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#PLDTfhe lelqommunkations ComPnY

Rrblhh€rFelipe B. Alfonso

Edltor{l}ChletMichael A. Hamlin

M.n4hg Edhollbana C. Gutierrez

ArCltsnt Managlng Edho.Kin Gatbonton

Dcslglt DltrctotAlexander Bowie

tu3oclrte EdltoESalome Rores"AldabaFederico S. EsguenaAleta A. Tabatba

Coitdbutlng EdltorsBangladesh: Milon Bikash Paut, MM'88.

Hong Kong: Stephen Tang Wing On,lvlBt4 '76. India: Juzar Khorakiwala,MBM '75. Indonesia: LeonardoTanubrata, MBM '78; Christina F.Ferreros, AIVIMP'82. Korea: Hong SooLee, MM '79. Malaysia: Tan Sri Dat6 lr.Talha Hj. l\4ohd. Hashim, MM '76.Pakistan: lshtiaq Ahmad Qureshi, Bt\,tp'77. Phi l ippines: Jesl i Lapus, MBtVt'73.Singapore: Gan Cheong Eng, t\rBM '82.Taiwan: Hsieh Lai Fa, TMP '82.Thailand: Somnuk Jetjiravat, BMp '81,

Technology: Asian OElanLationsBy Gabino A. lvendozaK.T. Li Protussor of Business Mana{ement

10 The New Boundarles of the'Bomdaryless Company'8y Lany Hirschhorn andThomas GilmoreWhanon Center for Apptied Research

25 Frorn Swampto Summit: IheNew Asean8y Andre SaumierChairman, SaumierFreres Conseil

AFTA: A WinWn Game

n

By Mari KondoProfessorAsian Institute oflVanagement

34 AttractlngForcign Investunent8y Francisco L. Roman, Jr.oon Andres So anoDistinguished Professor of EusinessManagement

The New Management

Edltod.l BoerdGabino A. MendozaHoracio M. Bonomeo, Jr.Sonny B. Coloma 4l

45

47

459

&soclate Publlrbo. & Advo,tbltrgDlGctor - lnt.m.tlonrllevor A. Roberts

Ae€oclat! Publleher & Adve bhgDlrcctor - Phlllppln€sDelia C. Gutienez

Assoclate Puubhgr & C{rc||la{o||DlFcto.Monette lturraldeLim

Olrrcto. ior ODe|q'tloo3Pinky l. GallegosCovr photo: @ Han! Wondr€r Th€ tmags Bank lHl()htofnrlion.l Aepr€sontatiE Ofi ic€.ASIA-PACIFIC: Hong Kong: Pameta Choy. paciticAsia 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 East Co6t R@d, Tay Buan Guan ShoDeinoC€ntre. S ngaporo 1542. T€t.3484495. Fd r6al44O8760. Indi. Sub-Condndt Bh€€m Timitsina. MediaSo'nh Asia (P) Lid., Apadm€nr 14, r'lbhi-Anit Awas.Kanlipaih-Jamal, Kathmandu, Nepat. T€t. 221 576.T€r€x 260,6 M€DFEP NP, Fa (977-1 ) 227 336. Ko..a:Y.K. Cnun, FiBt Media S€dic€s Co|pohrion. CpOBox 7919, S€oul, Xor@. Iel. 738 3591/3592, TetexFMS@RP K ?9137, Fax (02) 738 7970. r€||v n:J6nnif6.Wu, JR International Ltd_, 5/F,2, No. 520, MinChuan Ea{ Foad, Taipei, Taiwan, B.O.C. Tet. 7172463,71996os, 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 .

Grcwing Mad(et ShateThrough ValueAdded PrcdubtsBy Jose l\4. FaustinoGoodyear Tife and Rubber Professor ofBusiness [4anagement

Makint ChangB WorkBy Teofilo R. Asuncion. J..Principal, Andersen Consulting

Ihalland in the Year 2020By lbafia C. cutiefiezlVanaging Editor

From the EditorA Beter Way

49 Reslllent lhailald:Re$ng on hsBe6t-lvlanagedConpaniesBy Kn GatbontonAssistant Managing Editor

5:l lhailand's CornpetitiveAdvantage: E0ric, Educatlon,and OpportunltyBy His tucellency Privy Counci or cenerat premTinsulanonda, Fomer Prime tvinister. Thailand

62 In Between Classes

5556

Book ReviewFeedback

60 As A Matter of Fax64 Travel Notes

coort'ght r 992 ov !h€ as an Ma..ge' Ar nghrs resrued neoo,oo" " ai*-* r .r.r. o, pai " r,rr. r.r ranguass poh,or.d. Th€ as,a.Ma'as€' \ pubrished b' mo.rh,v bv lhe asan rrsri ra nr ManasF€.r Fo'r;' ar and dwn,s,ns br'ce ;;e; rnsnr,re ot vanEgF@r. EJs&o I opozFou'dd on Jo*Dh n McM ct ns campus, r 23 Pas de Forai. r,,t.t .ri. uer.J v.'ir., ir'irpizu i;i, (63ri s;4;r r , F*, (632) a1 7e240. photosraphseurced by n€ ArM L'D,ary pnnr.d by r,m6 p d6 A€ Lrd , sinsapo..

-inJa.r"" i.l-i"i{,iiirrrn €) 24s,€,e1 KoN pp(s) r3a2

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H

illchaol A, Hfiilh

Gaby's continuing search...

mila-Cl€byMfj�tdlozaconi:ibuies the lead ar-tide for our cover focuson tends in marage-

ment eclurology, glo,bal organiza-tions, tsadeandinvestnst Authorof Morugenvnt : TIE Asian W,Gabyhas been studying Asian manage-ment styles-and searldry for theAsianManaga -ftxweraquarbc€nnny

As dean - and later dean ardpresident concurrendv - of theesia" Itutlt rte of Irianagemmtfrom i|5 inception until l ,C,aWhashadanexcellmtvantagepointftom which to conduct his seaEh.In the early '80s, he wrote his stu-dents, "And who is this AsianManager that you must discoverand develop, you may well aslcAnd again, I submit to you thatthis Asian Manaser that we seek-is you. In a wiy, you might saythat you are the searchers and youarc what we s€ek."

By February 1989, Gaby's con-cept of the Asian Manager hadbeen distilled to manifest specfic,critical characteristics: "First, thepofessional manager is a rnanwho uses all of his talents to be-come the best manager that he canbe: one who is continua-ly leam-ing; endlessly growing.

"Second, he is a man who

makes sure that all those aroundhim-his colleagues, his subordi-nates - ar€ given the drance tobecome the best that they can be.ln so doin& he ensur€s that hisolganization is continuaily leam-ing endlessly growing.

'Third, he is a man vvtn dreamsgeat drcanq lre Ealizes that onlyby mking inspirinS plans can hed|annel the oeativity of his meruignite their imagination and rm-leashthepowqof theirmthusiasrn

"And 6aally, he is a responsi-ble rnar; one who thinks gready ofhis calling, who lives by a codethat eschews Dettv self-inter€st.

Gabv savi tr,i tras ouserveathese cham&eristics in.the SreatAsian Managen he has observedover his car€er. Among thes€manageE is Kim woo Choong,founder of Daewoo Corporation,So involved.was he in his massiveorganization that Kim, accordingto Gaby, "often slept at the fac-tory'' when Daewoo took over afailed manufacturing firm, takingpersonal responsibility for turn-ing the acquisition arcurd.

A second rnodel is AkioMorita, who Gabv notes has b€enseen "physically' helping to un-load 30,000 radio seb ftom severaltrucks and storing them ina warc-house ftom mid-moming up tothe late hours of the night."

"Grc of the exemplars in Asiaof the professionai manager,"Gaby has written, "is Tur Ismailbin Mohamed AIi... what makeshim truly stand out... is his geatprcbity, his integrity, his unsu[iedreputation as an honest public of-ficial... (he is) a source of inspim-tior! a model for emulation."

Another exemDlarv AsianManager is Washfigto; Sycip,chairman of one of Asia's origi-nal multinationals, The SGVGroup. Sycip "frequently causesconsternation among his juniorpartneF with his encyclopedicknowledge of whaf s going on in

the company," Gaby says. "^rou

get the feeling that he knowsevery client personally, readsevery report, and remembe$every detail,"' a partner is rs.ported to have rcmarked.

But what is univenal in allthe€e manageE is not so muchthat they arc inspirational person-alitie - whidr they are - butthat they lead theil organizationsby tryh8 to be what they hopeothers will becomq an examDle.

SyCip - rccently named the192 Ramon Magsaysay awardeein intemational undeFtanding -has long bem an example of thebenefits of do6er cooFration anda boundaryles Asia. His SGVGroup introduced professionalaccounting and managementconsulting services to the region.kiRM nM thag 'tsesides thePhilippire, where the goup has15@ employees, SGV affliae artamong the targest acmunting 6nruinlndoneia(2ffi statr),Taiwan(650)andThailand (50). Theirdient listreads like the who's who ofbusin€ssin tho6e coutries."

On the recent trend toward regional trade liberalization and in-creased intra-A6€an cooperatio&Sycip asks "lsn't this rcalty rcturting to the earlier and more sersibleyears before passports werc in-vented? There w"as a time whenanyone from lvlanila aould go toChina with a boadoad of goods.

"He would then come backwith producls of China withoutdocumentation and without hav-ing to pass thJough customs andimmigation authorities. All thiswas perfectly legal and proper.While this trade may still be car-riedoutnowitissometinescalled'smuggling."'

Gaby's continuing search forthe Asian marager - and ouraccompanying artides - suggestthat Asia as well as its enterpris€smay soon be borderless andbourdaryless as well. I

Seekins the AsianManagEr

"The Asian Manager isa man who makes surethat all those aroundhim - his colleagues,his subordinates - aregiven the chance tobecome the best theycan be."

(-I

.IHE ASIAN MANAGER NOVEMBER/DECEMBER 1992

Asian aTlonsThe NewManaement Techn

o

I

F9g

By Gablm A. MondouaK.T. Li Professor of Business Management

More than o thausnd yfirs ago, a Ainese ?@tnaume:d tlu inmitability ol dufl4e with thev im-rrcrtal Trnrds:

"Thne was no holding the yestedays.Drato a knife and cat the uratcr, yettlt uatetflmrs."

T wenty years ago, the Japanese funda-

I menta y transformed the principles and

I the practice of management. Sinc€ I doI not have the eenius of Li Tai-Po to com-

municate the sicnificance of this inevitablechanee in a few, well chosen, pithy wordq I shallhave"to do so in several tiund'red everydaywords.

Whm. in the mid-70s, we fi$t discovercdthe radically new way theJaPanese werc man-aeins their factories, we focused on what to us;ere- the 'oddities" in their system - themorninq ceremony, the ringislro, the work-be-sotted ilaryman," tife-long employment andthe slowly rising marugerial escalator that Prc-moted classmat€s all at the same tirne. Japaneseacademics were quick topoint out how all the6ethings werc rcod in their culh.ue. We agr€edwith-them because their exolanations fitted ourfirst impr€ssions so nicety. Everything did lookso Japanes€.

ilodomlray Gonghis ]th gThe first rcaction to the effecs of Japanese

management technology was const€rnation.They were invading and caphrring exPort ma!-kets Like modemday Tamerlanes and GenghisKhans. With their low Priced, hiShnualitygoodg they were sweeping everything in sightand taking noprisoner. Whatwas morcalarm-ins to some was the "lock" thejapanese s€emedto"harre on mattagement technoiogy. Only theycou.td use it. The wide-spread view was that itwoutd work only in Japan and not anywhereelse because it was culture-bot[d. This view,.howwer, wasquicklydispelled inthemid:70s.

Sony set up their own plant in San DegoCalifomia. Wthin months, the Sony Plant wa5

producing world-classproducts using the Japa-nese management sys-tem. Sanyo took over themoribund Warwick TVplant in Fonest Ciry Ar-kansas . Wi th in twomonths, Sanyo - usingthe same Warwick work-en and the same equipment - had slashed thedefu rate ftom 30% to5 E .

Matsushita boughtthe Motorcla TV plant inFranklin Park, Illinois.Over a longer period,they achieved even mored r a m a t i c r e s u l t s .Motorola had had a de-fect rate of 150 to 180 per100 TV sets; Matsushitabrought this down toonly 3or4 per 100TV sets.What i s more , theAmerican workers tookto the Japanese systementhusiastically. Theyparticularly liked thesystem's participativeways and its total dedica-tion to quality.

As more and morelaDanese firms set up factories in the United-stites

using ;apaneseinanagment technolqgy,then high{uality, lowtost oPerations veryquickly surpassed that of their Americar com-petitors. In selfdefence, a numberofUS compa-i'tio d*id"d t , w *rt the lapanese methods.nies decided tos decided to Fy out the Japanese methods.

In 1978, in an effort to leam how theJaPanese

mother of all sunenders."Frcm the very beginning Nummi (the name

of the ioint ventur);chieved the highest qual-iw pnrduction of anv GM plant Trcops ofGM,ri"il"n"rs *"t rotit"a diol,sh the plant sothat tliev could team ftomtovoia. Wtreir in tS88GM pui up a $1 billion plant to produce theSah.dn, they shove to bui.ld into ii e*,erythingthev had linrned ftom the JaPanese. A GMexecutive remarked, "I{ummi has taught usthat peopleale the most important commodirySatuh witl trave Uorir the feopte side and themanuJacturing techniques of Nummi.'

fn fS78. FLttev-Oi"idson, the makers ofthose monster bikis, found themselves beingdriven out of business by their JaPanese com-

petiJos. Theysued the Japanese for durnping...and lost. During the court proceedings, how-ever, they fouldthat their competitors opemr-rng ca6ts were 30Vo lower tltan theirs. Thevattributed this difference to quality cir€les, thause of statistical proc€ss conbbls to ens,.,te con-sistently high quaity, ana just-in-time tech-niques. They qu.ickly adopted these methods in$eir _operations. By the mid-'80s, Harley-Davidson was again a Fofitable business.

Richard Sclronberger, who vrrcts.� laryneseManulacturing Techniques and World ClassManufactuing, cites Hewleft-Packard (com-puters) and Oma* (saws and drills) most ad-vanced in the use of both iust-in-time andqua.lity improvement. He aedits their success

were producing zuch hiSh quality cars at suchlow costs, Ceneral Motors which once, asSha-kespeare would have put it, "besde theworld like a Colossus," humblv entercd inbo abint ventue with Toyota to produce cars in theUnited State6. They cnmpletely tumed overtlreir plant in Ftemont, Califomia, to the JaPa-nese io marnge in their own way. It was, asSaddam Hussein would have put it '"The

THE ASIAN I qMGER NOVEMBER/DECEMBER 1992

_u6r-u'sy rEdrry dIE Dr€lruung ro De sreepeo ln scnoor. As Peter L)mcker put it,,?ormorethan

:lre Ja.panese yay..+nd, wonder of wonders, la century, two basic approaches tothere is not a single Japanese lnsight. manulactuiing have plwailed, especialy in_. ]l_" -*-rylT* rf the last fifteen yeanlras ] the United States. Che is the erigi"eeiinggrvm us cause to rcview our early pre.judge- | approach pioneered by Frederick"Winsloi

ho the fact that in these companies, everyone ments about the natue of Japanese manage_ftom. top nutnagement to the workeE is dedi- lmenttechnolqiyandourerplarutiorrsfortlieircated to "maishaling resour(es for continual I success. The re"litiv. "u* *ith *hi.h th" lup"_flig

raPid imFovement." They have adopted I nese companies inuoduced their marugemimtk4,zer as the driving philosophy that ties tG I technology in both the indusbiar unitea $atesgether, that animates all their efforts. ] and in- orir l"ss induseialized countries sug_

In Southeast Asia, the spread of Japanee I eos ttut perhaps the technology is not isrranagement tec.hno.logy _!as followed, the ] cultu€-bo6d as we first thoughi: The initialsame_pattern as that in the Unid States. F-irst, I successes tlut indigenow comfrnies as well aswholly-owned Japanese subsidiaries like ] American muttinitionats in'southeast AsialoyotaMotor(Thailand),Ornron MalaysiaSdn. I have experimced the use ofJapanese manage_IIq-

Tosjem lha^ttang Co. Ltd. and japanese ment technology - often r,,,itlout .;apanfu

,orntventureslikePrccision Electnonicscorp. in I help _ may evei lmpty that peftaps th'e tech-thePhilippines,PhilippineFuji-Xeroxandihai notiryy isculturc-fteeuila uni"ersai.Arrow IMucts Co. Ltd. established th€m- I Lilheearly 190C, beginningwith Frcderickfly,es 'r' 9ur corngies and $an to inkoduce I fayto.,tneari.rericans a8r,"iofr -r*g" "rrttnell marEgement systems. Our initial repti- ] technol%y based on the rimdfic mJthod, acism was quickly dissipated by their wide- | mahod ihat relied on rational, logical, linearP*i9*:F:-qtducing.worlddassgoods. thinkin& one that was congnrdt with thel'Tecrsronhlectlorucstodatforexample,manu- | minds€t ofAmerican civilization. This enabled

F.3.a,,*J"p.""o"_managemmttechnology I thentogreatlysucceedindevelopingforthem_rn tneu operahons. Nowadays, as you walk selve a powerfirl indwtrial establshment,through their plants you hear people discuss- ] tn tlie midr30s, with the HawthorneIq^t"IJ"-t"IThtrgsandlshikawacharts, I experiments on industrial tighting, theylust-ur-ume and k4rbah, mixed modelproduc- stumbled upon the powerful effeit thith$ qj kT'?,g*j You.look tlunugh their I motivated workers-wbrkingasteams _had

factures a full line of Mabushita's'products and exports a subotantialfartoritsoutpuitoyip*.

--- "The expedence of the last

n"ff"*Ti.3ltl"'ijTffn$*: fffteen yearc has gven us causel:se fll l"-",!T "p,eaa,.i"dig- to revlew our eaily ptejudgementsenously-owned and managed firmslike Automated vi.r."r&t "-* about the natule of JapaneseInc., owned by the Ayalas of Makati,;il""ilE lil;;lFh#;1ffi"i management"'even the American multinationalJohnson & Johnson (Philippines)

ubiquitou.s bu.tletin boards and read about ] on productiviry while their acadernics like,ql11]l1ll.*p-.""T*ts in quality and rccod I Elton Mayo,Het-zbef& Maslow and McGregordedines in iosts. You meef tt eii nvmagers, aia outstinaing *o.fi" uyiog to,rrra"oAlladressed rn rugged dothe, n:aming around the / and to explain"thts phenoireion, they never:,1'9P rlTrand qettilg their hands dirty hetp_in8 | quite succeeded in" marryint the siienHficthe.workers solve their problems. You realize ] school of management rvith"the behavioralrnar_ney rcaxy arc beglnnng to be steeped in I school. As peter Dmcker put it, ,?or more than

Taylor's 'scientific management.' The other is look at how the most Prcgressive Americanthi'human relations' ipproach... The two and European companies -GE and GM,IBMapproaches have alwayi

-been considered and Philips, Hewlett-Packard, Harley

thdt they used and even the prcducts that theyDroduced. In so doinR they were able to wed,io weld together t&hnoiogy-based, highquatiw and Droductivitv - on the one hand -utd peopl.;r aspirations to do meaningfulr,lork', *itk .orihy of hunan beings, on"theother.

To the group-oriented Japanese, usingteams came naturallv It was part of their fam-ily centered culturc. To th; individudisticAmericans, thet culture-imposed mentalconstructs about people and theirrelationshipsbecame barriers to their br€aking thraugh.They found it very difficult to change theirparadigms, the assumptions in their mindsabout how managers and laborcF shouldwork together They saw the workers not asresoorsible members of the team but as hiredhands. They tleated them like automatons, asextensions of their machines, and not asmembers of the family.

Fat?Shadng BodlesUp to the '70s, Americar management

technblogy ur5 modem management, as ujd-versal andas world <lass as we;ould get. Sincethe'70s, however, Japanese management tech-nology has been modem management. Thetwo systems are not alternatives, they a!€ notsubstitutes for one another because the JaPa-nese system is patently the suPerior system lnfact, ii is a quantum imPrcvement over the

' American system.The reality is that the American model is

obsolescent. lt is moribund. One need only

very closely bound to JaPa-nes€ history and to Japanese culturc and tla-dition. Rather, I rcfer toJapa\# tarugementfecftlrolo$l And this technology - this rnix ofmanagerial principles, policy, practice, toolsand techniques - I suggest, is universal. Al-though originally cultuebased,. it is not cul-h.re-bound. It is transfemble from lapanesecompanies toAmerican and Euopean comPa-nies. as well as to the companies of the NiCsand the r€sour€e-rich deveioping countries ofSoutheast Asia.

