacharts, I lust-ur-umeand k4rbah,mixed modelproduc- stumbled upon the powerful effeit thit h$ qj kT'?,g*j You.look tlunugh their motivated workers-wbrkingasteams _had ubiquitou.s bu.tletin boards and read about I on productiviry while their acadernics like ] in quality and rccod ,ql11]l1ll.*p-.""T*ts I Elton Mayo,Het-zbef& Maslow and McGregor
dedinesin iosts. You meef tt eii nvmagers, aia outstinaing*o.fi" uyiog to,rrra"oAlla dressedrnruggeddothe, n:amingaroundthe and to explain"thtsphenoireion, they never rlTrand qettilg theirhandsdirty hetp_in8/ quite succeededin" marryint the siienHfic :,1'9P the.workerssolvetheir problems.Yourealize | schoolof managementrvith"the behavioral ] rnar_ney rcaxydIE arc Dr€lruung beglnnngro to De besreepeo steepedln in I scnoor. put it,,?ormorethan school.As Aspeter Peter Dmcker L)mcker put it, ,?or morethan _u6r-u'sy rEdrry wonder Ja.panese of wonders, yay..+nd, century, two basic approaches to :lre is not la there a singleJapanese lnsight. manulactuiinghaveplwailed, especialyin rf the lastfifteenyeanlras the United States.Che is the erigi"eeiing _. ]l_"us -*-rylT* grvm causeto rcviewour earlypre.judge-]| approachpioneeredby Frederick"Winsloi
Taylor's 'scientific management.' The other is thi'human relations' ipproach... -been The two considered approacheshave alwayi airiithees, itrd""d, mutually exdusive."
Braw*wod( B,ar'worrvs.
Whv did the Japanesesucceedin integrating theie two app'roacheswhere the Ariericans failed? I suggest the exPlanation ties in that the Japanes€built on t€ams to achieve integration. Unlike the Americans who assisn-ed"brain-work" to nlanagersand techni"brawn-work;to the workers, ca'iexpertsand theJapanesereliedon-gaveresponsibilityto - tea-msof manageE and worLels to design and to continuously imprcve the Processes
'T@
look at how the most PrcgressiveAmerican -GE andGM,IBM andEuropeancompanies and Philips, Hewlett-Packard, Harley Davidson, and Asea Brown Boveri - have scampered,and rrarnbled, and
:'*1"rtrrffli$filil*#,#fffiT
tfir world<lass managementsystem,the management technology-that wiLl dominate the future we needto make two other very imPortant points. Fi$t, I do not advocateher€that we adoPt the Japaneselit'atyk , whtch structurcs them into being the world's champion savers, nor the Japanesenaragementstvle,which builds strongly integratedwork teamsthroughafterhours socializins in coffee
teamscamendulally.lt was uslng palt of theh family Centeled
class companiesas Sonv and Matsushita, Procter& Gamble and Motorola. Cdtlcal Components We first start with a tight and firmly fixed focuson our ultimate customer.Wemust thoroughly understand his ne€dsin rclation to the businesswe'rc iry to the competenciesthat we have mastered.Moreovet, we rnake sure that everyone in the company is awar€ of what kinds of satisfactiontire customer seeksfrom theproductsor sereicesthat we offexWePrime eachmemberof the companyto enswethat he is ready, eager and able to exert whatever efforts may be necessaryto serve our target customer'severyneed.In thelastanalysis,we iudge the goals that we set,the Process€swe employ, the products we produce - everythins that we do, our failurc and our success, on th'ebasisofeachemployee'scontribution to our customer's satisfaction. Next, we cultivate in our comPanya cultur€ founded on organized orderliness.We clean up our workplace. Wediscard what is umecessaryor superfluous. Weqeate a designated ptacdfor evirything and make sure that eveiything is in its placi when it is not being us€d. "spicand Wemal<eit a trabitto keepeverything " span because we realize that disciPtined *utne"t f th" b"a-.k ofquality andeffibenry Thid, we nurtur€ in olu comPany a Passion for quality, a determination that every prcduct tliat w; prcduce will beand will do for ivery customer what he bought it for. We eliminate every defectnot only ftom our prodthat we usein uctsbut alsoftom the Drocesses prcducing thcepoducts. webench-markand innulate cimpariles tike Motorcla who aim at bringing theii defect rates down to 3.14units per million. Fourth, we develop in wery one of our peoplean abhorrenceof waste- the wasteof inanpower, the waste of raw materials, the wasti of space.the waste of machinetime. To achievethis, we work dooely with our suppliers. We employ iust-in-time and parallelprocessing techniques. We develop ir,ri.Lo.t rp*-utit "". Wi lnstatlvisiUle<ontrdt devices. We continuously evolve and adoPt proceduresand processesthat will relentlessly ieduce the cycle times of prcduct design and developmmt, sales,poduction, delivery and serviceoperations.With theseand other similar tecluiologies,we ensurethe total elimination of waste ftom all our oPerations.We thus makesule that our co€tsarclower than thoseof anv of our comDetito6. -Fifth, we erirpower our PeoPleto excellentlv accomDlishthebusinessof ourbusiness We develop-flexibility in our marugers, our technical people, and our fronFline workers Wegive them the competence,by continuous traiing and coachingi not onli to tet their own pbs and those of thei! colleagues done, but also,to analyzeand imprcve the Prccesses that they us€ ard the poducts ihey Poduce.
itrH$#?1:f'l,T;'H: HYSI*ff:,"'Xffii:11 jn getlrcr whatAkioMorita
calls "fate sharing bodies," ecoromrc nor th€ Japanese" CUltUfg.tt slste , whj,ch enables government and the sreat lairefsrsto cooperatein forging and Pursuing coher€nt industrial policies. All thee obviously are very closely bound to JaPathdt they usedand eventhe prcducts that they nes€history and to Japaneseculturc and tlaDroduced.In so doinR they were able to wed, dition. Rather,I rcfer toJapa\# tarugement io weld together t&hnoiogy-based, high fecftlrolo$lAnd this technology - this rnix of quatiw and Droductivitv - on the onehand managerial principles, policy, practice, tools utd peopl.;r aspirations to do meaningful and techniques- I suggest,is universal. Alr,lork',*itk .orihy of hunan beings,on"the though originally cultuebased,. it is not culh.re-bound. It is transfemble from lapanese other. To the group-oriented Japanese,using companiestoAmerican and Euopean comPateamscamenaturallv It was part of their fam- nies.as well as to the companiesof the NiCs and the r€sour€e-richdeveioping countriesof ily centered culturc. To th; individudistic Americans, thet culture-imposed mental SoutheastAsia. Second,although Japarese managemmt constructsaboutpeopleand theirrelationships became barriers to their br€aking thraugh. technologywasfi$t developedon the PrcducThey found it very difficult to change their tion floor, it doesnot concemonly the manageparadigms, the assumptions in their minds ment of manufacturing. It also rcachesinto, about how managers and laborcF should affus and shapeshow marketing - namely, work together They saw the workers not as product design, sales,logistics and serviceresoorsible membersof the team but as hired aswell asraw materialsand componentsprc hands.They tleated them like automatons,as cwement, peEonnel and accounting and fiextensionsof their machines,and not as n a n c e a r e t o b e m a n a g e d . I t i s a n all-encompassingmanagementsystemfor the membersof the family. en e companv How d6 wd build a company basedon the Fat?ShadngBodles Up to the '70s,Americar management essentialsof Japanesemanagement technoltechnblogyur5 modem management,as ujd- ogy? How do we build a businessthat can versalandasworld <lassaswe;ould get.Since coinpete not onty within a country but on a the'70s,however,Japanesemanagementtech- global basis?The answer to this question is nology has been modem management.The incr€asinglybecominga sucial one. With the two systemsare not alternatives,they a!€ not world-widi tr€nd towads trade liberalizasubstitutesfor one another becausethe JaPa- tion, it is one that practically every company nesesystemis patently the suPeriorsystem ln that evjsts today must be able to practice, fact, ii is a quantum imPrcvement over the soonerrather than later,if it is to survive and to ' American system. succeed.To answer this questiorLlet us examThe reality is that the American model is ine thecritical componentsofthe new manage obsolescent.lt is moribund. One need only ment technology as practiced by such world
19S2 THEASIANMANAGERNOVEMBER/DECEMBER
We teach them how to use such tools and production possible. The men who fathercd techniquesas fish-bone diagrams and Parcto modem management- the Thylors and the chafts.Wercward individuals whoexpand the Fayols,the Henry Fordsand the Elton Mayos range of what they know and what they can - were greatly involved in this exciting procdo. We give our people at the lowest possible essof exploiting the miracle of machinery So level of the organization the capacity, the wrapped up wer€ they in the wonders of nuts knowledge the skills, the information, rne and bolts, so rapt with gearsand springs and power and the authoritvto make thedecisions tuming things that evenasthey contemplated ihat they arein the bestirosition to make.By so the workings of humaa organizations they doing, we encourageand developand eventu- couchedthet thoushts in mechanisticmodes. ally tap their creativity, their innovative abili- Their minds were, if you will, captives to the ties,thetuinitiative. Wegive them "ownership" paradigm of the machine. ofwhatthev do. Webuild in them pridein their Examinea machine.It is made up of many work. Weevokefrom them adeepseatedcom- parts. Each part has a purpose, a prcdetermitment to the comDanv mhed function, a unique us€ that it alone is Sixth, we rely on teams rather than on designedfor No part doesother than its preordained work. When all the parts properly tulfill their functions, the machine works. It is this model of the machine - so piedictable, so reliable so conbollable thdt inspires the design of most of today's o€anizations, whether Drivate or public.Theyall aspireto the smoothlymeshingprecision of well-oiled machinery. Look at the architectureof a individuals to get things done.Weform teams typical organization. It neatly divides the orthat cut acrossfunctions; aqossorganizational ganization into rationally oder€d parts. You lines.We give these teams responsibility for haveproduction,marketing and financeasthe managing and improving work flows and core operating divisions of the company. businessprocesses that lead to and enhance Thesedivisioru arefurth€r suMivided into customer satisfaction. We reward these their component parts. Marketin& for examteams,mther than individuals - for sood ple, is typically composed of marketing reperformance. search,advertising and promolions, sales, Finall, we cultivate in our companya spirit logutics and service. To steer,support, and "d.ivine of discontent." We forcswear the old seNe th€se corc di\,,tsions,the rest of th€ orsaw,"U it ain't brcke, don't lix it." Weadopt in ganization is madeup ofstaffdivisions suchas itssteada policy ofcontinuousimprovement. corporateplannin& persormeland labor relaWe build into the culturc of our company the tions, accounting and conhol, legal and adenduring belief that no product, no prccess ministration. Precise lines of responsibility, that the mind of man canconceive,designor authority and accountability interconnect implement, is perfect. It can always be done thes€diverse parts of the organization. Rigorbetter.It should alwavs be improved. ously defined boundaries delineatethe funcThesebasic elementsof wbrld-class man- tions thev can and should perform. When all agementmesh and intemct with one another the partj property fulf l tfreir functions, the When employed together, they orsanization works. createthe syneryies that make for a globally ThiE,at least,is the theory The rcaliry howcompetitive business. ever, is that this mechanisticstructure of the organization often actsas a drag to smoothly Paradlgmof the Machlne accomplishingits function, which is to satisfy How do we organize our company,struc- itscustomers. Theneatdefinitions,theprecise ture its resDonsibilities,its authorities and its linesof communication,the well channeled relationships so that we can manage it in a flows of authority render it rigid, burcaucratiworld-class mamer? cally constrain it and slow its rcactions to Manaeement- that which we used to call sudden changes in the envircnment. Even "modemt - was bom during the early years wors€,becauseof its box-like rigidity, it fails to of this fast receding century lt was conceived tap the innate creativity of its members,cultiat a time when the great inventions - the vate their eagemessto leam, enhance their engines, the machines, the equipment, the fleibility, reinforcetheir capacityto takeinitiatools, the jigs - that created the induskial tives,and capitalizeon their ability to prcduce fevolution werc finally being used in nynad synergy when they work in teams. The shortcoming of the paradigm of the combinationsand Dermutationsto make mass
"Wecultivatein ourcompany a 'divine splrltof discontent.' We 'lf forswear the oldsaw. It aln't broke.don'tfix it."'
'1992 THEASIANMANAGERNOVEMBEF/DECEMBER
machineis that it is unrealistic.Real-lifeoreanizationsarenot madeup of inanimatepiecesof metal, or plastic or ceramic. Their parts are flesh and blood, mind and will, wishes and whims and gossamerdr€ams.Organizations are less than, and much, much mor€ than machines. The new manatement technology - the kind that hansforrns companiesinto globally competitive businesses- designsand develops organizations in the image and likeness not of machinesbut of living, sentient,retentive, rational, imaginative, inventive, qeative, gregarious human beings.Unlike turbines or generatorswhich canonly convert oneform of energyto another,or shapersand latheswhich can only gou8e out pattems and forms frcm steelor wood or clay,man can do and does a limitless multiplicity of things. He canact and react.He canpersistand pers€vereat a pokily, ploddingly pedestrian task. He can shift and swint and switch with the swiftly changrng demands of the moment. All thesehe can do becausehis six s€nsesand his agile mind, working in concert,eruble him continuously to leam. The organization of the futurc will rely on all of its members, its executives,its technicians,and its rank-and-file workers - all of thosewho have constantcontactwith its customers- to sense,to slop up, to sop up - as well asto make senseof - to understand,and to interpret all the information that the business needs about its customers,its competitors,andtheenv onmentin which itoper;tes. It will encouraeethosein the fron[linesof thebusiness, in theinter€stof optimumseruice to its customers,to communicate directly, to cross-talkinformally; to dialogue incessantly with one another. It will group them in manageablysma4 multidisciplinary dive.sefunction teams that can respond decisively and r€act Dositivelv to unsatisfied customer needs.ltwill empowertheseteamstoe\ercise what authority they may require to gratify thes€needs.And in defining and refining the vision of the company,its long-run dircchons and its strategy,its top exeotives will listen to and leamfrom allof its members,whetherthey wearbluecollar,white collaror batlkshirts,gray flannel suits, short or long sleeved barong fdgalogsor bush iackets. The ageof the machine-likeorganization is gone. The organization of today and of the futur€ must be built to mirror man. Like man, it mustbe d perpehralJyrnnovati ng organism, a continuously leaming rrganization. This, I suggestto you, is the ki d of organizahon we must build if were are to sunrive and to successfullycompetein the year 2020.The world of the manager has changed and we must changewith it. As Li Tai-Poput it, "Therezoasno holding the yesterdays. Draut a knife and cut the uate, vet the watet flo.os." t
ofthe TheNewBoundaries
'Boundaryless
By Larry Hirschhon and ThomasGilmore WhartonCenterfor ApDliedResearch I n an economy founded on innovation and I change,one of the premier challenge.of I mana8ementis to de"ign morc fleribleorI ganizations. Cornpaniesare replacingvertical hierarchieswith horizontal networks, linking together tFditional functions through interfunctional teams; and forming strategic allianceswith suppliers; customerc,and even competitors. Managersareinsisting that every emoloveeunderstand and adhereto the ctxnpany's strategicmission without distinction of title, function or task. For many executives,a singlemetaphor has cometo embody this managerialchallengeand to capturethe kind of organizationthey want to create: the "corporation without boundaries." GeneralElectricCEOJackWelchhaseloquently z describedthis new orsanizationalmodel. "Our a WelchwrcteinGE's1990 drcamfor the 1990s," annual report,''is a troundarylesscompany... u'here we knock dou'n the walls that separate u5lrum ea(hotheron thernsideand from our on the outside." kev - constituencies In Welch's vision, such a company would remove barriers amone traditional functions, "recocnizeno distinctions" betweendomestic and foreign operations, and "ifFore or erase 'salaried' group labelssuchas 'management.' 'hourly,' which get in the way of p€tlple or $ orkin€i to8ether. Managers are right to break down the rigid and boundariesthat makeorganizations unresponsive.But they arewrong if they think that doine so eliminatesthe needfor boundaries altosether.Indeed, once traditional boundaries of hierarchy,function and geography disappear, a new set of boundaries be comesrmF\)rtant. Thesenew boundariesaremore psychologlcal thanoreanizational.Thevaren'tdrawn on o "o-puny's organizationai chart but in the minds of its managersand emplovees.And insteadof beingreflectedin a companysstruc"enacted"over and over ture, they must be with bqises, againin a manager'srelationships and peers. subordinates
Becausethese new boundaries are so different from the traditional kind, they tend to be invisible b most managers.Yet knowing how to reco8nize these new is boundaris and rl\e thempnc<Jucrively the essenceof managementin the flexible organization.And managerscanfind help in doing so from an unexpected place: their own gut feelingsaboutwork and the people with whom they work.
Company ,*
The Challenges of Flexible woft ln thetraditionalcompany, boundaries were "hardwired" into the very sfucture of theorganization. Thehierarchvofoccupational titles made manifest differences in power and authoriry Independent functionaldepartmentscoordinatedpools of spcialized e'.pertise.kicdted bu5i/ nessunits were a rcflectionof acompany's prcducts and markets. Thisorganizationalshucturewasrigid, but it hada singular advantage:therolesof managersand employeeswithin this structurewere simple,clearand relatively In a team envilonment,peoplemust bcus not only oo stable. Company boundaries functioned theh own wo* but also on what othe6 do. like markerson a map. By makingclear who reported to whom and who was responsi- what relationshipsthev needto maintain to use thos€dif ferences;ffectivelyin pr(tductivework. ble for what, boundaries oriented and coordi Takethe simple exampleof an engineeron natedindividual behaviorand hamessedit to an interfunctional product design team. To be the purposesof the company as a whole. The prcblem is that this traditional organi- an effective participant on the team, the engi zational map describesa world that no longer neer must play a bewildering variety of roles. exists. New technologies,fast changrng mar- Sometimessheacts as a technicalspecialistto ketsand globalcompetition arerevolutionizing assessthe intetrity of the team'spro,Cuctdebushessrelationshios. Ascompaniesblurtheir sign; at othertimessheactsasa representative tradifiondlboundariesto reqpondto this more of the engineering department to make sure fluid businessenviroffnent, the rcles that pe{} that engineeringdoesnot get saddledwith too ple play at work and the tasks they perform much respon\ibilitywhjle re(eieing too few becomecorrespondinglyblurred and ambigu- resources; then again, in other situations she may a(l as a lovdl teammemberto chamPion ous. Howevet just becausework roles arc no the team's work with her enp;ineeringcollonger defined bv the formal organizational leaeues. No one role exhauststhe kinds of relationstructuredoesnt meanthdt differencesin au thority, skill, talent and perspective simply ships she must engagein to make the team disappear. Rathet thes€ differcnces present work. The engineerwill probably play all three both managercand employeeswith an added rcles at leastoncewhile she-son the team. But challenge. Everyonein a comPany now must how drxs sheknow which role to play when? figure out what roles they need to play and And how canshebesurethat therestofthe team IHE ASIANMAMGER
he imagines that together they can de- suchdif{erencesbecomessimultaneouslvmore velop a new and more prcductive way to importdnt dnd more difficult. Fle\ibility dedivide up the work. Unfortunately, the pendson maintaininga qeativetensionamong engineerhearsthequeshonnot asa sim- widelv different but complementarv skills and ple requestfor inJormation but asan im- pointi of view. In the theater, a demanding plicit attack on this authority. So he director can elicit an especially brilliant peranswersvaguelyand dismissively,mak- formance from an actor. Similarly, an accoming it clearhe doesn'tthink much of the plished actor can help a director better worker'squestion. understand his own vision of a plav So too in Theworker feelsput down anddoesn't theworkplace,wheredemandinbs;bordinates presshis question. But insteadof trying to can make for better bosses- and a brilliant understand why the engineerreactedthe marketing department can push manufacturway he did, the worker simply chalksup in8 to pedorm at its best. the responseto the contempt that "elidsf' But this kind of crcative tension does not comeeasily As the task,rolesand outcomesof engineersfeelfor "uneducated,"blue{ollar workers. work becomemore uncertain,clashesof opinNeither the engineernor the worker ion and peGpectivesbecomemore likely. Beknows how to managethe psychological causethey nay signal that a worl group is boundaries that order their relationship. approachingaboundarythdtneedsmanaging During their interaction, they drcw on a suchconflictscanbe healthv and pRrductivesuccessionof distinctions . betweenexpertand novice,superior and subordinate;exploiter and victim. Howevet In anyorganizatioo,interestgloupssomctimescmfflci, becauseneither has an accurate "map" to figure out the and mamgers must know how to negotiate kind of r€lationship they are in knows which role sheis playing at any particu- and what boundary they have enlar moment? countered, the interaction that was ln thecor?ontion withoutboundaries, then, intended to make them more effeccreating the right kind of relationships at the tive colleaguesonly servesto sepa in a goodplay." right time is the key to productivity, innovation rate them. The result is a failed and effectiveness.But good working relation- encounterand an unprpductive relaif they are containedor bounded so they don't ship€don't happenautomatically; they are not tionship. ln fact, too much focus on eliminating old becomeoverwhelming. the simple product of good feelings,teamspirit bourdariescan causemanaeer5to misunderTherelore.manag;rs in flerible organizaor hard work. ln fact, opportunities for confu sion and conflict abound in a flexible organiza- stand their fundamental role in the flexible tions must focus on boundary management. tion. olganization.All toooften,managersthink that They must teachpeople what new boundaries Imagine the following q?ical interaction getting rid of boundaries also mearu doing matter most, then how to recognize such betweena shop-floorworker andan engrneerat away with conflict. They assumethat oncethe boundaries in their relationshiDswith others. a companytrFng to crcatea teamen\,'rronment. companybreaksdown the walls that "get in the Finally, good boundary managers encourage The worker takes the company's commit- way of people working together," employees emplo,veesto enactthe right kinds of boundamentto teamworks€riouslyand,in an attempt like the engineerand the worker vr,illput aside riesat theight time, asa director helpstalented to leam how and why prcduct engineersmake what divides them and unite behind the com- actorstake up and perform the roles of a good panys mission. Differencesin authority, talent Play the decisionsthey do, asksan engineer to ex plain the criteria he us€d to approve some or perspective will no longer be a source of mcnon, Remafiing oEanizational Boundaties design changeson a blueprint. ' What psychologicalboundariesmust manThe worker has focus€d on the task. He Nothinecould be further ftom the truth. As wants to be the engineer'scollea5 e. Perhaps traditional boundaries disappear,establishing agerspay attention to in flexible organizations?
