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Interview: Chinese Family Businesses in Asia Need Revamp to Compete in Global Economy
Globalization and e-commerce will force Chinese family businesses (CFBs) in Asia to restructure their traditional business models in order to survive in the new economy, Anderson Consulting and the Economist Intelligence Unit (EIU) said in a report published Tuesday in Hong Kong.
The report, entitled "Beyond the Bamboo Network," says the traditional strength of CFBs -- the role of the middleman and the reliance on "who you know" -- will matter less as these organizations will now be tested against their ability to build markets and acquire new customers.
As the first true regional assessment of the outlook of this significant segment of Asia's economy, the report comes on the eve of China's potential entry to the WTO and examines a vital sector of business.
CFBs control an extremely large percentage of Asia's economic wealth in proportion to their share of the region's overall population. In Indonesia, for example, the Chinese, who constitute only 3-4 percent of the population, control 70 percent of the country's economy.
"Many of the CFBs operating in this region represent some of the most aggressive and agile businesses that have managed to thrive over the last decade," said Joseph Lobbato, a partner with Anderson Consulting's Organization and Human Performance practice in Asia.
"However, the Asian financial crisis has rocked the foundation on which these organizations were built and many are soon realizing that familiar marketplaces are becoming increasingly complex.
"Through our research, we have come across examples of CFBs who are already embarking on this transformation. These organizations are aware that they are going to have to embrace change and new thinking if they are to survive for the next five years," he noted.
"Overall, CFBs in Asia will need to discard rigid, traditional ways and learn to live with the idea of developing more flexible and agile organizations in order to cope with the challenges brought about by the new economy," Lobbato added.
With e-commerce rapidly emerging as a potent driving force in the global business landscape, CFBs will be revolutionized to a degree never before.
Ken Davis, chief economist and bureau chief of EIU Asia, said CFBs risk losing business to competitors who will be better able to attract staff and financing and who, therefore, will be better attuned to the needs of the market.
"Nonetheless, during the research phase of this study, we were encouraged to meet leaders of several CFBs throughout the region that are identifying weaknesses within their own organizations and making serious efforts to bring about change," he added.
The report refers to numerous prominent CFBs, their senior executives and management teams including Li Ka-shing's Cheung Kong/ Hutchison/ Orange empire and Cheng Yu-tung's New World Group.
The report comments that one has to assimilate so much more knowledge nowadays to conduct business, either IT or general market knowledge.
"Overall, the outlook is bright for CFBs across Asia. The first step is to recognize areas that will need to be transformed," concluded Lobbato.
"Even with the best business models in place, an organization without the right corporate culture and leadership talent will not be able to deal with the competitive pressures. Once this is accomplished, CFBs can move full speed ahead with aggressive change programs aimed at increasing their competitive advantage," he noted.
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