Second, although Japarese managemmttechnologywas fi$t developed on the Prcduc-tion floor, it does not concem only the manage-ment of manufacturing. It also rcaches into,affus and shapes how marketing - namely,product design, sales, logistics and service -as well as raw materials and components prccwement, peEonnel and accounting and fi-nance are to be managed. I t i s anall-encompassing management system for theen e companv

How d6 wd build a company based on theessentials of Japanese management technol-ogy? How do we build a business that cancoinpete not onty within a country but on aglobal basis? The answer to this question isincr€asingly becoming a sucial one. With theworld-widi tr€nd towads trade liberaliza-tion, it is one that practically every companythat evjsts today must be able to practice,sooner rather than later, if it is to survive and tosucceed. To answer this questiorL let us exam-ine the critical components ofthe new management technology as practiced by such world

class companies as Sonv and Matsushita,Procter & Gamble and Motorola.

Cdtlcal ComponentsWe first start with a tight and firmly fixed

focus on our ultimate customer. We must thor-oughly understand his ne€ds in rclation to thebusiness we'rc iry to the competencies that wehave mastered. Moreovet, we rnake sure thateveryone in the company is awar€ of whatkinds of satisfaction tire customer seeks fromthe products or sereices that we offex We Primeeach memberof the company to enswe that heis ready, eager and able to exert whateverefforts may be necessary to serve our targetcustomer's every need. In the last a nalysis, we

iudge the goals that we set, the Process€s weemploy, the products we produce - every-thins that we do, our failurc and our success,on th'e basis ofeach employee's contribution toour customer's satisfaction.

Next, we cultivate in our comPany a cultur€founded on organized orderliness. We cleanup our workplace. We discard what is umec-essary or superfluous. We qeate a designatedptacdfor evirything and make sure that eve-iything is in its placi when it is not being us€d.We mal<e it a trabit to keep everything "spicand

span " because we realize that disciPtined*utne"t f th" b"a-.k ofquality and effibenry

Thid, we nurtur€ in olu comPany a Pas-sion for quality, a determination that everyprcduct tliat w; prcduce will beand will do forivery customer what he bought it for. Weeliminate every defect not only ftom our prod-ucts but also ftom the Drocesses that we use inprcducing thcepoducts. webench-markandinnulate cimpariles tike Motorcla who aim atbringing theii defect rates down to 3.14 unitsper million.

Fourth, we develop in wery one of ourpeople an abhorrence of waste - the waste ofinanpower, the waste of raw materials, thewasti of space. the waste of machine time. Toachieve this, we work dooely with our suppli-ers. We employ iust-in-time and parallel-p rocess ing techn iques . We deve lopir,ri.Lo.t rp*-utit "". Wi lnstatl visiUle<ontrdtdevices. We continuously evolve and adoPtproced ures and processes that will relentlesslyieduce the cycle times of prcduct design anddevelopmmt, sales, poduction, delivery andservice operations. With these and other simi-lar tecluiologies, we ensure the total elimina-tion of waste ftom all our oPerations. We thusmake sule that our co€ts arc lower than those ofanv of our comDetito6.-Fifth,

we erirpower our PeoPle to excel-lentlv accomDlish the business of ourbusinessWe develop-flexibility in our marugers, ourtechnical people, and our fronFline workersWe give them the competence, by continuoustraiing and coachingi not onli to tet theirown pbs and those of thei! colleagues done,but also, to analyze and imprcve the Prccessesthat they us€ ard the poducts ihey Poduce.

airiithees, itrd""d, mutually exdusive." Davidson, and Asea Brown Boveri - have

B,ar'worrvs. Braw*wod( :'*1"rtrrffli$filil*#,#fffiTscampered, and rrarnbled, and

Whv did the Japanese succeed in integrat- tfir world<lass management system, the man-ing theie two app'roaches where the Arieri- agement technology-that wiLl dominate thecans failed? I suggest the exPlanation ties in futurethat the Japanes€ built on t€ams to achieve we need to make two other very imPortantintegration. Unlike the Americans who as- points.sisn-ed "brain-work" to nlanagers and techni- Fi$t, I do not advocate her€ that we adoPtca'i experts and "brawn-work;to the workers, the Japanese lit'atyk , whtch structurcs themtheJapanesereliedon-gaveresponsibilityto into being the world's champion savers, nor- tea-ms of manageE and worLels to design the Japanese naragement stvle, which buildsand to continuously imprcve the Processes strongly integrated work teams throughafter-

hours socializins in coffee

'T@ itrH$#?1:f'l,T;'H:uslng teams came ndulally. lt was HYSI*ff:,"'Xffii:11palt of theh family Centeled getlrcr jn what Akio Morita

calls "fate sharing bodies,"CUltUfg.tt nor th€ Japanese" ecoromrc

slste , whj,ch enables gov-ernment and the sreatlairefsrs to cooperate in forg-ing and Pursuing coher€ntindustrial policies.

All thee obviously are

THE ASIAN MANAGER NOVEMBER/DECEMBER 19S2

We teach them how to use such tools andtechniques as fish-bone diagrams and Parctochafts. Wercward individuals whoexpand therange of what they know and what they cando. We give our people at the lowest possiblelevel of the organization the capacity, theknowledge the skills, the information, rnepower and the authoritvto make thedecisionsihat they are in the best irosition to make. By sodoing, we encourage and develop and eventu-ally tap their creativity, their innovative abili-ties, thetu initiative. We give them "ownership"

ofwhatthev do. Webuild in them pridein theirwork. We evoke from them a deepseated com-mitment to the comDanv

Sixth, we rely on teams rather than on

"We cultivate in our company asplrlt of 'divine discontent.' Weforswear the old saw. 'lf It aln'tbroke. don't fix it."'

individuals to get things done. We form teamsthat cut across fu nctions; aqoss organizationallines. We give these teams responsibility formanaging and improving work flows andbusiness processes that lead to and enhancecustomer satisfaction. We reward theseteams, mther than individuals - for soodperformance.

Finall, we cultivate in our company a spiritof "d.ivine discontent." We forcswear the oldsaw, "U it ain't brcke, don't lix it." We adopt initsstead a policy ofcontinuous improvement.We build into the culturc of our company theenduring belief that no product, no prccessthat the mind of man can conceive, design orimplement, is perfect. It can always be donebetter. It should alwavs be improved.

These basic elements of wbrld-class man-agement mesh and intemct with one another

When employed together, theycreate the syneryies that make for a globallycompetitive business.

Paradlgm of the MachlneHow do we organize our company, struc-

ture its resDonsibilities, its authorities and itsrelationships so that we can manage it in aworld-class mamer?

Manaeement - that which we used to call"modemt - was bom during the early yearsof this fast receding century lt was conceivedat a time when the great inventions - theengines, the machines, the equipment, thetools, the jigs - that created the induskialfevolution werc finally being used in nynadcombinations and Dermutations to make mass

production possible. The men who fathercdmodem management - the Thylors and theFayols, the Henry Fords and the Elton Mayos- were greatly involved in this exciting proc-ess of exploiting the miracle of machinery Sowrapped up wer€ they in the wonders of nutsand bolts, so rapt with gears and springs andtuming things that even as they contemplatedthe workings of humaa organizations theycouched thet thoushts in mechanistic modes.Their minds were, if you will, captives to theparadigm of the machine.

Examine a machine. It is made up of manyparts. Each part has a purpose, a prcdeter-mhed function, a unique us€ that it alone isdesigned for No part does other than its preor-

machine is that it is unrealistic. Real-life oreani-zationsare not made up of inanimate pieces ofmetal, or plastic or ceramic. Their parts areflesh and blood, mind and will, wishes andwhims and gossamer dr€ams. Organizationsare less than, and much, much mor€ thanmachines.

The new manatement technology - thekind that hansforrns companies into globallycompetitive businesses - designs and devel-ops organizations in the image and likenessnot of machines but of living, sentient, reten-tive, rational, imaginative, inventive, qeative,gregarious human beings. Unlike turbines orgenerators which can only convert one form ofenergy to another, or shapers and lathes whichcan only gou8e out pattems and forms frcmsteel or wood or clay, man can do and does alimitless multiplicity of things. He can act andreact. He can persist and pers€vere at a pokily,ploddingly pedestrian task. He can shift andswint and switch with the swiftly changrngdemands of the moment. All these he can dobecause his six s€nses and his agile mind,working in concert, eruble him continuouslyto leam.

The organization of the futurc will rely onall of its members, its executives, its techni-cians, and its rank-and-file workers - all ofthose who have constant contact with its cus-tomers - to sense, to slop up, to sop up - aswell as to make sense of - to understand, andto interpret all the information that the busi-ness needs about its customers, its competi-tors,and theenv onment in which itoper;tes.

It will encouraee those in the fron[lines ofthe business, in the inter€st of optimum seruiceto its customers, to communicate directly, tocross-talk informally; to dialogue incessantlywith one another. It will group them inmanageably sma4 multidisciplinary dive.se-function teams that can respond decisivelyand r€act Dositivelv to unsatisfied customerneeds.lt will empower these teams toe\ercisewhat authority they may require to gratifythes€ needs. And in defining and refining thevision of the company, its long-run dircchonsand its strategy, its top exeotives will listen toand leamfrom allof its members, whethertheywear blue collar, white collar or batlkshirts, grayflannel suits, short or long sleeved barongfdgalogs or bush iackets.

The age of the machine-like organization isgone. The organization of today and of thefutur€ must be built to mirror man. Like man,it must be d perpehra lJy r n nova ti ng orga nism,a continuously leaming rrganization. This, Isuggest to you, is the ki d of organizahon wemust build if were are to sunrive and to suc-cessfully compete in the year 2020. The worldof the manager has changed and we mustchange with it. As Li Tai-Po put it,

"There zoas no holding the yesterdays.Draut a knife and cut the uate, vet thewatet flo.os." t

dained work. When all theparts properly tulfill theirfunctions, the machineworks.

It is this model of the ma-chine - so piedictable, soreliable so conbollable -thdt inspires the design ofmost of today's o€aniza-tions, whether Drivate orpublic. They all aspire to thesmoothly meshing precisionof well-oiled machinery.Look at the architecture of a

typical organization. It neatly divides the or-ganization into rationally oder€d parts. Youhave production,marketing and finance asthecore operating divisions of the company.

These divisioru are furth€r suMivided intotheir component parts. Marketin& for exam-ple, is typically composed of marketing re-search, advertising and promolions, sales,logutics and service. To steer, support, andseNe th€se corc di\,,tsions, the rest of th€ or-ganization is made up ofstaffdivisions such ascorporate plannin& persormel and labor rela-tions, accounting and conhol, legal and ad-ministration. Precise lines of responsibility,authority and accountability interconnectthes€ diverse parts of the organization. Rigor-ously defined boundaries delineate the func-tions thev can and should perform. When allthe partj property fulf l tfreir functions, theorsanization works.

ThiE, at least, is the theory The rcaliry how-ever, is that this mechanistic structure of theorganization often acts as a drag to smoothlyaccomplishing its function, which is to satisfyitscustomers. The neat definitions, the preciselines of communication, the well channeledflows of authority render it rigid, burcaucrati-cally constrain it and slow its rcactions tosudden changes in the envircnment. Evenwors€, because of its box-like rigidity, it fails totap the innate creativity of its members, culti-vate their eagemess to leam, enhance theirfleibility, reinforce their capacity to take initia-tives, and capitalize on their ability to prcducesynergy when they work in teams.

The shortcoming of the paradigm of the

THE ASIAN MANAGER NOVEMBEF/DECEMBER '1992

The NewBoundaries of the'Boundaryless Company

za

By Larry Hirschhon and Thomas GilmoreWharton Center for ApDlied Research

I n an economy founded on innovation andI change, one of the premier challenge. ofI mana8ement is to de"ign morc flerible or-I ganizations. Cornpanies are replacing ver-tical hierarchies with horizontal networks,linking together tFditional functions throughinterfunctional teams; and forming strategicalliances with suppliers; customerc, and evencompetitors. Managers are insisting that everyemolovee understand and adhere to the ctxn-pany's strategic mission without distinction oftitle, function or task.

For many executives, a single metaphor hascome to embody this managerial challenge andto capture the kind of organization they want tocreate: the "corporation without boundaries."General Electric CEOJack Welch has eloquentlydescribed this new orsanizational model. "Our

drcam for the 1990s," WelchwrcteinGE's 1990annual report, ''is a troundaryless company...u'here we knock dou'n the walls that separateu5lrum ea(h other on the rnside and from ourkev constituencies on the outside."-

In Welch's vision, such a company wouldremove barriers amone traditional functions,"recocnize no distinctions" between domesticand foreign operations, and "ifFore or erasegroup labels such as 'management.' 'salaried'

or 'hourly,' which get in the way of p€tlple$ orkin€i to8ether.

Managers are right to break down theboundaries that make organizations rigid andunresponsive. But they are wrong if they thinkthat doine so eliminates the need for bounda-ries altosether. Indeed, once traditionalboundaries of hierarchy, function and geogra-phy disappear, a new set of boundaries becomes rmF\)rtant.

These new boundaries are more psychologl-cal than oreanizational. Thev aren't drawn ono "o-puny's organizationai chart but in theminds of its managers and emplovees. Andinstead of being reflected in a companys struc-ture, they must be "enacted" over and overagain in a manager'srelationships with bqises,subordinates and peers.

Because these new boundaries are sodifferent from the traditional kind, theytend to be invisible b most managers. Yetknowing how to reco8nize these newboundaris and rl\e them pnc<Jucrively isthe essence of management in the flexibleorganization. And managers can find helpin doing so from an unexpected place:their own gut feelings about work and thepeople with whom they work.

The Challenges of Flexible woftln thetraditionalcompany, boundaries

were "hardwired" into the very s fuctureof the organization. The hierarchvofoccu-pational titles made manifest differencesin power and authoriry Independentfu nctional departments coordinated poolsof spcialized e'.pertise. kicdted bu5i-ness units were a rcflection of a company'sprcducts and markets.

This organizational shucturewas rigid,but it had a singular advantage: the roles ofmanagers and employees within thisstructure were simple, clear and relativelystable. Company boundaries functionedlike markers on a map. By making clearwho reported to whom and who was responsi-ble for what, boundaries oriented and coordinated individual behavior and hamessed it tothe purposes of the company as a whole.

The prcblem is that this traditional organi-zational map describes a world that no longerexists. New technologies, fast changrng mar-kets and global competition are revolutionizingbushessrelationshios. Ascompaniesblurtheirtradifiondl boundaries to reqpond to this morefluid business enviroffnent, the rcles that pe{}ple play at work and the tasks they performbecome correspondingly blurred and ambigu-ous.

Howevet just because work roles arc nolonger defined bv the formal organizationalstructure doesn t mean thdt differences in authority, skill, talent and perspective simplydisappear. Rathet thes€ differcnces presentboth managerc and employees with an addedchallenge. Everyone in a comPany now mustfigure out what roles they need to play and

1 rIn any organizatioo, interest gloups somctimes cmfflci,and mamgers must know how to negotiate

he imagines that together they can de-velop a new and more prcductive way todivide up the work. Unfortunately, theengineer hears the queshon not as a sim-ple request for inJormation but as an im-plicit attack on this authority. So heanswers vaguely and dismissively, mak-ing it clear he doesn't think much of theworker's question.

The worker feels put down and doesn'tpress his question. But instead of trying tounderstand why the engineer reacted theway he did, the worker simply chalks upthe response to the contempt that "elidsf'

engineers feel for "uneducated," blue{ol-lar workers.

Neither the engineer nor the workerknows how to manage the psychologicalboundaries that order their relationship.During their interaction, they drcw on asuccession of distinctions .�between expert and novice, su-perior and subordinate; ex-ploiter and victim. Howevetbecause neither has an accu-rate "map" to figure out thekind of r€lationship they are in

and what boundary they have en-countered, the interaction that wasintended to make them more effec-tive colleagues only serves to separate them. The result is a failedencounter and an unprpductive rela-tionship.

ln fact, too much focus on eliminating oldbourdaries can cause manaeer5 to misunder-stand their fundamental role in the flexibleolganization. All too often, managers think thatgetting rid of boundaries also mearu doingaway with conflict. They assume that once thecompany breaks down the walls that "get in theway of people working together," employeeslike the engineer and the worker vr,ill put asidewhat divides them and unite behind the com-panys mission. Differences in authority, talentor perspective will no longer be a source ofmcnon,

Nothinecould be further ftom the truth. Astraditional boundaries disappear, establishing

such dif{erences becomes simultaneouslv moreimportdnt dnd more difficult. Fle\ibility de-pends on maintaining a qeative tension amongwidelv different but complementarv skills andpointi of view. In the theater, a demandingdirector can elicit an especially brilliant per-formance from an actor. Similarly, an accom-plished actor can help a director betterunderstand his own vision of a plav So too inthe workplace, where demandinb s;bordinatescan make for better bosses - and a brilliantmarketing department can push manufactur-in8 to pedorm at its best.

But this kind of crcative tension does notcome easily As the task, roles and outcomes ofwork become more uncertain, clashes of opin-ion and peGpectives become more likely. Be-cause they nay signal that a worl group isapproachinga boundary thdt needs managingsuch conflicts can be healthv and pRrductive -

,*

/

In a team envilonment, people must bcus not only ootheh own wo* but also on what othe6 do.

what relationships thev need to maintain to usethos€ dif f erences;ff ectively in pr(tductive work.

Take the simple example of an engineer onan interfunctional product design team. To bean effective participant on the team, the engineer must play a bewildering variety of roles.Sometimes she acts as a technical specialist toassess the intetrity of the team's pro,Cuct de-sign; at other times she actsas a representativeof the engineering department to make surethat engineering does not get saddled with toomuch respon\ibility whjle re(eieing too fewresources; then again, in other situations shemay a(l as a lovdl team member to chamPionthe team's work with her enp;ineering col-leaeues.

No one role exhausts the kinds of relation-ships she must engage in to make the teamwork. The engineer will probably play all threercles at least once while she-s on the team. Buthow drxs she know which role to play when?And how can she be sure that the rest ofthe team

knows which role she is playing at any particu-lar moment?

ln the cor?ontion withoutboundaries, then,creating the right kind of relationships at theright time is the key to productivity, innovationand effectiveness. But good working relation-ship€ don't happen automatically; they are notthe simple product of good feelings, team spiritor hard work. ln fact, opportunities for confusion and conflict abound in a flexible organiza-tion.

Imagine the following q?ical interactionbetween a shop-floor worker and an engrneer ata company trFng to crcate a team en\,'rronment.

The worker takes the company's commit-ment to teamwork s€riously and, in an attemptto leam how and why prcduct engineers makethe decisions they do, asks an engineer to explain the criteria he us€d to approve somedesign changes on a blueprint.' The worker has focus€d on the task. Hewants to be the engineer's collea5 e. Perhaps

NOVEMBER,OECEMBER 1 992

"A good boundary managelencoulages employees to enactthe dght kinds of boundaries at theright time, just as a director helpstalented actors perform the rolesin a good play."

if they are contained or bounded so they don'tbecome overwhelming.

Therelore. manag;rs in flerible organiza-tions must focus on boundary management.They must teach people what new boundariesmatter most, then how to recognize suchboundaries in their relationshiDs with others.Finally, good boundary managers encourageemplo,vees to enact the right kinds of bounda-ries at the ight time, as a director helps talentedactors take up and perform the roles of a goodPlay

Remafiing oEanizational BoundatiesWhat psychological boundaries must man-

agers pay attention to in flexible organizations?

IHE ASIAN MAMGER

We call them the "authority" boundary, the"task 'boundary the "political" boundary andthe "identitv" boundarv. Each is rooted in oneof four dimlnsions common to all work experienc6. At the same time, each poses a qulli-tatively new set ofmanagerial challenges in thenew work environment. And each boundarycan be recognized by the characterishc feelingsit evokes. If managers are attentive, they canus€ thes€ feelines as clues to assess whethertheir relationships at the boundary are work-ing effectively (See the exhibit "A Manager'sGuide to the Boundaries that Matter")

The Authodty Boundary Even in the mostboundaryless company,some people lead, andothers follow; some prcvide direction whileothers have responsibilitv

below. If subordinates need to challense inorder to follow, suDeriors must listen in orderto lead.

I{hen suDeriors and subordinates workwell togethei; both can play their rcspectivercles. Subordinates feel husted by their superiors, and that feeling of Fust flees them up toexercis€ initiative at work. Superio6 feel si-multaneously supported and

-challenged by

their staff, which allows them to lead.But when people dorlt work effectively at

the authority boundary other feelings pledominate. Subordinates who doft believethat their bosses trust them can become eitherrebellious or excessivelv dependent and cau-tious - opposite ryrnittorns that rcflect the

turing a new product, sat or providing inte-grated service to an importantcustomer. Butinorder for teams to work tho€e involved mustmanage their rclationships at the task bound-arv. Here the critical question is, 'lr'y'ho doeswfiat?" People in task rclationships divide upthe work they share and then coodinate theirseparate efforts so that the rcsulting product orservice has integrity

In the traditional o€anization, managingtask rclationships was largely a matter of over-seeing the formal interactions among R&Dmanufachrrin& marketing and the other clas-sic functions. But in the new team environ-ment, people from all of the6e areas are mixedtogethir Increasingly, individuals have to de

for execution. Vy'hen man-agers and employees takeup these rcles and act assuperiors and subordi-nates, they meet at the au-thority boundary.