1 r
"A goodboundary managel
to enact encoulages employees at the the dghtkindsof boundaries righttime,just as a directorhelps talentedactorsperformthe roles
1992 NOVEMBER,OECEMBER
We call them the "authority" boundary, the "task 'boundary the "political" boundary and the "identitv" boundarv.Eachis rootedin one
below. If subordinates need to challense in orderto follow,suDeriorsmust listenin order to lead. I{hen suDeriors and subordinates work well togethei; both can play their rcspective rcles. Subordinatesfeel husted by their supe riors, and that feeling of Fust flees them up to feel siexercis€initiative at work. Superio6 -challenged by multaneously supported and their staff, which allows them to lead. But when people dorlt work effectively at the authority boundary other feelings ple dominate. Subordinates who doft believe that their bossestrust them canbecomeeither rebellious or excessivelvdependent and cautious - opposite ryrnittorns that rcflect the
turing a new product, sat or providing integratedserviceto an importantcustomer. Butin order for teamsto work tho€einvolved must managetheir rclationships at the task bound'lr'y'hodoes arv. Here the critical question is, wfiat?" Peoplein task rclationships divide up the work they shareand then coodinate their separateeffortssothat the rcsulting product or servicehasintegrity In the traditional o€anization, managing taskrclationshipswas largely a matter of overseeing the formal interactions among R&D manufachrrin& marketing and the other classic functions. But in the new team environment, people from all of the6eareasare mixed togethir Increasingly,individuals have to de
of four dimlnsions common to all work expe rienc6. At thesametime,eachposesa qullitatively new setofmanagerialchallengesin the new work environment. And eachboundary canbe recognizedby thecharacterishcfeelings it evokes. If managersare attentive, they can us€ thes€ feelines as clues to assesswhether their relationshipsat the boundary are working effectively (Seethe exhibit "A Manager's Guide to the Boundariesthat Matter") The Authodty Boundary Even in the most boundarylesscompany,somepeoplelead,and others follow; some prcvide direction while others have responsibilitv for execution. Vy'henmanagers and employeestake up these rcles and act as ctaractorlsilcFooilrEb il€co€EaryTemlon3 xeyQuedlon3 superiors and subordinates,they meet at the au"Wholi h ch.|S! trudlira Ho{ to lcd h|t l!m*r Auttrodtylotdary thority boundary. optll opdr to cd{cl!m. d wnd?' Theauthoritybourdary rldd "VVho posesthe question: ttndlolrr Hou to lbllor b|lt ldl dcLrtr is in charge of what?" In !upcdo[. DAa$VO most companies,that question used to be relatively "Whodo€| whrt?" coitdgnl Hov to drDar$ oi od|.|r yo|rdoo't Ta* Boudary easy to answer Those in oornpat!nt codrol, authority were easy to Dfolro identify. Bossesissued or'|xlorlt ]hrv to ltoddlre ylt u|d€dr|d ders,and workers followed qthd Fod.'. Fnc. krcorrFtani them. Management was r€hanad primarily a matter of effective monitoring and con'lflh!t'. ln lt to t|3?" .mDo{trtd [ow to ffird on 'i htorEt wlthout Pollthd Eou|ddy h0l. trtdi.d l*ly dltannlnhE lh6 odarilradoo. But in more flexible ortorvlr'le|| ganizations, issuing and .ulotted flow to dltloortha ianrra.n whwln following orders is no a wlDloaolhrdlo|t. longer good enough. The individual with the formal "who b---fl{ bntpford Houtohol p llwttho|rtd€YCuk€ Ir|onftyBo{nrtry authority is not necessarily '|r3'?' loytl od|c]|. the one with the mo6t up tof'ant to-dateinformation abouta dlrtrutthrg ll,o* to Emaln loyal wl$out business problem or cuscodamptlom utdqn n&E out!&ab tomer need. A manager may leada quality team,for example,that includes not onlv her peersbut alsoher boss.Oran account sameunderlying problem. Similarly, superi- pend on otherswhoseskiDsand rcsourcesthey rep'mavaskhis bossto ioin the accountteamat ors who arenot challengedby their employees calturotconkol and often don't even under"can do no stand. To be effertive, they cannot simply a aritic;lphas€ in the work with an important mav feel inlulnerable, as if thev wrong." At the sametime, the lack of support ignorc the work of others - in effect, to say cL$tomer. "ifs not my iob" - anv more than a subordiIn suchsituations,subordinatesfacethe far ftom theL subord inatesmay makethemsuspinate cansimolv followthe orders of his or her morc comptcated task of adequatelyinform- cious and over controllins. TheTask Boundary Work in complex or- boss. Indeed, their own performance may ing their supedors and helping them to think clearly and rationally, even as they work to ganizationsrcquircs a highly specializeddivi- depend directly on what their colleaguesdo. implement their superior's r€quests. Para- sion of labor. Yet the more sDecializedwork So, while in focusing primarily on their own doxically, being an effective follower often becomes,the harder it is to give peoplea sense task,thev must alsotake a livelv interestin the chatlengesand problems facing others who means that subordinates have to challenqe of common mission. This conhadiction be tweensDecializedtasksand theneedforshared contribute in differcnt ways to the final prodtheir superiors.A fter atl, allowing superiorslo uct or service. p"rposi tretps explain why teams have be act foolishly only urdermines them. When task relationships with co-workers What it takesto be an effectivesupenor u come such a popular form of work organizasimilarly complicated. Managersneedto take tion in recent vears. Tearns provide a go well, people feel proud of their work, comfortableabouttheir dependenceon otheF, and chargeand to provide shong leadeFhip. But mechanismfor bringing togetherieople with in the process,they must also lemain open, dilfercnt but complementary skills and tying confident that they have the resourcesand the even\,'ulnerable,to criticism andfeedbackfrom them to a singlegoal: designing and manufac- skills necessaryto get the job done. But when
1992 THEASIANMANAGERNOVEMBER/DECEMSER
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a work group has problems defining the tasl dividing up responsibilitiesand apportioning i"ai*iiaul members befon to feel t *ut6, incompetent,unable to accomplishtheir work, and sometimesevenashamedof theiob the/ve done. Ih€ Polldcal Boundary ln most comPanies, "Dolitics" isatermof puederision. lndeed,one -the corPoration without o'f the pmmises oI "one boundaries is to make the comPany into politics ftom and eliminate bis happv family'' thi,"o;i.irtace on"" and for all. Bu[thispromise containswithin it a Potmtially dangerousmistake. Politics involves the interaction of $ouPs with differcnt interests,and any large complex
badly,membersof a particular work group can feeluftecognized, unden€Pre6entedin imPortant decisionsand exPloited. The ldonw Boundary. The corPoration without boundariesseemsto offer employeesa common identity, the kind that JackWelchsug"FouP gestswhen he talks about erasing the working g* way people in the of hbels...whictr tosether." In fact, people have a multitude of er6up identitie at wori. SometimestheseidmEtiesare a product oI a particutar occupational or professionalculh[e: aftomeys, engineels, sofiware proexanmers, evenshopfloor workthev' re rooted in the local work ers. Somdtim-"es group: theteam,departmmt orrcSional offi ce, AndsometimestheiroriginsarcmorcPe6onal, grounded in the individual's exPeiience as a member of a Darticular race,gender or nationaliry The distinguishing chaEcteristic of such relationships is the gr,oup-s"samenes9."When people "us" verbesin to think in terms of "tlem," of theb in-group as s* oppos€d to other ouFgrQuPs,they are engagedin a relationshiPat the identity bourdary Unlike the pa litical boundarv, which is about interests, the idi:ntity boundary is about values. Put another way, the identity 'fiho is - and boundary raisesthe question, isn't - us?" Peopleacting at the identity boundary trust inside; but arc;ary of outsiderc. They seek out people who seemlike themselvesand take for pgantedthe value of their own SIouP Perspective.The membersof a localofficemay feel thatheadquartershasnourde6ta(ding of how their rcgi6n r€ally operates. Sciendstsin an R&D lab may feel that marketing PeoPlehave noconceotionofwhatmakesthemti& Womelr be convinced that their male colleaguesdon'trespecttheir distinctivestyleof managing. Or foreign nationals in a multinational company may believe that headquarte$ otr".*u" "int itt t"utly grasp the sub0etiesof the local markel ldentiw relationshipsarEimportant becaus€ they tend b be exhem;ly ene4,izirig and motivating. ln a workplace wherc effective Performance increasingly depends on employee commihnent to and engagement in the Fb organizations need to tap this enetry soulce and put it to productive use. Thafs why companiat lke *ero]" Coming alrd l€vi Strauss irave encourageddiversity at all levels of the organization. -But r€lationshipg at the idmtity boudary also run the risk of disruFing the hoader allegiancesnecessaryto work together. For this reason,creatingand supporting a senseof elan "we are the best grouP" or team spirit withou t divaluine the potentialccncibutionof other groups is thdreal challengeof work at the ideftitv boundaqz WienorganizationsstikethisbalancePe
"Peopleactingat the identity trust insidelsbutarewary boundary Theyseekout People of outsidets. andtake whoseemlikethemselves fur grantedthe valueof the gloup peFpective." organizationcontainsmany suchgroups R&D hasa leeitimate inteFst in long+erm Esearch, manufa"cturingin theproducibfuty of a Product and markethg in customeraccePtanc€.A union mernberwho conftonts a fol€man over an allegedcontractviolation, a regionalvice president who wants to rnakesule her factori€s8et more investrnent funds and the direcborof a rcsearchlab who tries to Protect his scientists from intrusions ftom marketing areall engaged in necessarilvpolitical relationships. Theserelitionships canbe exhemely useful to senior managers,becaus€they mobilize the differcnt inter€sts and PersPectivesthat tq eether add up to a comprehmsive view of the Lttit" titt utidtr. Political activity becomesdetrimental only when peoPleareunable to negc tiate and baEain in qoductive ways and when they can't define thdir interestsbrc;d ly enough to discover muhrallv benefic'alsolutions. whenmanagersmeaal tlepoliticalboundary, they view one another as memb€rsof dittirict inierest groups with different needsand "Vvha(s in it for eoals. They posethe question, is?" Thm, d negotia-tingand bargainingwith eachother,thev form coalitions to further their ends and develop strategiesand tacticsfor advanchg their inter€sts.At the Political boundary,peoplefacethe challengeof defending their iniei,ess wittrout undermining the effectiveness and coherenceof the organization as a whole. They must Ey to distinguish between "win-lose" and "win-win" shategies. Whm gouDs in a company do this effectivelv Deo;k tend to feelpo:werful. staff membersirclievethevareuearedfailvand rcwaded adequate$ Bui when political relatioruhips go
Seniormanagersat a rnidsize office equip mmt manufachler faceda seriousthr€at. New competito$ were introducing lower priced prcd-uctsthat outperformed thecomPany'sbaditlonat prod uct [ne. Managersknew they had to counterwith a new product of their own. But thev worried that their company,which was organizedalong sbong functionai lines,simply could not respondfast elough. For the company's chief operating officer, the solution was to ceate a PatotyPe that would designa new moreadvancedversionof main product. The team aF the companys -COo proactr, itre arsued, cou.ld benefit the iompanv in two wayi. lt would be the fastest -euin oi Uri"gl"g to marketa Prcductequal to thechanqingcompetitivesituation. Evenmorc importait, [re teah would be a laboratory for or{anizational leaming in which the comPany coutd e\periment with a more flexible work orsanizaton. Despitetheskepticismof someof thE companys fuictlonal vice presidents,the CEO aFeed. The COO aPPointedrcPr€sentativesfrom marketing, manufacturing englneerinS,and finane toa l2-member Product r€desiSniask force.Their rnissior! heexPlained,wasnot only to innovate a new prcdcut but also to invent a whole new ay of working toFther. For example,theteamwor:ld beenttely "s€lf-maraged"; members would selecttheir own leader ftom among themeelves. To suPPortthe team in its effors! the COO hired a hainer to teachmembers the new skills - brairstorming problem solvin& and group dynamics - necessaryto work effectivelv h a team envircnment. et rust, taik force members shar€d the skepticism about tearns that they picked up frorir their superiors. But as they develoPed their team skills - how to define problems systematically,to give everyonea hearing and to reachconsensus- their skepticism melted away. As the C@ watched the teamgrow, he felt exhemely encouraged. The old fiShting was gone. He was convinced that he'd fashioned'thefirst successfulindtnctional gouP inwhat had alwaysbeenatsadition-boundand turf-con6€iouscompany. The task force developed a new Prcduct designright on rhedule and Pr€s€ntedit to the companis executive committee at a sPecial
meeting. In a gesture that emphasized the group s team spirit, the lowest statusmember of the task force, a manage! from purdnsing direcied ihe presentation. Everything proceeded without a hitch, Howeve!, whm it cametime to discussthe team's proposals, the meeting broke down. Company executives,naturally enough,asked tough questionsto test the task force's design concept. Was this product really an imporvement on current company lines? Wouldnit it iust confusethe customer? What more could the team do to bring down prices? But insteadofrcsponding to theselegitimate questions,the team members kep defending their own original prcposal. They didn't think any aspectof their design could be modified. And teammembeE seemedready- too ready - to leaDto the defenseof fellow team membersfrom d iffercnt functions. When onesenior managel, for example, argued that the producfs manulacturing co6tswer€ too high to be it was a competitive in the current marketpLace, team meanberftpm marketine who insisteri Similarly, that the costscouldn't be lowfu. when another senior manger criticized the product design as too complex and thenefore dilficult to manufacturc,it was someoneftom manufacturing who defended the complexity asnecessaryfor producing a fi$tdass prcduct. The morc the senior managerspushed, the more the teammembeE dug in their heels.But this cyde only succeededin convincing top management that the task force had become inflexible. The executive grcup rciecled the product designand askedthe teamto gobackto the drawing ticard. When the team managers left the room, severals€nior managersinsisted that the COO find new people for the team. Why did this office equipment company's attempt at interfunctional proJuct deign go wrong? The answer is that senior managers didn't know how to orqanize the team's boundariesso that it couldivork effectively. In the processof bringing the team tqgethel at leastthree boundary misiakesoccurred. 1. The COO did not createaclearauthority bourdary. On the one hand, he gave team nembers a grandiosesenseof themselvesand their mission. They were to be the new model forthemtirecompany. Ontheotherhan4once
ple feel loval to their own Foups and also in irrt it uir""lthv topect for;ther. But when team spirit is actompanied by contemPt for othes who don't sharc the iame vahies or experience,identity rclationshiPsbecome extemelv disruptive. Igs-imDortart to r€m€rnberthat these four psychological boundaries don't exist in isolaiion from-oneanother. In anv work experience, they interact d''namically. Consider the exam-
ple of the unsuccessfulprcduct development team,which is dessiH- in the insert, 'DecodingBoundarylv.Iistake: TheTeamThatFailed." A chief operating officer establishes an interfunctional team to design a new prcduct. He believesthat in order for the team to work, it is enough to encourage group cohesion amons its members. So under the rubric of ' "self-iranagement " he neither designates sorneoneto representhis authorityon the team
]HE ASIANMANAGER
._
NOVEMBER/DECEMBER 1992
needto do the work. The team'sstrongidentity boundarv makesit imDossiblefor membersto establishthe intemal ta;k and Doliticalboundahe establishedthe team, he r€fused to play a ries nec€ssaryfor functionin! etrective$ Put leadership role. Becausethe team was s€lJ- simply, the task force fails asa teambecauseits managed, no one had the authority to make membersfeel foomac, like a team. hard tsade-offsamong conflicting goals. Only when rnanagers understand how 2 The team coped with the ab,sence of au- boundaries interact in this way can they leam thority by enactingan identity bourdary that how to manaee tiem, And executivesmust was too sbong. Once told that they were pio start by realizing thaq like the COO, their mo6t neersin interfunctional work, team members common mistakes are made at the authority became convinced thev were the Dotential boundary saviorsof the company ind developeda sense Vacul|m of themselvesas separatefrom everyone else. TheAuthorfty They were able to be "different " "new," an Seniorexecutive know thatin thenew busi"elite group." nessmviiDnment the old authoritarian style managementby control - no longer works. I An overty 6hong idenffty boundary pevsrH Eam rnsnbss ftom qEatingthe inbrnal Eager to encourage participatioo teamwork taskand politicalborjndariesthev neededto do and employee empowernent, tnanagers astheir woric The price for zustainingthe senseof sume they must give up their own authoritla diffelerre betweenthe bam ard the rcst of the But this decisionhasa paradoxicalresult.Wltm componywas the srppressinnof important dif- managersabdicateauihority, they camot strucfercnes amongteamm€(Irbe(s. turcparticipatiorf teamworkorempowerment which makes it imDossiblefor For example,the teamneverfound a way to effectivelv oeate the appropriate task boundaries so that subordinatesto be productive. product deeachmembersused hjs or her specialexpertise In the caseof the unsuccessfu-l on the deign projectfor the good of the whole. sign taskforce,the vacuum of authority is filled The manulacturing engineerdidnlt sufficiendy by too much group cohesion. In other cases, challengethe designengineer'swork ftom the teams rcspond to the authority vacuum by perspective of producibility. The markethg becomingpassive.Irstead of supprcssingtheir repr€sentativerarclyquestionedthe engineer's dilfurences and conflicts, team members arc cost assumptionsftom the penpective of cus- paralyzed by them. Becausetherc is no sbong tomer acc€ptanceand pricing. As a result, the authority to contain the inevitabletensionsftat team was never able to take advantageof the increasedparticipation necessarilygenerates, difiercntskillsteammembershadortooptimiz€ subordinates believe, quite righdy, that any them in the product design. conJlictgwill rcmain unresolved. Thercfore, In additioo becausetask force participants they digin to PIod their turf, and theconflicts wercsocommifted totheiridentityasmembers becomeooliticized. Sincetheseniorexecutiveis of an elite team,they lo6t sight of the politics of psychol6gicallyabsent,peoplefeelthere is "no prcduct design. Yet for the team to function court oflast resort/' no guarantorto ensurethat effectively,the managershad to think of them- decisiors will be fair. Take,for example,what happenedat a large selvesassomethingmore than teammembe6. They were also political representativesof im- multirntional firurcial rrvices company that portant interest $oups thoughout the com- was hying to designa new integrad informapany BecausetheyfailedtolepresenttlEsegrouts tion system. The compan/s executive grcup - ior exarnple,manufacturtng'sinterestin prod- wanted to qeate a system that would link together the databasesof the company's indeuct simplicityor ma*eting:s inter€stin a poduct dlat could be disbibuted thrcugh €stablished pendentPloduct lin€sand allow salepersonnel dunnels-ftevcorld notftivelvsellthenew to analyze a customer's financial needs and designto then 6wn colleagues. processapplications immediately in the field. Theunfortunab r6rlt a Ploductdesigntl|at Sucha system,they rearcned,would not only couldr(tbeddendedoneith€rbclufcalorpolitical make for better and fasterservice,it would also gounds and rcraws skqrticism ttuoirghout position the company to take advantageof the next comDetitive frontier in their businessthe comDanvaboutthe us€fiirEs of bms. "crosrseliing:' u *ide anay of financial products to individual customeG. nor plays tl|at role himself by actively porticiThe executivegroup's strategicvision was patin8 in the team's deliberations. sound, but their plan foundered on the messy Becausethe COO never enactsa dear au- details of implementation. From the very bethority bourdary, the leam getslo6t in its own ginning the lGperson committee rcsponsible good feelingsabout igelf. Its mernbersmd up for developing a comprehensive technolo|y qeating too shong an identity boundary be- plan became mied in conflicts. Some team tween themselvesand the r€stof the companv. hembers complained that the information sysAll of their energiesgo into maintaininj thit temsdivision wasn't rcally commift ed to develgroup identity, evm at the price of suppressing oping a new genemtionof code and prograns. the diffurence of skill and pe$pective they Product line reprcsentative6worried that they
would lose the advantagesof the hiShly customzed information systems that each unit had developed over the years. And field service representatives were skePtical that headquarterscould really accomPlishsuch a comple\ and ambihousundertakinS. Ftustratedbv the committee'slack of progressand conuincedthat it "iust didn't to malethe newsystem havethehorsepower'' happen,the e\eotive SroupsetuP d second, higher level teamof threetoPmana8ers-one from the information systemsdivision and the other two from the comPany'smapr Product $oups. But this teamwas no more effective ihanihe oneit replaced.ThelS representanve complained thai the product p6ople didn't
And the smallerthee-peFonteamwas exPlicitly designed as a grpup of equals with no single member in chalge. Wlty didn't the executive committee authorize someoneto rcpresentits new strategic intent on either commiftee? Upon r€flectior! seniormanagersrcalized they had shiedaway from exercisingauthority in the desiSnProcess becausethev hadn't faced up to their oa.t1intemal divisi-onsabout the rj;ks of the companv's new strateqy.Specifically,the chief oirratins officer,iho iad shong ties to the wasskeptical indepenlentproductmanagers, aboJt the new d irection.H olwever,becausehe fett obliged to support the other two chief officer-another examPleof misPlacedgrouP cohesion-hercmained silent.Of course,by failing to enactthe authority boundary, this execntive group createda vacuum that allowed potitical and identity differencesto paElyze the work of both design committees. As this example suggests, manaqersaHicate authority not just b,6causethey believe iha(s what flexible organizations require. On a deeper level, managersaMicat€ authoriw to defend thems€lvesagainst their o-n aniieties. If conflict is an inherentfeatue of work in flexible orqanizations,sotoo is risk. ln a business envircnment characterizedby changeand uncertainty,there is no Suarantee that thedecisionsmanagersmakeor thestlate gic options they choosearethe ri€ht ones.And asthecompetitiveenvtonment becomesmore unforgivirig the consequencesof fail"ue become gr€ater. Often execuhvestry to coPewith this anxietv bv focusing on task in a mechanisticway t("t/b..n-" E*^ored with elaboratemethodologies for strategicplanning.They sye tematicallv evaluateoperationsand assess risks. Thesemanagersilevelop elegantplans for rcorienting the strategic direction of the company. But \ /hile such detailed Planning and analysismay help shapea decisio+ they cannot determine it. At some cdtical Point, their subordinatesmust move beyond the ae sessmentof risks and make decisions in the faceof considerableuncetahty. Indeed,senior managementteamsmav beuncertainabout any straEty's legrtimacyind validiry But jn the end, a strategy'slegrtimacy rcsts on the Dersonalauthoriw of the chiefexecuuve - thai is, on his or her ibility to rcpr€sentand embody the intercsts of the entire organization. If subodinates cannot identify psychc loeicallv with the chief executive as the reiresentative of the whote, they will be unableto cedetheir autonomy to the CEO and in effect,psychologicallyauthorize him or her to lead. That meansthe best-laidPlansand strateeies - will never be rcalized. The realsolution is for managersto exercis€ authority but in a new way Authority in the
"Managerc to abdicateautho?lty againstthelr defundthemselves ownanxieties,"
understand the complexitiesof the new technology. Meanwhile, the two prcduct rePrcsentaiivesaccusedthe Isdivisibn of dragging its heelsin order to prctect its centralizedcontlol of the company's information systems. The erecutivegroup couldn't understandit. 'avhy aren't we gettin8 any action?"they wondered. What happenedat this comPanyilluskates what fr€quently occurswhen a teamofmanagers is askedto design new systemsor Prcducts that Dromise to revolutionize core business rehtibnships in a company. Ifs only nahlral that therc will be conjlicting PersPectivesand disagreementsabout critical issues. Only by confronting suchconflictscana teamcomeuP with a workable new apProach. A deeperdnalvsis of the financial s€rvices company's conflicts rcvealed that beneathall the variousSrouPsrePre the disagreement, sentedon both committeesshdreda corrunon feeling:they were ajrxious about the new strategic iireciions outlined by the comPany's sefuorerecutives.The company's successhad traditionally been built on its brganizational structur of hiql yautonomousprcductlines. ProductmanaiersfunctionedaaindePendent entrepreneurs -without freeto extendand develoPtheir interferencefTomheadquarte$. lines Naturally, they were afraid of loeing this autonomv The problem was that no person on either the first br secondcommitteehad the authority to act as a tie breaker when sbong disagrcements persisted,and neither team felt it could refer such deadlocksto the toP management qroup. The chairpersonof the first committee "convene/'than iotei that he felimore likea a team leader with decision-making Power.
corporation without boundaries is not about controlbut aboutcontainment- containment I of the conflicts and anxietiesthat disruPt Prcductive work. For instance,at the financial servicescompany, the executive SrouP took the simple stepof apPointing a new Personas leader of the seconddesEn team. Pufting an explicit representativeof top marBgements auihority on thissecondteam wasenoughto keep the concernsover the comPan/s new stratew from Daralvzingeveryone. it""a-to F "prisenf' for their uii"g"o subordinates in prccis€ly this way, rcady to resolveconflictsthat cannotbemanagedby the group and to acknowledgehonestly the anxiety inherent in working in ar uncertain and risky envlonment. When they do so,manaSersian usetheir personaldealingswith othe$ to get people to do extraordinary thinSs,even in the iace of extremely difficult challenges.
Downstdng as Contalnment Management wfthUgnty For a porhait of a managerwho works in thisnew way,consjderhowthevicePr€sident for human rcsourcesat a fugh-tech compon€nts manulacturer handled the downsizing of his own deDartment. Once a leader in the businest this;lechonics compary was facing a mai:r crisis. Relentlessinnovation in the industry had led to falling pricesard the growing technical obsolescenceof the comPany's pr;ducts, which produced a short-term iueezeon cashflow anda long-termthrcatto th! company's suwival. ltr'hai thd company had to do to rccaPture market slure was clear: dismantle its three indeDendentbusinessunits, eachwith its own expeisive staff functions, and rcPlace them wiih a sinelemutti-prcduct orqanization. The eronomid of scalemade possi"blebv etiminatine duplicate support oreanizaiions woutd t& ,ro'r.ro,rt "r id itrvestin new R&D. Even more imDortant, an integFted organization could reslpondto the gni*ing he;d toward technological integration in the comPan/s three Droduct lines as well as meet ostomer demands for inteffated salesand service But shifting tf,e sbategic direction of the company necessarilycame at a stiff Price: a massive'downsizinf. The HR vice President fac€d the daunting task of managing the corpomte rcorganization and fiSuring out how his depatment could best serve the comPany's new businessstrategy- even as he laid oif nearlv 40qoof his ov,ri'staff - or about 20 people. ' Dowruizings bring the Political boundary into play as perhaps no other management decision does. In the face of massive cuts, people stluggle to defend their own intercsts, iesourcesand i:bs. Concemed that the high level of reh,enchmentwould demoralize his staff,the HR vicepresidentwasdetermined to maruge the doransizing Processin his own deoarhnmt in a wav that would contain the
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Come home a celebrate our i---Yrs,--l 25th llear-. Twenty-Fiae Yeflrs Educating Asian Managers In February7993, theAsianInstituteof Management celebrates its 25thAnniversary. As Asia'sonly regional schoolof management, AIM haseducated globallycompetitivemanagers who will leadtheregion's enterprises and organrzations into thenextmillenia. Whetherthey'refrom Bandung or Bombay,KualaLumpur or Kathmandu,manyof our nearly20,000 alumniare at theheartof Asia's vigorousandexpanding economy. If you'reoneof them,why don't you join us at Shangri-La's EDSAPLAZA Hotel this February? There'splenty to celebrate!
Marketing FinancialManagement, Management, operationsManageManagement. mentandDevelopment whicharegivenoutin six Theawards, N4alaysia, countries- Indonesia, sponsored by A half{ayconference HongKongorganizatronal dynam- Thailand.Singapore, the Asianlnstituteof lvlanagement, WanenBennis, dinner. awards beginwiththePhilippine and ics expertand authorof the best of Hawaii at Manoa, theUniversity a Leader, Business. sellingbooks,0n Becoming ofInternational theAcademy "lnternational WhyLeadersCan'tLeadandthe Un- 79 Februaty This year'stheme is Dinner GrandHomecoming of New realitylndusBusinessandthe Formation Realities in try will be Economic andGeopolitical Organized by AIMalumni,the homeAsia." Sessionswill focuson new a m o n g t h e to liveupt0 comingdinnerpromises various k e y n o t e andwillfeature tradealliances publicofficialsandpolitical its name.Over1,000alumnifromall thinkers. speakersat overAsiaare expectedto attendthe AIM's fourth andformaldinnertobeheld cocktails annualMan75-76February EDSA PLMAHotel at theShangri-La's for agement PacificAsianConsortium FirstclassentertainGrandBallroom. Conference. lntemationalBusinessEducation ment will be providedby lvlonique otherparticiand Research(PACIBER) pants are andoneof Wilson, starof MissSargon talents. mostexciting thePhilippines' conference chief execuThe1993annualPACIBER Numerous orizeswillbe raffledoffto environment tive officers focusesonthechanging of Asia'smost out- luckywinners. of executive educationin Asia and and presidents companies, amongthemDel Among theconference standing NorthAmerica. Instruments, 74-79February MontePhilippines, Texas soeakersare DeanEdwinMillerof P.T.SemDati Air and Neptune 0rient AIM Exhibits NormanNlarrof Michigan University; focuseson Lines. The conference J.A.Patagof the MasseyUniversity; and TheHallof Fame,a perpetualexhibit, of Management aswell humanresourcedevelooment AsianInstitute of organiza- honorsfoundingfacultymembers, Yonsei meetingthe challenges fromKorea's asrepresentatives presidents, governors and outstandUniver tionalgrowth. andSeoulNational University exingalumni.The25thAnniversary McGillUniversity. sityandCanada's hibitprovides a visualhistoryof AlM, 78 February highlighting specialeventsand the Awards TheAsianManagement 77 February people foundto theInstitute's central Booklaunching AIMCommemorative Awards iscon- inganddevelopment. TheAsianNlanagement byAIMto recognize, its25thAnniversary, ductedannually Tocommemorate - includactivities two books, h o n o ra n d p r o m o t eo u t s t a n d i n g All25thAnniversary AIM has commissioned golf, tours and shopping maning cruises, city in seven areas of 25 achievement Leonardo Silos and AIM2020 by for Infor- - provideexcellentopportunities lvlanagement, General Yearsof AIM by GabyMendozaand agement: Comerenewold Management, Peo- alumninetworking. Technolo$/ S.J.Thetwovolumes mation JamesDonelan. andmakenewones and Management, friendshios AIM'sfirst quartercentury ple Development celebrate coursein the andchartthe lnstitute's vear2000. 15 February on IntemationalSymposium PacificAsianBusiness(ISPAB)
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Dolitics of the sihration. The cmcial decision was to ask subordinates to help him design a new and smaller human resourcesorganization. The vicepresident believed that if p€ople helped plan the cutback, the subsequent layoffs might be viewed aslessarbitrarvand oersonal.Because they would understarid the;hategic logic behind the downsizin& those who remained would trust seniorrnanagemmf smotivesand Dtitns. At a meeting with his eight dir€ct subordinates,the vicepr€sidentdivided them into two task forces. He askedboth teamsto come uD with a wider rangeof possibleconfiguratioru for the new human resourcesoEanization and
task bourdaqr By specifying a charge,a s€tof conshaints, and a tight deadline, he helped task force membersfocr:son the work. The vice Dresidentalso undetstood that he had to inter;ct with his dilect subordinatesas individuals, not iust assubordinatesor technical specialists. The entire FIR manatement team conflonted an unavoidabl€ fact someof the task forcemembeE were designing themselvesout of a job. Soat the end ofthe meeting, th€ vice pesident offercd to meetwith eachof his subordinates orivatelv ln the next two days,all eight met-with the vice prcsidentfor a confidmtial conversationabout their own futur€s.WhatwerctheirprosDects?Whatwould they do iI the reorgatzation meantthey had to leavethe comp6ry? How might the vice president help them either to adapt to a new role at the company or to find a |:b elsewhere? These conversations were painful but poductive. They helped their subordinates feel that the vice Dr€sident valued their thinking and would not discount their own personal dilemma during the r€organization. The vice Dresidentshowedthat hecould stavconnected io them as people and to their orin penonal situations, even though he was the sou!€e of their immediate stress. The private meeting also served another important purpose. By meeting with eachof his staff members,the vice presidenthelped to contain the uncertainty and risk - the difficulty and the pain - associatedwith downsizin8. Natualy, his subordinate were prcocopied with their own personalwelfare. But at the sametime, thev identified with the vice presidenfs authoriw and wanted ro sarisfy him. necausehe was connectedto them emotionally and not only through a formal role relationship,they acceptedhim astheir leader and were willing to do the work he expectedof them. This emotional connectionalso helped them look beyond thef irnmediate intercsts. Over the next two week, the task forces prcduced a total of nine configurations. The disc'ussionswere storm, and occasionallyde parhnent headsshongly supported a particular desisn becaus€it servedtheir intercstsbest. But their loyalty to the vice president and commitment to accomplishing the task he had given them meant they couldn't simply discountplansthatmight threatentheirown pDs. Thevice Dr€sidentdrcw on a number of the planstosket-chhisdesiredconfiguration. Then he worked with his staff, three of whom were to los€their iobs,to implement thenew or8anizational design. While difficult for everyone involved, the implementation went smoothly. HR staff memberc believed in the new smrcture. They werc convincedthat it fit well with the company's new business shategy and
"Yetanyonewhohaseverbeena partof a groupthat wo*ed well togethelremembers howgood that expelience felt." to rccruit some of their own subordinatesas task force participants. The teams were to considerissuessuchasreporting relationships, spansof conhal, organizationalstructur€ and new combinationsof functions. Whafs more, the vice president said, each of the proposed scenarioshad to r€cognize four major conshaints and challenges. Fi$t, head count had to droo bv 4O7u Yet the HR deDartmentalso had to take on two new re. sponsibilities: managing the company-wide retr€nchm€ntplan and rchaining the company's engineeringpersonneland salesforce to function effectively in the new integrated organization. Finally, time was of the essence. The task forceshad lessthan a month to come up with their proposals. During this meetin& the HR vice president didn't tust Biveorders. He did someextremely sophisticatedwork at both the authority and task boundaries. For example,his decisionto ask the task forces for a vlrietv of Dossible configurations rather than to come up with a single recommendationplaceda clearauthorityboundary betweenhimself and his subordinates. Becausehe took the rcsponsibility for making the fiml decision,they didnlt have to. This authority boundary effectively contained thepotentially destructivepoliticsofthe situation. Notice that the vice Dr€sidentdidn't try to eliminate the politics aitogether. Since each configuration was simply one among manv Dossiblealtematives, task force membersieft fteeto advocateaparticularconfiguration vigourcusly without undermining the group's work. Peoplecould expresstheL corc intercsts without gefting into political deadlock. At the sametime, the vice presidentalso helpedto containpolitics by delineatinga clear
would enable the human rcsourcesdepartment to do its job in an extrmely difficult situahon. Even morc important, people felt they had beentreatedwithdignity. They had taken part h a "crisis team," doing important work at a critica.ltirne. Thev had helped the HR vice presidentand the iompany 6nd the bestsolution to a difficult problem.
Gettlngstart6d:F6ellngs a3Data
TheHR vicepresidentknew aLnostinstinctively how to enict the right kind of boundary relationships with his subordinates. But what -manaser about the who is not so skilled? Where does he oi she begin? To managethe new boundaries of flexible olganizations, the best tools manaeershave ar€ their own feelings At first glance,this claim may sound unlikely. After all, many managerstend to discount thet feelings as having nothing to do with work. In pa*iculat they view negative feelings as dangercus and disruptive. Either they ignore them, grit their teeth and get on with the job or they dismiss them as something merely personal, their own problem, uffelated to their work. Yet anvone who has ever been part of a group that worked well together rcirembers how good that experiencefelt. When people have pncductive working relationships,they feelat eas€,relaxed ard focusedon theirwork. Work of this quality r€semblesa good canversation, in which people are "in q'nC' and everyone has something valuable to offer When this happens, employees experience work asnot only productive but also qeative, innovative - and quite simply - fun. Sirnilarly,when a work interactionhasgone wrong and people are in the heatof a difficult situation,they often feelterrible. Theybecome frushated, angry, confused and sometimes even ashamed. "I hate this," thev find themselvesthinking. "This isn't working." "I can't be productive." "I don't like the way'X'is behaving." In suchsituations,peoplefeel asiI they are swirnming against a shong current. Anv s€nseof achievementor accomDlishment they glean from work comesdespitetheir porticipation in the organization team, not be. caus€of it. Sotoojn the exampleswe have described. A common denominitor in all of them is the presenceof shong feelings:the engineer'sdefensivenesswhen questionedby a shopfloor worker; the shameand anger of that worker, feeling put down by the engmeer; the contempt that product desgn team membersfelt toward anvone not part of their intense team experience; the anxieties that led to the paralyzingconJliclsat the firuncial services comDanv Suchfeelingsarcn't iust the inevitable emotional residue of human work relationships. Thevaredala,valuablecluesto thedvnamicsof
THEASIANMANAGERNOVEMBER/DECEIVTSER 1992
boundary relationships. In this rcspect,feelings are an aid to thinkin8 and to marugln& thev are a real part of real work. Like the human resourceivice prcsident,the bestmanagers undentand thjs intuitively. They not only manage with their heads but also with their gut feelings. Tobegood boundary managers,executiv€s must be ableto decipher frustrating and diffic1 t personalrclationships and diagnosewhy they have gone wrong. Doing so requir€s acknowledging their own often intense personal responsesto work situations. Much as managers leam how to make subtle distinctions when interpreting empirical data, boundary managementalsorequiresdevelog ing a more preciselanguagefor describingthe feelings people experienceat work. But the sametime, managersalso need to know how to distancethems€lvesftom their own experimce and feelings- in a sense,to depersonalizethem- in order to s€ehow their own rcsponsesare symptoms of a brcader gmup process. In fact, the stronger the negative feelingspeoplehaveabout a work interaction, the less likely those f€elings are "just personal"and the morc likely they ar€a s)'rnp tom ofa rcal organizationalprcblem. Feelings are impoftant signals to mana8ers that they must steDback and examine their work relationshipi. Forixample, had the engineerbeenable to ask himself, " Why do I feelsoattached?"then his encounterwith the worker might havehad a more productive outcome. Similarly, the defensivenessof the product design team in responseto questionsftom top management should havebeena sign to teammembe$ and the COO that therc was a fundamental structural Drobleri in the team'srelationship to the executivegroup. Firullt had seniorexecuhves at the financial servicescompany unde$tood their frushation with the de6im committeeas a svrnDtom rather than as evidence that the indiviauals on the teamlacked "horsepower," the managen might haveavoided making the samemistake twice. UsingonesoumfeelingstodiagnGer€lationshipson thepb ishardwork Yetanawar€nessof ftelings,one sown and thoseof others,is qucial to rraking flerdbleo€aruzationswork. It is the way to discoverthe boudades peopleneedin Itisatthevery r€lationshipstoachievetheirbest. heartofrnanagementintl€"corporationwithout boudaries." I
em4roil. ment -to ride the vuh wirrl
of success? Theseare the concernsof TheAsian Manager. Written by practicing managerswith
tempered with an intimate understanding of the way of life, traditions ;l':;:::;,::.1** and cultures of Asians, as well as the intraregional, contrastsethnic and geographical are presentedeachissuein our lively and informative, authoritative - yet no-nonsense- editorial. Subscribe today and keep up-to-date with the latest managementthinking and trends.
Yfffoil l( i;,;:'iii:;
K(W im;#.tf:.
significant experience in
the managementof Asian and multinational enterp sesand govemment and non-government organizations,TlreA sian Maflager focuseson today's managementtrends and their analysis,real-life management issuesand the opinions of key decision-makers.
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subsciotDn /l2 rssues)to THEASIAN MANAGER and rush my lree copre6of ASIA 2O2O:A REGIO AI SC€ AilOlII|{EYEAR 2lr2o and I SEARCHOF THE ASIA MAI{AG€R FON lC YEAR 2O2O
tr tPREFER"""","", slbscriptron(6 6s!es). My choEe or a free Cift s lplease tbk one): O ^s|4 at2o: A R€GO|{ L SCEIIARIO lX tE YE R 2020 E III SE RCH OF ITE ASIAI MANAGER FOR It|E YEAR 2O2O
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Thisarticle@asreprintedwith thepernissionof the Harvard BusinessReview. Inrry Hirxhhom andThonasCilmoreoft pinciryl andobe yesidmt, resrytioely, of the INhartonCefitel Phikdelphin.Hirs.hhom'smlrst for Arylbd Researchin rccenthnk isMa aEj^Bin the New Team Environmenl Skills, Tools, and Methad' and Gilmoreis fhe . duthor ofM^kifl.r ala dership Change How Organizations and kaders Can Handle l-eadership Transitions Successfully.
The Asi.,n Maflager brings togetherthe best minds of Asia, North America and Europe to give you a steady flow of new ideasand developmentstrategies and always with a contemporary Asian perspective.The latest in global managementthinkrng and trends
And what does he need to meet the challengesof the Year 2020?How does he readv himself, what does he have to know - not only to survive, but to master his
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1992 lHEASIANMANAGERNOVEMBER/DECEMBER
21
An invitationtoAsia'smost prestigious management awards @--
AsreNIt'{srrrurn onMlwecrurur PRESENTS
rneAsian anagement Awbrds IN COOPERATION WITH
PtDT fhe I eleconnaniotionsConpony
gnizingoutstandingachiev Rec.o ement xnsevenmanagement categories HE ASIAN INSTITUTEOF MANAGEMENTinvites you to join the searchfor Asia's best-managedcompanies.
Institute of Managementwill recognizefor the third consecutiveyear deservingcompaniesthat havedistinguished themselvesin sevenmanagementcategories.
Nominate a companyyou believedeservesrecognition for excellentbusinessDerformance.You can alsonominate There will be sevenwinners in each of the following a not-for-profit orginization that has demonstrated countries:Hong Kong, Indonesia,Malaysia,Philippines, managementexcellencein servingits target beneficiaries. Singaporeand Thailand. You may nominateasmany companiesasyou wish. These winning organizationswill be recognizedin Through The Asian ManagementAwards, the Asian formal awardsceremoniesconductedin all six countries.
Categoriesand their Criteria TECHNOLOGY MANAGEMENT. FoTthe cTeaGENERALMANAGEMENT.For successin strategically INFORMATION positioningthecompanywithintheindustryandtransforming tive useof information technologytoenhancethe competitive positionof the company. it into an outstandingcompany. For outstandingmanagementof MARKETINGMANAGEMENT. For outstandingand successfi.rl FINANCIATMANAGEMENT. liabilitiesandequities,in keepingwiththe innovation in the useof the elementsand tools of marketing, thecompany'sassets, owners'bestlong-terminterests. leadingto customersatisfaction. DEVELoPMENTMANAGEMENT.For creating substantial positiveimpact on its targetbeneficiariesthrough innovative, sustainableand effectivemanagement.This awardis givento a PEOPLE DEVELOPMENT AND MANAGEMENT. FoTexcellence developmentorganizationwhich is primarily not-for-profit in the managementand developmentof the people in the (suchas a government,non-governmentor people'sorgaorganization, geared towards productivity, professional nization) andwhich hasasits main objectivethe improvement of the qualityof life of people. developmentand enhancementof the qualitylife. OPERATIONS MANAGEMENT. For outstandingproductivity in production and deliveryof quality goodsand/or services.
OFFICIALAIRLTNT:Thai Airways Limited OFFICIALCREDrTCARD;Diners Club International OFFICIALH)TELS: Hong Kong Iiong Kong H ilton IndonesiaJakartaHilton Internation il MalaysiaThe Crown PrincessKuala Lump w PhilippinesShangri-La'sBDSA Plaza Hotel SingaporeHyattRegenrySingapore ThailandTheDusit Thani EnHIBITORGANIZER; Pico Art International OFFTCIAL Pte. Ltd. OFFICIALFILMPROCESSING COI,rp,qNy:KodaKPhils. Ltd. AUDITORS PRoCESSj OFFICIAL oF THTSEARCHANDSELECTION PUBLICATIINS:Hong KongStneTao Daily, Sing Tao Evening Post, The Standard IndonesiaTempo, SGVlArthur Andersen OFFICIAL SWA Sembada MalaysiaBusinessTimes PhilippinesThe Philippine Star, The BusinessStar Thailand Nation Publishing Group
Membersof the Boardof fudges HONG KONG l)avid K. P. Li Dircctor and Chief Flxecutive The Bank of EastAsia, Limited
Ian Perkin Chief Economist Hong Kong General Chamber of Commerce
Surasa PresiclentDirector Bank Bumi Daya Cacuk Sudarijanto Executivel)irector IndonesianManagement Association Prol Djuenadi Hadisumarto LembagaManagemcnt John A. Prasetio Managing Partner [)rs. Utomo & (lompany MALAYSIA Tan Sri Geh Ik Cheong Chairman PerlisPlantatirns Berhad Ahmad RejalArbec Editor, BusinessTimes D r . T a r c i s i u sC h i n (ihairman, Malaysian I n s t i t u t eo f M a n a g e m c n t J o h a r ib i n H a s s a n Governmenl Aft-airsand Human Rcsources Manager BP MalaysiaSdn. Bhd. S i e hL e eM e i L i n g Professor& (lhairman BusinessAdministration Division fracultvof Econorricsantl Adrn in istration Univcrsitvof Malava PHILIPPINES VicenteT. Patcrno Chairnanand Managing l)irector P h i l i p p i n eS e v e n Corporation
WASHINCITONSYCIP Chairman 1 he S(iV Group Phiiippines
Enrique l). F-steban Presidenl Center fbr Rcsearchand Communication
DR. BRIANW. SCOTT Chairman Management lrrontiersPty Ltd Australia
Cabriel Manalac Publisherand Editor The BusinessStar
DAVII] K. P. LI Dircctor& ChiefIlxecutive 'fhe BankofEastAsia,Ltd. Hong Kong
RenatoValencia Administrator SocialSecuritySvstem
Dr. Robert I. l'ricker Professor Universitvof Hong Kong BusinessSchool
INDONESIA l)rs. RachmatSaleh EconomicAdvisor to the Clovernmentfor Trade andBanking l)epartment ofTrade
Thegoverningboardapprovesthe criteriaand thesearchand selectionprocess and conlinnsthe final winners.
Arsenio BartolomeIll ChiefExccutiveOfficer Urban l)evelopmentBank
FrancisG. Ilstrada Prcsidcnt PacificCapital Partnersl-td.
The Hon. N{rs.Anson Chan, I.P. Secretaryof Economic Serviccs
The GoverningBoard
JACKI'ANG President Tri-StateHoldings,Ltd Hong Kong
SINGAPoRE Herman Ronald Hochstadl (lhairman
FP-{NCISF-STRADA President PacificCapital PartnersLtd. Hong Kong
Export Credit Insurance Corporation of SingaporeLtd
DR, IAGDISHPARIKH ManagingDirector Lee& Muirhead(lndia Pvt Ltd) lndia
Dr. \\reeChow Hou AssociateProfessorand Dean Facultyof Business Administration National Universityof Singaporc
ADITYA tsIRI-A Chairman GrasimIndustriesl-td. India
I)RS.R,{CHMAl'SAI-I-H EconomicAdvisorto the Gov't fbr'l rade& Banking Departmentol Trade Indonesia
VICENl |'1. PATERNO Chairman and NlaDaging Director Philippine Seven (iorporation
DIi. DUK CHOONG KINI f-xecutive Counselor lJaen'oo Industrial (1o.,
Philippines
l-td South Korea
R O B B YD ] O I I A N Presidcnt/Director P.'l'.BankNiaga Indonesia
ANDRI-]S SORIANO III Chairman of the tsoard and Chief Executivc Officer San Mlgucl Corporation Philippines
I{EUIROHATTORI Chairmarr Hattori SeikoCo.,Lld lapan YOTAROKOtsAYASHI President Fuji-XcroxCo.,Ltd iapan T U N I S M A I t ,B I N MOHAN{EDALI Chairman NationalLquitvCorporation Malaysia TAN SIII C]t]HIK CHEONG Chairman PerlisPlantations Berhad Malaysia
Mr. Lim Hock San Chairnan Institute of Certified Public Accountantsof Singapore
STAN SHIH Chairman and Chicf Executive C)fficer Acer Incorporated Republic of China tlON. \\IANG CHIhN-St llflN Minister Ministry ol Finance Republic ofChina HEI{MAN RONALT) HOCTISTADT (lhairnran
PYONG HWOI KOC) Chairman I-uckl Goldstar lntcrDational Corp. South Koreil DI{, AN,INUAY VIITAVAN Deputv Prime N'linister 'l haihnd VIRO] PHUTRAKUI, Chirirnan Lever Brothers (Thailand ) Ltd. Thailancl
lixport Credit Insurance Corp. ofSingapore Ltd. Siigaporc
DA\JII) K. NE\\TBIGGING Chairman Rcntokil Group PLC Unitcd Kingdom
ALAN C,Y. Yt]O Chairman and Managing Director Yeo Hiap Seng t-imitcd Singapore
\\rlLLiAM ANI)lrRSON I{etired Chairman of thc Board NCR Corporation United Statcs
How to Nominate To nominate a candidatefor the awards,fill in the coupon below and fax or mail today.Photocopyadditional copiesof this form for eachcompany you nominate. Hurryl Mail or fax the nomination form now! * oF- -. - - -l
Prol Tan Teck Meng Dean, Schoolof Accountancyand Business NanvangTechnological University Mr. D. R. Murray Chairman Sinplapore Intcrnational Chamber of Commerce THAILAND Viroj Phutrakul Chairman Lever Brothcrs (Thailand) I_td. TceerachaiChemnasiri ManagingDirector RachadaPropcrty Management ToemsakdiKrishnamra I)irector SasinClraduatcSchoolof BusinessAdninistration Chulalongkorn University Chotc Sophonpanich President T h a i l a n dM a n a g e m e n t Association 'I
arrin Nimmanahaeminda N4inisterofFinance Thailand SuthichaiYoon Iiditor and Publisher The Nation Publishing (iroup Co. Ltc1.
Director I senito: rne Prog-ram
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IJomination ft'ff:r,xni?:Tiil-i:;J*'.", 123Paseode Roxas
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Philippines 0r farc HongKang(552) g77- 59211l Indonesia(6221) s70 -2306) Malaysia (603) 244-| 6961 Philippines(632) 817-9240al Singapore(65) 293-2557C Thailand (662) 374-0860 | I nominate the following organization: Name of Organization Address
Country Telephone Name of President /CEO/MD Position
Fax
Tick box or boxes below to indicate the categoriesof awards. f General Management I Information TechnologyManagement I Marketing Management tr People Development and Management fl OperationsManagement tr DevelopmentManagement I Financial Management Your own Position Company Address
Country Telephone
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By AndreSaumiel Chairman. SaumierFreresConseil
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iny Taiwan exported in 1991more thanall of China,the populationof which is 60 times laryer. It enjoyed an infant mortality rate inJerior to that of most Europeancountries. The American organizers of the forthcoming Art Asia fair will face rental costsat the Hong Kong Convention Center 10 times higher than at their ostomary Miami and Chicago venues; they will also have to install wall-tlwall carpeting at a cost of asvr'ellasbuild smallgardensand $200,000 fountains. Why? Otherwise demanding Asianclientswill not come. It is fairly clear that the Asia-Pacific region will leadthe global economy in the 21stcentury The Paris-Londonand later New York axis is still the basis for the globally dominant Atlantic Rim which rcplacedtheMediterranean une,twoor three hundred years d8o. Thdt dominancei: i itself about to passon: an Asia PacificRim, currently bounded by Tokyo and Hong Kong, is already starting to take over. Within tenyears,Europewill representone fourth of global bade, North America one fourth, Asia Pacificone fourth, and the rest of the world one fourth. But the momentum will be on the sideof theAsia Pacific. Europeand North America are indeed mature economies sated with consumer goods: every family hasa telephone,a TV set cum video, a refrigerator, a washerdryer, and more often than not, oneor two cars.Notsoin theAsiaPacific.Mostpeople still seekto gain accessto dependablesources of electricalpower and drinking watex Theseare,therefore,economiesdriven by a demand for basicindividual and collective need'. And real demandis growing Twentyyearsago,for example, exponentially. 60%of Indonesia'spopulationlived in abso lute poverty, as defined by the World Banl; today this applies to lessthan 20%of a much larger population of 185million inhabrtants. Market surveys sho\a'that a newly affluent
Re$onalSelfâ&#x201A;Źufficiency More critical in the long term, pefiaps, is the source of investments and inveshnent capital for the region: it flows prâ&#x201A;Źdominantly fromwithin. It hasbeenyearssince North America and Europe were crucial or evenvery significant pn> viders of technological and financial capital for the Asia Pacific. Japan has been more than financially self-sufficientfor a number of years,aswell asa shong exporterof capitalto otherRim counhies.l /hat is noteworthy, however, is that Japan hasbegunto loseground to the region's own newly industrialized economies(MEs) - fuuth Korea, Taiwan, Hong Kong and Singapore. They have become,both asa groupand individually,the largest investors in the next four NIESMalaysia,Thailand, Indonesiaand the Philippines - wherc they account for more than one thftd of all foreign investment (more than the NorthAmericans orWest Japanese, Europeans). The first bankin8 joint venture to be allowed in Vietnam had an Indonesianbank, BankSurnma,as its foreign partner. Thailand, still a developing country with a gross domesticproduct (GDP)per capita Jakarta family (which will have a combined of $1,420,has put in place its own forcign aid income of US$20G$250a month) will rush to program. lt beganlast year with a $4 million buy its filst electric iron, and then an electric human resourcesdevelopment grant to the lan. govemment of [,aos; last Febmary Cambodia This is true consumptionJed demand, received $5.8 million to repave a highway something the West has not seenfor genera- while Russiahas sincebeenoffered $200miltions, and it will be sustained for many dec- lion in rice credits as well as $500,000in outades. It is not surprising then, that steel right grants. consumptioninAsia,excludingJapan,already Japan,South Korca and Taiwan are high surpassesthat of the United Statesor of the labor cost countries and are increasingly deEuropeanComrnunity (EC); what may beless pendent on manual and blue collar workers
'19S2 IHE ASIANMANAGER NOVEMBEF/DECEMBER
poseof selling to the Chinese- 1,000million Chinese.Cornparethat with 60rnillion Filipinos or Thais;2.5 million Singaporeans. True,sinc€the boxerrcbellion the Chinese I n May, I fulfiUed my dream of aftending have not beenthe important mtity that they I the Canton Trade Fair. Several decades deserve to be. But with the changesof this it was a valuable decade,it is a certahty that the individualistic I ago, I had head that Chinesewill becomea dominant factor in the I experience, It is a "by invitation only' affair and it was only last year tllat I received regional economy and its $owth. like tiny snowflakescollectedto form a snowball, the an invitation. The visithad a stong and important influ- iugg€rnaut is acceleratingits massivefu. enceon my thinking that I wart to share. I OnebillionChineseand howtheyliveand die havealwaysknown that Chinawasbig. Itwas will makea differenceonwhathappals tothe onlv asa result of mv visit to the China Trade Filipino ard the Malays,theIndonesiansanl T Faii that I realzed ti\e extent of its size.The theThais.AsRobertKuokDutit, ouhaveto exhibits were ftom the differ€nt prcvinces of give the Chineser€spect one in wery forru china, and I saw maruJacturA eleclrical human beings is Chinese." fiow sh(IJld we D6iticn ourEelv€sb ttis equipment from all the prcvinc€s. The same with food items. textiled. household wares teatityi ItistiLedrepniUtanofthedeasathadring thernsdvestothed%.'Iheydon'thar€mudrb and c€ramics. I :ealized that eachof thoseDrDvinceswas sayon whele the dog goes- they candecide larger than all the countriesof Europe,There what p€rt of the dqj b atbch tlsnselv€s kr werea few foreigntradersattending theshow hrt afu that they only oopewith how to live I But the exhibition of goods was for the pur- wherwer the dog takestlren" By Rob.rto H. Llm SGVProfessorin BusinessManagement AsianInstituteof Management
coming ftom the region, often illegally; even Ma.taysiais beginning to feel the phch. As for Singapore,it decided someyearsago to implement policies specifically designedto discouragelabor-intensive,low valueaddedindustries (precisely the type that so many North Americian business and labor leaders are so anxious to save at public expense). Put in a
l,ly'henit was forciblv exoelled from the MataysianFederation26iea; ago,the "State" of Singaporc was a s€edy entepot town swrounded by swampland.Its alrcadybleakprospects deteriorated further when, shortly afterwardt its main dient - the British Nary - announced that it was pulling out of Asia altogether.The rcst,of courseis history ard the cleatest Dossibledemonstration that poverty and underdevelopment are not incurable congenital cuses to be passedftom onegenerationto thenext, even in the absence of natural rcsowces. What has taken place in Singaporc is likely to h^ppen, mutatis mutnndis - and on a much grander xale - in ASEAN as a whole. Indonesia'sperformanceon thepoverty fIont, while striking is emulated to a large extent by Thailand and Malaysia; only the Philippines still has to recover fully ftom the systematicand sustainedlooting of its national wealth visited upon that hapless country by former Pr€sidentMarcosand his cronies.Thailand is already the lal8est exporter of plywood - from alrnost nothing a few years ago. Indonesia,again,progr€ssedflom being the biggest importer of rice in the early 1980sto a cunent stateof self-sufficiencyand is inhoducing advancedbiological pestcontol techniques to its rice paddi€s. It moved during the same Deriodftom alnost comDleterelance on oil and gas exports to a situaiion wherc these two
"Aseanofbrs its membesan expandil€mafietwhlchwillsoolt rcach3(X)millionpeople- anevel goportionof whichare increasing ftonrpovertyto rclative moMng affuen@." nutshell, Citibank recendycalculatedthat Asia Pacificwill grow by some$5,000billion by the end of the century, more than one third of the world's forccaster0wth. Within Asia iacific, Singaporcoffers its 2.5 million citizens the best standad of living in Asi4 aheadof Japar, as measued by the cost weighted availability of a basketof amenities. The averagesalary of SingaporearuCEOs, at $100,000a yeax,is the highestin the region; the same holds true for the second managerial level. Singaporeis in someways a miqocosm ofwhat theAseannations- Brunei Indonesia, Malaysia,the Philippines, Singaporeand Thailand - that singular regionwithin Asia Pacific, hasbeen,is presendyand might become.
resourcesnow accountfor lessthan 457oof total exDort revenues. One mav not be too taken aback that a fu-tl page advertisement in the Indonesiandaily Konrpdscosts$45,000,or that Indonesiar motoristspay world pricesfor their gasoline (NiSerianspay four cmts a liter.). It mav not be ideal to contrast Indonesia's food and export performance with that of equatly or better endowed African countries which now find themselvesutterlv deDendenton imported grains to feed themselv;s and totally at the mercy of the vagades of internadonal oil 'Dricesfor their hard currencv. A similar story holds for ihailand and Malaysia,Malaysia's real GDR for exampl€,glew at an averagerate of 6.7Vaa year from 7977to 1990;its savings rate in 1990stood at 30% of GDP and investment at 3570. A master Dlan unveiled in late I qqOidenhfied 250public sector activities, then valued at more than M$16,000 millon, to behandedto the private sectorby the end of the decade. The candidates include Malaysian Railway, the Post Office ard the state-owned car maker Proton: they will all follow Telekom Malaysia and former public power monopoly TenagaNasionalon the rcad to orivatization. The sixASEAN countriescametosetherin a loosepactin 1%7.Despitelofty soundingwords and aims, the Aseanheaty never amounted to much exceptfor a plethora of meetingsof ministersand officials.Although the heaty committed member countries to hade expansionand liberalizatiort,the actualeffectswere negligible; it is said that the biggest achievementon that front was to allow the duty-ftee importation of snow plows.
ewAsoan ThelastAseanSummit, held earlierthis year in Singaporc,s€emsto have changed all this. Spearheaded bv Prime Minister Anand Pinvarachun, who devoted considerabletime and'energy to the effort (Including a special negotiating task force which reported directly to him.), an agr€ementqeating an Asean Fr€e TradeArea (now known asAFIA) was signed by all Aseanheadsof stateor governmentsin a televisedceremonyat the end of the summil To the surpriseof all observers,a clear timetable for tarriff rcduction was a8rced on, with sp€cificmilestonesand no exclusions.Member counhies will bring their existing tarrifb down to a maxiinum of 20%over the next five yea$, and a complete ftee hade areawill be in place within 15 years. There is already some optinism that it will be possibleto acceleratethese AseanS€cretwo schedutes.TheJakarta-based tariat was itself shen8thenedand its Sesetary Genemlgiven a sh,ongermandatewith themnl and title of Minister The reasonsfor theseunexpeded changes appearto be numerous.Thedetermirution and sl.ills of Prime Minister Anand of Thailand werccrucial; theextemalenvionment wasalso ripe for mov€ment, and it was Anand's genius THEASIANMAMGER
to seethis and act creatively on his perception. It seemsprobable that the major urderlying factor was the demise of the USSRand the consequentreordering of world political f orces away from the prcvious bipolar systemwhere one could play each superpower against the other. That alsor€movedmuch ofthe relevance of the so<alled Non-AligneJ Movemen! in which many Asean countries traditionally played an important role. On the trade front, the emergenceof Europe '92 and of the North American FreeTradeArca exacerbat€dlatent Asean concems that they might becut off from thoserich markes essential to thet continued growth; nor is the imminent prospectof a Japandomiruted economic zonepartiolarly cheerful,with its shadesof the infamous "cGprosperity sphere." Stlat€icdly, the withdrawal of the USSR, arrd the downsizing of the shong Americar military pesence in th€ area it trigger€d, are seen as creating a potentially dangerous vacuum which might no longer contain a number of long simmering territorial disputes. And the long shadow of China always looms orninously and inscrutably,even though that country is udikely to get itself into ieal shape before the middle of the next cenhtry at best. AFIA is thus in many ways a defensivemeasure, especialy since Asean countries tend to compete with each other in world markets rather than kade amone themselves. Nonetheless,Asean"offersits membeE an expanding market which will soon r€ach300 million peop)e,an everinqeasing proportion of wh.ich are moving ftom poverty to rclative affluenceand incipient middle classstatus.The r€gion as a whole is superbly endowed with rich ard varied natural rcsources; it boasts dlmamic financial and capital markets which can mobilize dometic ard international savings, as well as a world-scale financial cmtet Singapor€;it is politicaly stableby many standards; its membeE sharea free market philosophy and a private enterprise orientatiory its work force is educated, plentiful and hard working and, its govemrirents have proven over time that they can devise rational economic policiesand hold to them. The prospects,thercfor€,ale quite positive for As€anto posjtionitseuat the centerof the Asian Pacificgrowth circle.By the time China getsits acttogether,the six counkies, if tlrey do not faltet should be far ahead. I Andre Saumieris chairmanofSaumier Freres Conseil,a financial advisorv firm, vice chairman of Montreal-basedAlpha Cipital Inc.,and a director of severalprivate and public operations.He ha9held seniorpo<itions in the financialservices industry including presidentoftheMontrealStock Exchange,directorof the CanadianDepositoryfor Securities,and director of the Intemational OpllonsClearingCorporation. AnclreSaumierand GordonWu's articlesoripihallv appcaredin the journal The Borderless Economy.