The authoritybourdaryposes the question: "VVho

is in charge of what?" Inmost companies, that ques-tion used to be relativelyeasy to answer Those inauthority were easy toidentify. Bosses issued or-ders, and workers followedthem. Management wasprimarily a matter of effec-tive monitoring and con-h0l.

But in more flexible or-ganizations, issuing andfollowing orders is nolonger good enough. Theindividual with the formalauthority is not necessarilythe one with the mo6t upto-date information about abusiness problem or cus-tomer need. A managermay lead a quality team, forexample, that includes not

xey Quedlon3"Who li h ch.|S!d wnd?'

Auttrodty lotdary

"Who do€| whrt?" Ta* Boudary

'lflh!t'. ln lt to t|3?" Pollthd Eou|ddy

il€co€Eary Temlon3

Ho{ to lcd h|t l!m*ropdr to cd{cl!m.

Hou to lbllor b|lt ldl dcLrtr!upcdo[.

Hov to drDar$ oi od|.|r yo|r doo'tcodrol,

]hrv to ltoddlre ylt u|d€dr|dqthd Fod.'. Fnc.

[ow to ffird on 'i htorEt wlthout .mDo{trtddltannlnhE lh6 odarilradoo. trtdi.d l*ly

torvlr'le||flow to dltloortha ianrra.n whwln .ulotteda wlDloao lhrdlo|t.

Houtohol p llwttho|rtd€YCuk€ pfordod|c]|. loytl

tof'ant

ctaractorlsilc FooilrEbtrudliraoptllrlddttndlolrrDAa$VO

coitdgnloornpat!ntDfolro'|xlorltkrcorrFtanir€hanad

"who b---fl{ bnt-'|r3'?'

Ir|onfty Bo{nrt ry

onlv her peers but also her boss. Oran accountrep'mav ask his boss to ioin the account team ata aritic;lphas€ in the work with an importantcL$tomer.

In such situations, subordinates face the farmorc comptcated task of adequately inform-ing their supedors and helping them to thinkclearly and rationally, even as they work toimplement their superior's r€quests. Para-doxically, being an effective follower oftenmeans that subordinates have to challenqetheir superiors. A fter a tl, allowing superiors loact foolishly only urdermines them.

What it takes to be an effective supenor usimilarly complicated. Managers need to takecharge and to provide shong leadeFhip. Butin the process, they must also lemain open,even \,'ulnerable, to criticism and feedback from

same underlying problem. Similarly, superi-ors who are not challenged by their employeesmav feel inlulnerable, as if thev "can do nowrong." At the same time, the lack of supportftom theL su bord inates may make them suspi-cious and over controllins.

TheTask Boundary Work in complex or-ganizations rcquircs a highly specialized divi-sion of labor. Yet the more sDecialized workbecomes, the harder it is to give people a senseof common mission. This conhadiction between sDecialized tasks and the need forsharedp"rposi tretps explain why teams have become such a popular form of work organiza-tion in recent vears. Tearns provide amechanism for bringing together ieople withdilfercnt but complementary skills and tyingthem to a single goal: designing and manufac-

ll,o* to Emaln loyal wl$oututdqn n&E out!&ab

dlrtrutthrgcodamptlom

pend on others whose skiDs and rcsources theycalturot conkol and often don't even under-stand. To be effertive, they cannot simplyignorc the work of others - in effect, to say"ifs not my iob" - anv more than a subordi-nate can simolv followthe orders of his or herboss. Indeed, their own performance maydepend directly on what their colleagues do.So, while in focusing primarily on their owntask, thev must also take a livelv interest in thechatlenges and problems facing others whocontribute in differcnt ways to the final prod-uct or service.

When task relationships with co-workersgo well, people feel proud of their work, com-fortable about their dependence on otheF, andconfident that they have the resources and theskills necessary to get the job done. But when

THE ASIAN MANAGER NOVEMBER/DECEMSER 1992

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a work group has problems defining the tasldividing up responsibilities and apportioningt *ut6, i"ai*iiaul members befon to feelincompetent, unable to accomplish their work,and sometimes even ashamed of the iob the/vedone.

Ih€ Polldcal Boundary ln most comPanies,"Dolitics" isatermof puederision. lndeed,oneo'f the pmmises oI

-the corPoration without

boundaries is to make the comPany into "one

bis happv family'' and eliminate politics ftomthi,"o;i.irtace on"" and for all. Bu[thispromisecontains within it a Potmtially dangerous mis-take.

Politics involves the interaction of $ouPswith differcnt interests, and any large complex

"People acting at the identityboundary trust insidels but are waryof outsidets. They seek out Peoplewho seem like themselves and take

badly, members of a particular work group canfeel uftecognized, unden€Pre6ented in imPor-tant decisions and exPloited.

The ldonw Boundary. The corPorationwithout boundaries seems to offer employees acommon identity, the kind that Jack Welch sug-gests when he talks about erasing the "FouP

hbels... whictr g* in the way of people workingtosether." In fact, people have a multitude ofer6up identitie at wori. Sometimes these idm-Eties are a product oI a particutar occupationalor professional culh[e: aftomeys, engineels,sofiware proexanmers, even shopfloor work-ers. Somdtim-"es thev' re rooted in the local workgroup: theteam,departmmt orrcSional offi ce,Andsometimes theiroriginsarcmorcPe6onal,

grounded in the individual's exPe-iience as a member of a Darticularrace, gender or nationaliry

The distinguishing chaEcteris-tic of such relationships is thegr,oup-s "samenes9." When peoplebesin to think in terms of "us" ver-s* "tlem," of theb in-group asoppos€d to other ouFgrQuPs, theyare engaged in a relationshiP at theidentity bourdary Unlike the palitical boundarv, which is about in-terests, the idi:ntity boundary is

fur granted the value of the glouppeFpective."

organization contains many such groups R&Dhas a leeitimate inteFst in long+erm Esearch,manufa"cturing in the producibfuty of a Productand markethg in customer accePtanc€. A un-ion mernber who conftonts a fol€man over analleged contract violation, a regional vice presi-dent who wants to rnake sule her factori€s 8etmore investrnent funds and the direcbor of arcsearch lab who tries to Protect his scientistsfrom intrusions ftom marketing are all engagedin necessarilv political relationships.

These relitionships can be exhemely usefulto senior managers, becaus€ they mobilize thediffercnt inter€sts and PersPectives that tqeether add up to a comprehmsive view of theLttit" titt utidtr. Political activity becomes det-rimental only when peoPle are unable to negctiate a nd baEain in qoductive ways and whenthey can't define thdir interests brc;d ly enoughto discover muhrallv benefic'al solutions.

whenmanagersmeaal tlepoliticalbound-ary, they view one another as memb€rs of dit-tirict inierest groups with different needs andeoals. They pose the question, "Vvha(s in it foris?" Thm, d negotia-ting and bargaining witheach other, thev form coalitions to further theirends and develop strategies and tactics for ad-vanchg their inter€sts. At the Political bound-ary, people face the challenge of defending theiriniei,ess wittrout undermining the effective-ness and coherence of the organization as awhole. They must Ey to distinguish between"win-lose" and "win-win" shategies.

Whm gouDs in a company do this effec-tivelv Deo;k tend to feel po:werful. staff mem-bers irclieve thev are ueared failvand rcwadedadequate$ Bui when political relatioruhips go

about values. Put another way, the identityboundary raises the question, 'fiho is - andisn't - us?"

People acting at the identity boundary trustinside; but arc;ary of outsiderc. They seekout people who seem like themselves and takefor pganted the value of their own SIouP Per-spective. The members of a local office may feelthat headquarters hasno urde6ta(ding of howtheir rcgi6n r€ally operates. Sciendsts in anR&D lab may feel that marketing PeoPle havenoconceotionof whatmakesthemti& Womelr

be convinced that their malecolleagues don'trespecttheir distinctivestyleofmanaging. Or foreign nationals in a multina-tional company may believe that headquarte$otr".*u" "int itt t"utly grasp the sub0eties ofthe local markel

ldentiw relationshipsarE important becaus€they tend b be exhem;ly ene4,izirig and moti-vating. ln a workplace wherc effective Per-formance increasingly depends on employeecommihnent to and engagement in the Fborganizations need to tap this enetry soulceand put it to productive use. Thafs why com-paniat lke *ero]" Coming alrd l€vi Straussirave encouraged diversity at all levels of theorganization.-But

r€lationshipg at the idmtity boudaryalso run the risk of disruFing the hoader al-legiances necessary to work together. For thisreason, creating and supporting a sense of elanor team spirit - "we are the best grouP" -

withou t divaluine the potential ccncibutionofother groups is thdreal challenge of work at theideftitv boundaqz

WienorganizationsstikethisbalancePe

Senior managers at a rnidsize office equipmmt manufachler faced a serious thr€at. Newcompetito$ were introducing lower pricedprcd-ucts that outperformed thecomPany's ba-ditlonat prod uct [ne. Managers knew they hadto counter with a new product of their own. Butthev worried that their company, which wasorganized along sbong functionai lines, simplycould not respond fast elough.

For the company's chief operating officer,the solution was to ceate a PatotyPe thatwould design a new more ad vanced version ofthe companys main product. The team aFproactr, itre

-COo arsued, cou.ld benefit the

iompanv in two wayi. lt would be the fastest-euin oi Uri"gl"g to market a Prcductequal tothe chanqing competitive situation. Even morcimportait, [re teah would be a laboratory foror{anizational leaming in which the comPanycoutd e\periment with a more flexible workorsanizaton. Despite the skepticism of some ofthE companys fuictlonal vice presidents, theCEO aFeed.

The COO aPPointed rcPr€sentatives frommarketing, man ufacturing englneerinS, andfinane toa l2-member Product r€desiSn iaskforce. Their rnissior! he exPlained, was not onlyto innovate a new prcdcut but also to invent awhole new ay of working toFther. For exam-ple, theteamwor:ld beenttely "s€lf -maraged";

members would select their own leader ftomamong themeelves. To suPPort the team in itseffors! the COO hired a hainer to teach mem-bers the new skills - brairstorming problemsolvin& and group dynamics - necessary towork effectivelv h a team envircnment.

et rust, taik force members shar€d theskepticism about tearns that they picked upfrorir their superiors. But as they develoPedtheir team skills - how to define problemssystematically, to give everyone a hearing andto reach consensus - their skepticism meltedaway. As the C@ watched the team grow, hefelt exhemely encouraged. The old fiShtingwas gone. He was convinced that he'd fash-ioned'the first successful indtnctional gouPinwhat had alwaysbeena tsadition-bound andturf-con6€ious company.

The task force developed a new Prcductdesign right on rhedule and Pr€s€nted it to thecompanis executive committee at a sPecial

ple feel loval to their own Foups and alsoin irrt it uir""lthv topect for;ther. But whenteam spirit is actompanied by contemPt forothes who don't sharc the iame vahies orexperience, identity rclationshiPs become ex-temelv disruptive.

Igs-imDortart to r€m€rnber that these fourpsychological boundaries don't exist in isola-iion from-one another. In anv work experience,they interact d''namically. Consider the exam-

ple of the unsuccessful prcduct developmentteam, which is dessiH- in the insert, 'Decod-

ingBoundarylv.Iistake: TheTeamThatFailed."A chief operating officer establishes an

interfunctional team to design a new prcduct.He believes that in order for the team to work,it is enough to encourage group cohesionamons its members. So under the rubric of' "self-iranagement " he neither designates

._ sorne one to represent his authorityon the team

meeting. In a gesture that emphasized thegroup s team spirit, the lowest status memberof the task force, a manage! from purdnsingdirecied ihe presentation. Everything pro-ceeded without a hitch,

Howeve!, whm it came time to discuss theteam's proposals, the meeting broke down.Company executives, naturally enough, askedtough questions to test the task force's designconcept. Was this product really animporvement on current company lines?Wouldnit it iust confuse the customer? Whatmore could the team do to bring down prices?

But instead ofrcsponding to these legitimatequestions, the team members kep defendingtheir own original prcposal. They didn't thinkany aspect of their design could be modified.And team membeE seemed ready - too ready- to leaD to the defense of fellow team mem-bers from d iffercnt functions. When one seniormanagel, for example, argued that the prod-ucfs manulacturing co6ts wer€ too high to becompetitive in the current marketpLace, it was ateam meanber ftpm marketine who insisterithat the costs couldn't be lowfu. Similarly,when another senior manger criticized theproduct design as too complex and theneforedilficult to manufacturc, it was someone ftommanufacturing who defended the complexityas necessary for producing a fi$tdass prcduct.

The morc the senior managers pushed, themore the team membeE dug in their heels. Butthis cyde only succeeded in convincing topmanagement that the task force had becomeinflexible. The executive grcup rciecled theproduct design and asked the team to goback tothe drawing ticard. When the team managersleft the room, several s€nior managers insistedthat the COO find new people for the team.

Why did this office equipment company'sattempt at interfunctional proJuct deign gowrong? The answer is that senior managersdidn't know how to orqanize the team'sboundaries so that it couldivork effectively. Inthe process of bringing the team tqgethel atleast three boundary misiakes occurred.

1. The COO did not create a clear authoritybourdary. On the one hand, he gave teamnembers a grandiose sense of themselves andtheir mission. They were to be the new modelforthemtirecompany. Ontheotherhan4once

]HE ASIAN MANAGER NOVEMBER/DECEMBER 1992

he established the team, he r€fused to play aleadership role. Because the team was s€lJ-managed, no one had the authority to makehard tsade-offs among conflicting goals.

2 The team coped with the ab,sence of au-thority by enacting an identity bourdary thatwas too sbong. Once told that they were pioneers in interfunctional work, team membersbecame convinced thev were the Dotentialsaviors of the company ind developed a senseof themselves as separate from everyone else.They were able to be "different " "new," an"elite group."

I An overty 6hong idenffty boundary pe-vsrH Eam rnsnbss ftom qEating the inbrnaltask and political borjndaries thev needed to dotheir woric The price for zustaining the sense ofdiffelerre between the bam ard the rcst of thecompony was the srppressinn of important dif-fercnes among team m€(Irbe(s.

For example, the team never found a way tooeate the appropriate task boundaries so thateach members used hjs or her special expertiseon the deign project for the good of the whole.The manulacturing engineer didnlt sufficiendychallenge the design engineer's work ftom theperspective of producibility. The markethgrepr€sentativerarclyquestioned the engineer'scost assumptions ftom the penpective of cus-tomer acc€ptance and pricing. As a result, theteam was never able to take advantage of thedifiercntskillsteammembershadortooptimiz€them in the product design.

In additioo because task force participantswercsocommifted totheiridentityasmembersof an elite team, they lo6t sight of the politics ofprcduct design. Yet for the team to functioneffectively, the managers had to think of them-selves as something more than team membe6.They were also political representatives of im-portant interest $oups thoughout the com-pany BecausetheyfailedtolepresenttlEsegrouts- ior exarnple, manufacturtng's interest in prod-uct simplicity or ma*eting:s inter€st in a poductdlat could be disbibuted thrcugh €stablisheddunnels-ftevcorld notftivelvsellthenewdesign to then 6wn colleagues.

The unfortunab r6rlt a Ploduct design tl|atcouldr(tbeddendedoneith€rbclufcalorpoliticalgounds and rcraws skqrticism ttuoirghoutthe comDanv about the us€fiirEs of bms.

nor plays tl|at role himself by actively portici-patin8 in the team's deliberations.

Because the COO never enacts a dear au-thority bourdary, the leam gets lo6t in its owngood feelings about igelf. Its mernbers md upqeating too shong an identity boundary be-tween themselves and the r€st of the companv.All of their energies go into maintaininj thitgroup identity, evm at the price of suppressingthe diffurence of skill and pe$pective they

need to do the work. The team's strong identityboundarv makes it imDossible for members toestablish the intemal ta;k and Dolitical bounda-ries nec€ssary for functionin! etrective$ Putsimply, the task force fails as a team because itsmembers feel foo mac, like a team.

Only when rnanagers understand howboundaries interact in this way can they leamhow to manaee tiem, And executives muststart by realizing thaq like the COO, their mo6tcommon mistakes are made at the authorityboundary

The Authorfty Vacul|mSenior executive know thatin the new busi-

ness mviiDnment the old authoritarian style -management by control - no longer works.Eager to encourage participatioo teamworkand employee empowernent, tnanagers as-sume they must give up their own authoritlaBut this decision has a paradoxical result. Wltmmanagers abdicate auihority, they camot struc-turcparticipatiorf teamworkorempowermenteffectivelv - which makes it imDossible forsubordinates to be productive.

In the case of the unsuccessfu-l product de-sign task force, the vacuum of authority is filledby too much group cohesion. In other cases,teams rcspond to the authority vacuum bybecoming passive. Irstead of supprcssing theirdilfurences and conflicts, team members arcparalyzed by them. Because therc is no sbongauthority to contain the inevitable tensions ftatincreased participation necessarily generates,subordinates believe, quite righdy, that anyconJlictg will rcmain unresolved. Thercfore,they digin to PIod their turf, and theconflictsbecome ooliticized. Since the senior executive ispsychol6gically absent, people feel there is "no

court oflast resort/' no guarantor to ensure thatdecisiors will be fair.

Take, for example, what happened at a largemultirntional firurcial rrvices company thatwas hying to design a new integrad informa-tion system. The compan/s executive grcupwanted to qeate a system that would link to-gether the databases of the company's inde-pendent Ploduct lin€s and allow sale personnelto analyze a customer's financial needs andprocess applications immediately in the field.Such a system, they rearcned, would not onlymake for better and faster service, it would alsoposition the company to take advantage of thenext comDetitive frontier in their business -"crosrseliing:' u *ide anay of financial prod-ucts to individual customeG.

The executive group's strategic vision wassound, but their plan foundered on the messydetails of implementation. From the very be-ginning the lGperson committee rcsponsiblefor developing a comprehensive technolo|yplan became mied in conflicts. Some teamhembers complained that the information sys-tems division wasn't rcally commift ed to devel-oping a new genemtion of code and prograns.Product line reprcsentative6 worried that they

would lose the advantages of the hiShly cus-tomzed information systems that each unithad developed over the years. And fieldservice representatives were skePtical thatheadquarters could really accomPlish such acomple\ and ambihous undertakinS.

Ftustrated bv the committee's lack ofprogress and conuinced that it "iust didn'thave thehorsepower'' to malethe newsystemhappen, the e\eotive Sroup set uP d second,

And the smaller thee-peFonteamwas exPlic-itly designed as a grpup of equals with nosingle member in chalge.

Wlty didn't the executive committee au-thorize someone to rcpresent its new strategicintent on either commiftee? Upon r€flectior!senior managers rcalized they had shied awayfrom exercising authority in the desiSn Processbecause thev hadn't faced up to their oa.t1 in-temal divisi-ons about the rj;ks of the compa-nv's new strateqy. Specifically, the chiefoirratins officer, iho iad shong ties to theindepenlent product managers, was skepticalaboJt the new d irection. H olwever, because hefett obliged to support the other two chiefofficer-another examPle of misPlaced grouP

corporation without boundaries is not aboutcontrol but about containment- containment I

cohesion-hercmained silent. Ofcourse, by failing to enact the au-thority boundary, this execntivegroup created a vacuum that al-lowed potitical and identity dif-ferences to paElyze the work ofboth design committees.

As this example suggests,manaqers aHicate authority notjust b,6cause they believe iha(swhat flexible organizations re-

of the conflicts and anxieties that disruPt Prc-ductive work. For instance, at the financialservices company, the executive SrouP tookthe simple step of apPointing a new Person asleader of the second desEn team. Pufting anexplicit representative of top marBgement sauihority on this second team wasenoughtokeep the concerns over the comPan/s newstratew from Daralvzing everyone.

uii"g"o it""a-to F "prisenf' for theirsubordinates in prccis€ly this way, rcady toresolve conflicts that cannot be managed by thegroup and to acknowledge honestly the anxi-ety inherent in working in ar uncertain andrisky envlonment. When they do so, manaS-ers ian use their personal dealings with othe$to get people to do extraordinary thinSs, evenin the iace of extremely difficult challenges.