NOVEMBER/DECEMBER 1992
By GodonS. t{u lvlanaging Director, Hopewell Holdings Ltd. ong Kong'sperformafte sincethe end of World War tr has been termed by
after 19n" The answer: 198. Depite the lowering of the Union Jackin StatueSquar€on 30 Jtl'l.e'1997,Hong Kong will goon. lt will rcntinue to prcsperas it did aJter1982- and asit kept on growing afier 4 Jure i989. Hong Kong will experiencebusinessas usual after 1997. And hereate my reasons: FlFt, Hor€ Nong's economy and the economiesof the Pearl River Delta comple. ment eachother almost perfectly. Since1978, Hong Kong's factorieshave steadily moved inland into the Pearl River Delta of Guangdong. Hong Kong-owned and Hong Kong pint ventur€ factories now employ more than two million people in the region. Guangdong offers exacdy what Hong Kong lacks- skilled and unskilled labor (at reasonable wages),land and c€rtain raw materials. Hong Kong offers exacdy what Guangdong needs:businesscontactsand orders, experienced management,technologicalkiowhow, financial expertise and capital. Guangdong and Hong Kong fit each other absolutelyto a tee. Socond, Ch|m, in its drive toward modemizatiorL hasincured debts to the international community, including the World Bank, of more than $,10billion. At the end of everv quarter,intelest paymmeand toanpaymmts ale due. Hong Kong accourts trorabout 50% of its foreign investrnent. China, therefore, haseveryinc€ntiveto maintainthe statusquo. If it does not, and the pessimistic views on
r | ffi#:ilffiffTi#ffiH"ff
lio& only 1,000squarc lio4 squarekilometrcsof ofland, land, and no rcsourresto speakofbesidesits peopleand deep waters around the isles. Hong Kong carupt even fuIfiU its own need for water more than 60Eaof it has to come from Guangdong. Yetat the and of the day it is still the tenth lalgest trading nation in the world. Its Kai f irlALport - with only one runway - handles more air ca€o than Heathrow London. Its port -of facilities boast an annual thrcugh-put apprcxirnately 5.1 million TEUs, secondin the world after Singapore. Togetherwith Japanand Singaporc,it boasts the highest per capita income in Asia. In 1982,China arurouncedits intention of resuming sovercignty over Hong Kong after 197. Subsequentnegotiationsresultedin the Sino-British Joint Declaration, stipulating in essenc€thah . Hong Kong will be part and panel of China after 197: . Hong Kong will rcnrain capitalistic as per Deng Xiaoping's "one counFy two systems"arrargemenb and, o It will enjoy a high degreeof autonomy and wil keep al its financial, iuridicial, commercial and educational systems intact asbeforc 197. Of cnurse,there were, and still are, ,iftels in the ninds of a good many Hong Kong r€sidents - and others outsideHongKong-as towhetheror not such a system will work. What if the Chinesedo not honor the declaration? Under these circumstances, one would have expectei Hong Kong s economyto grind to a halt, trading volumes to dectiie, a"ndpeopleand capital to leave. But this hasnot happened.Althoushsome 40.000odd people hive ernigrateddirnually in the last few years,this is lessthan 1% ofthe population per year ard cainot be called a mass exodus. Since 1982,Hong Kong has experienced,year alter yeaI, unprec€dented
"Chinahaserreryircertiveto maintain thestatrs quo."
prospenry
To date, I have been working actively in thePeople'sRepublicofChina (PRC)formore than 12 years,and my company is currently thecountry's largestoverseasinvestor(power stations and superhighways do co6ta lot of money).Alter somajry yearsof hand+haling and dinking zai lais with the PRC official, both rcformen and had-liners alike, I feel that I car now give you the answer io the qu€stion: 'What will happen to Hong Kong
Hong Kong come to past the intemational political and banking communities would tale a much dinmer view of Chiru's future loan applications. This is why China bent its ndes to allow HonS Kong an additional 5& year extensionto practicecapitalism, Flnd$ $e cha€eowrin 1997isapolitical one and not an economicone. Thereig there for€, no rcason why the results should be anywheie nearastraumatic aswhat ocqJrred in Shanghai in 1949. Witnessing Deng Xaoping andYangShangkun'ssymbolic visit to the SpecialEconomicZone this year,and having spokento many party leadersat both the Central and Provincial levels, it ls extremely clear to me that the Chinesegovemment is firrnly commitd to openingits doors to theWest This is not a to€ndthat caneasilv be reversed,no matter what might happen iir Beiiingtomonow: Hong Kong hasabsolutely no leasonlo worr,./.
Corlpetitlp Aryaptage...
NGrrvm
INBy Mari Xondo Professor Asianlnstituteof lManagement t theJanuary leg2suormit of lhe Asedr heads of govemment in Srngapore, i! wa: decided that an Asedn free Trade and Area (AFl A) would beestablished
barriers to trade dismantled over a ltyear l,1993(See"Frcm periodcommencin8January Swamp to Summit" in this issue.) AFIA is intended to createa singlemarketof 350million people right at the growth centerof the world: Asean. If successfullvimplemented, the effectsof AFTA will be felt by practically every Asean citizen: ftom the palm oil farmers working a plantation in Thailand to the chief exeotive officersofAsia's principal enterprisesand multinational corporations.AFIA signalsthe start of a new economicgame for the Asean countries. And this grvesrise to specrtlationon who will win this eaine.But canAFIAbe a wrn-wrn same for all olAsean?And if so,what will make it a win-win game? why Asean Needs the Game As€an'sold gamesof economiccooperahon - such as the Asean PreferentialTradeAgree ment.rndtheAseanlndustridI Joint venture have had liftle impact on intra-Aseanhade.As a result,theintem;l readinessofAseanmember countries to opt for a new game hasincreased dramatically in recentyears, in Part due to the and threat - of the increasine credibiliw EurooeariCommunitv. As seenin the Growth Triangle venture invoiving Singapore,Malaysia and Indonesia,complimentarily among Asean - the basis for intra-resional hade has increasedmarkedly. There is also increasingagreementon the long-term positive effec1sof economicliberalization.And extemal threatsto Aseanhave narrowed altematives to hade libemlization and cooperation among member nations. Among these threats,two are especially pressing:the shift of foreisn direct investment (FD[) to other regions,and"emergrngregionalismand protectionism.
Flr|n StrateAf Structuro and Rivalry .Enhanced rivalryandintensified competition .lndustrystructure changes completely
.lvore Jv, acquistlons,etc. .Organizationalchanges- MNCs setup re' gionalHQs,new distributionciannels, etc
. Scooefor intra'industtutrade widens
Fim Strategy Structurc andRlvalry . Factorcreationby both publicand private sectorstimulatedif
Ilonand .AFTAwould open up a m€rket of 35o million izedby rapideco
challenge . Speedup develop different tastes .Costs (captal goods, inputs)go down .Governmentsubsidies .Knowledgeresourcesto strategize AFTAdevelop .Reform of financialsectof induces . Foreignexchangerestrictionsscrapped .Growthtriangletypecoordinationproliferate .SpecializedHRDby MNCs,etc
more sophisticated
Relatedand Suppo.tlng lndustiieg .Large demand created by AFTA wouldstimulate groMh and de\eloP ment of supplierindustries .MNCSwould encouEgethe formationof morespecializedsuppliers,dependingonthe localcontent requrrement Clusteringof industies begins
Figure 1 FDI to Asean - the ensine of economic srowth for mobtol the Asetn .ountries since i985 has decreasedand moved to: 1) Regronalgroups suchasthe ECand North American FreeTrade Area (NAFIA); and, 2) Other emerging countries,such as Chira, India arrd Vietnam. Athacting external capital will become an even more critical concem for Asean countriesin the 190s. EastemEuropeand the former Soviet Union will competeviSolously for intemational resources.As€an mwt move quickly to developits narkets to remaincompetitive in the racefor investment. The EuropeanEconomicAr€a (EEA - the consolidatedEC and the EuropeanFreeTiade Area, or EFIA) - with 380milion People- is expected to be fully oprational by January 1993.InNorth America, the NAFIA will eventually cr€atea US$6trillion market with a population of 360million. Formal hade negotiations are shiftine from multilateraldiscussionscoverins thi entireworld (GATT)- concemed
tagein intemahonally competitive industries. 1. FactorcondltloG factorsofproduction necesary for competing in a specificindustry, suchas infragtructuieand skilletJlabor; 2. Demnd conditions - thenatureofhome demand in quantity and quality terms; 3. Related and supporting industries; 4. Firm strate$/, structure and rivaldes. For theAseancounhies,AFIA should serve astheir "dynamic advantage,"triggering faster innovation and pressure to upgrade and thereby enhancedevelopment of all four attributes to achievecompetitive advantage(See accompanying chart.). Mutual reinJorcement of these four attributes further strensthens competitrveadvdntage.Indu\trial growth stimulated bv increasedcomDetitivenessand innovation should catalyzeeconornicdevelop ment. To understand the effectsof AFIA, the privdtesectormay be categorizedinto threeiectors: inwardlooking, outwardlooking and lntormal. The outwardlooking sector produces goodsand servi(:esthat arepotentiallv competitive in the world market, but it mav not be a ornent exporting sectorA country with a lalge
with long-term adjushnents to bilateral or re gionaldialoguesintendedtoachieveaseriesof pressurq.within these quickfi}es.Prctecbonist regional groups are intens€. Arrd a credible AFIA is necessaryto counter thesepressules. "Dynambm' ThGEs,senceof AFTA is tts Staticeconomicanalysisshowsthat theSains for Asean countries associatedwith the establishment of AFIA are positive overall, but limited. All staticanalysesof economicintegration - includins that of the EC, however havehistorically shownmodestr€sultsbecause they i8nore the d)'namic effectsof economic integration. Indeed,the essenceof the AFIA Sameis its "dynamism." Michael Porter's "diamond" model of competitive advantage is useful in explainingthis d1'namism.PorterPirvides four broad attributesof a nation that shapethe environmentin which localfi.rrnscomPete,Prcmote or imDede the crcation of competitive advanTHEASIANMANAGER
hrdd.looLlt8 laclol
Insrd.bokftg
yo' 0utwar+looklng Sectol
0utwa6d4iog Sectot
lnfu|nal Socid lnftfinal S€c-tor B3bl€ AFTA
Aftsr AFTA
NOVEMBEFYDECEMBER 19S2
outwanllooking sectoris, naturally, more pre. pared to competein an integrated market than a country with a large inwardJooking sector. An inwardJcnking sectorusually develops during a period of prrtectionism and is usuallv inefticienl.Tfus sectorcan be further divided into two sub-sesments:onewhich canbetransformed into anoutwardlookine sectorand one which cannot be transformed. Theoreticallv 5p€aking, A FTAwi ll encouragetranrformahon of the former and dislocation of the latter. The informal sectordiminishes as job creation in the formal sectoraccelerates. AF|A will encourage the informal sector to become an integral ;lement in the outwardlooking sec.or.
panies- which will not becomDetitive- will grow at a slowerpace;and the growth of outwardJookingindustriesmay be displaced. As the fiIst scenariosuggests,AFIA can be a win-win gamefor Aseanaswell astherestof the world. The secondscenariosuggeststhat theestabli5hment of AFTAi. a losical ifnot unavoidable - decision for Asean.The third scenariosuggests,however,that the successof AFIA dependson how AFIA shapesup as the "dynamic advantage"for each member country, so that the dynamic responsesrequired to createcompetitive advantageby public and pdvate sectorsare triggered.Unless AFIA provides sufficient Drcssureto stimulate nttions and their enterDrises ro oevelop competitive advantage - and unless AFIA effectivelvpromotesenhancedoutwardlooking sectorgrowth the benefitsof AF|A will be limited, and may evenbe harmful to the
Scena os br Asean Ys. the Rest of the Wod AFIA is not likelv to be an exclusivetrade block becauseof strong existing extra-r€gional linkages.At leastthree scenariosof AFTA implementation readily come "AFTAis not likelyto be an to mind. The Dynamic AFIA Scenado. If AFTA is implemented successfully with the dynamic effectsrequired to evolve competitive advantagefor the Asean regon - rejectionof regronal protectionism, inqeased FDI, mpid developmentof indigenouscompaniesinto intemational, outward-looking enterprises -then the Asean countries will maintain their position asthe groi 'th centerof the world, and eventually the rest of the world will benefit Asean region or certain countries. from their erowth. The No AFIA Scenario. If AFTA is not im- Asean member countdes - who will rvin? plementedor is ineffective,then theie will be no WhichAseancountry will benefitmost from d).namiceffectsandno encouraging growth of AFTA?Or canAFIA - asI have suggestedthe ouhryardjookin g sector ftrotectionisttrade be a win-win eame tbr all Asean member blocs may appear- which will rcsult in the countries? Potentialwinningandlosingsectors declineof ,{seanexports- and FDI will simply are summarizedin the accompanyingtable. go somewneteels€. The kev comDetitiveindicatorsof Aseancoun The NoGDynamlcAFIA. If AFIA is imple- tries are shown in a secondtable. mented,bul fails to trigger the dlmamic reSingapore,a free trade country with a sponses required to create competitive strongly outwardlooking economv, hastreen advantageand growth in the outwardlooking activelyconsolidatingits position as a "total sectot MNCS- from their home bas€s may businesscente/'forAseansincethemid-l980s. dominate the Asean market. Indisenous com- The four attributesof the Porter "diamond" are
exclusive tradeblockbecause of strongexistingextrare$onal linkages."
TheAFIAgame is simple:allAseanmarufucturins companiescompete in a virhlally utit-fr6, "ninea -att."t. io obain this obirtive Aseanwill: . Throushthecorffnon Efiectivel\efersr tArarif (CEpl rttetne, progressivelyrcduce tariffsto amaximumof 20%within five to eight years,and to zera to five Percent over the ;lr@uent sevm-yearperiodfor all manulacturedproductswith anAseancomponentcontst levelof 40%or mor€; . Non-taiff barden induding all quantitative r€strictionswill be gradualy eliminated; . A! accelerated CtrT schenewill be ap plied to fifteen ':omrnodity gouP6: !'egetable fuioils,cemgt, chemicals,pharmaceuticals,
tizer, plastics,rubber Products,leatrcr products, paper pulp, texti.les,eramics and gl"s" proarjct, sdns;na iewe erv,coppercatlrcdes, Lt""to d-a *ooaen ard -i6n fumitr:re. The tarif& on thee commoditieswill be rcducedto20%orlessbyJanuary1,1990,andwill be furth€r r€ducedto 5% or lessby January1, 200;and, . Coopqatein suchar€asas:develoPmqt of rules to enzurefair comPetitiorrrcmove technicalbaJrier to h-adeftamonization of standads, r€ciprccalrccognitionof testsand certification of prcducts) ! uiarly conduct and Povide fcr cons'ultations mar:roeconomic industrv ard inveshnmt cooperatioD -capital. indudlng tlrei'romotion of vantue
Although tlre @nceptof AFIA is simple in reality,itE notassimpieorasfairasit idei.lly shcnnd-be. TomakesuieAFf,Aevolvesinb a gar€ worth playin& six issuesmust be ad. EstablishinslocalconEtEquir€rnenb lor/venoughtoat6d FDt,Uutttigli€ntorrgho prerent maiortradedeflectioru ' . Derefo'Pinga cnncise€rdusion list to assueAFIAS intsgity; . Determinini whaher AFTA should evenhrallvindudi arriculh.ueand services, whichacilrntformolethanhalf ofASEAN's ouhr.lt -. Simihly, determiningwh*her capttal goodsand rnapr intermediarygoodsshodd le indudd in theaccelqatedCEPT- without liberalizing inputs, the [b€ralization of final qoods -Mninscannd beachis/ed; . ttle natue and scoPeof tlle 'Rules for Fai Compettiol" indudin8 e(portdutiesanddrawlad<s,gov€rnmentzuF inrt or subsidies, public procurements, and right of estabtishrrElt ard, dumpine ' . gstablishingprogams and prccedures to: 1. attain tarsetsard deadlinesto (IEte "announcementefwhat hasbeencalledan (i€., fed' the armqncem€nt of a deadlir€ adiustnerrtsby the Privab sector stimu.l,aie6 Ieadingb moree{ficienLcomPetitivernanufactudns and as a r6ult of nrotivatint the privab sectorto lobby ior more npid tariff ieductioru 2 neutralizebweaucrafc roadblocrks;3. sh€ngthenthe t$tihrtional set-uP; an4 4. establishh-anspartttmeclEniffns at setdedisrutes.
labor-intensiveindushies to Prccessingindustries to fuIlv exploit its abundant natural resources.Malaysiais activelycreatingadvanced competitivefactors(suchasdeveloping higNy skilled human resourcesand hightech facilities and nufuring suPPortindustries) which will continue to athact technically advanced FDt. Thailand hasthe secondla€est poPulation in Asean,and isbackedby the exPandingBahteconomvregion of Indochina. Thailand envisionsit;U t;be a financial,tradeandtourism centerinitsseventhfive-yearplan('192-97).Its economic structure has rapidly taken on the characteristics of the newly industrialized economies,and the governmentis Pursuing developmentof thepetrochemical, engineer"Thailand andMalaysiawill also ing and electronic hdustries as its mai)r playwell. Bothhavemade engines of economic hasbeenvery successfulin its effortsto athact MNCS - not onlv in the export s€ctor- but growth. Industrialization of also to service its large domestic market (See "Attractinp,ForeignDir€ctInvestmenf in this the Philippines and Indoriesialags behind the issue.l.InAFTA,Indonesia- withthelaBest in thereglon- wilJplayanimporrest of the region; i.e., popularion -tanl "diamond" roleasa primesourcefor both naturaland the Porter it in general,lessdevel- abundant, economicallabor resources. The Philippines has experienceda slower oPed. For some indusoace of induitrialization becauseit missedthe a chance is hies, there that comDaniesbasedin most r€centFDI wave due to Political instabilother Asean countries iw and nahrral disasteG,the inwardlooking will crowd out Poten- oiigopolistic nature of key sectors and its economy'spressingdebt-sen/ice Both of these countries made substantial tiallyoutwardlookingindiSenouscomParues The Philippines' Primary asset among game to is about AFIA the although Howevet prugressin industrializingtheir econonxe. Asean courtdes is its human resourcesand not be comPlete start, its implementation will ovei the lastsevenyears.They havestrength"dialevel of educational attainment high their yeals. can attan lf these countries 15 for ened the four athibutes of the Pofter takealleasta Seneration (their willprobably Sinceit own competitiveadmond" and growth in the outwardJooking complementaritv to catchuP with countries emerging for other and iftectively within Asean vaniager) sectorof theiieconomies hasvastly increas€d this factorwill educational)y, Philippinei to the catalyze dynamic privates€ctor r€sPonse their intemational comPetitiveness. petitive advantag,efor the I com remain a critica be game can the time frame, within this AFTA Malaysia,with a population of onlv 18 Philippines over the next 10years million and a relahvelvwell-pardlabor force a win-win undertaking for thesecountries as Thi recentlyinstalledRamosgovernment well. needs AFIA for furiher eipansion of its government s€ems set to further liberalize thi PhiliPPine is committed The lndonesian develindustrial after the economy.Pattemed Some observers believe that the economy. and and derezulation, liberalization to further opmentbfSingapore,Malaysiais shifting from
welldeveloped,enablingSingaPor€to take tutl advantaieof AFIA. lt is likely thatSingapore will continue to attract the rcgional headquarters of multinational firms establishing operations in the region. Indeed, Singapore "quasi home base"investmentsto needssuch its welldeveloPed economy expand further AFIAwill help SingaPorecomPetewith Hong Kong, which has Guang Dong Province (a regionlargeenoughto be an As€ancountry) ,nl the relt of China at its bacldoor.Private s€ctor respons€to AFIA is enthusiastic and adiustmentsby governmentaswell asPrivate enterprise are well underway. Singapore is very well positioned to win the AFTA game. ihailand and Malaysiawill also play well.
plogressin substantial theiteconomies industilalizing ovelthe lastsevenYears."
1992 THEASIANMANAGERNOVEMBER/DECEMBER
z1 tt,\ \\ {\'\ ;
TrrWonro's 0rury Srnro, Dury lnom fihnrm IolosAr,rcnrs.
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( S n n r n2c6 r no r 0 c r o l r n )
ith PhilippineAirlines' Skybedservice,long flights to Los Angeles and back are now a timc for gaining precious,uninterruptedsleep.The world'sonly Skybedcomesto you, with our compliments,when you btnk your First Classpassage. Once airbomc, you can rcst e:rsyand assuredof the luxury of a
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Shining ThroughForTheFilipino
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I
Singapore
Countries Inflation(%) PowerRates(P/kwh) WageRates(US$/day) l\4inimum LendingRates(%) Manufactung Growth(%) ($M) Foreign Investments ($l\4) Exports lmports($lV) Debt($B) Foreign Savings(%of GDP) GrossDomestic (%of GDP) CapitalFormation PedapitaGNP($) (M persons) Population
3.5 1.95 2025 7 .40 5.50 4,489 59,663 N.A. 46.10 37 .40 t2,962.4O 2.76
Malaysia 4.4 1-.32 7.2 13.1 2,902 34,442 19.5 30.2 35.7 2,320.O 18.17
Phlllppineg
Thailand
lndonesla
18.7 2.77 3.644.36 24.3 N.A. 530 4,6t2 12,806 30.45 16.6 20.o 760.0 62.r
5.4 L.77 3.143.53 19.0 8.5 2,236 27,792 37,747
9.3 1.34 o.&7.2 20.4 13.4* 964 29,016 25,420 67.91 37.4* 36.5* 330.2 777.58*
31.4* 36.8* L,420.O 56.92
d c R cP a v n g c d c t u p
"ltaly of countryshouldaim at becomingthe Asia" becauseof its superioriw in fashion, food, furnishings and e;tertainment. lf it is successful in attaining this unique complementarity and if the lhiliPPines playswisely- A FTAmay Presentthesecond chancefor this oncedlrlamic economyto catch up with the rest of Asean.
ThePdvateSectorRole But the key players of the AFIA Sameare theorivate sectors.How do they win theAFTA game?PortersuSSeststhreestePs:fust estabIish your own corporatecomPetitiveadvantage;second,improvethenationalcompetitive environmentoiyour homebase;and finally develop a competitive strategy for other As€an markets. Here are some tips for companiesintending to win the AFTA game.
Op"ratl"" l".ny*.
fo, tt " tt"tt C"ntury
AFTA - AseanFreeTradeArea CEPT - CommonEffectivePreferentialTariff
Area Economic EEA - European FreeTradeArea EFTA- European FDI - Foreign oirectinvestment
onTariffsandTrade GATT - GeneralA$eement - NorthAmericanFreeTradeArea NAFTA
. VlewAFIAa a chalblEe oropportunity. U you are the manage! of a comPany in an outward{ooking sectol AFlAprcsents a Sreat opportuniw. Actively seek ways to take adviitageot it. tf you aie in the inwartl-looking sector,AFIA is a challenge. You must find wavs to convertyour (ompany rnto an out_ lead*ardJooking entirprise.Uiriv;te secbor ers demand - and obtain .government
Co0ntry
Wlnne|s
L(,3€rs
Sh€i'pore
suchasindustrial fieavyindustries ironandsteel,transport chemicals, equrpnent
industdes such Labodntensive as textiles and clothing
Malay8h
Foodproducts,nontnetalploducts, sectorslikewood Laborintensive products machinery cement,gemsandje{/ellry andcapitalintensive electronics, sedor;glass,chemicals, plastb,paper & pulp,rubber fedilizer, products, vegetable oil
nta||and
Food,lgather,metalandnon"rnetal, cement,fertilizer, machanery, electrical gems& jewellryrubber,textales
mehinery, Palftoil,woodp.oducts, goods,glass,copper professional plastics, paper andPulP cathodes,
Phmpphes
pfodudionincluding Capitalintensive elecricaland non{etal manufacturcrs, fertilizer, machinery, non€lectrical paper& pulp,rubber pharmaceuticals, products
chemicals, woodp(oducts, industrial gass,vegetable oil,textiles
lnlonoda
- intensile Food,nometals,uansportequiprnent, Labor- andrcsoutce paper gass,lertilizer,gemsandjewellery tenjb, woodpfoducts, industries, vegetable andpulp,cemeflt,chemicals, leather,pharmactu' oil,coppercathodes, ticals,dastics,rubberProducts
sou@3: A$
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protection ftom competition,AFIA will probiblv lose key players(i.e.,there wi.ll be too manv exclusioir#ctors) and asa result, fail to creatL the dyramism rcquted for AFIA to rival other regional grouPs. Exclusionftnm CEPTmeans that not only does an industry deny accessto its market, it also closes the door to foreign investment, which will subsequently seeka more hosP! table environment. . Pr€paE well, Developan AFIA strateglr and Move Eady. AFIA will direct\ inllumce the shucturesof Aseanmanufacturing industries. Corporate stlategy must thercfore addresstheorganization'scapacityto comPetein the AFIA envlonment. Early movers are usuallv the winnels. . fake the Inttlatlve In lmproving Home Base CondltloG. Home baseconditions become inqeasingly imPortant in determining vour competitivenesswith other Aseanenterbrises. The private sectormust take the initiafonerequited to imptove training resealchand develoDmentof inft ashucture. . Pbrtlclpate In Shaplrg AFIA. The pnvate s€ctor can influence AFIA rules so that AFIA enhancesthe counhl/ s competitive advantagewithin the r€gion. Close- and continuous - dialoguebetweenSovemmentand the privdte sectoris critical in developing the support rcquir€d for successfulAFTA implementahon. AFIAis intended tobe a win-win gamefor Asean membet countries. How AFIA rules ared eveloped,how eftectively they areimple' mented and how dyMmic the AFTA game is played are the maior cha-llengesfor Asean ' "dynamic adihe essenceof AFTA is the provides pressure'for innovawhjch vantage" tion,iirprovementandchinge.Whereplayers respondpositively,AFTA will materializesucc"""nrlty ut a aI -itt "njoy the Potentialto win Countries with rapidly growing outwardlooking industrial sectorswith strategic developmentprograms- intendedto enhance theii intemationalcompetitiveadvantagewill enjoy the most rapid paceof economic I develoirment.