Management as Contalnment Downstdngwfth Ugnty

For a porhait of a manager who works inthis new way, consjderhow the vice Pr€sidentfor human rcsources at a fugh-tech compo-n€nts manulacturer handled the downsizingof his own deDartment. Once a leader in thebusinest this;lechonics compary was facinga mai:r crisis. Relentless innovation in theindustry had led to falling prices ard the grow-ing technical obsolescence of the comPany'spr;ducts, which produced a short-termiueezeon cash flow and a long-term thrcat toth! company's suwival.

ltr'hai thd company had to do to rccaPturemarket slure was clear: dismantle its threeindeDendent business units, each with its ownexpeisive staff functions, and rcPlace themwiih a sinele mutti-prcduct orqanization. Theeronomid of scale made possi"ble bv etiminat-ine duplicate support oreanizaiions woutdt& ,ro'r.ro,rt "r id itrvestin new R&D. Evenmore imDortant, an integFted organizationcould reslpond to the gni*ing he;d towardtechnological integration in the comPan/sthree Droduct lines as well as meet ostomerdemands for inteffated sales and service

But shifting tf,e sbategic direction of thecompany necessarily came at a stiff Price: amassive'downsizinf. The HR vice Presidentfac€d the daunting task of managing the cor-pomte rcorganization and fiSuring out howhis depatment could best serve the comPa-ny's new business strategy - even as he laidoif nearlv 40qo of his ov,ri'staff - or about 20people.'

Dowruizings bring the Political boundaryinto play as perhaps no other managementdecision does. In the face of massive cuts,people stluggle to defend their own intercsts,iesources and i:bs. Concemed that the highlevel of reh,enchment would demoralize hisstaff, the HR vice president was determined tomaruge the doransizing Process in his owndeoarhnmt in a wav that would contain the

higher level team of three toP mana8ers -one

from the information systems division and theother two from the comPany's mapr Product$oups. But this team was no more effectiveihanihe one it replaced. The lS representanvecomplained thai the product p6ople didn't

"Managerc abdicate autho?lty todefund themselves against thelrown anxieties,"

understand the complexities of the new tech-nology. Meanwhile, the two prcduct rePrc-sentaiives accused the Isdivisibn of draggingits heels in order to prctect its centralized con-tlol of the company's information systems.The erecutive group couldn't understand it.'avhy a ren't we gettin8 any action ?" they won-dered.

What happened at this comPany illuskateswhat fr€quently occurs when a team ofmanag-ers is asked to design new systems or Prcductsthat Dromise to revolutionize core businessrehtibnships in a company. Ifs only nahlralthat therc will be conjlicting PersPectives anddisagreements about critical issues. Only byconfronting such conflicts can a team come uPwith a workable new apProach.

A deeper dnalvsis of the financial s€rvicescompany's conflicts rcvealed that beneath allthe disagreement, the various SrouPs rePresented on both committees shdred a corrunonfeeling: they were ajrxious about the new stra-tegic iireciions outlined by the comPany'ssefuor erecutives. The compa ny's success hadtraditionally been built on its brganizationalstructur of hiql yautonomous prcduct lines.Product manaiers functioned aaindePendententrepreneurs free to extend and develoP theirlines

-without interference fTom headquarte$.

Naturally, they were afraid of loeing this au-tonomv

The problem was that no person on eitherthe first br second committee had the authorityto act as a tie breaker when sbong disagrce-ments persisted, and neither team felt it couldrefer such deadlocks to the toP managementqroup. The chairperson of the first committeeiotei that he felimore likea "convene/'than

a team leader with decision-making Power.

quire. On a deeper level, managers aMicat€authoriw to defend thems€lves against theiro-n aniieties. If conflict is an inherent featueof work in flexible orqanizations, so too is risk.ln a business envircnment characterized bychange and uncertainty, there is no Suaranteethat the decisions managers make or the stlategic options they choose are the ri€ht ones. Andas the competitive envtonment becomes moreunforgivirig the consequences of fail"ue be-come gr€ater.

Often execuhves try to coPe with this anxi-etv bv focusing on task in a mechanistic wayt("t/b..n-" E*^ored with elaborate meth-odologies for strategic planning. They syetematicallv evaluate operations and assessrisks. These managers ilevelop elegant plansfor rcorienting the strategic direction of thecompany. But \ /hile such detailed Planningand analysis may help shape a decisio+ theycannot determine it. At some cdtical Point,their subordinates must move beyond the aesessment of risks and make decisions in theface of considerable uncetahty. Indeed, sen-ior management teams mav be uncertain aboutany straEty's legrtimacy ind validiry

But jn the end, a strategy's legrtimacy rcstson the Dersonal authoriw of the chief execuuve- thai is, on his or her ibility to rcpr€sent andembody the intercsts of the entire organiza-tion. If subodinates cannot identify psychcloeicallv with the chief executive as thereiresentative of the whote, they will be un-able to cede their autonomy to the CEO and ineffect, psychologically authorize him or her tolead. That means the best-laid Plans and strat-eeies will never be rcalized.-

The real solu tion is for ma nagers to exercis€authority but in a new way Authority in the

.IHE ASIAN MANAGEB NOVEMBEFYDECEMBER '1992

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Come home a celebrate our25th llear-.

Twenty-Fiae YeflrsEducating

Asian ManagersIn February 7993,

the Asian Institute ofManagement celebrates

its 25th Anniversary.As Asia's only regionalschool of management,

AIM has educated

15 FebruaryIntemational Symposium onPacific Asian Business (ISPAB)

A half{ay conference sponsored bythe Asian lnstitute of lvlanagement,the University of Hawaii at Manoa, andthe Academy of International Business.This year's theme is "lnternational

Business and the Formation of NewEconomic and Geopolitical Realities inAsia." Sessions will focus on newtrade alliances and will feature variouspublic officials and political thinkers.

75-76 FebruaryPacific Asian Consortium forlntemational Business Educationand Research (PACIBER)

The 1993 annual PACIBER conferencefocuses on the changing environmentof executive education in Asia andNorth America. Among the conferencesoeakers are Dean Edwin Miller ofMichigan University; Norman Nlarr ofMassey University; J.A. Patag of theAsian Institute of Management as wellas representatives from Korea's YonseiUniversity and Seoul National University and Canada's McGill University.

77 FebruaryAIM Commemorative Book launching

To commemorate its 25th Anniversary,AIM has commissioned two books,AIM 2020 by Leonardo Silos and 25Years of AIM by Gaby Mendoza andJames Donelan. S.J. The two volumescelebrate AIM's first quarter centuryand chart the lnstitute's course in thevear 2000.

77-78 FebruaryThe 1993 AIM ManagementConference: The Asian Managet:Shapingthe Futurc

Wanen Bennis, organizatronal dynam-ics expert and author of the bestselling books, 0n Becoming a Leader,Why Leaders Can't Lead and the Un-reality lndus-t ry w i l l beamong thek e y n o t espeakers atAIM's fourthannual Man-a g e m e n tConference.other partici-pants a rechief execu-tive officersand presidents of Asia's most out-standing companies, among them DelMonte Philippines, Texas Instruments,P.T. SemDati Air and Neptune 0rientLines. The conference focuses onhuman resource develooment andmeeting the challenges of organiza-tional growth.

78 FebruaryThe Asian Management Awards

The Asian Nlanagement Awards is con-ducted annually by AIM to recognize,honor and promote ou ts tand ingachievement in seven areas of man-agement: General lvlanagement, Infor-mation Technolo$/ Management, Peo-ple Development and Management,

Financial Management, MarketingManagement, operations Manage-ment and Development Management.The awards, which are given out in sixcountr ies - Indonesia, N4alaysia,Thailand. Singapore, Hong Kong -begin with the Philippine awards dinner.

79 FebruatyGrand Homecoming Dinner

Organized by AIM alumni, the home-coming dinner promises to live up t0its name. Over 1,000 alumni from allover Asia are expected to attend thecocktails and formal dinnerto be heldat the Shangri-La's EDSA PLMA HotelGrand Ballroom. First class entertain-ment will be provided by lvloniqueWilson, star of Miss Sargon and one ofthe Philippines' most exciting talents.Numerous orizes will be raffled off tolucky winners.

74-79 FebruaryAIM Exhibits

The Hall of Fame, a perpetual exhibit,honors founding faculty members,presidents, governors and outstand-ing alumni. The 25th Anniversary ex-hibit provides a visual history of AlM,highlighting special events and thepeople central to the Institute's found-ing and development.

All 25th Anniversary activities - includ-ing cruises, golf, city tours and shopping- provide excellent opportunities foralumni networking. Come renew oldfriendshios and make new ones

i in Manila...

Located in Mandaluyong, the center ofthe newlydeaelo\ing commercial and business district ofMetro Manila. Only 15 minutes diue from Makati and30 minutes from the airflrt, Shangri-In\ EDSA PAZAHltel transtz^ !0u into a haaen oflururious comfort,a mark of Shangri-La's uncomfronising standarfuwoddwide.

globally competitive managerswho will lead the region's

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Whether they're from Bandungor Bombay, Kuala Lumpur or

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Please send memore information onthe 25th Anniversarycelebration today.

NAME

POSITION

COMPANY

ADDRESS

TEL. NO.

FAX NO.

SEND TO:CORPORATE PUBLICCOMMUNICATIONS

Asian lnstitute of ManagementEugenio L6pez Foundation

Joseph R. McMicking CampusP0 Box 2095

123 Paseo de RoxasMakati, Metro Manila

Phil ippines

OR FAX TO:DAPIK|N/PTNKY

Dolitics of the sihration.- The cmcial decision was to ask subordi-

nates to help him design a new and smallerhuman resources organization. The vice presi-dent believed that if p€ople helped plan thecutback, the subsequent layoffs might beviewed as lessarbitrarv and oersonal. Becausethey would understarid the;hategic logic be-hind the downsizin& those who remainedwould trust senior rnanagemmf s motives andDtitns.-

At a meeting with his eight dir€ct subordi-nates, the vice pr€sident divided them into twotask forces. He asked both teams to come uDwith a wider range of possible configuratiorufor the new human resources oEanization and

"Yet anyone who has ever been apart of a group that wo*ed welltogethel remembers how goodthat expelience felt."

to rccruit some of their own subordinates astask force participants. The teams were toconsider issues such as reporting relationships,spans of conhal, organizational structur€ andnew combinations of functions.

Whafs more, the vice president said, eachof the proposed scenarios had to r€cognizefour major conshaints and challenges. Fi$t,head count had to droo bv 4O7u Yet the HRdeDartment also had to take on two new re.sponsibilities: managing the company-wideretr€nchm€nt plan and rchaining the compa-ny's engineering personnel and sales force tofunction effectively in the new integrated or-ganization. Finally, time was of the essence.The task forces had less than a month to comeup with their proposals.

During this meetin& the HR vice presidentdidn't tust Bive orders. He did some extremelysophisticated work at both the authority andtask boundaries. For example, his decision toask the task forces for a vlrietv of Dossibleconfigurations rather than to come up with asingle recommendation placed a clear author-ityboundary between himself and his subordi-nates. Because he took the rcsponsibility formaking the fiml decision, they didnlt have to.

This authority boundary effectively con-tained the potentially destructive politics ofthesituation. Notice that the vice Dr€sident didn'ttry to eliminate the politics aitogether. Sinceeach configuration was simply one amongmanv Dossible altematives, task force mem-bers ieft ftee to advocate a particularconfigura-tion vigourcusly without undermining thegroup's work. People cou ld express theL corcintercsts without gefting into political dead-lock. At the same time, the vice president alsohelped to contain politics by delineating a clear

task bourdaqr By specifying a charge, a s€t ofconshaints, and a tight deadline, he helpedtask force members focr:s on the work.

The vice Dresident also undetstood that hehad to inter;ct with his dilect subordinates asindividuals, not iust as subordinates or techni-cal specialists. The entire FIR manatementteam conflonted an unavoidabl€ fact some ofthe task force membeE were designing them-selves out of a job. So at the end ofthe meeting,th€ vice pesident offercd to meet with each ofhis subordinates orivatelv ln the next twodays, all eight met-with the vice prcsident for aconfidmtial conversation about their own fu-tur€s. WhatwerctheirprosDects? Whatwouldthey do iI the reorgatzation meant they had to

would enable the human rcsources depart-ment to do its job in an extrmely difficultsituahon.

Even morc important, people felt they hadbeen treated withdignity. They had taken parth a "crisis team," doing important work at acritica.l tirne. Thev had helped the HR vicepresident and the iompany 6nd the best solu-tion to a difficult problem.

Gettlng start6d: F6ellngs a3 DataThe HR vice president knew aLnost instinc-

tively how to enict the right kind of boundaryrelationships with his subordinates. But whatabout the

-manaser who is not so skilled?

Where does he oi she begin? To manage thenew boundaries of flexible olganizations, thebest tools manaeers have ar€ their own feel-ings

At first glance, this claim may sound un-likely. After all, many managers tend to dis-count thet feelings as having nothing to dowith work. In pa*iculat they view negativefeelings as dangercus and disruptive. Eitherthey ignore them, grit their teeth and get onwith the job or they dismiss them as some-thing merely personal, their own problem,uffelated to their work.

Yet anvone who has ever been part of agroup that worked well together rcirembershow good that experience felt. When peoplehave pncductive working relationships, theyfeel at eas€, relaxed ard focused on theirwork.Work of this quality r€sembles a good canver-sation, in which people are "in q'nC' andeveryone has something valuable to offerWhen this happens, employees experiencework as not only productive but also qeative,innovative - and quite simply - fun.

Sirnilarly, when a work interaction has gonewrong and people are in the heat of a difficultsituation, they often feel terrible. Theybecomefrushated, angry, confused and sometimeseven ashamed. "I hate this," thev find them-selves thinking. "This isn't working." "I can'tbe productive." "I don't like the way'X'isbehaving." In such situations, people feel as iIthey are swirnming against a shong current.Anv s€nse of achievement or accomDlishmentthey glean from work comes despite their po r-ticipation in the organization team, not be.caus€ of it.

So toojn the examples we have described.A common denominitor in all of them is thepresence of shong feelings: the engineer's de-fensiveness when questioned by a shopfloorworker; the shame and anger of that worker,feeling put down by the engmeer; the con-tempt that product desgn team members felttoward anvone not part of their intense teamexperience; the anxieties that led to theparalyzing conJlicls at the firuncial servicescomDanv

Such feelings arcn't iust the inevitable emo-tional residue of human work relationships.Thev are dala, valuable clues to the dvnamics of

leave the comp6ry? How mightthe vice president help them ei-ther to adapt to a new role at thecompany or to find a |:b else-where?

These conversations werepainful but poductive. Theyhelped their subordinates feelthat the vice Dr€sident valuedtheir thinking and would not dis-count their own personal di-

lemma during the r€organization. The viceDresident showed that he could stav connectedio them as people and to their orin penonalsituations, even though he was the sou!€e oftheir immediate stress.

The private meeting also served anotherimportant purpose. By meeting with each ofhis staff members, the vice president helped tocontain the uncertainty and risk - the diffi-culty and the pain - associated withdownsizin8. Natualy, his subordinate wereprcocopied with their own personal welfare.But at the same time, thev identified with thevice presidenfs authoriw and wanted ro sar-isfy him. necause he was connected to thememotionally and not only through a formal rolerelationship, they accepted him as their leaderand were willing to do the work he expected ofthem. This emotional connection also helpedthem look beyond thef irnmediate intercsts.

Over the next two week, the task forcesprcduced a total of nine configurations. Thedisc'ussions were storm, and occasionally deparhnent heads shongly supported a particu-lar desisn becaus€ it served their intercsts best.But their loyalty to the vice president andcommitment to accomplishing the task hehad given them meant they couldn't simplydiscount plansthat might threaten theirownpDs.

The vice Dr€sident drcw on a number of theplanstosket-chhis desired configuration. Thenhe worked with his staff, three of whom wereto los€ their iobs, to implement the new or8ani-zational design. While difficult for everyoneinvolved, the implementation went smoothly.HR staff memberc believed in the new smrc-ture. They werc convinced that it fit well withthe company's new business shategy and

THE ASIAN MANAGER NOVEMBER/DECEIVTSER 1992

boundary relationships. In this rcspect, feel-ings are an aid to thinkin8 and to marugln&thev are a real part of real work. Like thehuman resourcei vice prcsident, the best man-agers undentand thjs intuitively. They notonly manage with their heads but also withtheir gut feelings.

To be good boundary managers, executiv€smust be able to decipher frustrating and diffi-c1 t personal rclationships and diagnose whythey have gone wrong. Doing so requir€sacknowledging their own often intense per-sonal responses to work situations. Much asmanagers leam how to make subtle distinc-tions when interpreting empirical data,boundary management also requires develoging a more precise language for describing thefeelings people experience at work.

But the same time, managers also need toknow how to distance thems€lves ftom theirown experimce and feelings - in a sense, todepersonalize them- in order to s€e how theirown rcsponses are symptoms of a brcadergmup process. In fact, the stronger the nega-tive feelings people have about a work interac-tion, the less likely those f€elings are "just

personal" and the morc likely they ar€ a s)'rnptom ofa rcal organizational prcblem. Feelingsare impoftant signals to mana8ers that theymust steD back and examine their work rela-tionshipi.

For ixample, had the engineer been able toask himself, " Why do I feel so attached?" thenhis encounter with the worker might have hada more productive outcome. Similarly, thedefensiveness of the product design team inresponse to questions ftom top managementshould have been a sign to team membe$ andthe COO that therc was a fundamental struc-tural Drobleri in the team's relationship to theexecutive group. Firullt had senior execuhvesat the financial services company unde$toodtheir frushation with the de6im committee asa svrnDtom rather than as evidence that theindiviauals on the team lacked "horsepower,"

the managen might have avoided making thesame mistake twice.

Usingone soumfeelingstodiagnGer€lation-ships on thepb is hard work Yetanawar€nessofftelings, one s own and those of others, is qucialto rraking flerdble o€aruzations work. It is theway to discover the boudades people need inr€lationshipstoachievetheirbest. Itisattheveryheartof rnanagementintl€ "corporationwithout

And what does he need to meet thechallenges of the Year 2020? How does

he readv himself, what does he haveto know - not only to

survive, but tomaster

hisem4roil.

ment- t o

ride thevuh wirrl

The Asi.,n Maflager brings together thebest minds of Asia, North America andEurope to give you a steady flow of newideas and development strategies -and always with a contemporary Asian

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These arethe

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tr tPREFER"""","",slbscriptron (6 6s!es). My choEe or a freeCift s lplease tbk one):O ^s|4 at2o: A R€GO|{ L SCEIIARIO lX tE YE R 2020E III SE RCH OF ITE ASIAI MANAGERFOR It|E YEAR 2O2O

subc.nottoa. oaered br Ptea.c 4h h the btnks betob

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This article @as reprinted with the pernission of theHarvard Business Review.

Inrry Hirxhhom and Thonas Cilmore oft pincirylandobe yesidmt, resrytioely, of the INharton Cefitelfor Arylbd Researchin Phikdelphin. Hirs.hhom'smlrstrccent hnk isMa aEj^B in the New Team Environ-menl Skills, Tools, and Methad' and Gilmore is f he

. duthor ofM^kifl.r ala dership Change How Or-ganizations and kaders Can Handle l-eadershipTransitions Successfully.

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lHEASIANMANAGER NOVEMBER/DECEMBER 1992

prestigious management aw ards

@--

An invitation to Asia's most

AsreN It'{srrrurn on MlwecrururP R E S E N T S

rneAsiananagementAwbrds

Rec.o gnizing o utstan ding achiev ementxn seven management categories

HE ASIAN INSTITUTE OF MANAGEMENT invites you tojoin the search for Asia's best-managed companies.

Nominate a company you believe deserves recognitionfor excellent business Derformance. You can also nominatea not-for-profit orginization that has demonstratedmanagement excellence in serving its target beneficiaries.You may nominate as many companies as you wish.

Through The Asian Management Awards, the Asian

IN COOPERATION WITH

PtDTfhe I eleconnaniotions Conpony

Institute of Management will recognize for the third con-secutive year deserving companies that have distinguishedthemselves in seven management categories.

There will be seven winners in each of the followingcountries: Hong Kong, Indonesia, Malaysia, Philippines,Singapore and Thailand.

These winning organizations will be recognized informal awards ceremonies conducted in all six countries.

Categories and their CriteriaGENERAL MANAGEMENT. For success in strategicallypositioning the companywithin the industryand transformingit into an outstanding company.

MARKETING MANAGEMENT. For outstanding and successfi.rlinnovation in the use of the elements and tools of marketing,leading to customer satisfaction.

OPERATIONS MANAGEMENT. For outstanding productivityin production and delivery of quality goods and/or services.

PEOPLE DEVELOPMENT AND MANAGEMENT. FoT excellencein the management and development of the people in theorganization, geared towards productivity, professionaldevelopment and enhancement of the qualitylife.