1992 THEASIANMANAGERNOVEMBER/DECEMBER
Veryrelaxingin bustlingBanghohto entercdlm,airy world ofTheDusitThani. Wry idzally locatedin the centreof the city. Veryluxuriousthe guestroomsand saites.Wry rich thedecor.Wry traditional the Thai opuhnce. And uery dclicio*sly appetisingthe eight restaurant ........
Veryliuelythe'&tbbla Videotheque. Verysophisticatad theLibrary t9t8 (read nouelouercochtail). Wry xirnuhting the FitnessCentre (gtm, tennis,squash),(from time to time). Wry courteoustite seruice(aluays) Verily, there is nothing that quite comDares with TheDusit Thani.
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R R 0 E0 F P 0 l r N t I t t s munications, bankinS servicesand transport systemsand availableconvenienceslike expatriate housing and easy accessto money chargers; o a diverity of investment opportunities, which over the years has shifted away from haditional commodities like lumber, oil and minenlt to a variety of agribusinesspnrducts suchasorchidsand hrna,aswell asto the usual electronicassemblyplantj; and, a a domestic market which is r€ady to takeoff dependent on a middle-class which rangesfrom the wealthy famiJy membersof the conglomeratesto a growing cadreof professionalmanagerswith MBAs; down to ordinary banl clerksand food stall operators. The list can go on, but it is a familiar list of "key faitor"." And onemustpav them sr-rccess theippropriate lipservice, becauseihese factorshaveindeedworked.Manycountries,trum JapanaherWorldWarl l, to theA":;an NICs in the last two decades,have "The
By FranclscoL. Roman,JL Don AndresSorianoDistinguishedProfessor of BusinesslManagement ll nationscompetewith onednotherfor xarce ioreign funds. For instance,the UnitedStates- hardly a capital-scarce country - carrie\a substantialdehcit. This deficit is financedin part by foreign investments from Japan desPitethe local outcry againstthe purchaseof Columbia Records,the RockefellerPlazaand the SeattleMariners. Thequestfor foreigndircct investment(FDI) is no less an acute need for less developed countries (LDCs), which usually lack the wherewithal to intemally financetheir Srowth and industrialization. Not too long ago, investments, esPecially from multinational corporations(MNCS),wer€ "tainted;" e.8.,represenF coruidered somehow inq vestige of colonidlim and North-South "hed down" e""ploltotlin.Or, the monevwa. bv;trictive clauses sucli asthe requrement to purchaseequipment through the MNC which pru\'idedthe financing. Nowadavs,monev is money and fDl is much sought after by LDCs. BecauseLDCs have discovered that their domestic savings bae is too smallto sustaininvestment\,Posslblv as a result of uneven income distribution ;thin thecountry. Or, LDC stcxk marketsmay serve as vehiclesof spec-ulationnot of caPital formation, but becaur stockbrckersand stockholders treat the market as part of a Private portfolio and not as a Public good. Even the citizenry of the LDC canexacerbatethe scarcity of investibletunds thrcugh caPitalfli8ht. Sothe altemative of funds from the once-maligned foreignersnow seemsmore palatable. This changeof heart representsa reactionto d changein thepolihcdldndeconomirenviron ment. The world is more interdependent,it is now a global marketplace - or a borderless world - accordingto Levitt and Ohmae. And the global corporition (GC); a.k.a..the once villified MNC, is now the Partnerin a strategic alliancewith the LDC qovemment. Theglobalcorporationnot only is asourceof FD[, it alsorepresentsa network for linking the
travered thisDath tosuccesstul eco nomic development. In the process,these successful
(or countries aitracted theirfairshare
bankersare often on the front-line of FDl, and often representMNCS in joint venture negotiatlons. The Indonesian government has successfully presentedan attractive image to foreign investors.For example,its central bank - asa key govemment institution - hasbeen critical in maintaining the flow of FDI. The Bank of Indonesia (BI) has proved quite ruthless in correcting problems - once a cons€nsusis reached.Thus in earlv lqJ'I. the monetarv authorities intervened to squeezeliquidity from the system,and to dampen currenry speculation. BI actedin the full knowledge that several banks and highly leveraged conglomerates would suffer asa result. The government itself standsready to take calculatid risl's. For e,.ample,it suciessfu-tlv expelled the D.rtch from th! IGGI Unter{o;ernment Group on lndonesia),the coruortium
willingness of intemational agencies tO aCqUieSCe tO IndOneSia'S OffiCial eXplanatiOn bf eXClUding the
more) of foreign investments. ln the
1qe0s,'rhailand appears somewhat Nethedandsfrom the lGGl implies a ahead of Indonesia. ir the-eves,of strcng negotiating postule on the foreign investors although both the Thai;ndrheforeign buiiness com- paft Of the IndOneSiangovemment."
^S lndonesia: Flom the tradltlonal to the modem state. LDC export-producersto the high-incomemarkets of North America, Europe and Japan. The GC orovides the inftastruchfe for sustaining the subconbactorsof parts and comPonentsfor elobal industries suchasautomobiles and electronics.It is alsoa valuableinformation and communications system which tsacksfinancial and market ttends. Little wonder that LDCSvie to athact FDI. The Indonesian Expedence lndonesia has been relatively successfulin recentyears in attracting foreign capital The "leap forward" came between 1989and 190,
,ort
munitiesarecurrently evaluatingthe ab lty ot ability of the post-Suchrnda post-Suchindagovema an abundance of nafural resourcesment to "make-up" for the eventsof May. The suchasland to siteindustrial estatesand export Philippinesistryingto "catch-up"in thetaskof processingzones; wooing foreign investors after several tlauo a reasonablywelldefined and transpar- matic yearsof lost opportunities and bad pubent lrcdv of corporate intemational law which licity. includet for instance,procedures for foreign Covemments thus play a key rcle in athactexchangerepatriation, ,oint venturc rclation- ing and keeping FDI by promoting thesecomships or mandatory labor practices. mon key successfactors.The debt crisis of the . a 5tillsmall. butdnamic andaf€ressive 1980s,following faston the heelsof the oil crisis businesscommuniry which includes export- of the 1970s,severelyundermined the notion oriented and globally-minded local conglom- that sovereigncountries- unlike private coreratesseeking strategic alliances with MNCs porations - cannot go bankrupt. A stable and CCs; govemment, sourd economic policies and a . a corc inlrastructure which continuesto track recordof effectivepolicy implementation 'athact investoF (despiterecentsignsof strain), goa long way inassuring nervousintemational and which includes reliable power and com- banlers thattheirmoney is in safehands.These _6
when FDI increasedfrom under $5 billion to alrnost$9billion. Dudng theGulfWat Jakarta's five-star hotels remained full not so much with touristsbut with visiting businessconsultants, joint venh.rreseekersand intemational bankers. Indonesia's govemment also recendy received the "seal of good housekeeping" ftom the intemational funding agencies.For example, the World Bank country rePort on Indone' aiacited the courtry' s effortsin oPeninguP the Indonesianeconomyand in reducing poverry lndonesia'ssuccessto date in attracting FDI reflectsseveral"haditional" factors: o cheaplabo1,relative to other comPetin8 countriesin Asia; THEASIANMANAGER
NOVEMBER/DECEMBER 19S2
of govemments which overseesthe disburse. ment of public sectorard to Indonesia. This decision was made in the wake of the adverse reaction.intemationallyto the EastTrmoraffair The willingness of intemational agenciesand their govemments to publicly acquiesceto Indonesia'sofficial explanationfor exctuding the Netherlands implies a strong negotiating po6ture on the part of the Indonesiangovernment. As a result,oveGeasbusinesstends to view Indonesiafavorably. It enhancesthe image of stability to have had only two headsof statein thelast,l0orsoyea$. Moreimportant,political stability permits economicchange. The Indonesianteamofbankert economistsandtechnocnts have successfully managed to keep a
balanced budget (as constitutionally mandated),to diversify exportsout ofoil and to Pry open - the domestic market. The Indonesian govemment actively pro"Fowth triangle" - a motes the conceptof a complex of businessesinvolving th-rcecountries'- Riau (Batam, Bulan and Butam) in tndonesia,Singaporeand Johorein Malaysia (Therc is an undarstandableemphasison the Indonesia-Singaporeangtes.).Bui therelationship is further complicated becausecooperatioir must be achieved amonq the [hree and govemments,their leadingconglo-merates other ioint venture partners from Japan, America, Eurape and Aushalia. Finally,the governmentcontinuesto Prom-
new areas for investment; Burma is still a closedeconomyformost FDI. Thesecountries are "green or fi€sh territory for the forcign investor. . Ih3 "ollgopolbtlc" comp€tlloG Sevelal elobalhdustries, suchasfoodsand softdrinks, iomputers and automobiles,telecommunicationi and heary equipment arc made uP of a small numberof very largecomPetitonwhich dominate their Dalticular industries. The second tier - nade up of many, much smaller will not medium sized firms - probably 'The large matter in selecting fOI tirgets. corporatioru arecharacterizedby comPetitive, market-buildhg behavior. If Toyota enter China, C€neral Moto6 must maintain a Ptesence as well. ITT and Sie mens are battling over EastemEurcpe as arc CocaCola and Pepsi. DePending on its rcsourresand its shateS/, theselarge corPorations "prime may be pioneers or movers" in opening up a country o! a rcgional market but the other large firms in the industry will not be far behind. o The 'nsftYork bulldo?." The more sophisticated, "world class" globat cor?orations not only exploit marketsand setup factories,theyb' 'ild networks. The automobile comPaniesestablish their karelsusconsisting patly of comPonentssupplieE spreadacrossthe globe.Firms in the advertisin& cosmetiG and fashion industries"think global and actlocal" in ceating and in imptementing worldwide inarket strattradeasmuch in accurate esies.Thesogo.sosftrs "information as they do in goods aia tirnely and seruices.The elobal banks have transformed money into-an el€ctroniccommodity, alrnostinstantaneouslytra$ferable. This 9?e of investor still seeksnew prcducts, new markets,new supplierc;but only aspad of a global network. With the expansionand expenseof soDhisticatedcornmu-nicationsand information technoloqies,the network builder is often much soughiafter by the LDC which otherwis€ could not link up with other comPanies and countries. . The ro3ourceuslng "carpetbaggor" Unfortunately,stodesaboundofinvesto6 who bring into a country obsoleteequipment (textiles); or of companieswhich transfer operations in toto ftom one country to the next ln pursuit of cheap labor (garments).And there are the MNCS which bring in and promote products which are prohibited in develoPed i:ountrie (toxic fertiDers and harmful dnr-gs). Theseinstancesar€presumably the excePtion rather than the rule, but they regrettablyoccur with sufficient h€quency to give FDI a bad image and to prclont the old image of the for€ign corporation as an exploiter, not as an investor.
'wotl& "Themoresophlsticated not class'globalcolpolations onlyexploltmarketsandset uP factories,theybulldnetwolks."
(9eThe ulgate its secularideology of Pancasila 1992.)asa ^iqn Morcger,Wternber&ober vehiclefor long+erm stabiliry The five Principles mcourage conrnsus and a sens€of naiionat discipline in an otherwise diverse courtrv If Pincasilape$ists into the 21stcentury, it iTrayrcflecta nitional vision ofdevelog ment that will do far mor€ to make Indonesia an attmctive trvestment than ary fleeting advantagesuchaslow-costlaboror any Package of investmentincentivesor other ind ucemenE to rnvestment.
SomoThoorlzlng
The foreitn corporation is often the intermediary Hween the country and the caPital tllat it seeks. So a natural question to ask i5: Why would the MNC inv*t in a Particular countrv? Obviowly, accessto low cost factors of production, such ascheaplabor and inexPeniive rpal estate,plus tax'breaks and effiiient infrastnrcturc, a[ improve the proverbial boF tom-line. Risk weishted rchlrn on investment is still the fundamental,theoretical- aswell as practical- reasonfor investing in any country, developing or otherwise. Nonetheless,somethoughtfitl observersof intemational hrsiness suSSestfour differcnt hoad categoriesto exPlain the behavior of global corporations making intemational inveshnents,particularly in LDCs: a The rg€onndd" ll|lsctor, Corporatiolu constantly search for untaPPed areasfor investment. China keeps opening and dosing; Eastem Euope and Vietnam are relatively
While globalcorporationsandglobalbanks arc the principal vehicles for FDL but they have- and will continue to have- their own strategicobjectivesin their useof investments.
MatcFMaklng Sothe processof FDI involves a fit between a countn/s facto$ and thecorporation'sshategic inten;ts. U nfortunately,low<ost labor and tax incentivesare f.ut as likely to bring in the carpetbaggeras they are the Feenfield invetor-On th";other h;d. unlesathe LDC builds un its middle classand improves income distribution, the domestic mirket is unlikely to attractiveto the oligopolistic competitor. Drove ' The network builder-is'a somewhat more favor€d inv€sto4 unfortunately, the behavior of the network builder and the carP€tbagSer are to a certain extent indistinguishable,since the long+erm strategic intent of the network builder is not immediately evident. Howeve4 the networkbuilder operatesin a way that sets it apart from the carPetbaSser and other investors.Forexample,theJaPanese automakers are known for their lonS+erm rclationshiDswithtrusd and reliablesubcontraclon and component manuJactuers. And they become an integral p6|It of the keiretsu network. However, the behavior of some automakersin Asia suSSeststhat they arc unwilling toHome too dePendenton any single supplier 'ihus. in any one country. the ;semblv or rnanufactue of engine blocks, transmissionParts, electrical equipment,etc.,is often duplicated within the A.ban rcEion. The MNc o; ff, with its internal network, is in a position tobargain aggressively with its suppliers and to Play off one suppter againstanother,or even one country aeiinst the-other.Treatinga subcontnctor like a-disposable diaper is hardly evidmce of a perminent ptacd in a dobil network Of iourse, the automakersthemselvespoint out that withdnwals ftom a country areonly temDorary,as in the caseof the Philippines and ttrini, and that their strategy is 6iilt on th€ long-term. Only time will te[. The Reallty: Had Beglnnlng Ahead This all seemsto imPly an automahc Processwhich matchesa counbys needsto forcign investor interests. Nothing could be further from realiry Countries and conglomeratesand GCs and their bankers - must face one another and negotiatelong and hard to setuP a joint venturc and to bring in the capital. The strensth of the LDC hostcountry govemment at th; negotiatingtable depenhi on several factols: 1. Its farniliarity with the MNCs home countrv laws and policies wherc the LDC's economicand trade attachescan play a rcle. 2. The cohesivenessof the different 8ovemment bureaucraciesand ministries - such as the investment board, fiscal authorities, trade and export departments,etc.They must
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FDI can exacerbatethe counbys economic cycle: 1) Indonesia'seconomy is Pr€s€ndyin dangerof overheatin& 2) the powel tlansport and communications infrashuctue is under strain;3) "bit tickef' proFcts fuel a bonowing frenzy; 4) pricesarc risin& and, 5) the clrrent accountdeficit must be contained,etc. Finaly, "inveshnent fatigue" setsin, even asthe country aftempts to rcctify its probtems. Foreign investoE thm takenote of the country's shortcomings,where once they only saw its athacnons. Second,each countrv has its own set of shortcomingsto overcome:1)Indonesia'secG nomic reforirers have beencalling for further liberalization of key industries and markets;2) another shortcoming is Inde nesia'shuman rcsou!€es- its workforce is not English-literate; its skilled labor force and suDeruison are onlv a small pait of the whole, ani is Indoplan lays cleady that a flvFyeal nesian management core is stretchedthin; and, 3) the Indonesian govemment is striving to transfer the gains of gowth away ftom the conglomerates - which dominate key industries - to smaller enterprises larly if the pint ventue partner seekssome which constitute the bulk of the employed population. Policies on small-scalecr€dit fimonopoly power or political connection. '' 6. The abilitv of the LDC to establish a nancng, aSnousrnesslmKageswrtn small 'win-win" situation, particularly if the LDC farmersand rural industrialization uoietls ale both pouhcaxy and econofiucary atra(nve. expectsto build a long-term rclationship. UnJoltunately, the la8 between overcomThatsaid,thehistorical!€cordsuggeststhat gooddealsdo go bad over time, pardy becaus€ ing shortcomingsand rciuvenatingthe intercst of changing expectationsand changing situa- of the foreign investor qeatesa dlop in capital "obsolescingbargain." inllows. For example, approved forergn intions.Vernoncallsit the vestmentin Indonesiain the first half of 192, Wels prcvides the classicexample: Aproduction sharing agreementfor minerals is based at US$3.4billio& rcpresenteda steepdecline on a mutua.lly acceptablelont-term price; the from the 191 total in thesameperiod of US$6.5 govemment at the time the agreement was billion. Thid, productivity ard specializationstill signed was interested in the stability of revenuesaccuing to its coffem.Butthedealcango rcprcsent the long+erm foundation for consour if the price of the commodity unexpect- tinuing to attrad FDI. l-owco6t factorswill not edly and npidly ris€s.Sincethe oil crisisof the generate pioductivity; but well-hained hu1970s,changesin the price of copper,for exam- man resourceswill. The time, cost and effort ple, have wreaked havoc on presumably weU Equired to upgrade human resou(es necesthought-out and carefully qafted agr€ements. sarily results in specializatiorf at least in the med'ium term. And Droductivitv thercfore Acontract, like a Pladuct, often becomesobsc takesDlaceat the indu3trv level Al Porter has lete ove! time. stated':"Theaeare no competitive countries, onlv competitive industrie." FDI thereforeis Rutsln the Road Indone6ia rcmains a rich country, with a indGtry drivery global corpontions are industry based.Often theseMNCS or (s prcdiriplined govemmenti its five yeardevelop ment plan clearly lays out the rcad to gr,o$'th. fessto becountry neuhal in t€rmsoforigin and Nonetheless,the road to athacting further FDI ownership, and thus focus on industries for is crowded and therearethjee new obstaclesto investment and market entry. ovelfome. Ftst, the stardard factors that Indonesia Pos3lue ew Dl]€ctlo|R The tried and testedmethods for athacting and other countries use to attrad forcitn inforcign investmentsmay by now be tired and vestmmts arc temporary - wages ris€ with improved standardsof living; e.9,, South Ko- trite. On the supply side, ffs are s€eking rca. Furthermorc,incentivesand inducements industries which are integrated, skilled, speare hardly unique - any courtry can offer a cializedand competitive. On the demandside, similarpacka8e.Next, theprocessof attracting LDCSwith a large middl€ class(asa proporpr€s€nta consistentpo6itionat the neSotiating table. 3. Th€ willingness to play the negotiating "game'bybringingothelMNcstothetablean effectivetactic with oligopolistic investors, for example. Furthermore, knowinS the last bestdealwhich theneighboringLDC extracted "benchmark' forthe fromtheMNC providesa final contract. 4. The "strategic inteng'and management capabilities of the host country govemment, specifically whether goverunent can Play an activerole- not mercly in the negotiationsbut also in the ownership of and participation in the ioint venhle. s. The strength of the LDC fim, partio-
"lndonesla ls a richcounttywith govemment and a dlsclplined
outthe loadto growth."
tion of the total population) rep!€s€nt attractive markets to foreim investoD. Here ate threesuggestionsto airact incIeasedlevels of forcign capital: One, f ocuson the industry-Govemment planning tendstobe maqHonomic. ktols "non-traditiona.l" aretoo broadly defined;e.g., exports. Resoures are scarceand efficiency reouires ^For specialization. the private sector,Porter prcposesfour conditions - a comDetitive induskv with "world-class" standarils, a sophisticat;d consumer base,skilled ard innovative factors of prcduction and an integrated network of rcliablesuppliers. Two, build up the domestic market Many a forcign investor hasfloundercd trying to capitalize on China's "one billion" market. The i€latively wealthier economi€sof Singapore and Malavsia on the other hand are imaller than Ctiina, but they possessa large middle class with a taste for a diversity of Droducts. The Door make unattractive customeD. Govemment policies should be dir€cd to bringing morebf thepopul,ationinto thelowermiddle class,rather tl|an ptoviding more income opporhrnities to an at€ady prcsPerous upper middte dass. Economic and political self-interestscoincidewhen a country succesg fullv expandsits middle class. itra€, differentiate, then collaborate Industry specializationshould qeate a prccess of selectionfor FDI which may in tum qeate a "win-win" sih.ntiorLsincesomeindustries in somecountrieswill performbetterthan others. Someforeign invesiols unforh.uratelytake the naive view that, "All Asian countrie6 are the same;" many more take the simPle view that "Asian counhies are only good for cheap labor." Dfferentiation of industries, skills, productsand marketpreferenceswill improve the counbys attractivenessto FDI. At the same time, collaboration can take olace in the context of competition. MNCs irllow different units within tieir network to competein productio4 while they cooPerate on product researchand desigal. The Asean shategy for tourism develoP ment promotesa packageof counhies to visit; it neatly side-stepsthe Poblem of Fomoting the "same" exoticlocationsto the forcign hav"yeal' for eachcounh'y eller by designatinga in Asean.At the sametime, individual courtrie6will continue to competefor tourists. But they urill also discover areasof collaborahon: Singaporeand IndonesiaPrcvide different athactions for the tourist. The goal is to avoid cut throat comPetition. For instance,the airline indwtry is relatively undifferentiated, especially in the United States.So price is the primary competitive weaoon. \A/hilepricecuttins benefitsthe consumir in the sirort run, c6nsolidationthat leavesa few (two to four) major carriers will r€sult in higher pricesover the long run. Soa
1992 THEA.SIAN MANAGERNOVEMBEFYDECEMBER
I t'
balancemust be rnaintained. These suggetions apply to lndonesia as well. Obviously, the shottcomingsnoted earlier must be addr6s€d. Mor€ importanuy, the economic agenda must be institutionaliz€d. The r€putable forcign invBtor tlEt Indonesia desires will ass€ssthe courtry frcm a longterm Frspective that will go beyond the next sx yea$. Finally, a new basis for coop€ration be tween the Sovemmmt and the private sector must be esiablished. At p!€s€nt,the gov€rnment is a close parher with the countr/s leading conglomerates- in developing industsial estaies,in financing mega-P(oi'cts,in sfengtheningnegotiatingt€rms,etc.Criticism within Indoneia has already surfaced about this concenhation of economicDower. In the ghortrurf theforcigninvetorhinuelf willlook for an influential local paftrer for a irint ventur€, But over the long rur! competitivefactors such asDroductiviw and irurovation are more 'Irhe importa;t. go;emment should tocus its assistanceon developing theseelements.
FDIt)opendence A new approachto FDI rcquir€sa strategic pe-rspective.All courtries, developed or de velopin& r€quirc FDI. The key is to maintain a fine bal,anc€to avoid becoming overly dependent on FDI. This is easiersaid than done. The US is - to some extent - comDlacent about its deficit becauseit has long deimded on investnents ftom other courtries to make uo - the shortfa.ll. LDCs are even more deDendenton FDI. When the Banl of lndonesia took steDsto reduceforeign borrowhgs and to decrea$ethe curent account deficit, domestic inveshnent apptcations wtle ur,ableto generatesufficient funds to tale up the slack Domestic investment applications dropped in the first half of 1992to Rp. 15.7 trillion, compared with Rp. 27.4trillion in the sameperiod in 1991 Indeed,the liquidity squeezeindicated that the local banking s€ctorwas also dependmt on foreign funding for its eamings. FDI is critical to Indonesiabecauseof its high lwel of debt and becauseof the anticiDateddecline in oil revenue asrcservesarc de;leted, SoIrdo nesia'sability to wean ieelf from overdependenceon FDI reoutes a consciousand concerted effort, epecialiy sinceIndon€sia has been so successfii in the past in attracting FDL PeF haps there can be too much of a good thing. But in the md, a country cannot conhol or dictatethe flow of FDI. In that sense,FDI is not avery dependablegood. SotheLDC must take the initiative to build a dometic savinqsand inveshnentbaseto complementFDL Tha thrce dfuectionssuggestedin the preceding section are a start. But each country must continuously rcnew its overall strategyand put FDI in tle proper context. FDI thus becomesa nece6sary condition, but not a sufficientoneby itself, to sustaining LDC growth. I
THEASIANMANAGER NOVEMBER,OECEMBER 1992
YAZAKI
HARNESSIIIG THEFUTURE YAZAKICORPORATION P t t 0 s . < / ' r r { r r ( o ( r \ a r B . D| ,2 3 . r o [ / t r / fr ' r a t o ( . r 0 r m 0 3^ o ^ \
YAZAKIINASIA
Yazaki-Torres, MFG.,INC.
Taiwan Yazaki Corporation
'
NM Componente Inc.
P.T. EDS Mfc. Indonesir
Thai Arow Products Co., Ltd.
EDS Mfg. Inc.
Yazaki Australia Pty. Ltd.
YAZAXI CONFORATION MANII.II RECIONAL HEADQUAATERS RiElowers 18O3-B 6745AvahAve..Makati. MM
39
Il I
Ar.cATEt 4100/4100 vs
PHILIPPINES Ground Floor,G & A Bldg., PosongTomo Exlension,Mokoli, Metro Monilo Tel. No. 816-7966 Fox (632) 812-1324
E@ FineTuning...
Market Share Through I'qooting Value-Added Products By Joso M. Fat|3tlno GoodyearTire and RubberProfessorof BusinessManagement rban Asians have come a long way in understandine their mark* enviionment and the ptoducts availablefor patronage.In the tast10yearsat leastfour dwelopments have had a significant and cumulative impact on the buying b behavior of middle and higher income e Asians: l. Incomeshave morc than tl doubled; 2. The formal education attained has surpassedthat of their parcnts; 3. Formal education is continuouslv suDplementedand complemmtedby TV, maio and print media; and, 4.Theincidenceof havel and opportunities io shareknowledge of lifestylesair-dproducts abroad hasincrea;ed substantiallv Thesehigher incomeAsians aresmart,and arebecomingsmarter eachyear.Thevare t)?ically brand conrious but n6toften brand ldval. They wi. no longer buy a produa automitica-lly;i.e.,becauseit carriesa famfiar brand. More than likely, this urban Asian consumer will reietl the garden variety "me-too" prpducl that offursno realmotivation for produd patronageor brandloyalty. As a result, the orqanization that undercstimates the decision making wisdom of the adult urban consumerwill pay for its lack of sensitivity by offering products that cost thousands- sometimesmillionsof pesosto produce beforefailing in the markaplace. -But thercis a fiiting r&ponse that a marketing-oriented orFnization can employ to win over the smarter, better paid consumers in major urban markets:value.added products.
of highquality,provenandaccepted everyday over a nundrcd vearsol orterahon. San Miguel Corporatirjn has pioneered in introducing produits targeted it the health and fitness segment ftom the venerablecottagecheeseto-thelow fat no cholesteroldairy desserts.SMC a.lsopioneered in another fasigrowth segmenLthe two-careerfamily featuring the working housewife whose scarcest corunodities upon reaching home are time and (rcsidual) energy. IrutaMeab and ready-
'HigherincomeAsians aresmaltandarc becoming smaltel eachyeaL Theyare typicallybrandconscious butnot oftenbrandloyal."
tq(ook skinless chicken address this imDortant talget market; i.e.,consumerswho have not only the wisdom to know what they want and need,but alsotheincometo buv what will satis4/thosewants and needs. Other successfulexamplesof value-added marKennqare: I Fasifood chains have introduced home and officedeliveryby motorcvcle, responding ValueAddod Ma*etlngSuccosses to theneednotoniy toconsume"food'fasf'but Let's takea lookat severalsuccesshiexam- alsoto eatit in faniliar surroundings,without plesof value-addedmarketingorganizations having to waste time toing out, queueint, that have employed innovativewisdom in oroenn& palug and returmnghome. rcsponse to the increasing sophistication of I Citibankhaserpandediti client>enrces Asran consumers. by enabling its well-heeledclients to continue San Miguel Corporation has several suc- to do their own banking without the major cessesto its name. SMC lent its Masnolia inconvenience of havingio go to oneofitsonly brand to a commodi$, dressedchicken,and two or threebranches. Ftotil ny empowerin! won the leadingmarket sharewithin two yean customels to do most of their banking by oflaunch.Thequickacceptance by the femdle telephone.This respondsto the need of banl target buye$ was due to the simple but pow- clientsto make theii own confidential transacbrful value-added- a name- to the product. honswithout dependingon messenqers. The value-added was SMCt strong heritage I Duty-Fr€e'fhilip;ines inhod;ced rhe
IHEASIANMANAGERNOVEMBEFI/DECEMBER 1992
higtrly succesful innovation of allowing the Filipino travelerto shopfor du ty-fteeqoodsfor up to,l8 houmafterarriving from aniverseas trip. Duty-Frce fulfilled multipte needs and thereforeadded multiple values: a.eliminatingtheeipenseofbaggageoverwelgnu i reteving the burden of manually carry" ing applianci into the airplane; and, o for checked-inappliances,doing away with the risk of in-hansit damaeeor loss. Duty-Frce added still mordvalue by expanding its product lines to food and household items, both popular with overseas shoppers.Result hundreds of millions of dollars in sales and profits, and performance awards from the worldwide aisociation of Dutv-Frce comDanies. For another perspectivelet's take a look at interesting examplesof value-added marketins in the United States.
BaldorB€atstheCheapForolEn Makos Baldorisa little-known manufacturerin the US that dominatesa tough niche,the $1billion market for industrial moto6 that oDerate -years in factories and work sites. After 21 of undisturH sales8lowth, Baldor discovered in 1981that it was in de€p houble. Beforc it could fully comprchendthesituation,a double whammy punished Baldor's bottom line. Cheap foreign motors had arrived in force in h^/o different ways: as integrated in forcignmade factory maihinerff,an"das separaremo torsdestinedfor Americin origuralequipment manufachrrers.From lc81 to 1c8i oroud Baldorate humblepie while profits drirpped JJ Dettent-
Baldormanagementwasseverelytempted tomoveout of its manufacturine facilitie ftom Arkansasto low waqeareasoutsidethe United States. Inltead, Baldor renewed its commrtment to its community, Fort Smith, Arkansat to its employeesand mostimportantof all, to its UScustomers. While other US motor companies werc shutting down, Baldor tripled iG capital investment, u pgrading itsown equiDmentacrcss theboard:millers,g;nders, latires,cuttersand winders. Managementspelledout its vision of aftainingand maintaininga superiorlevelof quality wfule at the same tinie optirnizing respons€to the specificimportant ostomers. Baldornow pilduces competitively higher
quality prcducts and has reduced the time traditional PennsylvaniaDutch bowl. In subrequioed-to .ake .rp an order from up to four sequent test markets. the new Packageinwe€ksto five davs.'Baldordevelopedwhat it creised satesby ZSzowithout any advertising or changein the producl. calls Fler Flow, wfuch etiminates progressive or promotion 'Note ftom theseinnovative packagesthat te worker Now an assembly assembly. Puts gethera motor by himself from d tray of Parts often the value-added is basicallypsychologiwith the help of a comPuterPrintout telling cal, not material. The lessonhere is that relahim what motor he is assemblinq,how to t i v e l v s i m p l e m a r k e t i n g m o v e s l i k e assemblethe Darts and how to tesi the final repositioninj or tepuckagingmay achiwe the assembly.Every motor canbe hacedto a single incremental value sought by the consumer individual. Theresull Baldor canmakeaprofit producing an averageof only 50 units of any Endchlng Prcduct Appeal wlth a Value fuvenmoior, and thui qu ickly and consistently Add€d S€fllce A number of establishedbrands havebeen satisfvthedemandsof its induskial customels. given new life by gafting a value-addedservhigher value-added: consistently Baldor's quality motors,manufachled accoding to the ice to the product. Clairol, for many years a orstomer's exacting specificationsand deliv- leader in hair coloring made available a tollfree number that customeE can call to ask eredwithinaweek. Baldoris abletosellmoto$ questions on hair care and coloring. This foreiSn in price than at times 40 to 507.higher make. Forexample,Baldordominatesthe sale servicehas beenepeciatly beneficialfor Peoof motors to caruringand freezinglines,where ple who have had no e4irience with bui are the motors are bombarded with soaPywater ihinking of coloring their hair for the first time. Where Sylvania Ughtin(s dive6e illumiall dav and niqht wher€cold tempemhles can -n 6eatitrgtl food -anulacturcrs swearby Baldor and so do many otherswho buy over $300million of its motoE annually. Repackaglng To Add MoI€ Value As one marketing consultant remarked, "Packagingis the lasffive secondsof marketine." In tho6ecrucial seconds,a marketer of oa"cl<ased eoods may miss siqnificant sales iolum"e dG to a weai impuli signal, a dull Dr€sentation,a now too familiar and/or old?ashionedtabeldesignnow virtually invisible - or packaging simPly inconvenient to the intended usei A candy company called Just Bom, Inc. carri€d thei Hot Tan;les,Jelly Josand Mike and Ike candiesin black and white Packages for a long tirne. ln 1988the comPanydecided to inkoduce a new package featuring a colorful castof animated graPesand cherries. Result sales advanced 25Vo.when interviewed, the kids thought the product went "definitelyawesome " from dul and boring to Markets are splintering while consumers are becoming more knowledgeable and demanding. \ tth media likewise prcMelating with myriad cablechannels,newspapersand magazines, Point-of-sale Pres€ncenow becomes cmciallv important to the rnass marKerer, Proctor & Gamble makes surc its familiar acnemedication,Clealasil, getsa new look a packaging change- every.few years.The reason:its teen target market likes novelty in their lives, and obviously in their Pulchases. Wheatena, a brand of hot cereal over a hundred yeaE in the market, rcceiveda new facefeaturint the picture of a modem striPed bowl with a modem spoon. Wleatena rranagement wanted to take advantage of the growing popularity of high-fiber dias espeadults.So, ciallvamongyourq urban-upscale ttre ite* ta6i ae.ifrr rcplaced the visual of a
"Adde&value marketing mearctaklngthe resoulces of the company gaps to exploitperceived to in - or opportunities - customel enhance satisfactlon."
nation prcducts are sold, this company has similarl]' instatled a consumerhot line soconsumerscan qet answerstb their inquiries and alsoorder pfuducts.Nikonindudd with their video cameraa freevideocass€fteteachingthe buver how to usethe camera,how to view fiLn ani how to take careof the prcduct. Addlng Valus As exhitanting as it is to read examPlesof valueadded marketing, it is chalengin8 even daunting - to develop successhi va-lue -added lequircments. Frcm the successstorieswe havestudied,it appearsthat thesearc the critical ingi€dients for successwith this shategy: l. Vision and Diripline. The comPanies which consistendyemploy value-addedshategy and win, succeededfirst in conceptualizin! and then communicahng the vision that their company will provide high customer xtisfaction. Tte company's PeoPle actively support this vision and will not allow waver-
ine "zor backsliding at any level. Supportive"and Flexible Top Manage" m€nl Added-value marketing means using the rcsourcesof the comPany to exPloit Perceivedgapsin - or oPPortunitiesto enhance ---<ustomer satisfaction. ToP rnanagement must support the teamsresponsiblefor value added ;;kedne with the-material,personal and systemic su[port r€quircd to gA the Fb done.Top managementmust not only allow, it should mcourage risk taking. And when the!€ is the inevitable failure of a pafticular proied, top rnanagement must reipond wlth'patienceand rnakesurethe riSht lesionsarelearnedftom eachfailure.Top managemmt should consider its rcle to be both sJpportive and rewarding knowing when to eei involved (supportive) and when and how io re.ognizea pd Ueingdonewell (rewarding. 3, A Delegated Bureaucacy-Fr€€System of Decision-Making Peter F. Drucker de 'The organization must be scriH it this way: rnade receptive to innovation and willing to Derceivechangeasan opportunity rather than I *,rot. lt -rirt b" oq;;ized lodo the had work of the entrepreneur...(The organization must value) innoJation ratherthan f,oH ing on to what aheady exists. "Innovation must be made athactive and beneficial to marngers; it is the best meansto pr€serveand perpetuatethe organization,and ihat is the foundition for the Gd ividual manager's iob s€curity and success." " The 3M orsanization,one of the most imovative in the"world, has actually built shuctur€s to encourage,alrnost force, innovation. Each of 3M s 45 aivisions is expectedto Pq duce 257oof dollar saleseachyear from productsthat did not existfive yearsago.3M allows its engineerc to develoP new products or value-addedinnovations of existing Products and to form their own new ventue teams (leavinq what they were doing beforc) to de velop n-ewideas.lithe teamfailsto develoPthe product idea profitably, there is no PerElry Team members merely go back to their old -bb6. An or8anization that requiles imovative people to queue for attention, to secure 20 iipg;tur€s tiach r€quiring thiddegr€e inquisition and second-guessing),to have to fight turf baftles with iealous, thr€atened co-€mplovees,will evenh.rallykill innovative drive ind' evmtuallv kill its 6wn future. 4. Sound itelief in Marketing Research' Addine value for customer satisfactionlooks like ani soundslike a simple task,but therearc critical requi€ments: o the ;roduct diffurcnce (or value added) mwt be meaningfir.tand attractiveenough for the tarset rnarket to act with inter€st; . the target market must Perceive the added value as authentically incremental to tho6e currently experienced from available competitive products; and, o the target mark* must accePtthe added
.THE 1992 A9IANMANAGERNOVEMBER/DECEMBER
' @
value as worth (ideally worth more than) the added exoense. Tobeableto ass€ssand influencethe target buyer's behavior,the marketing people mist understandconsumerneeds,wairts,ittitudes and curlent and past usageof the product. They must also iinow hdw to maie a gap anarysisto detierminethe level of current satisfaction of buyers needsand uncover areas of opportunity whelesatisfactionhasnotbeen optimized by producis already avai.lable. All thesequestionsarc arswered by systematic rcsearch that consistendy monitors and measuresthe parameters'identified above.It is an inconsGtentand unwise managemmt that provides logistical and material support to the rnarketing people for valueadded products and yet iiihh<ilds money for r€searchingthe target consumer and testing products, conceptsard comrnunication camPa.rgns. 5, A Systematic Prcc6s for Sceening Va.lueAdded ldeas and Nourishing a MablFew to Market. While 3M allows continuous, relatively u$tructurcd experimentation and product development under the supervision of alJ 45 division presidenis,another market
"Evelyone is famlllarwith ptoducts 3M's wondrous '8G, of the Postits. Few peopleknowthat thls new productfalledmiserably in bur urbanmalkettests."
leader company,Frito-Iay, hasa more higtlly strucfufed manner of screeninsideas. Frito-lay has to develop new products to continue to lead the billion dollar snackfood market in the U.S. Frito-tay is sood at this cmcial activity and is ils t-ough"estcritic in screeninghundredsof prod ucts-eachyear.The Frito-Lry system is sotough only five or su survive the processeach vear. A new snack chip has to fass numenrw strict criteria as it
KAWASAKT MOTORS (pHtLs.) coRpoRATtON
Km.23 EastServiceRoad,Bo.CuDano Muntinlupa, MetroManila1ZO2 P.O.BoxNo.843MCCMakati.M.M. Cable:DELSACOR MANTLA Tet€x26,t2gr-ax:842.27-30 Tel.Nos.:842-3140 to 43; 842-OS9O to 94
IHEASIANMANAGERNOVEMBER/DECEMBER 1992
goes through tests in the kitcher! consumer taste testing, brandnaming packagedesign, aqverflsrnSpostnomnt and planmn& manutacturing and test marketing. A poor grade in any onecategorycanhold backor e*n kill the Sometime a product that fails in a maior p€rlormance category can be revived by changrngiust one aspect.Everyoneis familiar with 3M's won&ous new product of the '80s, Post-its. Few people know that thrs new product failed miserably in four urban market tests.The Ploduct Ploponentsnever lo6tfaith, shrdied what was going wronq and diroveredthat this wonderful6ffice p6duct needed tustonesimple rnarketingactivity: demonshation. 3M marketing people had to show the targetbuyers how to usei t in order to genemte inter€stand to rclate the poduct to perceived neeqs. This story tells a lot about value-added marketing: You have to keep the fai0r, collect I€qufuedinformation and act on it quickly. Urban Asian consurnesswill see-more-and morc value-addedpoducts in thecamingy€ars as more companies develop the expertise, cultue and organization to develop tirem. I
EXPORTSTURN THE WI{EELS OF PROGRESS 43
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Buildings! . Factory-built,all-bolted complete Steel Buildings. o Pr*designedand PrecisionEr*ted to your particular rquiremenfs. Factories, o ldeal for Warehouses, *hools and Commercial Buildings . Corrosion-resistant o PracticallyMaintenanc*free. o Much shorterconstructiontime. . Can be Disssembledand Relocated.
T e l s . 6 3 1 - 8 0 - t1o11 9 ' F A X : ( 6 3 2 )6 3 1 4 1 4 0 ' ( 6 3 26)3 1 0 9 3 3- .
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" @
processes... Reengineering business
Making Change\4lork By Teoflo R. Asunclon, Jr. Principal AndersenConsulting ull-sen'ice telephone banking. Befterdesigned banl lobbies. Shorter and quicker-moving teller lines. On-line s€tup, approval, and credit scoring of new accounts.On-line rcsearEhcapabilities. Accurateaccountinformation and activitv uDdates.Quick error resolubonand accountadiustments. Products, servicesand pricing tailor-fitted to sDecificcustomers. A survey conducted by Andersen Consulting in the US has revealed t}rat these are the banking services and featurcs that customers will expect by the year 2000. Customer demands and customer demographics have been changing together with shifts in politics, economicsand trade, sendingunsuspecting,ill-prepared and inllexible organizations into tailspins. A few have rccoveredonlv to bebuffeted anew bv technological progress. Business,product, job and career rycles have sped up somuch asa result that keeping business processesand human resourles rn stepwith iapid ilevelopment hasbecomea rop priorilr for managementthe world over, rncluding Asia. And many Asian CEOs have demonstratedthe will to make the necessary though sometimespaintul, changesin their organizahons. FEBTCDaFs to Wln In the Philippines, the Far East Bank and Trust Company (FEBTC)was one of the fust amongthe countq/s largestbanksto make the drastic changesrcquired to strengthen customer serviceand cost-eff€ctiveness. FEBrc management,with the help of Filipino and global experts and technology,undertook a comprehensive review of its objectivesand shatiegies.The bank's leaders and consultantsexamined its opeFtions and setclear market goals.They evaluatedeachof the bank's service lines, looked for way of maximizing profitability and fine-tuned the organizational shuctuie to rnake sur€ that it was marketdriven and that it suDDortedthe overall objectivesof the bank. . F E B T C ' Sb u s i n e s s D r o c e s s e sw e r e reengineered.The branchesused to combine tellering with backrcom operations.The r:on-
su.ltantsdid not try to male incremental improvementsin branch operation systemsand procedures. Instead, they computeriz€d tlle backruom tasksard moved them to a central location. The move fteed exDensivecommercial space,allowing thebanlio meetits clients needs more efficiently and precisely while ottlng co6ts.
Lessons fiomDeveloped Countrles Thesolutionsthat worked for FEBTCapply
"Business, job and produet, caleel cycleshavespedup
so muchthat keedlE hsinessprccesses and humanresources in stepwith mpiddevelopment has becomea pdoritybl
man4ementtlrc woddover." iust aswell to other s€ctors.Asian maragers in manulacturing, health care,defenseand govemment can - and should - taD into vast global resoulres and leam from ihe erperiencesof more develoDednations. Even now, Wetem consultantsarc working feverishly to rcengineerRussia'sfood sup ply system and shorten bread lines. Simple changes,such as wrapping preservative-ftee brcad in plastic bags to prolong shelf-li.feand requiring fewer forms from delivery truck drivers, have made head more readily available to Muscovites. In healthcare,productivity lessonslearned from manufactuiing have 6een applied to major US hospitals.Like work cells in marlufachrring plants that containall the equipment needed to produce a prcduct focused carc units containins all the heatrnent facilities needed for relatid caseswere set up by l€e Memorial HosDitalin Florida. A patient n6 longer has to be moved from room to room or floor to floor Care center specialitiesareon the floor with their patients, with common resourcesclose at hand. Each teamis responsiblefor heating specilicgroups
.1992 IHEA.SIAN MANAGERNOVEMBER/DECEMBER
of patients from admission to discharge. Combinint advanced manufacturing technology with old{ashioned customer sewice, the focusedcareconceDtho6ts l€e Menorial's productivity savinls and help6 to rnakeit one of the best-rur hospitals in the US.
Pood6areOurMost|rpofm A$ot kading organizatioru everywhere have alsocometo recognizea long-overduedehrtto iheir people, indisputably their gr€atBt a& set- and have taken step,sto r€pay this d€bt. They aretaking a secondlook at the way their people relate to the organization and are rethinking and overhatdhg their personnelsye tems and strategy. With the right methods and reeourtes,the quick-to-leam,highly+killed alrd hard-working Asian workfor€ can becomeevm more ed-ucated,erubled and mrpowered - a 3Es workforce. As their knowiedge steadily improve though continuing trainin& they can do morc and better work given the necBsary tools and prccessel Clearly defined rcsponsi bilities and authority arc also critical motivators. Moving from excesively tradition-bound ard stsatified structures to flafter, less autocraticonesshould Sreadyimprove theptoductivity ofAsian organizations,renderthemmore rcsponsiveto their dients, and bring thern in stepwith worldwide triends. Cha€e Man4ofliont at Wor* FEBTC'Sshategic review and ortanizational hansformation, for instanc€, also entailed an extensive rcthinking of personnel prccessesand issues. Pooition classification s)stemsand salary struchf€s were r€vised to conform to changesin work flows and irb content. A new performanceappraisalsysiern was designedand implemented, with the a9sistanceof human rcsoulEe sDecialists.The new systemcombinesquantitaiive and qualitative performance criteria that support the bank's new goals. An assessmentof haining systems,PIocessesand methodologiesand the skills of the in-househaining staffled to a two-year plan to beimplementedby the bank'sharning department and outside consultants. The Dlan included the development of a tiaining curiculum for each business unit and a packageof coursesto equip traineeswith Fb-
specific skills, instill in them desired values, solve concemsat an early stage.Detailed and inform them of new policies,Procedurcs workflow analyseswere made; unnecessary andstandardsof performance.Prioritycourses activities were scrapped and other activities were defined, designed, developed, piloted were sheamlined. Suitable elements of new and packagedfor easeof delivery and consist- technology were incorPorated in iJbs to improve work quality and enhancejob satisfacency of instruction. iTEBTCmanaeementrealizedthe need for tion. The consultins team then qeated a model radicalctungeand wascommitd to makingit. FEBTCpeople,operationsand teclnok8y are otficeprototype to testthe new iobsand procereengineered d ures'usingi careload from a reaI office.Forty continuor,rslybeingmtegratedand volunteersrotated through the office for up to for the futue. six months studying the ergonomics of the the ForwardJooking leadershipissirnilarly Lev catalvstfor changein the public sector' work environment,assessingnew work methRe'natoVilencia of thdsociat s.i,rrity Syttem ods and testing trainin8 Prograrns and re(SSS)is one of the Philippine govenunenrs porting on their etfectiveness.The team then mostprogressiveadministrators.His agenry performed trials in 23pilot officessostaJtat all hasover 3,000cieil rrvice employeesservinB ievels could gain hands-on experiencebefore five million activeSSSmembers. Valenciahas nationwide implementation. Comprehensive computer-basedtlaining a very specific goal zero rcspons€hme but lie is well aware of the aifficulties his was devllooed to enablethe DSS staff to use the new sysiemsquickly.Some34,000employorsanization must overcometo achieveit He is confident that value formation is the eeswent thrcugh the l Gday training program answer.Beyonddocumenting,reviewing and over a 2 l/2-year Period.SPecialhaining sheamlining SSS work Prccesses,Valencia programs for managershelPedthem adFst to believes that clearly defining the organiza- lheir new rolesasthelocalofficeswere Sranted tion's goals and communicating them to its greater rcsponsibility for their finances and peoplewill makethe critical difference.PeoPle recruitment. Regional imPlemmtation teams ihould be gluenopportunjtiesto understand were also formed to coordinate baining and provide gujdancein costreduction. fully the reasonswhy thet organization eists ' With the skategyin place,DSShassaved and the cmcial role they play in it. From this, morethan$290million annually and increased Valenciasays,everything elsewill follow Valenciafeelsthat his organization'sgoal of efficiencyby more than 20 Percent.Enor rates zelp r€sDonsetime js specific enough hDbe have dropped ftom ten to two percent.It forimpbmdnbble yetchaleriglngenougtriofirettre merly took ftom three to four months for irnaeirutionof hisDeople.Fromhjsmanyyeanof beneiitsto becleared;now it takesthr€eto four q) er.di"nce-ottit.ig*lth privdtebanksiiMdnila, days.Some perrent of all inquiries arc now by accessinga single imnediately handled hehdsleamedthaiwhm peoPlein an o€anization areexcitedaboutsomethin&they aremoh- terminal, mther than by calling back the next day Impressivegainshavealsobeenachieved vated. AsianorsanizahonssuchastheSSScanleam in job satisfaction. from the wiy the uKs DeParhn€ntof Sociat Secuity (D65)handledmaiu changewithin the TunlngGlobal These successstories from arcund the integrated framework of strateSy,Focesses, tecnnobgy and peopledevelopment D6S,like world - and there are many mole acrossall SSS,wantedto r€shapetheway it did busines so thematorindustries-conf irm theadvantages it codd servethe public hter, Sive ta{Pay€rs that effectively managed change Srves any ThefasFrisinBAsia / Pacifictiger more value for their money and imProve )ob organization. economiesare bright e\amPlesof how busiquality. This meant taking a whole personap Jt r"il to ur"aaiu"* of b;nefits.DSSstafircuid ness reengineering can helP entirc nations irstantly actesson a'terminalall theinformahon leapfrogtraditionalstagesof development. The Asia/lacific tieers have also shown pertainingtoaperson,includingallhisbenefit\ procthat developing countriesneednot follow the payrnents. were thus Transactions and tedious development paths forged by nowessedmore quickly and accurately. ToachieveDSSobje'ctive,comPutersystems maturine economies.lsolationism and inhad to be updated, intqfated and extended ward-looking nationalism as ideals are long thouehout the LK. More than 70 mainframe past their prime. To grow and, indeed, to surcomputen fourareacomputercente6and60,fll0 vive in aneraof intensecompehtion,orga zaterminalswere installedover a Periodof five to tions must hrm global and outward-looking withthetechnology,iniormatioryandlnowlseven years. Change managementwas nationsftombothrcgional edgeavailabletoAsian deemedcritical to the successof the Pro,ect. The DSSconsultinqteam first communi- and worldwide sources,forwardJooking orcated the changestlatagy to all the organiza- ganizationsneednot iust strivetiocatci uP with to Peak tion's 80,000people working in 450 offices theintormationsocietywhich isexPected they can now start PrePannt throughoutEngland,Scotland,and Northem in themid-2000s; keland. The team erplained the changesto for the biotechnology society of the 2lst I secureevery employee'scommitmmt and re- century and beyond.
NAtvlE
POSITION
COMPANY
ADDRESS
IEL. NO. FM NO.
SENDTO: COMMUNICATIONS PUBLIC CORPORATE AsianInstituteof l\4anagement L6pezFoundation Eugenio CamPus JosephR. l\4cMicking P0 Box2095 123 Paseode Roxas Makati,MetroManila PhilioDines
OR FAXTO: DAPIKIN/PINKY
(6iP) 8L7 912ffi
i
NOVEMBER/DECEMBERl9S2 THEASTANMANAGER
globalandthinking Going big...