INFORMATION TECHNOLOGY MANAGEMENT. FoT the cTea-tive use of information technologyto enhance the competitiveposition of the company.

FINANCIAT MANAGEMENT. For outstanding management ofthe company's assets, liabilities and equities, in keepingwith theowners' best long-term interests.

DEVELoPMENT MANAGEMENT. For creating substantialpositive impact on its target beneficiaries through innovative,sustainable and effective management. This award is given to adevelopment organization which is primarily not-for-profit(such as a government, non-government or people's orga-nization) and which has as its main objective the improvementof the quality of life of people.

OFFICIAL AIRLTNT: Thai Airways Limited OFFICIAL CREDrT CARD; Diners Club International OFFICIAL H)TELS: Hong KongIiong Kong H ilton Indonesia Jakarta Hilton Internation il MalaysiaThe Crown Princess Kuala Lump w PhilippinesShangri-La's BDSAPlaza Hotel SingaporeHyatt Regenry Singapore ThailandTheDusit Thani OFFTCIAL EnHIBIT ORGANIZER; Pico Art InternationalPte. Ltd. OFFICIAL FILM PROCESSING COI,rp,qNy: KodaK Phils. Ltd. OFFICIAL AUDITORS oF THT SEA RCH AND SELECTION PRoCESSjSGVlArthur Andersen OFFICIAL PUBLICATIINS: Hong KongStne Tao Daily, Sing Tao Evening Post, The Standard IndonesiaTempo,SWA Sembada Malaysia Business Times Philippines The Philippine Star, The Business Star Thailand Nation Publishing Group

Members of theBoard of fudges

The Governing BoardThe governing board approves the criteria and the search and selection process and conlinns the final winners.

WASHINCITON SYCIPChairman1 he S(iV GroupPhiiippines

DR. BRIAN W. SCOTTChairmanManagement lrrontiers Pty LtdAustralia

DAVII] K. P. LIDircctor & Chief I lxecutive'fhe

Bank ofEast Asia, Ltd.Hong Kong

JACK I'ANGPresidentTri-State Holdings, LtdHong Kong

FP-{NCIS F-STRADAPresidentPacific Capital Partners Ltd.Hong Kong

DR, IAGDISH PARIKHManaging DirectorLee & Muirhead (lndia Pvt Ltd)lndia

ADITYA tsIRI-AChairmanGrasim Industries l-td.India

I)RS. R,{CHMAl'SAI-I-HEconomic Advisor to theGov't fbr' l rade & BankingDepartment ol TradeIndonesia

ROBBY D]OI IANPresidcnt/DirectorP.' l ' . Bank NiagaIndonesia

I{EUIRO HATTORIChairmarrHattori Seiko Co., Lldlapan

YOTARO KOtsAYASHIPresidentFuji-Xcrox Co., Ltdiapan

TUN ISMAI t , B INMOHAN{ED ALI

ChairmanNational Lquitv CorporationMalaysia

TAN SIII C]t]H IK CHEONGChairmanPerlis Plantations BerhadMalaysia

VICENl | '1. PATERNOChairman and

NlaDaging DirectorPhi l ippine Seven ( iorporat ion

P h i l i p p i n e s

ANDRI-]S SORIANO II IChairman of the tsoard and

Chief Execut ivc Off icerSan Mlgucl Corporat ionP h i l i p p i n e s

STAN SHIHChairman and Chicf

Execut ive C)f f icerAcer IncorporatedRepubl ic of China

t lON. \ \ IANG CHIhN-St l l f lNMinisterMinistry ol FinanceRepubl ic ofChina

HEI{MAN RONALT)HOCTISTADT

(lhairnran

l ixport Credit InsuranceCorp. ofSingapore Ltd.

Si igaporc

ALAN C,Y. Yt]OChairman and

Managing DirectorYeo Hiap Seng t- imitcdSingapore

DIi . DUK CHOONGKINI

f-xecut ive CounselorlJaen'oo Industr ial (1o.,

l - tdSouth Korea

PYONG HWOI KOC)ChairmanI-uckl Goldstar

lntcrDat ional Corp.South Korei l

DI{, AN,INUAYV I I T A V A N

Deputv Prime N' l in ister' l

haihnd

VIRO] PHUTRAKUI,Chir i rnanLever Brothers

(Thai land ) Ltd.Thai lancl

DA\JII) K.NE\\TBIGGING

ChairmanRcntoki l Group PLCUnitcd Kingdom

\\r lLLiAM ANI) lrRSONI{et i red Chairman of

thc BoardNCR Corporat ionUnited Statcs

How to NominateTo nominate a candidate for the awards, fill in the coupon below and fax or mail today. Photocopy additional

* copies of this form for each company you nominate. Hurryl Mail or fax the nomination form now!oF- -

I seni to: rne Prog-ram Director - -- - -. - -

. - -l

HONG KONGl)avid K. P. LiDircctor and Chief

FlxecutiveThe Bank of East Asia,

Limited

Francis G. IlstradaPrcsidcntPacific Capital Partners l-td.

Ian PerkinChief EconomistHong Kong General

Chamber of Commerce

Dr. Robert I. l 'r ickerProfessorUniversitv of Hong KongBusiness School

The Hon. N{rs. AnsonChan, I.P.

Secretary of EconomicServiccs

INDONESIAl)rs. Rachmat SalehEconomic Advisor to the

Clovernment for Tradeand Bank ing

l)epartment ofTrade

SurasaPresiclent DirectorBank Bumi Daya

Cacuk SudarijantoExecutive l)irectorIndonesian Management

Association

Prol DjuenadiHadisumarto

Lembaga Managemcnt

John A. PrasetioManaging Partner[)rs. Utomo & (lompany

MALAYSIATan Sri Geh Ik CheongChairmanPerlis Plantatirns Berhad

Ahmad Rejal ArbecEditor, Business Times

Johar i b in HassanGovernmenl Aft-airs and

Human RcsourcesManager

BP Malaysia Sdn. Bhd.

S ieh Lee Mei L ingProfessor & (lhairman

Business AdministrationDiv is ion

fracultv of Econorrics antlAdrn in istration

Univcrsitv of Malava

PHIL IPPINESVicente T. PatcrnoCha i rnan and Manag ing

l)irectorPh i l ipp ine Seven

Corporation

Arsenio Bartolome Il lChiefExccutive OfficerUrban l)evelopment Bank

Enrique l). F-stebanPresidenlCenter fbr Rcsearch and

Communication

Cabriel ManalacPublisher and EditorThe Business Star

Renato ValenciaAdministratorSocial Security Svstem

SINGAPoREHerman Ronald Hochstadl(lhairman

Export Credit InsuranceCorporation ofSingapore Ltd

Dr. \\ree Chow HouAssociate Professor and

DeanFaculty of Business

AdministrationNational University of

Singaporc

Mr. Lim Hock SanChairnanInstitute of Certif i ed Public

Accountants of Singapore

Prol Tan Teck MengDean, School of

Accountancy and BusinessNanvang Technological

University

Mr. D. R. MurrayChairmanSinplapore Intcrnational

Chamber of Commerce

THAILANDViroj PhutrakulCha i rmanLever Brothcrs (Thailand)

I_td.

Tceerachai ChemnasiriManaging DirectorRachada Propcrty

Management

Sasin Clraduatc School ofBusiness Adninistration

Chulalongkorn University

Chotc SophonpanichPresidentTha i land Management

Association

'I arrin Nimmanahaeminda

N4inister ofFinanceTha i land

Suthichai YoonIiditor and PublisherThe Nation Publishing

(iroup Co. Ltc1.

Philippines0r farc HongKang

Philippines

ft'ff:r,xni?:Tiil-i:;J*'.", IJomination123 Paseo de Roxas rryqcf.gj Box2oe5. rormMakati, Metro Manila

(552) g77 - 5921 1l Indonesia (6221 ) s7 0 -2306 ) Malaysia (603) 244- | 6961(632) 817-9240 al Singapore (65) 293-2557 C Thailand (662) 374-0860 |

I nominate the following organization:

Name of OrganizationAddress

CountryDr. Tarc is ius Ch in(ihairman, Malaysian Toemsakdi Krishnamra

Ins t i tu te o f Managemcnt I ) i rec to r

I Information Technology Managementtr People Development and Managementtr Development Management

CompanyAddress

Country

Telephone FaxName of President /CEO/MDPosition

Tick box or boxes below to indicate the categories of awards.f General ManagementI Marketing Managementfl OperationsManagementI Financial Management

Your ownPosition

Telephone Fax

rT'�:" - - - ,^-!rl

yiSe�ffienmillionse I'Ou e1'erYdaif helus a lotto lodk Your#harpIst,

#PLDT

-t#*#i.-Sj-***os**r" t#srJls tr&a#s:*-

Next year's GTE Yellow Pages will show sharperlooking ads - thanks to a new, advanced

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FromSwampto Summil

TheNewAsean

placed the Mediterranean une, twoor three -hundred years d8o. Thdt dominance i: i

By Andre SaumielChairman. Saumier Freres Conseil

iny Taiwan exported in 1991 morethan all of China, the population ofwhich is 60 times laryer. It enjoyedan infant mortality rate inJerior to

that of most European countries. TheAmerican organizers of the forthcomingArt Asia fair will face rental costs at theHong Kong Convention Center 10 timeshigher than at their ostomary Miami andChicago venues; they will also have toinstall wall-tlwall carpeting at a cost of$200,000 as vr'ell as build small gardens andfountains. Why? Otherwise demandingAsian clients will not come.

It is fairly clear that the Asia-Pacificregion will lead the global economy in the21st century The Paris-London and laterNew York axis is still the basis for theglobally dominant Atlantic Rim which rc-

itself about to pass on: an Asia Pacific Rim,currently bounded by Tokyo and HongKong, is already starting to take over.Within ten years, Europe will represent onefourth of global bade, North America onefourth, Asia Pacific one fourth, and the restof the world one fourth. But the momen-tum will be on the side of the Asia Pacific.

Europe and North America are indeedmature economies sated with consumergoods: every family has a telephone, a TVset cum video, a refrigerator, a washer-dryer, and more often than not, one or twocars. Notso in theAsia Pacific. Most peoplestill seek to gain access to dependable sourcesof electrical power and drinking watex

These are, therefore, economies driven by ademand for basic individual and collectiven e e d ' . A n d r e a l d e m a n d i s g r o w i n gexponentially. Twenty years ago, for example,60% of Indonesia's population lived in absolute poverty, as defined by the World Banl;today this applies to less than 20% of a muchlarger population of 185 million inhabrtants.Market surveys sho\a' that a newly affluent

Jakarta family (which will have a combinedincome of US$20G$250 a month) will rush tobuy its filst electric iron, and then an electriclan.

This is true consumptionJed demand,something the West has not seen for genera-tions, and it will be sustained for many dec-ades. It is not surprising then, that steelconsumption inAsia, excluding Japan, alreadysurpasses that of the United States or of theEuropean Comrnunity (EC); what may be less

expected is that Asian demand forsemi{onductors this year will begreater that the EC's.

Re$onal Self€ufficiencyMore critical in the long term,

pefiaps, is the source of invest-ments and inveshnent capital forthe region: it flows pr€dominantlyfromwithin. It has been years sinceNorth America and Europe werecrucial or even very significant pn>viders of technological and finan-cial capital for the Asia Pacific.Japan has been more than finan-cially self-sufficient for a number ofyears, as well as a shong exporter ofcapital to other Rim counhies.l /hatis noteworthy, however, is that Ja-pan has begun to lose ground to theregion's own newly industrializedeconomies (MEs) - fuuth Korea,Taiwan, Hong Kong and Singa-pore. They have become, both as agroup and individually, the largestinvestors in the next four NIES -Malaysia, Thailand, Indonesia andthe Philippines - wherc they ac-count for more than one thftd of allforeign investment (more than theJapanese, NorthAmericans orWestEuropeans).

The first bankin8 joint ventureto be allowed in Vietnam had anIndonesian bank, Bank Surnma, asits foreign partner. Thailand, still adeveloping country with a grossdomestic product (GDP) per capita

of $1,420, has put in place its own forcign aidprogram. lt began last year with a $4 millionhuman resources development grant to thegovemment of [,aos; last Febmary Cambodiareceived $5.8 million to repave a highwaywhile Russia has since been offered $200 mil-lion in rice credits as well as $500,000 in out-right grants.

Japan, South Korca and Taiwan are highlabor cost countries and are increasingly de-pendent on manual and blue collar workers

e6

IHE ASIAN MANAGER NOVEMBEF/DECEMBER '19S2

By Rob.rto H. LlmSGV Professor in Business ManagementAsian Institute of Management

I n May, I fulfiUed my dream of aftendingI the Canton Trade Fair. Several decadesI ago, I had head that it was a valuableI experience, It is a "by invitation only'affair and it was only last year tllat I receivedan invitation.

The visithad a stong and important influ-ence on my thinking that I wart to share. Ihave always known that China wasbig. Itwasonlv as a result of mv visit to the China TradeFaii that I realzed ti\e extent of its size. Theexhibits were ftom the differ€nt prcvinces ofchina, and I saw maruJacturA eleclricalequipment from all the prcvinc€s. The samewith food items. textiled. household waresand c€ramics.

I :ealized that each of those DrDvinces waslarger than all the countries of Europe, Therewerea few foreign traders attending theshowBut the exhibition of goods was for the pur-

coming ftom the region, often illegally; evenMa.taysia is beginning to feel the phch. As forSingapore, it decided some years ago to imple-ment policies specifically designed to discour-agelabor-intensive, low value added industries(precisely the type that so many NorthAmerician business and labor leaders are soanxious to save at public expense). Put in a

"Asean ofbrs its membes anexpandil€ mafiet whlch will sooltrcach 3(X) million people - an evelincreasing goportion of which aremoMng ftonr poverty to rclativeaffuen@."

nutshell, Citibank recendy calculated that AsiaPacific will grow by some $5,000 billion by theend of the century, more than one third of theworld's forccast er0wth.

Within Asia iacific, Singaporc offers its 2.5million citizens the best standad of living inAsi4 ahead of Japar, as measued by the costweighted availability of a basket of amenities.The average salary of Singaporearu CEOs, at$100,000 a yeax, is the highest in the region; thesame holds true for the second manageriallevel. Singapore is in some ways a miqocosmofwhat the Asean nations - Brunei Indonesia,Malaysia, the Philippines, Singapore and Thai-land - that singular region within Asia Pacific,has been, is presendy and might become.

pose of selling to the Chinese - 1,000 millionChinese. Cornpare that with 60 rnillion Filipi-nos or Thais; 2.5 million Singaporeans.

True, sinc€ the boxer rcbellion the Chinesehave not been the important mtity that theydeserve to be. But with the changes of thisdecade, it is a certahty that the individualisticChinese will become a dominant factor in theregional economy and its $owth. like tinysnowflakes collected to form a snowball, theiugg€rnaut is accelerating its massive fu.OnebillionChineseand howtheyliveand diewill makea difference onwhathappals totheFilipino ard the Malays, the Indonesians anltheThais.AsRobertKuokDutit, T ouhavetogive the Chinese r€spect - one in wery forruhuman beings is Chinese."

fiow sh(IJld we D6iticn ourEelv€s b ttisteatityi ItistiLedrepniUtanof thedeasathadringthernsdvestothed%.'Iheydon'thar€mudrbsay on whele the dog goes - they can decidewhat p€rt of the dqj b atbch tlsnselv€s kr -hrt afu that they only oope with how to livewherwer the dog takes tlren" I

resources now account for less than 457o of totalexDort revenues. One mav not be too takenaback that a fu-tl page advertisement in theIndonesian daily Konrpds costs $45,000, or thatIndonesiar motorists pay world prices for theirgasoline (NiSerians pay four cmts a liter.). Itmav not be ideal to contrast Indonesia's foodand export performance with that of equatlyor better endowed African countries whichnow find themselves utterlv deDendent on im-ported grains to feed themselv;s and totally atthe mercy of the vagades of internadonal oilDrices for their hard currencv.'

A similar story holds for ihailand and Ma-laysia, Malaysia's real GDR for exampl€, glewat an average rate of 6.7Va a year from 7977 to1990; its savings rate in 1990 stood at 30% ofGDP and investment at 3570. A master Dlanun veiled in late I qqO iden hfied 250 public sectoractivities, then valued at more than M$16,000millon, to be handed to the private sector by theend of the decade. The candidates includeMalaysian Railway, the Post Office ard thestate-owned car maker Proton: they will allfollow Telekom Malaysia and former publicpower monopoly Tenaga Nasional on the rcadto orivatization.

The six ASEAN countries came tosether in aloosepact in 1%7. Despite lofty sounding wordsand aims, the Asean heaty never amounted tomuch except for a plethora of meetings of min-isters and officials. Although the heaty commit-ted member countries to hade expansion andliberalizatiort, the actual effects were negligible;it is said that the biggest achievement on thatfront was to allow the duty-ftee importation ofsnow plows.

ew AsoanThe lastAsean Summit, held earlier this year

in Singaporc, s€ems to have changed all this.Spearheaded bv Prime Minister AnandPinvarachun, who devoted considerable timeand'energy to the effort (Including a specialnegotiating task force which reported directlyto him.), an agr€ement qeating an Asean Fr€eTrade Area (now known as AFIA) was signedby all Asean heads of state or governments in atelevised ceremony at the end of the summil

To the surprise of all observers, a clear time-table for tarriff rcduction was a8rced on, withsp€cific milestones and no exclusions. Membercounhies will bring their existing tarrifb downto a maxiinum of 20% over the next five yea$,and a complete ftee hade area will be in placewithin 15 years. There is already some opti-nism that it will be possible to accelerate thesetwo schedutes. The Jakarta-based Asean S€cre-tariat was itself shen8thened and its SesetaryGeneml given a sh,onger mandate with the mnland title of Minister

The reasons for these unexpeded changesappear to be numerous. The determirution andsl.ills of Prime Minister Anand of Thailandwerccrucial; theextemal envionment was alsoripe for mov€ment, and it was Anand's genius

altogether. The rcst, of course is history ard thecleatest Dossible demon-

l,ly'hen it was forciblv exoelled from theMataysian Federation 26iea; ago, the "State"

of Singaporc was a s€edy entepot town sw-rounded by swampland. Its alrcadybleak pros-pects deteriorated further when, shortlyafterwardt its main dient - the British Nary- announced that it was pulling out of Asia

stration that poverty andunderdevelopment arenot incurable congenitalcuses to be passed ftomone generation to the next,even in the absence ofnatural rcsowces.

What has taken placein Singaporc is likely toh^ppen, mut at is mu tnndis- and on a much granderxale - in ASEAN as a

whole. Indonesia's performance on the povertyfIont, while striking is emulated to a largeextent by Thailand and Malaysia; only thePhilippines still has to recover fully ftom thesystematic and sustained looting of its nationalwealth visited upon that hapless country byformer Pr€sident Marcos and his cronies. Thai-land is already the lal8est exporter of plywood- from alrnost nothing a few years ago.

Indonesia, again, progr€ssed flom being thebiggest importer of rice in the early 1980s to acunent state of self-sufficiency and is inhoduc-ing advanced biological pest contol techniquesto its rice paddi€s. It moved during the sameDeriod ftom alnost comDlete relance on oil andgas exports to a situaiion wherc these two

THE ASIAN MAMGER

to see this and act creatively on his perception.It seems probable that the major urderlyingfactor was the demise of the USSR and theconsequent reordering of world political f orcesaway from the prcvious bipolar system whereone could play each superpower against theother. That also r€moved much ofthe relevanceof the so<alled Non-AligneJ Movemen! inwhich many Asean countries traditionallyplayed an important role.

On the trade front, the emergence of Europe'92 and of the North American Free Trade Arcaexacerbat€d latent Asean concems that theymight be cut off from those rich markes essen-tial to thet continued growth; nor is the immi-nent prospect of a Japan domiruted economiczone partiolarly cheerful, with its shades of theinfamous "cGprosperity sphere."

Stlat€icdly, the withdrawal of the USSR,arrd the downsizing of the shong Americarmilitary pesence in th€ area it trigger€d, areseen as creating a potentially dangerousvacuum which might no longer contain anumber of long simmering territorial disputes.And the long shadow of China always loomsorninously and inscrutably, even though thatcountry is udikely to get itself into ieal shapebefore the middle of the next cenhtry at best.AFIA is thus in many ways a defensive meas-ure, especialy since Asean countries tend tocompete with each other in world marketsrather than kade amone themselves.

Nonetheless, Asean"offers its membeE anexpanding market which will soon r€ach 300million peop)e, a n ever inqeasing proportion ofwh.ich are moving ftom poverty to rclativeaffluence and incipient middle class status. Ther€gion as a whole is superbly endowed withrich ard varied natural rcsources; it boastsdlmamic financial and capital markets whichcan mobilize dometic ard international sav-ings, as well as a world-scale financial cmtetSingapor€; it is politicaly stable by many stand-ards; its membeE share a free market philoso-phy and a private enterprise orientatiory itswork force is educated, plentiful and hardworking and, its govemrirents have provenover time that they can devise rational eco-nomic policies and hold to them.

The prospects, thercfor€, ale quite positivefor As€an to posjtion itseu at the center of theAsian Pacific growth circle. By the time Chinagets its act together, the six counkies, if tlrey donot faltet should be far ahead. I

Andre Saumier is chairman ofSaumier FreresConseil, a financial advisorv firm, vice chairmanof Montreal-based Alpha Cipital Inc., and a direc-tor of several private and public operations. Heha9 held senior po<itions in the financial servicesindustry including presidentof the MontrealStockExchange, director of the Canadian Depository forSecurities, and director of the Intemational Op-l lons Clearing Corporation.

Anclre Saumier and Gordon Wu's articles oripi-hal lv appcared in the journal The BorderlessEconomy.

By Godon S. t{ulvlanaging Director, Hopewell Holdings Ltd.

ong Kong's performafte since the endof World War tr has been termed by

after 19n" The answer: 198.Depite the lowering of the Union Jack in

Statue Squar€ on 30 Jtl'l.e'1997, Hong Kongwill goon. lt will rcntinue to prcsperas it didaJter 1 982 - and as it kept on growing afier 4Jure i989. Hong Kong will experience busi-ness as usual after 1997.

And here ate my reasons:FlFt, Hor€ Nong's economy and the

economies of the Pearl River Delta comple.ment each other almost perfectly. Since 1978,Hong Kong's factories have steadily movedinland into the Pearl River Delta ofGuangdong. Hong Kong-owned and HongKong pint ventur€ factories now employmore than two million people in the region.Guangdong offers exacdy what Hong Konglacks - skilled and unskilled labor (at reason-able wages), land and c€rtain raw materials.Hong Kong offers exacdy what Guangdongneeds: business contacts and orders, experi-enced management, technological kiow-how, financial expertise and capital.Guangdong and Hong Kong fit each otherabsolutely to a tee.

Socond, Ch|m, in its drive toward mod-emizatiorL has incured debts to the interna-tional community, including the World Bank,of more than $,10 billion. At the end of evervquarter, intelest paymmeand toan paymmtsale due. Hong Kong accourts tror about 50%of its foreign investrnent. China, therefore,has every inc€ntive to maintainthe status quo.If it does not, and the pessimistic views on

r | ffi#:ilffiffTi#ffiH"fflio4 only 1,000 square kilometrcs ofland, andlio& only 1,000 squarc kilometrcs of land, andno rcsourres to speak ofbesides its people anddeep waters around the isles. Hong Kongcarupt even fuIfiU its own need for water -more than 60Ea of it has to come fromGuangdong. Yet at the and of the day it is stillthe tenth lalgest trading nation in the world.Its Kai f irlALport - with only one runway- handles more air ca€o than HeathrowLondon. Its port facilities boast an annualthrcugh-put

-of apprcxirnately 5.1 million

TEUs, second in the world after Singapore.Together with Japan and Singaporc, it boaststhe highest per capita income in Asia.

In 1982, China arurounced its intention ofresuming sovercignty over Hong Kong after197. Subsequent negotiations resulted in theSino-British Joint Declaration, stipulating inessenc€ thah

. Hong Kong will be part and panel ofChina after 197:

. Hong Kong will rcnrain capitalistic asper Deng Xiaoping's "one counFy -two systems" arrargemenb and,

o It will enjoy a high degree of autonomyand wil keep al its financial, iuridicial,commercial and educational systemsintact as beforc 197.

Of cnurse, there were, and still are,,iftels in the ninds of a good manyHong Kong r€sidents - and othersoutside HongKong-as towhetherornot such a system will work. What ifthe Chinese do not honor the declara-tion? Under these circumstances, onewould have expectei Hong Kong seconomy to grind to a halt, trading volumesto dectiie, a"nd people and capital to leave.

But this has not happened. Althoushsome40.000odd people hive ernigrated dirnuallyin the last few years, this is less than 1% ofthepopulation per year ard cainot be called amass exodus. Since 1982, Hong Kong hasexperienced, year alter yeaI, unprec€dentedprospenry

To date, I have been working actively inthe People's RepublicofChina (PRC) formorethan 12 years, and my company is currentlythecountry's largestoverseas investor (powerstations and superhighways do co6t a lot ofmoney). Alter so majry years of hand+halingand dinking zai lais with the PRC official,both rcformen and had-liners alike, I feelthat I car now give you the answer io thequ€stion: 'What will happen to Hong Kong

"China has errery ircertive tomaintain the statrs quo."

Hong Kong come to past the intemationalpolitical and banking communities wouldtale a much dinmer view of Chiru's futureloan applications. This is why China bent itsndes to allow HonS Kong an additional 5&year extension to practice capitalism,

Flnd$ $e cha€eowrin 1997isa politicalone and not an economic one. There ig therefor€, no rcason why the results should beanywheie near as traumatic as what ocqJrredin Shanghai in 1949. Witnessing DengXaoping and Yang Shangkun's symbolic visitto the Special Economic Zone this year, andhaving spoken to many party leaders at boththe Central and Provincial levels, it ls ex-tremely clear to me that the Chinese govem-ment is firrnly commitd to opening its doorsto theWest This is not a to€nd that can easilvbe reversed, no matter what might happen iirBeiiing tomonow: Hong Kong has absolutelyno leason lo worr,./.

NOVEMBER/DECEMBER 1992

Corlpetitlp Aryaptage...IN- NGrrvm

By Mari XondoProfessorAsian lnstitute of lManagement

t theJanuary leg2 suormit of lhe Asedrheads of govemment in Srngapore, i!wa: decided that an Asedn free TradeArea (AFl A) would beestabl ished and

barriers to trade dismantled over a ltyearperiod commencin8January l,1993 (See "Frcm

Swamp to Summit" in this issue.) AFIA isintended to create a single market of 350 millionpeople right at the growth center of the world:Asean.

If successfullv implemented, the effects ofAFTA will be felt by practically every Aseancitizen: ftom the palm oil farmers working aplantation in Thailand to the chief exeotiveofficers ofAsia's principal enterprises and mul-tinational corporations. AFIA signals the startof a new economic game for the Asean coun-tries. And this grves rise to specrtlation on whowill win this eaine. But can AFIAbe a wrn-wrnsame for all olAsean? And if so, what will makeit a win-win game?

why Asean Needs the GameAs€an's old games of economic cooperahon

- such as the Asean Preferential Trade Agreement.rnd theAsean lnd ustrid I J oin t ven tu re -have had liftle impact on intra-Asean hade. Asa result, the intem;l readiness ofAsean membercountries to opt for a new game has increaseddramatically in recent years, in Part due to theincreasine credibiliw and threat - of theEurooeariCommunitv. As seen in the GrowthTriangle venture invoiving Singapore, Malay-sia and Indonesia, complimentarily amongAsean - the basis for intra-resional hade -has increased markedly.

There is also increasing agreement on thelong-term positive effec1s of economic liberali-zation. And extemal threats to Asean have nar-rowed altematives to hade libemlization andcooperation among member nations. Amongthese threats, two are especially pressing: theshift of foreisn direct investment (FD[) to otherregions, and"emergrng regionalism and protec-tionism.

Flr|n StrateAf Structuro and Rivalry.Enhanced rivalry and intensified competition.lndustry structure changes completely. Scooe for intra'industtu trade widens

.lvore Jv, acquistlons, etc..Organizational changes - MNCs setup re'

gionalHQs, new distribution ciannels, etc

Ilonand. Factor creation by bothpublic and privatesector stimulated if

Figure 1

FDI to Asean - the ensine of economicsrowth for mobt ol the Asetn .ountries sincei985 has decreased and moved to: 1) Re-gronal groups such as the EC and North Ameri-can Free Trade Area (NAFIA); and, 2) Otheremerging countries, such as Chira, India arrdVietnam. Athacting external capital will be-come an even more critical concem for Aseancountries in the 190s. Eastem Europe and theformer Soviet Union will compete viSolouslyfor intemational resources. As€an mwt movequickly to develop its narkets to remain com-petitive in the race for investment.

The European Economic Ar€a (EEA - theconsolidated EC and the European Free TiadeArea, or EFIA) - with 380 milion People - isexpected to be fully oprational by January1993.In North America, the NAFIA will even-tually cr€ate a US$6 trillion market with a popu-lation of 360 million. Formal hade negotiationsare shiftine from multilateral discussions -coverins thi entire world (GATT) - concemed

.AFTA would open up am€rket of 35o million

ized by rapid eco

develop di f -ferent tastes

more sophisticated

Related and Suppo.tlnglndustiieg

.Large demand created by AFTAwould stimulate groMh and de\eloP

ment of supplier industries.MNCS would encouEge the formation of

more specialized suppliers, dependingon thelocal content requrrementClustering of industies begins

with long-term adjushnents to bilateral or regional dialogues intended toachievea seriesofquick fi}es. Prctecbonist pressurq. within theseregional groups are intens€. Arrd a credibleAFIA is necessary to counter these pressules.

ThG Es,sence of AFTA is tts "Dynambm'

Static economic analysis shows that the Sainsfor Asean countries associated with the estab-lishment of AFIA are positive overall, butlimited. All static analyses of economic integra-tion - includins that of the EC, however -have historically shown modest r€sults becausethey i8nore the d)'namic effects of economicintegration.

Indeed, the essence of the AFIA Same is its"dynamism." Michael Porter's "diamond"

model of competitive advantage is useful inexplaining this d1'namism. Porter Pirvides fourbroad attributes of a nation that shape the envi-ronment in which local fi.rrns comPete, Prcmoteor imDede the crcation of competitive advan-

challenge. Speed up

.Costs (captalgoods, inputs) go down.Government subsidies

.Knowledge resources tostrategize AFTA develop.Reform of financial sectof induces

. Foreign exchange restrictions scrapped

.Growth triangletype coordination proliferate

.Specialized HRD by MNCs, etc

Fim StrategyStructurcand Rlvalry

THE ASIAN MANAGER

"AFTA is not likely to be anexclusive trade block becauseof strong existing extrare$onallinkages."

benefit Asean region or certain countries.

Asean member countdes - who will rvin?WhichAsean country will benefit most from

AFTA? Or can AFIA - as I have suggested -be a win-win eame tbr all Asean membercountries? Potential winning and losing sectorsare summarized in the accompanying table.The kev comDetitive indicators of Asean countries are shown in a second table.

Singapore, a free trade country with astrongly outwardlooking economv, has treenactively consolidating its position as a "total

business cente/' forAsean since the mid-l980s.The four attributes of the Porter "diamond" are

tage in intemahonally competitive industries.1. FactorcondltloG factorsofproduction

necesary for competing in a specific industry,such as infragtructuie and skilletJ labor;

2. Demnd conditions - the nature ofhomedemand in quantity and quality terms;

3. Related and supporting industries;4. Firm strate$/, structure and rivaldes.For the Asean counhies, AFIA should serve

as their "dynamic advantage," triggering fasterinnovation and pressure to upgrade andthereby enhance development of all four at-tributes to achieve competitive advantage (Seeaccompanying chart.). Mutual reinJorcementof these four attributes further strensthenscompetitrve advdntage. Indu\trial growthstimulated bv increased comDetitiveness andinnovation should catalyze econornic development.

To understand the effects of AFIA, the pri-vdte sector may be categorized into three iec-tors: inwardlooking, outwardlooking andlntormal.

The outwardlooking sector producesgoods and servi(:es that are potentiallv competi-tive in the world market, but it mav not be aornent exporting sector A country with a lalge

Insrd.bokftg

yo'0utwar+looklngSectol

lnfu|nal Socid

B3bl€ AFTA

outwanllooking sector is, naturally, more pre.pared to compete in an integrated market thana country with a large inwardJooking sector.

An inwardJcnking sector usually developsduring a period of prrtectionism and is usuallvinefticienl. Tfus sector can be further dividedinto two sub-sesments: one which can be trans-formed into an outwardlookine sector and onewhich cannot be transformed. Theoreticallv5p€aking, A FTA wi ll encou ra ge tra nrforma honof the former and dislocation of the latter.

The informal sector diminishes as job crea-tion in the formal sector accelerates. AF|A willencourage the informal sector to become anintegral ;lement in the outwardlooking sec.or.

Scena os br Asean Ys. the Rest of theW o d

AFIA is not likelv to be an exclusive tradeblock because of strong existing extra-r€gionallinkages. At least three scenarios ofAFTA implementation readily cometo mind.

The Dynamic AFIA Scenado. IfAFTA is implemented successfullywith the dynamic effects required toevolve competitive advantage for theAsean regon - rejection of regronalprotectionism, inqeased FDI, mpiddevelopment of indigenous compa-nies into intemational, outward-look-ing enterprises -then the Aseancountries will maintain their positionas the groi 'th center of the world, andeventually the rest of the world will

panies - which will not be comDetitive - willgrow at a slower pace; and the growth of out-wardJooking industries may be displaced.

As the fiIst scenario suggests, AFIA can bea win-win game for Asean as well as the rest ofthe world. The second scenario suggests thatthe establi5hment of AFTA i. a losical ifnotunavoidable - decision for Asean. The thirdscenario suggests, however, that the success ofAFIA depends on how AFIA shapes up asthe "dynamic advantage" for each membercountry, so that the dynamic responses re-quired to create competitive advantage bypublic and pdvate sectors are triggered. Un-less AFIA provides sufficient Drcssure tostimulate nttions and their enterDrises ro oe-velop competitive advantage - and unlessAFIA effectivelv promotes enhanced outward-looking sector growth the benefits of AF|Awill be limited, and may even be harmful to the

from their erowth.The No AFIA Scenario. If AFTA is not im-

plemented or is ineffective, then theie will be nod).namic effects andno encouraging growth ofthe ouhryardjookin g sector ftrotectionist tradeblocs may appear - which will rcsult in thedecline of ,{sean exports - and FDI will simplygo somewnete els€.

The NoGDynamlc AFIA. If AFIA is imple-mented, bul fails to trigger the dlmamic re-sponses required to create competit iveadvantage and growth in the outwardlookingsectot MNCS - from their home bas€s maydominate the Asean market. Indisenous com-

NOVEMBEFYDECEMBER 19S2

hrdd.looLlt8laclol

0utwa6d4iogSectot

lnftfinal S€c-tor

Aftsr AFTA

TheAFIAgame is simple: allAsean maru-fucturins companies compete in a virhlallyutit-fr6, "ninea -att."t. io obain this obir-tive Asean will:

. Throush thecorffnon Efiective l\efersrtArarif (CEpl rttetne, progressively rcducetariffs to a maximum of 20% within five to eightyears, and to zera to five Percent over the;lr@uent sevm-year period for all manulac-tured products with an Asean component con-tst level of 40% or mor€;

. Non-taiff barden induding all quantita-tive r€strictions will be gradualy eliminated;

. A! accelerated CtrT schene will be applied to fifteen ':omrnodity gouP6: !'egetableoils, cemgt, chemicals, pharmaceuticals, fui-

welldeveloped, enabling SingaPor€ to taketutl advantaieof AFIA. lt is likely thatSinga-pore will continue to attract the rcgional head-quarters of multinational firms establishingoperations in the region. Indeed, Singaporeneeds such "quasi home base" investments tofurther expand its welldeveloPed economyAFIAwill help SingaPore comPete with HongKong, which has Guang Dong Province (aregion large enough to be an As€an country),nl the relt of China at its bacldoor. Privates€ctor respons€ to AFIA is enthusiastic andadiustments by government as well as Privateenterprise are well underway. Singapore isvery well positioned to win the AFTA game.

ihailand and Malaysia will also play well.

"Thailand and Malaysia will alsoplay well. Both have madesubstantial plogress inindustilalizing theit economiesovel the last seven Years."

Both of these countries made substantialprugress in industrializing their econonxe.ovei the last seven years. They have strength-ened the four athibutes of the Pofter "dia-

mond" and growth in the outwardJookingsector of theiieconomies has vastly increas€dtheir intemational comPetitiveness.

Malaysia, with a population of onlv 18million and a relahvelv well-pard labor forceneeds AFIA for furiher eipansion of itseconomy. Pattemed after the industrial devel-opmentbfSingapore, Malaysia is shifting from

. Coopqate in such ar€as as: develoPmqtof rules to enzure fair comPetitiorr rcmovetechnical baJrier to h-ade ftamonization ofstandads, r€ciprccal rccognition of tests andcertification of prcducts) ! uiarly conductmar:roeconomic cons'ultations and Povide fcrindustrv ard inveshnmt cooperatioD indud-lng tlre i'romotion of vantue

-capital.

development of the pet-rochemical, engineer-ing and e lec t ron ichdustries as its mai)rengines of economicgrowth.

Industrialization ofthe Philippines and In-doriesia lags behind therest of the region; i.e.,the Porter "diamond"

it in general, less devel-oPed. For some indus-hies, there is a chancethat comDanies based inother Asean countrieswill crowd out Poten-

tiallyoutwardlooking indiSenouscomParuesHowevet although the AFIA game is about tostart, its implementation will not be comPletefor 15 yeals. lf these countries can attancomplementaritv (their own competitive ad-vaniager) within Asean and iftectivelycatalyze dynamic privates€ctor r€sPonse toAFTA within this time frame, the game can bea win-win undertaking for these countries aswell.

The lndonesian government is committedto further liberalization and derezulation, and

labor-intensive indushies to Prccessing indus-tries to fuIlv exploit its abundant natural re-sources. Malaysia is actively creating advancedcompetitive factors (such as developing higNyskilled human resources and hightech facili-ties and nufuring suPPort industries) whichwill continue to athact technically advancedFDt.

Thailand has the second la€est poPulationin Asean, and is backed by the exPanding Baht-economv region of Indochina. Thailand envi-sions it;U t;be a financial, tradeand tourismcenterinitsseventhfive-yearplan('192-97). Itseconomic structure has rapidly taken on thecharacteristics of the newly industrializedeconomies, and the government is Pursuing

tizer, plastics, rubber Products, leatrcr prod-ucts, paper pulp, texti.les, eramics and gl"s"proarjct, sdns;na iewe erv, copper catlrcdes,Lt""to d-a *ooaen ard -i6n fumitr:re.The tarif& on thee commodities will be rc-duced to20% orlessbyJanuary 1,1990,and willbe furth€r r€duced to 5% or less by January 1,200;and,

Although tlre @ncept of AFIA is simplein reality, itE not as simpieoras fairas it idei.llyshcnnd-be. To make suieAFf,Aevolves inb agar€ worth playin& six issues must be ad-

. EstablishinslocalconE tEquir€rnenblor/v enough to at6d FDt, Uut ttigli€ntorrgh oprerent maior trade deflectioru'

. Derefo'Ping a cnncise €rdusion list toassue AFIAS intsgity;

. Determinini whaher AFTA shouldevenhrallv indudi arriculh.ue and services,whichacilrntformolethanhalf ofASEAN'souhr.lt-.

Simihly, determining wh*her capttalgoods and rnapr intermediary goods shoddle indudd in the accelqated CEPT - with-out liberalizing inputs, the [b€ralization offinal qoods can nd be achis/ed;

. -Mnins

ttle natue and scoPe of tlle'Rules for Fai Compettiol" indudin8 e(-portdutiesanddrawlad<s,gov€rnmentzuFinrt or subsidies, public procurements,dumpine and right of estabtishrrElt ard,

. ' gstablishing progams and prccedures

to: 1. attain tarsets ard deadlines to (IEtewhat has been called an "announcement ef-fed' (i€., the armqncem€nt of a deadlir€stimu.l,aie6 adiustnerrts by the Privab sectorIeading b more e{ficienL comPetitive rnanu-factudns and as a r6ult of nrotivatint theprivab sector to lobby ior more npid tariffieductioru 2 neutralize bweaucrafc road-blocrks; 3. sh€ngthen the t$tihrtional set-uP;an4 4. establish h-ansparttt meclEniffns atsetde disrutes.

has been very successful in its efforts to athactMNCS - not onlv in the export s€ctor - butalso to service its large domestic market (See"Attractinp, Foreign Dir€ct Investmenf in thisissue.l. InAFTA,Indonesia- withthelaBestpopularion in the reglon - wilJ playanimpor--tanl

role as a prime source for both naturalandabundant, economical labor resources.