Thailand in theYear2020 By lbara C. Gutierez ManagjngEditor ha and, one of Southeast Asia'sfastest al growing economies,fully e\pects to beI I come a rnaior business center in the region by the year 2020.According to a I muntry scenariodrawn uD in connectionwith a projectof theAsian hstihrte of Management, Thailand will achieve this goal primarily by going global and by thinking bit. This scenariowas incorporated in a papet "Asia 2020:A ftenario of EastAsia in the Year 2020,"which was presentedbyAIM professor Victor A. Lim in the conference"In Searchof the Asian Manaqerfor the Year202Y' (SeeTre Asian Mnnagu, Aprt\/May /Jrne 192 issue). Theconference,held in Manila, wassponsored by AIM and the Asia PacificEconomicCoop erationls Human ResourcesDevelopmentBwiness ManagementNetwork.
be very high but will remain rcbust enough to Fovide stability in the s'stem. Price stability will be the top priority of poliry-makers to ensue that Thai prcducts rcmain competitive in the world market and to s€eto it that inflation does not urdermine the country's real ProsPenry. kspite the increasein population to some 80 million, iobs will be more readilv available and thestandardof living witl rise.6y 2020,the per capitaincomeis expectedto rcachbetween
corurtrie, both in the Associationof Southeast Asian Nations(Asean)and Indochina. By the year 202Qthe Indochinesecountries ar€ expected to have become members of Asean, with regional econornic cooperahon already at the free trade or even the common market stase. A Ma*et Economy To fund corporate growth, large sums of Bv the vear 2020,Thailand will have comcapital will be needed.Mo6t Thai companies plet6d lti tlansformation into a market will chooseto be listed in the stockmarket and iconomy Thistraruformation will beachieved tobonow directly by issuingmorecommercial thrcugh gover4rnent's liberalization poliry paper in local and overseasfinancial markets. aimed at encouragingcompetitionboth within Thailand's good credit rating will make forthe domestic market and in Thailand's extereignloanseasyto ot'tain at rcasonablerates.As nal trade. a rcsult, the oveEeasborrowings of the privat€ Increasingly,the private sectorwill takethe sectorare expectedto approxinate that of the lead in determining the dircction the Thai govemment. economyshould take.The govemment's rcle With mega-companiesdominating the as controller will weaken considerablv Govbusinessscene,many smallfims will beforced emment intervention witl ocol only during to closeshop or mer8e with the big ones.The unanticipatedshocksand only for the purpose remaining few will have to be very efficient of maintainins overall stabilitv. and will have to caterto well-defined market The private sector is expected to play a niches.Still, they will needgovernment assistbigger role in Thai politics. While the form of anceand financial support in order to sureive. government will remain a constitutional With its strong frtential to become the monarchy, it will become increasingly businesscenterof SoutheastAsia and the sate democractic.The House of Reprcsentahves, way to the hitherto untapped Indochinese for instance,will be composedmore of busimarket, Thailand will continue to attract fornessmenand represeniativesof business US$l2,0m and $14,000at the current exchanqe eign investols. Many of these investo$ are groups.As a result,parliamentwill becomethe rate of one US dollar to 26 bait. expectedto form ,oint venhrres or to put up stagewhere influential bwiness gloups strugreglonal officesin the country. gle against each other to enhanceor prctect Blgigorand Mo|€ Global Companles Foreigncompaniesseekingto expand into thei respectiveeconomicinterests. Thai companieswill becomebigger and go Thailand will prefer to link up with the bigger As the clout of the private s€ctorinqeases, international in order to attain economiesof companies.Beingbig and strong,Thai compathe influenceofthe militarv in Thai politics will scaleand eain better matket access.Busrness- nies will be in a better bargaining position. decrease.Thus, the possibility ofseeing an- men will liave to think globally and formulate Hence,negotiationsarcexpectedto benefitthe other mililary coup in the future will beFeatly long-term plans. As competitionintensifiesin Thai side more and result in suchadvantaees rectucect. the local market,they will also have to look at as betterand moreappropriatetechnologres, Thailand's economic $owth rate will not opporhmitiesabroad,especiallyin neighboring more favorable conditions for technology
"Wlthits strongpotential to become the buslness centerof Southeast Asia andthe gatewayto the untapped Indochinese market,Thailand will continueto attractforelgn lnvestors,"
'1992 THEASIANMANAGEB NOVEMBEFVDECEMBER
hansfer and human resource develoPment and larqervolumesof capitalinflow. Ioinl ventures witl actept more Thars on their executiveboards.Weli-educatedyoung Thais will be appointed to high-ranking positions. The proportion of Thais to forcign executiveswill increase.
lndustdalDocertrallzatlon The govemmenf s industrial decentralization poliry is e\peded to createseveral new ind uitrial'boom iowns all overThailand. LiSht industries will rise in the count!/s northem and northeasternrcgionswith hubs at Chiang Mai, Nalhon Sawan, Phitsanulok, Nakhon Ratchasima, Khon Kaen and Udon Thani. Heaw industries, led by the petrochemical and its downstream industries, wil locatern the eastemand southem reglons. Manufacturint will outpace all other economic sectors,with its shar€in the gloss domesticproduct (GDP) projectedto riseto 3570. The electronicsand Fwelry industries,already mairr foreign exchangeeamen for Thailand, will becomeeven more important by the year 2020. lndustriesare likely to becomemor€caPital-intensive and more hi8h technoloty-oriented.Multinational corporationsareexPected to play a key rotein theindustrial develoPment of'Thaitanii by providing Uottr the neeaed capital and technology. ' Despitethethrusioward industrialization, agriculture will remain an imPortant activiry In 2020,Thailand should still bea food-surPlus country.Prcduction ofbasiccroPs,suchasrice, will remain sufficient to meet domestic consumDtion and export commitments fio*erre4 as -ages become higher and land more expensive,Thailand will gradually becomelesscompetitive in agricultur€. By the year 2020,the country will ceaseto be a maior food exDorterin Asia. lnsteadThailand will be importing agricultural commoditiesand pniesini theseinto high value-addedprodircs for rdxport. This divelopment will have a signficant'impacton thegrawth of theThdi and manufacturing sectors. agricultural Meanwhile, the service sector's role in Thailand's economywill grow in imPortance. With the qpening up of Indochina, Bangkokis exDectedto becomethe financial and business hub of continentat SoutheastAsia. Mor€ foreim banks will operatein Thailand and internaitional bankinj, such as offshore banking, will become more active. The SecuritiesExchangeof Thailand, which is exPectedto list Asean aswell assomelnd ochinesecomPanies, is likely to become the regional market for Indochina. The financial market wi.u become more sophisticated,of{ering a variety of assetsand senrices.ComrnerciafUanLswttt come to re semblesupermarketsProvidingcomPletefinancialservices.Therewi lJbea high degee ol competition among Thailand's financial insti-
"Despitethe thlusttoward agdcultule Industriallzation, will remalnan impoltant activity.ln 202O,Thailand shouldstlll bea foodsurPlus of basic countly.Ploductlon clops,suchas ilce,wlll remainsufflclentto meet and domesticconsumption expoltcommitments."
tutions as well as.hween local and forcign financial gloups. to lndochina,Thailandis As thdeatiwav-become the hansPortation also prcjded to centerof SoutheastAsia. Tourism will rernain animportant industry particularly astheThais'
incrcasingincomesenablethem to havel morc ftequently. The D,ownsldeof l)evelopmont The future, however, is not all rosy for Thailand. Notwithstanding the govemment's decentralization policy, industrialization is e\pectedto result iir urban congestion.This will give riseto problemsof inadequatesuPPliesof water and electricitv.Banekok'snotorious traffic iamsare also likely to be rcplicated in other largetowns. Howevel, the lessonsof Bangkok should provide useful inPuts to Thailand's urban plannen. Poliution and the rapid depletion of Thailand's natural resource, will become maior concems for both the sovernment and the Drivate sector The Thais will have to learn to utilize their limited natural rcsourcesin the most efficient way and show Sreaterconc€m for their environment. hsum,theforecasteconomicdeveloPmmtof thecor.mtrywill causeproirund changesin Thai lociew Hv'r'een now and the vear 2020.It is imperativethatthepeoPleleamtoadiustto tlEse draneesand find a happy balancebetweeneca nomicprosperityand siial resporsibility l
THE NEW COMPAQLTELITE OPEN. COMPUTERS. PERSONAL ( A P P R E C I AH TO E W M U C HW E P U TI N T O T H E I , 1 . ) STANOARO FEATURES
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SIANOAROI1OO€15
fr]o 1992 THEASIANMANAGERNOVEMBER/DECEMBER
Thriving democracy anddlstressing symptoms...
ResilientThailand: Refiing onits Best-Managed Companies By Kin Gaibonton AssistantNlanagingEditor '50s and early '60s,it was fashI n the late ionable amongintelligentsia andactivists I I alike to seeany loreigninvestmentas d - form of neocolonialism.Todavthis view is larsely anachronistic. Forcim investment infusions have been credited with the growth of Hong Kon& Thiwan and SouthKorea- countrieswhich have deliberately encouragedthe inflow of foreign investments. As we get well into the 1990s, Asians on the whole have developed a more pragmatic, Iess ideological apprcach to the costsand benefits associatedwith foreisn direct investment(FDl). Happily,this general receptivity has been matched by a healthy interest by both the West and Japan in the region'seconomicaffairs. Frcm 1959-1989, for instance, Japan invested approximately $40 billion in Asia,437oof which went to theAsean countries. The Asian Development Bank (ADB) estimatesthat frcm 1985-89alone, JapaneseFDI incrcasedby 62%per annum. Over the last two decades,Asian nations havegrown in impotance in termsof FDISperhaps none inore so than Thailand, which has long beenregardedasAsia's Cinderella. Bendlng with the Wlnd It is a sourceof pride among the Thais that their nation - alone amons the six Southeast Asian nations - hasmanaged to preserveits independenceof the West. "We bend with the wind," goesa popular EGAT:Genelatlngol6ctricity and lob6.
Thai saying. And indeed, this malleability and opennessto compromisehasservedtheThais well. Throughout the country's long history, Thailand has managed not only to skilfully maintain its political ffiom, but has also managedto oltivate a multiplicrty of contactswith bothAsia and the West. Until this May, it was thought that this same sbrt of resilieiry extended to domestic affairs as well. The Thai coups - there werc some 15 govemments and seven military coups between 1932 and 1968,and there have Bangkok Bank: Chalklngup ff]sts. been eleven morc since then are generally of the benign varietv "Nothing the milita{y's role and paving the way for a morc than political hiccups" sniffed onepoliti- govemmentbackedby popular vote. Anand's cal observer, "All sound and very little fury" pleasfor fair and orderly elections"played to Not so however, the May disturbances. the favor of the so-called'angelparties,'a When General Suchinda Kraprayoon finally coalition of four parties which openly sided relented to popular demands that he step with democracydemonstatorsduring the down, sheetdemonshationsand a confronta- ctacKoowTl. tion with the armv had left moie than 100 The new prime minister, prcdemocmcy peopledeadand 589reportedmissing. leaderChuan Lee Pai, is a 53 year-old lawyer Sincespring,newque.tionsabouttheThdl and veteranpolihcian.Like Anand, Chuan polity have begun to emerge. Violent though enioys widespread popularity and is known the prcvious coups werc, they were largely for his integrity and hisability to foâ&#x201A;Źe comPloclurnsv attempts at settling major conflicts of mise. Chuan has said repeatedlythat he will interest and nothing quite as cathartic or continue Anand's pro-growth, pro-reform cleansing as the military takeovers in Latin economrcPollqes. America, or more rccentl, Peru. For the fiIst time in a year and a half of The thriving democracy movement anct political instability,the Thais havereasonto be the ferocity with which the generalsclamped cautiouslyoptimistic. "Businessleaders,"redown on the Mav demonstra- ported the,4irfi WnllStrcetloumal last *V tions have made ihais warv ot temberare"paficularlvsupportiveof a Chuan futurc prcspects. Similarly, po- govemment becausehe is viewed as a pragtential investors are now asking matist." Although political observerssuggest themselveswhether the mili- that the new govemment is likely tobe weaker tary's penchantfor extralegal in- than its piâ&#x201A;Źdecessor's in their grasp of ecotervention is a manageable nomic affairs, a maioritv of Thais seem comelement of Thai politics or a dis- fortablewith Chuan, who during the ele(nons tressing s''rnptom of the latent "distanced himself from the more dogmauc instability of Thai society. ChamlomgSrimuangand paintedhimself as I n t e r i m P r i m e M i n i s t e r a moderate." Anand Panyarachun,a widely respectedand popular figure Investments Forthcomlng? his eleventh hour appointment Prior to the events last May, the economy last Juneoccasionedgreat rejoic- was already showing signs of cooling down. ing in the capital - wisely used From 1987-92,theThai economygrcw an averhis three.month term to rcsolve ageof l07aamually. By the late'80s,Japanese the political crisis by reducing factoriesweresprouting at the rateofone every
THEASIANMANAGERNOVEMBEF/DECEMBER 1992
two and a half days. This year,the economyis exDectedto clow 7-870 - hadlv what one r,u6uld."1.1u ilu.k"nit s-off, but stili a letdown to the hard-working Thais who have grown acostomed to double-digit Srora'th. The number of Japaneseventues filed before the locai Board of Investments decreasedfrom 1285 in 1989to m5 in 1990.To cover existing and future capitalneedsand to Paper-overthe countrv's worrisome $8 billion cu[ent-accounts deficit, the country needscloseto $40 billion over the next five years to be able to match previous growth levels. However,Thailand still d rawsa substantial amount of foreisn investments. Thtd in the reeion - follov,ring Singapore which manag;d to Uring jtr ttr" lion'isirare of $4.8billion aid Malavsia.some$2.9billion -Thailand's FDI in l* totalled $2.3billion, representinga 14%insease over the prcvious year. By contrast Indonesiabrought in$964milion, rcPresentinga significant 22%changeover the 1Ql9 figure of ffi2 rnillion. Attncting oveEeas investments may be difficult at a time when Indonesia, with its targe population and imPortant raw materials, is prcving more alluring to JaPanese Dockets- now even morc so as a result of ihailand's crisis damaged economy. In thjs month's issueof Tht AsianMtmgo we tale a look at the Thai winners of the 191 ManagementAwardsProgram,eachofwhich is a pairas.onof manaqenientercellenceand on r.ihoi 'houlders iruch of Thailand's tuhIIe prooperity rests.
"It help6,"he says"that w€ ar€ well regarded and acceptedby Thai societu otr products ale well thougirt of ana tnrsted by our customers. Reliability is a rcputation we havebuilt over the veaus, - "The same qoodwill extends from our employees.Wearevery conscious of emplovees' health and safety needi ai wel as the environmental aspectsof our own ooeratioru and of those of our dealers,contractorsand customels. Ourslogan,'Shell means value and integrity,' is something we've tried to takevery seriously. Shell Company of Thalland: Royal 6ndots€m€ni' So much so that She[ rec€ndy '1ow smoke" lubricant poducts and is curlauncheda new international standardsystem for is luboil blending and $ease Plantsin the rentlv workins on a new hDe of fuel which effort to steerthe company towards total qual- R&d experts frope win be bis harmJul to the itv rnaragement." The program, knom as envtonment. Such enlightened policies have atbacted tSO 9OOO L a oualitv staniards svstem develthe risht soi of atteition. Just before Shell celebrited its centenaryin early 191, the comoanv receivedone of the highest accoladesit iouid posslblv trox for. h August l9O, Shell Thaitaird was awirded the Roy;l hsignia (the Sealof Garuda) by King Bhumibol Aduyadej, makingShell the first in theoil industry tobeso honored.
"Potentlalinvestorc ale nowasklngthemselves whetherthe mllltary's penchant fur extralegal is a lnteruention element manageable of Thaipolltlcsor a ot symptom distresslng latentinstabillty.'
andilanagement: PoopleDayeloFnent AldaYs ThalIntematlonal
To hear the mo6t seasonedhaveller tell it the efficiency and comfort of Asian airlines soes v tualiy unchauenged in an industry Ma?ketlng Management: The Shell fnown for i-s overdeveloped aPPetite for Companyof Thalland competition. Among the Asian carriers, Thai ot theShetlCompanyof Themanagement Intenrational is among the best;distinguished Thailand attribu tesa largemeasureof its curoperations and not onlv bv its sophisticad 25.7% of the has 'by the comPany rent success the graciousnessof is moaeni n,i'et but market share in refined oil fuels, lubricants "Smooth as Silk " as the saying employees. arld indwhial chenicals - to its cor?orate "a go;, Thai's charming flrght aftendanb ;"a imase and what one Shell executivecalls quaItvapproachto mdnagement." At ptesent, oped by the Intemational Organization for and reliablefFound clew work hard at Prcviding the seamlessservice that satisfiestoday's Standardisation. dtreuitr.iiiand is amone tne handful of hdu"fickle and disaiminating havelleF. Thailand new svstem, Shell Under the the state controlled include try leadeF that How does the company keePits Etaffever Pfi and ESSO. gmciousand smiling? SaysChatrachaiBunyaAnanta, Dresidentof Thai htemational,'lrVith Thal Alrway3: Smooth as sllk. all our computerized s'Etems and soPhistibadgesof consumerexcellmc€,'1SO cated equipment and aisaft, it is easyto lo6e 9000 accreditation," says Sakdi sight ofihe fact that ouls is a serviceindustry. AiThailnternational, we recognizethis Most Kamchamnong, She[ Marketing Economicsand Planning Managet of our investments,in terms of time, money "will give our custome6 ftuther as- and other resor.uces are dkected towads staff surance that they are usint toP trainins. As far aswe re conceme4 the efforts we've fut in aresolid investrnentswith Proven quality prcducts." ' Thi-greening of businesshas r€sults. "Our organization has develoFd several prcmpted Shell Thailand to introiuce "environmentallv-friendlY training proglams, a large number of which ael rnitir titrnicat or commercial skills regoducts.' In 190, Shelli"ttoauceit ur eaded gasoline (LILG) into the quhed bv staffto enablethem to performHter conh'ols i"a to irepate them for proniotions in the local market and at present 39V"ot tJLG sales. ln addition to futue." Employeesare given carcerdeveloPmmt ULG, Shell also laurched a line of
19Sz THEASIANI\,IANAGERNOVEMBER/DECEMBER
plans that fit into company-wide business strategiesand that indude sweral personal development paths. Each of Thai lntemational's departmentt from Marketing to Ground and Rigtrt Opera"o-.rr-. tions, tiorrs, have their owr own specialized specialized programs. The programs - which vary ftom i fiie-day orientation to more indepth workshops and seminars- ar€ designedby Thai's Personnel Developmentand Training Department. Among the various programs'obiechvesareto encouragepositive work attitudesand to mold employeebehavior to fit the companys existing corporateculture.Thai'straining programs utcorporateclassroominstruction and on-thejob experience. Vr'h e cabin clew haining is an arca of "special importance," saysBunya-Aranta, '"Theyarethe face ofThai International and we put them thigugh extensivecoursesto develop their communications and rrvice skills,'Thai has not neglected its other employees. Marketing traineesfor instanceare allowed to further develop thet skills in courcestaught at local and overseasuniversities. "A shone personnel develooment program is invaluible in trelping us handie"organizational change.-ln addition to keepingemployees dormed ,our training programspreparestaff to meet fuhue challmges with Freaterconfidence in their own abfuties," Binva-Arunta says. Thai's advertising pitclr, "Reach for the sky'' clearly appearsto apply to the companys emproyees as weil.
To facilitate overseaskansactions such as international fund tlansfels and trade harsactions, the bank is connected to the SWIFT network and the Amex and Msa networks which serve all American Express and Visa cardholdemworldwide. Straightforward inquiries such as balanceinouiries or exchange rate updaies are now handled by electronic neh.vorks which areconrectedto telephone systemswith voiceresponse,facsimiles and rcs. At prc6€nt,95% of the banks entiie transactionsar:edealt with BangkokInsurance:Busin€3sbuilt on trust. elechonically BangkokBank'sexhaustiveapprcachto lT cr€dit card seruices,custodian services, erc. ertmds to financial managemenias well. ln More impoftantly it meanschargingour custhe last thrce yeaE, the bank's retum on sales tome$ reasonablerateswhile rnaintaining the hasaveraged25%.In I 990alone!€hlm on sales lowestcostspossible.' ro6eto33.61%.Gro6i salesq'enues areequallv
"ThetasksPrlmeMinister AnandPanyalachun faces as arbiterof the oldand newolderatefotmidable."
Infomatlon Technology Managemont and Flnanclal Management: Bangkok
Bank
The winnerof both the 191 award in IT Management and Financial Management is the largestcommercialbankinThai6nd. With over 21,000employees.BangkokBank pra imprcssive: in 1990, revenues amounted to vides the most-completera;ge of finaicial $797.15rnillion, up from 9535million the pi€seruicesin Thailand - from oedit card serv- vious year. Similarly,the bank's rehrrn on icesto custodianrrvices - and hasan exten- -stockholderequity improvd from l2.9qq to sive overseas network of branches and 17.d'6V. in 1990. correspondingbanks. BangkokBank atbibutesits successro pruAs an industry leader,BangkokBankwas a dent and laryelyconservativefinancialpolicies. pioneer in the computerizahonof banking ap Saysone bank official, ',VVealways make it plications, and the bank has chalked up a a point to adhercto BOTr€gulations.Thebank number of firsts. For instance:it was firsi in also managesits assetsand liabiiities by slnautomating front teller sereices;the ftust in chronizing maturities with cash inflow dnd expandint computerization to over 400 pio- outflow Wealsomanageour intereststructure vincial and rural branches and 2000 work sothat the bank cantak; advantageof the most stations; and the fust in automatine trade fi- cost effective interest rates. Arrd finally, we nanceapplicationsaswell asshareregistration. nevertakerisk on foreignexchange." "Our corporate To copewith ib over eight million accor.rnts strategy," sayi executive and an averageof one million transactionsper vice prcsident Sura-\ak Nananukool, ,,is to 9y, Bangkol us€s stateof-theart technol<fuy. grow thrcugh our standards of quality and Currendy thebank usesUnix serverswith M57 sen/iceexcellence.This of coursemeanspavDS computers)st€rnsfor high volume applica- ing attentionto capitalstrensthand tiouidiiv tions,a domstic network ushg X,25and SNA/ control as well ai emphasiiing profi;biliri SDLC protocolswith landline, mioowave and over growtn. "Profitabfity satellitemediaaswell asnon-faultcomputersfor to us meansconstantinnova2,I-hourservicingof ATM rantholders. hon in new products and new marketssuchas
'1992 ]HEASIANMAMGER NOVEMBEFVDECEMBER
General Management: Bangkok Insurance Ltd, TheThai l9l GeneralManasementaward went to Bangkok Insurance Lfu., one of the countl/s largestand most progressiveinsurancefirms. Salesandqrossrevenuesamourted to $57.8million in 1990when total industrv revenuesstood at $66c million. By contrasi, Bangkok lnsurances closest comfttitor, the American Intemational GrouD, had sales of $36.5million for the sameveal Among the company'siliensare blue chip corporationssuchasthe BangkokBankGroup ofCompanies,the SahaUnion group ofcompanies, Siam Cement and the Charoen Fhokapan group of companies. Bangkok Insurance's portfolio includes comprehensivefire insurance, marine insurance,motor insuranceand miscellaneousinsurance which includes, coverage for accidentt travel, workmen's compeisatiott ^Of and livestock and crop insurance. all its product lines, the company has its highest market share(13.97c)in fireinsurance. Ifalso hasa particularlystrrng portfolio in marine insurancewith a comfortable 12.7%of industry market share. Says Chai Sophonpanich, chairman and managing director of Bangkok Insurance, 'The basic principle on which we operate is that insurahceis a businessbuilt on trust and especiallyon confidencethat futureclaims will bepaid promptly and fatullaOneofthercasons ior our successis that we enjoy a good reputanon among our customers. Our record of service, hnancial strength and prompt claim pa)'ment has further r€inforced our policv holders'confiden<ein us." The company,saysSophonpdnich, place: . rtspnonheron customerservice,soundfinanciai managementand human resourcedevelopment. Like its hundreds of policy holders, the companyinvestsin its own insurance- its
"W'elike to think that nearly 600employees. we run our operationsin a working mvfuonment that encourag€s active participation.' Our organization policy is to prcmote ftom within the ranks of our own employees. For new rccruits, we provide systematicFaining andadevelopmmtprcgramtofuIyintegrate them into the company. Ou middle marngersarc constantlyrotad amongthe differ€nt departrnmtssothatthevarefamiliarize<twith fairgkot Insunnc€ s pitlicies,ai-s and practices.Wdrecontrdmtthatourpr€sentpolicies have made for a responsible,effective team which will ensureBingkok Insurances continued successand prcperity"
throughouttheKingdomof Thailandandwinner of the 191 MAP award in Operations Managemmt. EGAfs cullent capacity is 39,639million kwh, up from 25,828million kwh in 1987. Grossrevenuesanounted to nearly $2 billion in 190 and r€turn on salesincreasedby 24.97o To inclease prcductivity from 1.8.9E"in 11t88. a3 well." even more, EGAT has introduced highly so phjsticated systemsfor monitoring and controlling power plants and power Plant efficiencysystems.Simil,arlt the comPanyhas invested heavily in extra high voltage transmission lines, gas insu.latedsubstationsard improved protection systems to incease EGAI'S existing transmission capacity with alization would continue. Since then, eco- the lowest risk possible. Adapting the latest technology into the nomic growth has made increasingdernands company'soperationshasproved enormously onelectsicpowercorsumpion. In190,maximum Dower demand rose to a rccord 7,091 successful.Like many of his colleagues,howMW Tlreaverageincreaseper annum hasbeen ever, Deputy General Manager Charmon Suthiphongdui prcfersto attribute his comPaapproxirnately 14%. Much of the burden for meeting this de- ny's continuing growth to EGAT'S 32,000 "Their skills h plaming managemard rcsts with the Electric Generating Au- employees. (EGAI), havemadeit Pcsible iorus rnst and opentions Thailand a fu llystate-owned thorityof enterprise responsible for generatint and to faithfully serveThai soci*y and povide effitransmitting electricity to distributors cimt and reasonablypricedpower service." I
"Thal'sadvenblng pltch,'Reachfur the Sky' cleailyappllesto the company's employees
ilanagoment:Electdclty operatlons Authorlty of Thslland ceneratlng After years of consolidatioD the Thai economy eventually rcspondedby becoming Asia's superstar during the mid-'8os. Along with Malaysiaand much laterlndonesia Thailand built up its manufacturing ard exportsat a furious pace. Suddenly Bangkok was saturated with new prcFcts and infrastructue particulady communicationsand energy b"--e *i.i.t i" g"u-oteeiry that indirstri-
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52
1992 THEASIANMANAGER NOVEMBER/DECEMBER
-E@ Thriving democracy anddistressing symptoms...
Thailand's Competitive Advantage: Ethic,Educatiori, and0pportunrTy By Hls ExcsllencyPrlW Counclllor GeneralPrem Tlnsulanonda FormerPrimeMinister,Thailand GmeralPremrws gtest of honorat theMarugementk)mrdsDimerinThailandlastMarch,His remarks, partkularlq thoseon rutionhad and ludenhip, arepfticilarly prescient , gtzxnMay's danonstrations.
ment policy in a vacuum haslong passed.The quality of our economic, development and trade policies no longer determines how fast we will grow or whether we will Fow. It determineswhether we will survive. For no domestic industry or organization will survive in an era of Egionaly integrated and globally interdependent maikets until it develops the capacity to eftrively compete with ils peersin the markehdace. The Asean FreeTraie Area agreement is important primariiy becauseii acknowledges'these new realities:the need to freelv comDeteto stimulate the development of*o.lddass -,ut ufacturers and that a united trade flont is imperative to compete with other similar yet morc advancedhade ftonts.
I am pleasedto leam tlut the rnanagement I award s,conductedby theAsian I ns[ituteof I ManagementforThaicompaniesaswellas ! other companies in the legion, are deterrnined in a highly competitive mannet as thousand of companies were nominated for their outstandingichievements. It speakswell for the country and the region that we rccognLe the greai importanie of management Commltrnent R€qulEd skills in our development DrDcess. Another questionis, "Arc we conunifted?" Managementis indeedthekey factorwhich Specifically,are we committed to r€sional demakesan organization or a nation more comvilopmeni and the short-term sacrificesthat petitive and must be acceptedas a driving devdlopment demands? iorce behind progressand development. Thi A Japaneseexecutive has thoughtfully -the successor failure of a nation in the global Genelal Prem: "Cutivate a sustalned, stated tfut the underlying caus€for ecoeconomyof interdependence in the yearsto bonsvolentleadeBhip." nomic successof Japan is pefiaps not the come canonly be measuredby the degreeof prcpensity to work hard on the pan of its itscompetitivenessin theintemational market. The question is, have we developed poli- people, but that government and the private The mles of the marketplace - unlike cieswhich capitalizeon our distinctiva compe- s€ctorhave createdan envlonment in which thoseof the bureaucrary - ireclear, consist- tence? Our development policies and hard work_- and sacrificefor the greatergood entandabsolutercompeteor perish.Achieve programsshould draw on the distinctive com- - Davsoll. -And ercellence,or be left behind. petenceof our peopleand theirorsanizahons. I would suggestthat this is something AE a nation, we are all competing for ttris is intendea to enhanceour iompetihve we mwt still work to achievein Thail,ard. investment ftrndt for iob qeation, for market advantate over other natiohsand oiher Ie. So perhapsI would rephrasemy question expansion and for gr6wth. Failue to athact qlons, and ask, "ArE we ir govemment and private -. investment - for whatever rcason - will Comparativeadvantageis no longercheap enterprise buly commifted to our people?" stunt iob opportunities. Failure to createhbs labor,realestateand power It is people,ethic, And then, 'What is that commitmeni?" ' will stunt market development. Failure to education,opportunity and uniry Peoplewil And I would say that commihnent - to dev€lop rnarketswill stunt economictrowth always be our greatest resourri beciuse of excellmt A5ian nvmageE - mearu several and raise the specheof sustainedpovefi their intelligence, not the cost of their labor. things. FiBt, that we believein people- both ratherthdn5ustainedprosperiry Our work ethic evolves ftom oblieation to Thai and foreign investors,the laboler and hjs family and rntiorl and not materialism. marager, the farmer and the industrialist Distlnctlve Competence is the greatequalizerthat prc- not only a s€lect or distinguished elite, and -Education It is thercforcimperative that our market\rdesthegreatestretumson theintelligence of their equal right to participate in the cultivathe Asian market - integratein order to nur- ourpeopleand generatesopporhrnifv. Oppor- tion and harvesting of the fruits of develop ture the growth of highly competitiveAsian tunity lrovides for the de'vilopmentof new ment. rnanufdcturers and io Drovidethe economies prcducts, organizationsand iridustries. And Second,that we work towatd clear,measof scalenecessaryto manufacture h.ighvalue- finaUy,it is unity of purposeratherthanethnic urablegoals- the "ideal" we wish to achieve; added, high-quillty products at re"asonable heritagewfuch providesthe s)'nergyboth na- leading to posperity and equiry costs.Obviously,we should provide the same tions and industries rcquire to becomethe best Thir4 that we provide opportunity and accessto our markets that we demand of the in the world. support to students,enhepreneursand indusAmerican,Japaneseand Eurcpeanmarketsto Understandingour distinctive competence trial pioneerswho demonstratethe vision ard ef{ectivelyexploit the competitiveadvantage alsomeansthat we havebezun to understand resolve to take the risk rcquir€d to achieve of AsianmanufacturcrsouisideAsia. that the time when we couid createdevelorr greatness.Sothat they will. THEASIANMANAGER NOVEMBEF/DECEMBER 1992
l ;
Fourttl, that we cultivate sustained, benevolent leadership politically and bureaucratically which demonstrates the dignity inherent in public service. Fifth, thit we listen to our peoPle. It is popular thesedaysto saythat PeoPlenot brick and mortar or orsanizational charts or products - are the orgirization. I beliwe this is also true in the caseof nations. Like the most successfiI- excellent- enterPrises,the most successftrlnationss€emto me to be those
"Undelstandlng oul
dlstlnctivecompetence alsomeansthat we have begunto underctand that the tlmewhenwe couldcreatedeveloPment policyIn a vacuumhas longpassed."
Now accepting applications to its
MASTERSPROGRAMS SchoolYear1993-1994 Sinceits founding in 1968,the Asian Institute of Management has had one mission: to train professional managersfor Asia It seeksto accomPlishthis mission mainly through its maste$ Programs. The Master in BusinessManagement Program (MBM) is an intensive, full-time twoyear couse designed to transform young men and women into Professionalmanagers equipped to manage comPaniesin Asia. Preferencewill be given to aPPlicants with ouGtanding college records ard meaningful work/leadership experience' The Master in Management Pro8ran (MM) is a full-time, one year program for experienced managersPreParing for higher management resPonsibilities APPlicants must have at least six years work experience,with a minimum of three years in a supervisory or manageriat Positiorr b€ at least 28 years old and have a bachelo/s degree or its equivalmt. The Master in DeveloPment Management Program (MDM) is a one-year,full-time program designed foi mid<areer practitionets ftom govemment, NGOs, development assistanie agencies,cooPerativesand Private firms. APPlicants must have a bachelo/s degee and at leasfsix years development work experiencewith three yeals at a suPervisory or managerial level. Application forms may be obtained from the AIM Admissions Office, Asian Institute oiManagement, Eugenio l,6pez Foundation, JosephR. McMicking CamPus, 123 Paseode Roxas,Makati, Metro Manila, PhiliPPines,TelePhone:874 011to 19 or 877 631 (direct line) or from AIM overseasrePresentativeoffices Or mail in coupon below to THE ADMIS$ONS DIRECTO& Asian lnstitute of Management'
that listen to their people, and act on their recomrnendations. Thee aresome- therearcof coursemany more - of the ouestionsthat rcquirc answeE ifwe areto realiiticallychart the-nationlsPath to development; if we arc to Perpehratethe progresswe luve made in uplifting the live bf oir people,and providing the ofportunity to tivea life ofd igniry A life both tulfilling and meaninsful. To thoseof you who have receivedawards this evening goesmuch honor, but also much rEsDonsibilitvFori t is vou who will determrne oui tevel of irroauaivity - our caPacityfor generatingwealth -and thereforethe quality 6f Me attainaUtefor our people. This is a burden you have thus far bome with much dignity, and it is one that will continue to dernand much sacifice. The rccognition of this evening is of a contsibution you make to your organizations,but it is a contribution that affectsthe lives of all Thais. Perhapswen morc importantly, your exampleof leadenhip - and Asian management - will trspire young managers.And tiese managerswill maketheir own contributioru tootheiorganizations, enharcing therate at which our capacity to generatewealth I and posperity - grows.
.
risr ce rens
Horc Ge_.e,a' sh,nE.Dnedo, Hongrtu !. MsF.E@,h 14lf farmonr nous r(6n! ManaeementAssocralro..
rer:rsrzooiie ii"c;i;;t;E;;;. c;;ui ;io.exi,ne.
and Admissions coordinato., hdL. Mrs.lessieLazfado. Asso.iation AlumniRelat ons,AIMAlumnr {hdra) iiii.e zzr'reIo fi;ll;#:';'i ;fr";;;i'di 8,;;;i 4tioort. rno'" r"r, tsriit ffi;6;;;;fi;;!j: 49+3347/49+3344 - lndonola.Ms,chnstinsF.Fe(eros,AIMRepresentarive dJt'iojii"loGr. s,,t" zsa, if[ii-:ji.iii,iie-"li, as r-,r"nr"nirjr siiai^a. t;kana 10220.hdonesia, Iet: 16221)570-2305/570-4444Ei 254 l(ot... Dt.Don*h' Krmoean co regeof Bushess iriiir""i,"t'o",_x-* u."e"rty. .t. i.am Dons. seoul.southhorea,lel: lo2)942541 sLngbur..Ku,
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:jL.Jj:1,:E:T:,:ei#i"j"1Tr"itr'ff33#* p.*lil|[ Mr.s. A. Shah,Managemem of Association MoJrvTamizuddi' P'rrqtdnP'orr\o 1a rarazarAtea (e221) rer: KhanJQuereRoad)r<.ehi-2 Pakist*' AIMAlumniol Enc Preedent' slntryr' Mr' GanCheong auirding sr"eaitre 54 MaudeRoad r0]o3 Townshend s,naaio.eoa2o lel: 165)291n265/1123 24 Lai,p,ofessorandSeret.ry t{r.n. Or.Shyh-Bao 13th/F' Assooarror' Geaeralchireie ManaS€ment B. 4 Roosewhload.Secno^1. ra,pe R o c Bu,ro,ng T€l:(02139G52o7
KhunTeerachaiChemnssii' AIM ttdlra. Ofiice Ihailand, 2/F Qlalitv Reoresentative Buirdinr.262.264 LardDrao132, BanSlapi'Bangkok Tel: (062)377 7080/4 Tharlan-d,
OF MANAGEMENT ASIAN INSTITUTE Eugenio[,6P€zFoundation Please send me more information on (please check):
n MBiil Position Company Address Telephone
n [4N4
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'
@ Sonny Coloma
Tapping innerresources...
Business asArtForm
"The startingpointfor creativityis selfdiscoveryandselfknowledge."
"The highest art form is ieally whichar€: Karl Pribam'sstudy on business. It is an extemely qea- the holographic bEin; theoretical tive form... In business,the tools physicist David Bohm's (Albert with which you re working are Einstein's prot6g6) study on d)'namic capital and people and holomovement which, the aumarkets and ideas. (Thesetools) tho6 claim, validates their Derall have lives of their own. So to c e p t i o n t h a t t h e r e i s - " a takethosethingsand to work with convergence of the in4od-wethem and rcorsanizethem in new tmst Gtifications for individual and different ways tums out to be surrendering to internal cleativa verv creativeproces." ity;' and Belfran physicatchemist Cieativity nieanstapping into a d 19n Nobel laureate Ilya a Derson'sinner r€sourceswhich Prigogine's theory of dissipative are,theauthorssay,enormow and structues foroDen svstemswhich -people's unJathomable: "the kev to Der- suggests that creative sonal oeativity in busiries is in responses are triggered by eliminatine the conflict between disequilibrium in energy flows. falsepersonality and Essence." I f at 6rst you don't zucreed,zurI l.rder. Destoy iudgment qrI atecuriogity.Payattention.Ask I dumb quetions. Doonlvwhafs easy,effortiessandmiryabie. Don't think aboutit. Ask yowself if ifs a yesor a no. Beordinarv Beinthe ;odd but not of it. Th€searcnot Dr€sqiDtionsfiom a modern book 6n tov6,caurtship and marriage.Theseare clnpten hc/'nakJr,k- CrutiviU in Businas --+hatdocuentstheStanfordUniveEitycor[sebearingthesametide. And by theway,thecoulseis taught to stud€nbin themasterin business administrationMBA) pmg-am. The ideasare culled not exclusively from mystics or psychics but from someof America's businessleaden and gurus who have appeareda5 resourcespeakersin the Stanfordcourse,amont them: Tom Peters(co-authorof In Search ol Ercellence),Steve Jobs (cofomder of Apple Computer),Rof. Harcld J.Leavitt,Ph.ilipH. Knight (fotutderandCEOofNike Inc.).and Nolan Bushnel, videogametmovator and founderof Atari. \ny'hyemphasize qeativitv in business? Simply becausebusinessis art, sayMr.RayandMs.Myers,quoting Wayne Van Dyck, founder of Wondfarms,Ltd:
THEASIANMAMGER NOVEMBER/DECEMBER 1992
Vylngtu Superlodty The starting point is selfdiscovery and self-knowledge, but this is a painstakingprocessthat is often blocked by fear, negative peronal iudgment and the chatterine of bne's rnind. The false personality - also called ego or external self - invariably comes into conflict with the irmer selt alsoknow asthe hidden mind, the divine spark or simply, Ess€nce. If at fi6t vou don't succeed, surrender This goes against the grain of traditional business thinling which underccoresthe values of persistence,pelseverance and stick-tcit-iveness. On closer analysis,what the authors rcallv meanis not Dassivesubrnission; but that oni must 'timplv work with absorption,surrendliing to the task at hand, not to someone else or to striving." Again here,striving is viewed in a differcnt context from the usual definition (to make efforts, to endeavorwith eamestness)and is taken to mean constant contention and r'ying for superiority In explaining this unorthodox apprcactL the authors cite findings ftom scientificres€archon the brcin which r€vealthe vast potential of the creative mind, amonq
Unseen Culp'lt Ar inner Voice of Judgment (VOD is the useen culprit that reshains us ftom attaining selfconfidencewhich is soessentialto creativity VOJ is a composite of four levels of negativeFdtment: self-iudgment,judging ftom othen, collectiveiudgment and judgment tudging the iudgment. VOJ is a voicefrom the past(a parcnt,a teacher,a role model) or a character in theprcsent(aspouse,abo6s), or a societal norm (e.g., fashion hemlines) which collectively impinge upon one's consciousness and gets expr€ssedor translated into personal beliefu,values and attitudes. Quoting PabloPicasso,the authors statethat "Every act of qeation is filst an act of destruction." Destroy iudgment; seate curiosity. One must recapturea child's love of wonder so that one can start being creativewithout being detened by VOJ. The next pr€scription for cIeativityis: payattention. Thismeans sensitizing oneself to the envircnemnt, beinS on the lookout and listening well for cuesthat lead to opportunities. The buzzwords for this process are quite familiar: MBWA (managing by walking about,coutesy ofTom
Respond Readers Peters) and MFBU (managing from the bottom up by Rene McPherson). The next imPerative, asking dumb questions,is not asdumb as it seems. Recall the child who bared that the empercr did not really wear new clothes because he was in fact, naked. lf the child didn't ask the dumb question, "lsn't hereally wearing nothinS?" the farcewould have gone undetected. The ability to raise even seeminglvdumb questionsis far moreirijortant than knowing the right answers.In a highly fluid world where business virtually "thrives on chaos," the authors point out thatdumb queshonst€I spiraliult in a cirorla r or heti.r.ica ting upwards to higher levels of understanding and creativity: dumb quetions leadto meaningfirl answers,which in hrm lead io insights;meaningful action; rcsolution; new beginnings; more questiorF; tnore creativity; and (full circle)dumb questions. While Dun and Bradstreetare concemedwith TiiPle A or hiSher credit ratings, Ray and Myers shessthe importanceof the Triple E: doing only what's easy,effortlessand enPyable.The TriPleE is the antidote to the Triple D: anYthing that is difficult, distasteftdor depressing.They quote educator Waren Bennis: '"Whenwe love our work, then we don't have to be managedbY forceor fear.Wecanbuild systems that facilitatecreativiryratherthan be prcoccupied with checksand conhols on people who ale motivated to beator exploit thesystem. I belive that everyone wants to find both quality and love in work." The next PrescriPtionis: Don't think about it. This imPemtive draws heavily from the Zen concept as described by Shunryu "lf Suzuki: your nind is emPtY,it is always ready for anythin& it is
56
open to evert'thin8. ln the beginner's rnind, thereare many Possibilities; in the expert'smind, there are few." The last thr€eprescriptionsinvolve expedencing balance in onds life, imbibing a senseof creativity within the organization. L:rdeed,creativeand innovative drn*ng - as contrastedto analllrcal and logical thinking -has become(to borrow Mctor Hugo's words)somethingmoreformidable than all the armies in the world becauseit is (pardon the pun) an I ideawhce tirnehascome.
All Arcund Congatulatlom During my r€centtrip to SoutheastAsia, I had the oPPortunity to read vouiercellent publication. I was impressedwith the editorial conte'ntwhich addreisedtotal quatity in wo;ld classmanatement and in open market economies.Your magazineaddr€ssesrelevant issues and the articles wele well written. Richard S.Wellins, Ph D. SeniorVice President,Plograms and Marketing DeveloDmentDimensionslntemational, Inc. Pmnsylounnia,USA I am happy to know thatTheAsisn MarrserhEsnow employed the service ofi reputed desiSndirctor to imProve the magazine'scover and inside pages. The magazinehascertainly made progess, but I feelthat one ar€a which needssome amount of aftention is on enterPrisesbeing Pramoted by alumni; this is one way of promoting entr€PreneushiP. I think this needs a focus becauseas noted frcm the AIM Business Drectory, alumni have got skills h different areaswhich could be eainfuIv diss€minatedso that fellow alumni can benefit.
'
K. Srinivas MBM'74 Suunderafud,India
Concntulations on the new format of TIE,4JianMarcger. T\elayout is aiiactive and the materialsarc excellent Your sectionon book reviews and Quality Managementmake it worthwhile and assistsme very much. '
BernardoGodinez GeneralManger Hotel50nt Klver KwaI Thailand However, I'd like to Congratulations! The new look is Sieat "SuccessfulCompanies/ sugsest'thatyou start a new sectionentitled CfG.- You;redoing a greatFb. Allad N. Hashim FPM Sdn. Bhd. Ku4l4Lurnryr, Mnlawio "colorized" layout is very To sav the least, the magazine'snew impressive. Somehow it silently conveysthat the articles therein are credible and worth rcading
Crcotiaityitl Business Michael Ray and Rochelle Myers 222 pages. Bantam Doubleday Dell PublishingCorp.,New York,l989
Edilberto Gamboa MDP'73 Prcsident/GeneEl Manager Fi$t Philippine Industrial ColPoration Mnkati,Philipprna
1992 ]HE ASIANMANAGERNOVEMBER/DECEMBER
I
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"Airlinesmustcope with two moving targets:customers " andcompetitors.
Making an airline world dass requiresdrastic and even painlul shifs in paradigms: a) From flying planes to serving passengeF; b) From hansporting people to serving people; c) From treatint pas6enget6 2. Custofl€I Sorvlca Delh/ery like baggageto heating baggage a) Staff attitude; b) Tmeliness - e.9., depar- like passengeo d) From in-flight service to turc/arrival times, ticket proc€sscompletesereice(pleflighttopost ing baggageretrieval c) Trmely and accurate pas- flight); and, e) From the transporiation sengerinformation systems. businessto the servic€b!,rsiness. Airlines should go beyond 3, CGtorprcdeflted coDo satisfying pass€ngers- by do rate Culture a) Corporate-wide commit- lighting, better yet, surprising passengers with exceptional, n to survive and grow ment to quality and salety order I prompt, unforgeftable service. b) CustomeFfocusedortaniI airtines,rcgadless of placeof The ultimate benchma* that inI operatio4 have to be both in- zation and networks I ternationallv comDetitiveand c) Cooperation with stake- dicates if an airline has reached must continuously improve their holde6, suppliers,and otherbusi- world classstatusis when its Dassengersceaseacting like custbmnessDarlners. comDetitivene$s. Passengersexpect the same To achieveexcellencein these ersand begin sewing the airline as its salespeEons- spreading the hish standardsof serviceftom all areas,airline managementmust: airlines-standards which are set a) constantly and continu- good word around and convincing their ftiends to fly the airline. by the world<lass airlines they ously imprcve all aspectsof op have flown. Thoseairlines which erations to improve customer Indeed, the best advertisementis do not strive to rcach these new sen ice; analyze prcsent systems not a satisfiedostomer, but a de I world standards of customer and determine their effectiveness lightedone. serviceand efficiencvrun the risk in delivering competitive cusof losins - sooneroi later -both tomer service qualiry enhance their local and intemational mar- systemsaccordingly,and get cusket shares to more competent tomer feedback on the changes, comDetitors. and repeatthe cycle of analysis/ Thus, airlhes haveto continu- improvement/ feedbackcontinuously work to unde$tand and ously (fraizezprocess); cope with two moving targets: b) institute a corporate-wide changingexpectationsof custom- effort to initiate changeand susersard ever-imprcving s€rviceof tain improvements. comDetitoN. Becauseboth cusc) stay dose to the customer, tomers and comDehtors deter- understanding and anticipating mine the criteria fbr service in a his needs; use the total quality dvnamic fashion,airlines have to apprQachand instihrte effective aiapt their organizations and feedback information systems; shategies to these new realities and, and be more Droactive in their d) leam what the best competitoN or evm non-competing shategicoutlook. In general,therearethrceareas airlines are doing and emulate w h e r e e x c e l l e n c e m u s t b e them if not surpassthem in qualachieved to stay competitive, aE ity of overall service and effiDer€eived bv customels. ciency; this process is called ' L Cusiomer Servlcs Quallty competitive benchnarking.
1992 IHE ASIANMAMGER NOVEMBER/DECEMBER
50
A GREATDEAI, FOR BUSINESS TRAVELLERS
Asia Marketing totheWorld Should we sell Asia as a trading bloc or as a region comprised of different individual countries? ! As a trading bloc ! As a region of individual countries Do you believe conditions now exist which make the fonnation of a regional bloc possible or feasible? n Yes lNo Which of the following do you feel are most important in making Asia attractive to foreign investors? a) comparatively cheaplabor ! b) infrastructure D c) growing consumer market and rising middle class ! d) incentives provided by govemment e) presenceof abundant raw materials f) low costof doing business(i.e.,rents,taxes,etc.) g) stablelabor-management relafions h) political stability ! i) others, pleasespecify , -
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4. As we continue to athact foreign investors, should we also regulate them to give local industries more chanceto compete? lNo ! Yes 5) Which tlrree countries are currently the most attractive to foreign investors? (Pleaserunk in ordet of preference) a) China b) Indonesia c) Malaysia d) Philippines e) Singapore 0 Thailand g) Vietnam Which three countries do you feel will attract the most investrnents five years frorn now? (Pleaserank) a) China b) Indonesia c) Malaysia d) Philippines e) Singapore 0 Thailand g) Vietnam
gT nN (632) Far( lh llhuu! Indonesia: Fax G221)57023M/798114O. Thailand: Fax /J,62\37408(fr/374 0867 Malaysiat Fax(@3\2441696. United States: Fax(41,5)956 4877
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choi( es oI l]uropean. Asran weslcrn an(l Chrrese (rrisiDe Relaxing l)ars aDd lolrnges ulrh live enlenainmenl Forly I$o private Kara()ke r(x)n)s To ke,cp fir - a heallh clLrb sauna and s\\'rmmrng pod l-_()r a.(essibilit\ complirnenlary shultlc blrs a flerr ( )f Volvo asla le cars. airporr bus and lbc neart)\' MTR link you Io cvcr)'u here arxi aDywnere lhere s lhe And for shopl)ing Yirohan Deparrmenr Srr)re and our shol)I)ng arcaoe sla,v ar For a really gredl daal Kowlclon l,anrla tl(tel, Ilong Kong s largestl
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nBacolod City,like the Philippines,is supremely confidentof having weathercdthe economic andpoliticalcrises, eagerlysavoringthe successfirecoveryand busyplanningfor the future."
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FrcmtheairDortweweretaken to one of the tluee brand new ho teb the I- Fisher Hotel. The next day we wmt to the seminar site, the University of St. la Salle,one ofthe co€ponsols of the lectue series which also induded the Meho BacolodChamber of Comnerce and Industry, the Financial Executiveslnstitute of Negros Occidental and Coca Cola Bottlers Phils., Inc. Dean Belrna Pestano gave us a quick tour of the ten hectarc campus befor€the moming lectue on the Overseas Chinese Management System. During the lurch break, we ugust 25, 192 we tmv- met RobertoAbello, a locat busielld loBacolodCitywhich nessmar, who rclated to us his we last visited nine yeals presentbusinessof lending to the ago. Then, we were con- market vendors of Bacolod,Chiducting a serninar for Jardine nesestyle; i.e.,no colateraland no Davies,aimed at coping with the documents. This u/as quite a onsl,aushtof an economic rcces- switch,fu)m ruming theSouthem sion.Now we cameasguestof the DeveloDmentBank. After ltmch, AIM dumni. In this, our Iatest Mr. Abillo gaveus a quick tour of visit we find BacolodCity, like the the city showing that the city has Philippines, suprcmely conJident been rcvived - traffic iams have ofhaving weatheredtheeconomic forced the city recendy to install and political crises, eagerly traffic lights. Mv aftemoon toDic covered savoring the successfulrecovery publii policy wherel recounted and busy planning for the futue. My AIM hosts werc GeoBe my experienceswith the passage Zulueta, MM '80) vice pr€sident of ('alakalan20, my proposed and gmeral manager for Negros leapftog strategyof development of Gaisano,Eric Montinola, mar- for the Philippines, the untapped ket planning manager for Coca market for computer progam'86), and Eddie mers and mv present work with Cola (MBM Pestano(BMP79).Inspted bythe Mayor Jeioniai Biruy of Malati. I succes of the Executive Lecture washappy to beinformed that the Series conducted at AIM rmder f'alakalar 20 law is being implethe sponsorshipof theAIM MBM mented in BacolodCiry Mv audience was ouite interClass192 they hoped to replicate that succ€ssthrough their own estedin the potential ofcomputer Executive Lecture Series. I was programrning. After all Negros, the prcducer ofsugar,prawnsand slatedas the ftst sDeaker. As an aside,M;. sally Flor€s- cut flowe$ for export,is oneofthe Aldaba, executive director for few provinces in the PhiliPPrnes, Alumni Relations,obEerv€dthat wherc busin€ssmenarc boti exAIM Alumni Associationstfuive port consciousand exPort profiwhen they undertake such activi- cient. My audience rightly tieorather than rcmain merely so- pointed out that if comPuter Programmingwork for Japancanbe cial dubs.
done in Manila, it can also be done in Bacolod City, and far more cheaply at that. The audience, as citizens of BacolodCitv, wer€ alsointer€sted in the implications of the new local Aut6nomy code which de volved substantialauthority and r€sponsibility to the city govemment ofBacolod.Theyquestioned me closelv on mv work with Mayor Binay h thi setting up of the Makati Researchand DeveloDmentCenter and of the Makati ftvelopment Corporati,on. After the seminar, my hoots took me and Sally to the Houseof Negros. The Hous€ of Nqjroo is an irnovative rnarketing conc€Pt. It brings together under one roof the prcducts of its exporter members, medium-sLed businesses which could not a.fford such an exhibit center on their own. Ir additio4 the HouseofNegtosacts as meeting placebetweenbuyen and producers and as a message and comrnunications centet As comDensation, the House of Negrcs gets a 15% override on poducts sold to the public. Our last evening in Bacolod besan with a farewell dinner ho;ted by the Nego6 chapter and endedraritha tor-riof the cisino. I
19S2THEASIANMAMGER NOVEMEER/DECEMBER
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"Singapore'sremarkable recordofprogressis the pedectrebuttal for whatevercriticism trickles in llom the outside."
64
iny Singaporc- a[ 633 squarekilq€hes of itis livurg proof of the virhres of an open trading sytun Just A yans aItg a weeping ke Kuan Yew announcedSrngapore's expulsion fiorn the Mal,aysianUniot ttp island rcpublic has long since beormetheeruy of its Southest Asian neighbors, With its FirEt World inhastructue, ar "airtrroDolis" the size of several dozdn football fields,and a per capitaincome comparableto that of prosperous Westem European countries, Singaporestandsa head above other regional economies. It's been said that the averageSingaporeaneni)ys a lifestyle appr0ximating that of theaf{luent Swissand oneonly has to look arourd Orchard Road - Singapore's posh shopping district and home to horrendouslvexpensivedothing and leathergirodsshopsto seethat this is true. Singaporein the yean directly after its explulsion from the Federation was vastly differ€nt to what it is now. To rcsidentswho left then only to Etum in the late '8Os,the city is virtualy uruecQgnizable. KanporSbungalowsand old colonial housesin the mockTudor black and whiE stylehave beenrcplacedby higltsdsehousing Gtatesard ofice buildings whce only dominant duracteristic is a cold,impesonal sameness. Eventoday I donJtparticularly carefor Singapore'sfirnncial distsict and I imagine much of its staidrcssiswhySingaporealways rnanages to land on the top of every traveller's most-boringDlace-tevisit 1ist, ADart ftom the irea closeto thewateifront, which is lovelv and verdant, downtown Singap6rcis a shivery expanseof concr€te and granite, much like anv modem urban center, but
somehowbereftof the excitement of, say,Hong Kong's Cmhal dishict. 9ingaporcis greatiorwalkin& the entire city is dean, green and pedestrian-friendlv. No manic ieepneysor noisy liitle tuktul<sthat thrcaten to run you down every hundred yards or so. Although, perhapElesssothan Hong Kong Singaporcis a city of contrasts. Arnid all the high-rise and high-tech gadgetry are litde rcminders of why Singaporehas done remarkably well. Young people no matter how prcspercus or independent, still address anyone rcmotely older than them as"Unde" or "Aury' and still remove their shoesuDon entering their homes. At the bottom of our rcad sometimein August, the air would be RUd with the headysmell of slowly buming irs sticksandI would comeacloss little altals overflowing with riF ening fruit lying on the wayside forsomehungryghostorwandeP ing spidt to consume. Sudr vencation of anGtors and rEspectbr eldels are among what L€eKuanYewlikesto calltl€ "irrtangibled'so ess€ntialb SuEapole's curlellt prosperity. This slured smseof traditbn and commiknmt to ommon vahres pro. vides a c€rtain coheErKe to the rclativelyyoung sciety whid! noi too long ago,was bekagu€redand "forced to live in a hostile neighborhood (Robert Shaplen, TmeOut S lland)." Foreigners make sport of knocking Singapor€.When I filst arrived, fd spendlazy aftemoons with other expats thinking of words that best describedShgapole. Antiseptic was one, maddeningly-oderly (if you'[ excuse the syntax) was another. It's hue, Singaporein a way is srrangety,alrnGtinfuriatingly,antis4ic In thesubway(whidl by the you seesigrtskft way is er<cell€nt)
ploring thepasser-byto disposeof his Eash prcperly or to pleasercfrain frcn bringing durian onto the trains. Neady ev€ryweek my botherand I would be onthe lookoutforne-t^r'sayingsoradmonifrons. Someofthesloganswoeinoedibly w€nlt one, hits "Abit of c!:r.utesy," "goesa lcng way." Yet Singapore's remarkable rccord of progress is the perfu rebuttal for whatever criticism trickles in ftom the outside. ke Kuan Yew'sincreasinglyauthoritarian bland of govenunent won him as many critics as admir€r:s before he stepped down in 190. Even my young Singaporean friends grouse about l€e's own peculiar brand of socialengineering. They fail to appr€ciate the circunsianc€sofSingapor€'sbil th and only rcmemberits recmt success€s, My pamts, for instance, re membertheE being sort of a siqje rnmtality fotlowing the break up of thefederation Certainlvthedifficultiesfacingthe ffirallGiand rcpublic with few resourcesof its bwn were immense. Its much larger neighbor iust minutes acroesthe causeway h/as a gleat source of concqn as was Singaporc's own potmtially fractiolrs population of Chinese, Malays, Tamilsand Flindw. l€e's rcaction to theseproblerruwasdEracteristiHis cathl,ee:Spiritedandbellicoee. nuin conci:rn was always Sing& pore'ssurvival as a selfgoverning sEte. h my las summerthere,Singa Doetumed 25, I runernberall the hokeylittlesongs('StandUpSingaporc," "I/Veare Singapote")that wereplayedoverand overagainin thesuDernarkeb.Bv thetime I was ace riretuminebo i\aanna,Ihew all the wods {-hea* 0 don't ihink I was b'rainw"ashedard when td F[.rshmy shopprngcart down the ftozcn iood aisle nobody sangthe lyrics lor,rderthan me. I
1992 lHE ASIANMANAGERNOVEMBEFI/DECEMBER
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