The Philippines has experienced a sloweroace of induitrialization because it missed themost r€cent FDI wave due to Political instabil-iw and nahrral disasteG, the inwardlookingoiigopolistic nature of key sectors and itseconomy's pressing debt-sen/ice

The Philippines' Primary asset amongAsean courtdes is its human resources andtheir high level of educational attainmentSinceit willprobably takeal least a Senerationfor other emerging countries to catch uP withthe Philippinei educational)y, this factor willremain a critica I com petitive ad va ntag,e for thePhilippines over the next 10 years

Thi recently installed Ramos governments€ems set to further liberalize thi PhiliPPineeconomy. Some observers believe that the

THE ASIAN MANAGER NOVEMBER/DECEMBER 1992

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Shining Through For The Filipino

I

Countries

Inflation (%)Power Rates (P/kwh)l\4inimum Wage Rates (US$/day)Lending Rates (%)Manufactu ng Growth (%)Foreign Investments ($M)Exports ($l\4)lmports ($lV)Foreign Debt ($B)Gross Domestic Savings (% of GDP)Capital Formation (% of GDP)Pedapita GNP ($)Population (M persons)

d c R c P a v n g c d c t u p

The Pdvate Sector Role

Co0ntry

Sh€i'pore

Malay�8h

nta||and

Phmpphes

lnlonoda

Op"ratl"" l".ny*. fo, tt " tt"tt C"ntury

AFTA - Asean Free Trade AreaCEPT - Common Effective Preferential TariffEEA - European Economic AreaEFTA - European Free Trade AreaFDI - Foreign oirect investmentGATT - GeneralA$eement on Tariffs and TradeNAFTA - North American Free Trade Area

Thailand

5.4L.77

3.143.5319.08 .5

2,23627,79237,747

31.4*36.8*

L,420.O56.92

lndonesla

9.31.34

o.&7.220.413.4*

96429,01625,420

67.9137.4*36.5*

330.2777.58*

protection ftom competition, AFIA will prob-iblv lose key players (i.e., there wi.ll be toomanv exclusioir #ctors) and as a result, fail tocreatL the dyramism rcquted for AFIA torival other regional grouPs.

Exclusion ftnm CEPT means that not onlydoes an industry deny access to its market, italso closes the door to foreign investment,which will subsequently seek a more hosP!table environment.

. Pr€paE well, Develop an AFIA strateglrand Move Eady. AFIA will direct\ inllumcethe shuctures of Asean manufacturing indus-tries. Corporate stlategy must thercfore ad-dress the organization's capacity to comPete inthe AFIA envlonment. Early movers areusuallv the winnels.

. fake the Inttlatlve In lmproving HomeBase CondltloG. Home base conditions be-come inqeasingly imPortant in determiningvour competitiveness with other Asean enter-brises. The private sector must take the initia-fone requited to imptove training resealch anddeveloDment of inft ashucture.

. Pbrtlclpate In Shaplrg AFIA. The pn-vate s€ctor can influence AFIA rules so thatAFIA enhances the counhl/ s competitive ad-vantage within the r€gion. Close - and con-tinuous - dialogue between Sovemment andthe privdte sector is critical in developing thesupport rcquir€d for successful AFTA imple-mentahon.

AFIAis intended tobe a win-win game forAsean membet countries. How AFIA rulesare d eveloped, how eftectively they are imple'mented and how dyMmic the AFTA game isplayed are the maior cha-llenges for Asean'

ihe essence of AFTA is the "dynamic ad-vantage" whjch provides pressure'for innova-tion, iirprovement and chinge. Whereplayersrespond positively, AFTA will materialize suc-c"""nrlty ut a aI -itt "njoy the Potential to winCountries with rapidly growing outward-looking industrial sectors with strategic de-velopment programs - intended to enhancetheii intemational competitive ad vantage -

will enjoy the most rapid pace of economicdeveloirment. I

Singapore

3 .51.95

20257 .405.50

4,48959,663

N.A.46.1037 .40

t2,962.4O2.76

Malaysia

4 .41-.32

7.213.1

2,90234,442

19.530.235.7

2,320.O18.17

Phlllppineg

18.72 .77

3.644.3624.3N.A.

5304,6t2

12,80630.4516.620.o

760.062.r

country should aim at becoming the "ltaly ofAsia" because of its superioriw in fashion,food, furnishings and e;tertainment. lf it issuccess fu l in a t ta in ing th is un iquecomplementarity and if the lhiliPPinesplays wisely - A FTA may Present the secondchance for this once dlrlamic economy to catchup with the rest of Asean.

But the key players of the AFIA Same arethe orivate sectors. How do they win theAFTAgame? Porter suSSests three stePs: fust estab-Iish your own corporate comPetitive advan-tage; second, improve the national competitiveenvironment oiyour home base; and finallydevelop a competitive strategy for otherAs€an markets. Here are some tips for com-panies intending to win the AFTA game.

. VlewAFIAa a chalblEe oropportunity.U you are the manage! of a comPany in anoutward{ooking sectol AFlAprcsents a Sreatopportuniw. Actively seek ways to take ad-viitageot it. tf you aie in the inwartl-lookingsector, AFIA is a challenge. You must findwavs to convert your (ompany rnto an out_*ardJooking entirprise. Uiriv;te secbor lead-ers demand - and obtain -

.government

Wlnne|s

fieavy industries such as industrialchemicals, iron and steel, transportequrpnent

Laborintensive sectors like woodproducts and capital intensive machinerysedor; glass, chemicals, electronics,fedilizer, plastb, paper & pulp, rubberproducts, vegetable oil

Food, lgather, metal and non"rnetal,electrical machanery, cement, fertilizer,gems & jewellry rubber, textales

Capital intensive pfodudion includingnon{etal manufacturcrs, elecrical andnon€lectrical machinery, fertilizer,pharmaceuticals, paper & pulp, rubberproducts

Labor - and rcsoutce - intensileindustries, tenjb, wood pfoducts, paperand pulp, cemeflt, chemicals, vegetableoil, copper cathodes, leather, pharmactu'ticals, dastics, rubber Products

L(,3€rs

Labodntensive industdes suchas textiles and clothing

Food products, nontnetal ploducts,cement, gems and je{/ellry

Palftoil, wood p.oducts, mehinery,professional goods, glass, coppercathodes, plastics, paper and PulP

wood p(oducts, industrial chemicals,gass, vegetable oil, textiles

Food, nometals, uansport equiprnent,gass, lertilizer, gems and jewellery

sou@3: A$ &6iN lury 1992 & hd! .l al. {19911

THE ASIAN MANAGER NOVEMBER/DECEMBER 1992

Very relaxing in bustling Banghoh to

enter cdlm, airy world ofThe DusitThani.

Wry idzally located in the centre of

the city.

Very luxurious the guest rooms and

saites. Wry rich the decor. Wry traditional

the Thai opuhnce.

And uery dclicio*sly appetising the

eight restaurant. . . . . . . .

Very liuely the'&tbbla Videotheque.

Very sophisticatad the Library t9t8

(read nouel ouer cochtail).

Wry xirnuhting the Fitness Centre

(gtm, tennis, squash), (from time to time).

Wry courteous tite seruice (aluays)

Verily, there is nothing that quite

comDares with The Dusit Thani.

tfueDtrsitThani3 { \ C j r o r T H A

4 \ D -

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BANGKOK RESERVATIONS CENTRE: TELJ (66 2) 2]8 4790,5, TELEFAX: (66 2) 238.4797, TELEX] SI I70 TH

o u s r { E s s ( D R R 0 E 0 F P 0 l r N t I t t s

By Franclsco L. Roman, JLDon Andres Soriano Distinguished Professorof Business lManagement

ll nations compete with one dnother forxarce ioreign funds. For instance, theUnited States - hardly a capital-scarcecountry - carrie\ a substantial dehcit.

munications, bankinS services and transportsystems and available conveniences like expa-triate housing and easy access to money

bankers are often on the front-line of FDl, andoften represent MNCS in joint venture negotia-tlons.

chargers; The Indonesian government has success-o a diverity of investment opportunities, fully presented an attractive image to foreign

which over the years has shifted away from investors. For example, its central bank - as a

This deficit is financed in part by foreign invest-ments from Japan desPite the local outcryagainst the purchase of Columbia Records, theRockefeller Plaza and the Seattle Mariners.

The quest for foreign dircct investment (FDI)is no less an acute need for less developedcountries (LDCs), which usually lack thewherewithal to intemally finance their Srowthand industrialization.

Not too long ago, investments, esPeciallyfrom multinational corporations (MNCS), wer€coruidered somehow "tainted;" e.8., represenFinq vestige of colonidlim and North-Southe""ploltotlin. Or, the monev wa. "hed down"bv;trictive clauses - sucli as the requrementto purchase equipment through the MNCwhich pru\'ided the financing.

Nowadavs, monev is money and fDl ismuch sought after by LDCs. Because LDCshave discovered that their domestic savingsbae is too small to sustain investment\, Possl-blv as a result of uneven income distribution;thin the country. Or, LDC stcxk markets mayserve as vehicles of spec-ulation not of caPitalformation, but becaur stockbrckers and stock-holders treat the market as part of a Privateportfolio and not as a Public good. Even thecitizenry of the LDC can exacerbate the scarcityof investible tunds thrcugh caPital fli8ht. So thealtemative of funds from the once-malignedforeigners now seems more palatable.

This change of heart represents a reaction tod change in the polihcdldnd economir en vironment. The world is more interdependent, it isnow a global marketplace - or a borderlessworld - according to Levitt and Ohmae. Andthe global corporition (GC); a.k.a.. the oncevillified MNC, is now the Partner in a strategicalliance with the LDC qovemment.

The global corporation not only is a source ofFD[, it also represents a network for linking the

lndonesia: Flom the tradltlonal to themodem state.

LDC export-producers to the high-income mar-kets of North America, Europe and Japan.

The GC orovides the inftastruchfe for sus-taining the subconbactors of parts and comPo-nents for elobal industries such as automobilesand electronics. It is also a valuable informationand communications system which tsacks fi-nancial and market ttends. Little wonder thatLDCS vie to athact FDI.

The Indonesian Expedencelndonesia has been relatively successful in

recent years in attracting foreign capital The"leap forward" came between 1989 and 190,

when FDI increased from under $5 billion toalrnost $9 billion. Dudng theGulfWat Jakar-ta's five-star hotels remained full not so muchwith tourists but with visiting business consult-ants, joint venh.rre seekers and intemationalbankers.

Indonesia's govemment also recendy re-ceived the "seal of good housekeeping" ftomthe intemational funding agencies. For exam-ple, the World Bank country rePort on Indone'aia cited the courtry' s efforts in oPening uP theIndonesian economy and in reducing poverry

lndonesia's success to date in attracting FDIreflects several "haditional" factors:

o cheap labo1, relative to other comPetin8countries in Asia;

_6

a an abundance of nafural resources -such as land to site industrial estates and exportprocessing zones;

o a reasonably welldefined and transpar-ent lrcdv of corporate intemational law whichincludet for instance, procedures for foreignexchange repatriation, ,oint venturc rclation-ships or mandatory labor practices.

. a 5ti l lsmall. but dnamic and af€ressivebusiness communiry which includes export-oriented and globally-minded local conglom-erates seeking strategic alliances with MNCsand CCs;

. a corc inlrastructure which continues to'athact investoF (despite recent signs of strain),and which includes reliable power and com-

^S ,ort

minenlt to a variety of agribusiness pnrducts in maintaining the flow of FDI. The Bank ofsuch as orchids and hrna,aswell as to the usual Indonesia (BI) has proved quite ruthless inelectronic assembly plantj; and, correcting problems - once a cons€nsus is

a a domestic market which is r€ady to reached. Thus in earlv lqJ'I. the monetarv au-takeoff dependent on a middle-class - thorities intervened to squeeze liquidity fromwhich ranges from the wealthy famiJy mem- the system, and to dampen currenry specula-bers of the conglomerates to a growing cadre of tion. BI acted in the full knowledge that severalprofessional managers with MBAs; down to banks and highly leveraged conglomeratesordinary banl clerks and food stall operators. would suffer as a result.

The list can go on, but it is a familiar list of The government itself stands ready to take"key sr-rccess faitor"." And one must pav them calculatid risl's. For e,.ample, it suciessfu-tlvtheippropriate lipservice, because ihese fac- expelled the D.rtch from th! IGGI Unter{o;-torshaveindeedworked.Manycountries,trum ernment Group on lndonesia), the coruortiumJa pan a her World War l l, to the A":;a nNICs in the last two decades, havetravered this Dath to successtul eco

"The willingness of intemationalnomic development. agencies tO aCqUieSCe tO IndOneSia'S

In the process, these successfulcountries aitracted their fair share (or OffiCial eXplanatiOn bf eXClUding themore) of foreign investments. ln the1qe0s,'rhailand appears somewhat Nethedands from the lGGl implies aahead of Indonesia. ir the- eves,of strcng negotiating postule on theforeign investors although both theThai;nd rhe foreign buiiness com- paft Of the IndOneSian govemment."munities are currently evaluating theability of the post-Suchinda govem-ab lty ot the post-Suchrnda govem-ment to "make-up" for the events of May. The of govemments which oversees the disburse.Philippines istryingto "catch-up" in the taskof ment of public sector ard to Indonesia. Thiswooing foreign investors after several tlau- decision was made in the wake of the adversematic years of lost opportunities and bad pub- reaction.intemationally to the EastTrmoraffair

haditional commodities like lumber, oil and key govemment institution - has been critical

licity. The willingness of intemational agencies andCovemments thus play a key rcle in athact- their govemments to publicly acquiesce to In-

ing and keeping FDI by promoting these com- donesia's official explanation for exctuding themon key success factors. The debt crisis of the Netherlands implies a strong negotiating po6-1980s, following fast on the heels of the oil crisis ture on the part of the Indonesian government.of the 1970s, severely undermined the notion As a result, oveGeas business tends to viewthat sovereign countries - unlike private cor- Indonesia favorably. It enhances the image ofporations - cannot go bankrupt. A stable stability to have had only two heads of state ingovemment, sourd economic policies and a thelast,l0orsoyea$. Moreimportant,politicaltrack record of effective policy implementation stability permits economic change. The Indo-goa long way inassuring nervous intemational nesian teamofbankert economistsand techno-banlers thattheirmoney is in safehands. These cnts have successfully managed to keep a

THE ASIAN MANAGER NOVEMBER/DECEMBER 19S2

balanced budget (as constitutionally man-dated), to diversify exports out ofoil and to Pryopen the domestic market.-

The Indonesian govemment actively pro-motes the concept of a "Fowth triangle" - acomplex of businesses involving th-rce coun-tries'- Riau (Batam, Bulan and Butam) intndonesia, Singapore and Johore in Malaysia(Therc is an undarstandable emphasis on theIndonesia-Singapore angtes.). Bui therelation-ship is further complicated because coopera-tioir must be achieved amonq the [hreegovemments, their leading conglo-merates andother ioint venture partners from Japan,America, Eurape and Aushalia.

Finally, the government continues to Prom-

"The more sophlsticated 'wotl&

class' global colpolations notonly explolt markets and set uPfactories, they bulld netwolks."

ulgate its secular ideology of Pancasila (9eThe^iqn Morcger,Wternber&ober 1992.) as avehicle for long+erm stabiliry The five Princi-ples mcourage conrnsus and a sens€ of na-iionat discipline in an otherwise diversecourtrv If Pincasila pe$ists into the 21st cen-tury, it iTray rcflect a nitional vision ofdevelogment that will do far mor€ to make Indonesiaan attmctive trvestment than ary fleeting ad-vantage such as low-cost labor or a ny Packageof investment incentives or other ind ucemenEto rnvestment.

Somo ThoorlzlngThe foreitn corporation is often the inter-

mediary Hween the country and the caPitaltllat it seeks. So a natural question to ask i5:Why would the MNC inv*t in a Particularcountrv?

Obviowly, access to low cost factors ofproduction, such as cheap labor and inexPen-iive rpal estate, plus tax'breaks and effiiientinfrastnrcturc, a[ improve the proverbial boFtom-line. Risk weishted rchlrn on investmentis still the fundamental, theoretical - as well aspractical- reason for investing in any country,developing or otherwise.

Nonetheless, some thoughtfitl observers ofintemational hrsiness suSSest four differcnthoad categories to exPlain the behavior ofglobal corporations making intemational in-veshnents, particularly in LDCs:

a The rg€onndd" ll|lsctor, Corporatioluconstantly search for untaPPed areas for in-vestment. China keeps opening and dosing;Eastem Euope and Vietnam are relatively

. Ih3 "ollgopolbtlc" comp€tlloG Sevelalelobal hdustries, such as foods and soft drinks,iomputers and automobiles, telecommunica-tioni and heary equipment arc made uP of asmall numberof very largecomPetitonwhichdominate their Dalticular industries. The sec-ond tier - nade up of many, much smallermedium sized firms - probably will notmatter in selecting fOI tirgets.

'The large

corporatioru arecharacterized by comPetitive,market-buildhg behavior. If Toyota enterChina, C€neral Moto6 must maintain a Ptes-

ence as well. ITT and Sie

new areas for investment; Burma is still aclosed economy formost FDI. These countriesare "green or fi€sh territory for the forcigninvestor.

While global corporationsand global banksarc the principal vehicles for FDL but theyhave - and will continu e to have - their ownstrategic objectives in their use of investments.

MatcFMaklngSo the process of FDI involves a fit between

a countn/s facto$ and thecorporation's shate-gic inten;ts. U nfortunately, low<ost labor andtax incentives are f.ut as likely to bring in thecarpetbagger as they are the Feenfield inve-tor- On th";other h;d. unlesa the LDC buildsun its middle class and improves income dis-tribution, the domestic mirket is unlikely toDrove attractive to the oligopolistic competitor.'

The network builder-is'a somewhat morefavor€d inv€sto4 unfortunately, the behaviorof the network builder and the carP€tbagSerare to a certain extent indistinguishable, sincethe long+erm strategic intent of the networkbuilder is not immediately evident.

Howeve4 the networkbuilder operates in away that sets it apart from the carPetbaSserand other investors. For example, theJaPaneseautomakers are known for their lonS+ermrclationshiDs withtrusd and reliable subcon-traclon and component manuJactuers. Andthey become an integral p6|It of the keiretsunetwork. However, the behavior of someautomakers in Asia suSSests that they arc un-willing toHome too dePendent on any singlesupplier in any one country.'ihus.

the ;semblv or rnanufactue of en-gine blocks, transmission Parts, electricalequipment, etc., is often duplicated within theA.ban rcEion. The MNc o; ff, with its inter-nal network, is in a position tobargain aggres-sively with its suppliers and to Play off onesuppter against another, or even one countryaeiinst the-other. Treating a subcontnctor likea-disposable diaper is hardly evidmce of aperminent ptacd in a dobil network Ofiourse, the automakers themselves point outthat withdnwals ftom a country are only tem-Dorary, as in the case of the Philippines andttrini, and that their strategy is 6iilt on th€long-term. Only time will te[.

The Reallty: Had Beglnnlng AheadThis all seems to imPly an automahc Proc-

ess which matches a counbys needs to forcigninvestor interests. Nothing could be furtherfrom realiry Countries and conglomerates -

and GCs and their bankers - must face oneanother and negotiate long and hard to set uPa joint venturc and to bring in the capital. Thestrensth of the LDC host country govemmentat th; negotiating table depenhi on severalfactols:

1. Its farniliarity with the MNCs homecountrv laws and policies wherc the LDC'seconomic and trade attaches can play a rcle.

2. The cohesiveness of the different 8ov-emment bureaucracies and ministries - suchas the investment board, fiscal authorities,trade and export departments, etc. They must

mens are battl ing overEastem Eurcpe as arc Coca-Cola and Pepsi. DePendingon its rcsourres and its shat-eS/, these large corPorationsmay be pioneers or "prime

movers" in opening up acountry o! a rcgional marketbut the other large firms inthe industry will not be farbehind.

o The 'nsftYork bulldo?."The more sophisticated,

"world class" globat cor?orations not onlyexploit markets and set up factories, they b' 'ildnetworks. The automobile comPanies estab-lish their karelsus consisting patly of comPo-nents supplieE spread across the globe. Firmsin the advertisin& cosmetiG and fashion in-dustries "think global and act local" in ceatingand in imptementing worldwide inarket strat-esies. The sogo.sosftrs trade as much in accurateaia tirnely

"information as they do in goods

and seruices. The elobal banks have trans-formed money into-an el€ctronic commodity,alrnost instantaneously tra$ferable. This 9?eof investor still seeks new prcducts, new mar-kets, new supplierc; but only as pad of a globalnetwork. With the expansion and expense ofsoDhisticated cornmu-nications and informa-tion technoloqies, the network builder is oftenmuch soughiafter by the LDC which other-wis€ could not link up with other comPaniesand countries.

. The ro3ourceuslng "carpetbaggor"

Unfortunately, stodes abound ofinvesto6 whobring into a country obsolete equipment (tex-tiles); or of companies which transfer opera-tions in toto ftom one country to the next lnpursuit of cheap labor (garments). And thereare the MNCS which bring in and promoteproducts which are prohibited in develoPedi:ountrie (toxic fertiDers and harmful dnr-gs).These instances ar€ presumably the excePtionrather than the rule, but they regrettably occurwith sufficient h€quency to give FDI a badimage and to prclont the old image of thefor€ign corporation as an exploiter, not as aninvestor.

.IHE ASIAN MANAGER NOVEMBEFYDECEMBER 1992

*l*, do 1ov /rov,r luali\?

Tirst, pu{ qour Vwa* iv*rz'the u.rork uo (b.)to*t se 1ol4 care,

Nltug unllgbd\dov*,ob' ihc uuviur in6.

@f@purdfortrwilt 5h0!(r ?vov,1ee.9o qoorr u\wos\ \osee

Ito.+ +he- ['ruit { y6ur laboi-vteens lvr iU Otrm -tinnebe.Sora \ouv\ rvca).

lfr .,eu ccv\ do +V\i9 ,lVreri euerl pno&et thatornriesqour sulmbo{ witl betrultl /ed.That rs hour

wnw

pr€s€nt a consistent po6ition at the neSotiatingtable.

3. Th€ willingness to play the negotiating"game'bybringingothelMNcstothetable-

an effective tactic with oligopolistic investors,for example. Furthermore, knowinS the lastbestdeal which the neighboring LDC extractedfromtheMNC providesa "benchmark' forthefinal contract.

-

4. The "strategic inteng'and managementcapabilities of the host country govemment,specifically whether goverunent can Play anactive role- not mercly in the negotiations butalso in the ownership of and participation inthe ioint venhle.

s. The strength of the LDC fim, partio-

"lndonesla ls a rich countty witha dlsclplined govemment anda flvFyeal plan that cleady laysout the load to growth."

larly if the pint ventue partner seeks somemonopoly power or political connection.

6. The abilitv of the LDC to establish a'win-win" situation, particularly if the LDCexpects to build a long-term rclationship.

That said, the historical !€cord suggests thatgood deals do go bad over time, pardy becaus€of changing expectations and changing situa-tions. Vernon calls it the "obsolescingbargain."

Wels prcvides the classic example: Aproduc-tion sharing agreement for minerals is basedon a mutua.lly acceptable lont-term price; thegovemment at the time the agreement wassigned was interested in the stability of rev-enues accuing to its coffem. Butthedealcangosour if the price of the commodity unexpect-edly and npidly ris€s. Since the oil crisis of the1970s, changes in the price of copper, for exam-ple, have wreaked havoc on presumably weUthought-out and carefully qafted agr€ements.Acontract, like a Pladuct, often becomes obsclete ove! time.

Ruts ln the RoadIndone6ia rcmains a rich country, with a

diriplined govemmenti its five yeardevelopment plan clearly lays out the rcad to gr,o$'th.Nonetheless, the road to athacting further FDIis crowded and there are thjee new obstacles toovelfome.

Ftst, the stardard factors that Indonesiaand other countries use to attrad forcitn in-vestmmts arc temporary - wages ris€ withimproved standards of living; e.9,, South Ko-rca. Furthermorc, incentives and inducementsare hardly unique - any courtry can offer asimilarpacka8e. Next, the process of attracting

FDI can exacerbate the counbys economiccycle: 1) Indonesia's economy is Pr€s€ndy indanger of overheatin& 2) the powel tlansportand communications infrashuctue is understrain;3) "bit tickef' proFcts fuel a bonowingfrenzy; 4) prices arc risin& and, 5) the clrrentaccount deficit must be contained, etc. Finaly,"inveshnent fatigue" sets in, even as the coun-try aftempts to rcctify its probtems. ForeigninvestoE thm take note of the country's short-comings, where once they only saw its athac-nons.

Second, each countrv has its own set ofshortcomings to overcome: 1) Indonesia's ecGnomic reforirers have been calling for furtherliberalization of key industries and markets; 2)

another shortcoming is Indenesia's human rcsou!€es - itsworkforce is not English-liter-ate; its skilled labor force andsuDeruison are onlv a smallpait of the whole, ani is Indo-nesian management core isstretched thin; and, 3) the Indo-nesian govemment is strivingto transfer the gains of gowthaway ftom the conglomerates- which dominate key indus-tries - to smaller enterprises

which constitute the bulk of the employedpopulation. Policies on small-scale cr€dit fi-' '

smallnancng, aSnousrness lmKages wrtnfarmers and rural industrialization uoietls aleboth pouhcaxy and econofiucary atra(nve.

UnJoltunately, the la8 between overcom-ing shortcomings and rciuvenating the intercstof the foreign investor qeates a dlop in capitalinllows. For example, approved forergn in-vestment in Indonesia in the first half of 192,at US$3.4 billio& rcpresented a steep declinefrom the 191 total in the same period of US$6.5billion.

Thid, productivity ard specialization stillrcprcsent the long+erm foundation for con-tinuing to attrad FDI. l-owco6t factors will notgenerate pioductivity; but well-hained hu-man resources will. The time, cost and effortEquired to upgrade human resou(es neces-sarily results in specializatiorf at least in themed'ium term. And Droductivitv thercforetakes Dlace at the indu3trv level Al Porter hasstated': "Theae are no competitive countries,onlv competitive industrie." FDI therefore isindGtry drivery global corpontions are in-dustry based. Often these MNCS or (s prc-fess to be country neuhal in t€rms oforigin andownership, and thus focus on industries forinvestment and market entry.

Pos3lue ew Dl]€ctlo|RThe tried and tested methods for athacting

forcign investments may by now be tired andtrite. On the supply side, ffs are s€ekingindustries which are integrated, skilled, spe-cialized and competitive. On the demand side,LDCS with a large middl€ class (as a propor-

tion of the total population) rep!€s€nt attrac-tive markets to foreim investoD. Here atethree suggestions to airact incIeased levels offorcign capital:

One, f ocus on the industry-Govemmentplanning tends tobe maqHonomic. ktolsare too broadly defined; e.g., "non-traditiona.l"

exports. Resoures are scarce and efficiencyreouires specialization.^For

the private sector, Porter prcposes fourconditions - a comDetitive induskv with"world-class" standarils, a sophisticat;d con-sumer base, skilled ard innovative factors ofprcduction and an integrated network of rcli-able suppliers.

Two, build up the domestic market -Many a forcign investor has floundercd tryingto capitalize on China's "one billion" market.The i€latively wealthier economi€s of Singa-pore and Malavsia on the other hand areimaller than Ctiina, but they possess a largemiddle class with a taste for a diversity ofDroducts.-

The Door make unattractive customeD.Govemment policies should be dir€cd tobringing morebf the popul,ation into the lower-middle class, rather tl|an ptoviding more in-come opporhrnities to an at€ady prcsPerousupper middte dass. Economic and politicalself-interests coincide when a country succesgfullv expands its middle class.

itra€, differentiate, then collaborate -Industry specialization should qeate a prccessof selection for FDI which may in tum qeate a"win-win" sih.ntiorL since some industries insome countries will perf ormbetterthan others.Some foreign invesiols unforh.urately take thenaive view that, "All Asian countrie6 are thesame;" many more take the simPle view that"Asian counhies are only good for cheaplabor." Dfferentiation of industries, skills,products and market preferences will improvethe counbys attractiveness to FDI.

At the same time, collaboration can takeolace in the context of competition. MNCsirllow different units within tieir network tocompete in productio4 while they cooPerateon product research and desigal.

The Asean shategy for tourism develoPment promotes a package of counhies to visit;it neatly side-steps the Poblem of Fomotingthe "same" exotic locations to the forcign hav-eller by designating a "yeal' for each counh'yin Asean. At the same time, individual cour-trie6 will continue to compete for tourists. Butthey urill also discover areas of collaborahon:Singapore and Indonesia Prcvide different at-hactions for the tourist.

The goal is to avoid cut throat comPetition.For instance, the airline indwtry is relativelyundifferentiated, especially in the UnitedStates. So price is the primary competitiveweaoon. \A/hile pricecuttins benefits the con-sumir in the sirort run, c6nsolidation thatleaves a few (two to four) major carriers willr€sult in higher prices over the long run. So a

THE A.SIAN MANAGER NOVEMBEFYDECEMBER 1992

I

t'

balance must be rnaintained.These suggetions apply to lndonesia as

well. Obviously, the shottcomings noted ear-lier must be addr6s€d. Mor€ importanuy, theeconomic agenda must be institutionaliz€d.The r€putable forcign invBtor tlEt Indonesiadesires will ass€ss the courtry frcm a long-term Frspective that will go beyond the nextsx yea$.

Finally, a new basis for coop€ration between the Sovemmmt and the private sectormust be esiablished. At p!€s€nt, the gov€rn-ment is a close parher with the countr/sleading conglomerates - in developing in-dustsial estaies, in financing mega-P(oi'cts, insfengtheningnegotiatingt€rms,etc.Criticismwithin Indoneia has already surfaced aboutthis concenhation of economic Dower. In theghortrurf theforcigninvetorhinuelf willlookfor an influential local paftrer for a irint ven-tur€, But over the long rur! competitivefactorssuch as Droductiviw and irurovation are moreimporta;t. 'Irhe go;emment should tocus itsassistance on developing these elements.

FDI t)opendenceA new approach to FDI rcquir€s a strategic

pe-rspective. All courtries, developed or developin& r€quirc FDI. The key is to maintaina fine bal,anc€ to avoid becoming overly de-pendent on FDI. This is easier said than done.The US is - to some extent - comDlacentabout its deficit because it has long deimdedon investnents ftom other courtries to makeuo the shortfa.ll.-

LDCs are even more deDendent on FDI.When the Banl of lndonesia took steDs tored uce foreign borrowhgs and to decrea$e thecurent account deficit, domestic inveshnentapptcations wtle ur,able to generate sufficientfunds to tale up the slack Domestic invest-ment applications dropped in the first half of1992 to Rp. 15.7 trillion, compared with Rp.27.4 trillion in the same period in 1991

Indeed, the liquidity squeeze indicated thatthe local banking s€ctor was also dependmton foreign funding for its eamings. FDI iscritical to Indonesia because of its high lwel ofdebt and because of the anticiDated decline inoil revenue as rcserves arc de;leted, So Irdonesia's ability to wean ieelf from overdepend-ence on FDI reoutes a conscious and concertedeffort, epecialiy since Indon€sia has been sosuccessfii in the past in attracting FDL PeFhaps there can be too much of a good thing.

But in the md, a country cannot conhol ordictate the flow of FDI. In that sense, FDI is notavery dependable good. So the LDC must takethe initiative to build a dometic savinqs andinveshnent base to complement FDL Tha thrcedfuections suggested in the preceding sectionare a start. But each country must continu-ously rcnew its overall strategy and put FDI intle proper context . FDI thus becomes a nece6-sary condition, but not a sufficient one by itself,to sustaining LDC growth. I

THEASIANMANAGER NOVEMBER,OECEMBER 1992 39

YAZAKI

HARNESSIIIGTHE FUTURE

YAZAKI CORPORATIONPt t 0s .< / ' r r { r r (o ( r \a rB.D, | 23 . ro [ / t r / f r ' ra to ( . r0 rm 03 ̂ o^ \

YAZAKIINASIA

YAZAXI CONFORATION MANII.II RECIONAL HEADQUAATERSRiE lowers 18O3-B 6745 Avah Ave.. Makati. MM

Yazaki-Torres,MFG.,INC.

NMComponente Inc.

P.T. EDS Mfc.Indonesir

-Taiwan YazakiCorporation EDS Mfg. Inc.

' Thai Arow

ProductsCo., Ltd.

Yazaki AustraliaPty. Ltd.

Ar.cATEt 4100/4100 vs

IlI

P H I L I P P I N E S

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E@

Fine Tuning...

I'qooting Market Share ThroughValue-Added ProductsBy Joso M. Fat|3tlnoGoodyear Tire and Rubber Professor ofBusiness Management

rban Asians have come a long way inunderstandine their mark* enviion-ment and the ptoducts available for pa-tronage. In the tast 10 years at least four

dwelopments have had a significant and cu-mulative impact on the bmiddle and higher income

l. Incomes have morc tl

buying behavior ofe Asians:

l. Incomes have morc than doubled;

of highquality, provenand accepted everydayover a nundrcd vears ol orterahon.

San Miguel Corporatirjn has pioneered inintroducing produits targeted it the healthand fitness segment ftom the venerable cot-tage cheese to-the low fat no cholesterol dairydesserts. SMC a.lso pioneered in another fasi-growth segmenL the two-career family featur-ing the working housewife whose scarcestcorunodities upon reaching home are timeand (rcsidual) energy. IrutaMeab and ready-

'Higher income Asiansare smalt and arcbecoming smalteleach yeaL They aretypically brand consciousbut not often brand loyal."

tq(ook skinless chicken address this imDor-tant talget market; i.e., consumers who havenot only the wisdom to know what they wantand need, but also the income to buv what willsatis4/ those wants and needs.

Other successful examples of value-addedmarKennq are:

I Fasifood chains have introduced homeand officedelivery by motorcvcle, respondingto the need not oniy toconsume "food'fasf'bu talso to eat it in faniliar surroundings, withouthaving to waste time toing out, queueint,oroenn& palug and returmng home.

I Citibank haserpanded iti client >enrcesby enabling its well-heeled clients to continueto do their own banking without the majorinconvenience of having io go to oneof its onlytwo or three branches. Ftotil ny empowerin!customels to do most of their banking bytelephone. This responds to the need of banlclients to make theii own confidential transac-hons without depending on messenqers.

I Duty-Fr€e' fhilip;ines inhod;ced rhe

higtrly succesful innovation of allowing theFilipino traveler to shop for du ty-ftee qoods forup to,l8 houm after arriving from aniverseastrip. Duty-Frce fulfilled multipte needs andtherefore added multiple values:

a.eliminating the eipenseof baggageover-welgnu

i reteving the burden of manually carry-ing applianci into the airplane; and,

"

o for checked-in appliances, doing awaywith the risk of in-hansit damaee or loss.

Duty-Frce added still mordvalue by ex-panding its product lines to food and house-hold items, both popular with overseasshoppers. Result hundreds of millions of dol-lars in sales and profits, and performanceawards from the worldwide aisociation ofDutv-Frce comDanies.

For another perspective let's take a look atinteresting examples of value-added market-ins in the United States.

2. The formal education attained has sur-passed that of their parcnts;

3. Formal education is continuouslv suD-plemented and complemmted by TV, maioand print media; and,

4. The incidence of havel and opportunitiesio share knowledge of lifestyles air-d productsabroad has increa;ed substantiallv

These higher income Asians are smart, andare becoming sma rter each year. Thev are t)?i-cally brand conrious but n6toften bra nd ldval.They wi.

no longer buy a produa automiti-ca-lly; i.e., because it carries a famfiar brand.

More than likely, this urban Asian con-sumer will reietl the garden variety "me-too"prpducl that offurs no real motivation for prod-ud patronage or brand loyalty.

As a result, the orqanization that undercs-timates the decision making wisdom of theadult urban consumer will pay for its lack ofsensitivity by offering products that costthousands - sometimes millions of pesos -to produce before failing in the markaplace.-But

therc is a fiiting r&ponse that a market-ing-oriented orFnization can employ to winover the smarter, better paid consumers inmajor urban markets: value.added products.

ValueAddod Ma*etlng SuccossesLet's takea lookat several successhi exam-

ples of value-added marketing organizationsthat have employed innovative wisdom inrcsponse to the increasing sophistication ofAsran consumers.

San Miguel Corporation has several suc-cesses to its name. SMC lent its Masnoliabrand to a commodi$, dressed chicken, andwon the leading market share within two yeanoflaunch. The quick acceptance by the femdletarget buye$ was due to the simple but pow-brful value-added - a name - to the product.The value-added was SMCt strong heritage

Baldor B€ats the Cheap ForolEn MakosBaldoris a little-known manufacturer in the

US that dominates a tough niche, the $1 billionmarket for industrial moto6 that oDerate infactories and work sites. After 21

-years of

undisturH sales 8lowth, Baldor discoveredin 1981 that it was in de€p houble. Beforc itcould fully comprchend thesituation,a doublewhammy punished Baldor's bottom line.Cheap foreign motors had arrived in force inh^/o different ways: as integrated in forcign-made factory maihinerff,an"d as separare motors destined for Americi n origura lequ ipmentmanufachrrers. From lc81 to 1c8i oroudBaldor ate humble pie while profits drirppedJJ Dettent-

Baldor management was severely temptedtomoveout of its manufacturine facilitie ftomArkansas to low waqe areas outside the UnitedStates. Inltead, Baldor renewed its commrt-ment to its community, Fort Smith, Arkansatto its employees and most important of all, toits US customers.

While other US motor companies wercshutting down, Baldor tripled iG capital in-vestment, u pgrad ing its own eq u iDment acrcssthe board: millers, g;nders, latires, cutters andwinders. Management spelled out its vision ofaftaining and maintaining a superior level ofquality wfule at the same tinie optirnizingrespons€ to the specific important ostomers.

Baldor now pilduces competitively higher

IHEASIANMANAGER NOVEMBEFI/DECEMBER 1992

quality prcducts and has reduced the timerequioed- to .ake .rp an order from up to fourwe€ks to five davs.'Baldor developed what itcalls Fler Flow, wfuch etiminates progressiveassembly. Now an assembly worker Puts tegether a motor by himself from d tray of Partswith the help of a comPuter Printout tellinghim what motor he is assemblinq, how toassemble the Darts and how to tesi the finalassembly. Every motor can be haced to a singleindividual. The resull Baldor can make a profitproducing an average of only 50 units of any

fuven moior, and thui qu ickly and consistentlysatisfv the dema nd s of its induskial customels.

Baldor's value-added: consistently higherquality motors, manufachled accoding to theorstomer's exacting specifications and deliv-ered withinaweek. Baldoris able tosellmoto$at times 40 to 507. higher in price than foreiSnmake. For example, Baldordominates the saleof motors to caruring and freezing lines, wherethe motors are bombarded with soaPy water

traditional Pennsylvania Dutch bowl. In sub-sequent test markets. the new Package in-creised sates by ZSzo without any advertisingor promotion or change in the producl.'Note

ftom these innovative packages thatoften the value-added is basically psychologi-cal, not material. The lesson here is that rela-t i ve lv s imp le marke t ing moves l i kerepositioninj or tepuckaging may achiwe theincremental value sought by the consumer

Endchlng Prcduct Appeal wlth a ValueAdd€d S€fllce

A number of established brands have beengiven new life by gafting a value-added serv-ice to the product. Clairol, for many years aleader in hair coloring made available a toll-free number that customeE can call to askquestions on hair care and coloring. Thisservice has been epeciatly beneficial for Peo-ple who have had no e4irience with bui areihinking of coloring their hair for the first time.

Where Sylvania Ughtin(s dive6e illumi-

ine or backsliding at any level."z Supportive"and Flexible Top Manage"

m€nl Added-value marketing means usingthe rcsources of the comPany to exPloit Per-ceived gaps in - or oPPortunities to enhance---<ustomer satisfaction. ToP rnanagementmust support the teams responsible for valueadded ;;kedne with the-material, personaland systemic su[port r€quircd to gA the Fbdone. Top management must not only allow, itshould mcourage risk taking.

And when the!€ is the inevitable failure ofa pafticular proied, top rnanagement mustreipond wlth'patience and rnake sure the riShtlesions are learned ftom each failure. Top man-agemmt should consider its rcle to be bothsJpportive and rewarding knowing when toeei involved (supportive) and when and howio re.ognizea pd Ueing done well (rewarding.

3, A Delegated Bureaucacy-Fr€€ Systemof Decision-Making Peter F. Drucker descriH it this way: 'The organization must bernade receptive to innovation and willing toDerceive change as an opportunity rather thanI *,rot. lt -rirt b" oq;;ized lodo the hadwork of the entrepreneur... (The organizationmust value) innoJation rather than f,oH ing onto what aheady exists.

"Innovation must be made athactive andbeneficial to marngers; it is the best means topr€serve and perpetuate the organization, andihat is the foundition for the Gd ividual man-ager's iob s€curity and success.""

The 3M orsanization, one of the most imo-vative in the"world, has actually built shuc-tur€s to encourage, alrnost force, innovation.Each of 3M s 45 aivisions is expected to Pqduce 257o of dollar sales each year from prod-ucts that did not exist five years ago. 3M allowsits engineerc to develoP new products orvalue-added innovations of existing Productsand to form their own new ventue teams(leavinq what they were doing beforc) to develop n-ew ideas.lithe team fails to develoP theproduct idea profitably, there is no PerElryTeam members merely go back to their oldbb6.-

An or8anization that requiles imovativepeople to queue for attention, to secure 20iipg;tur€s tiach r€quiring thiddegr€e inqui-sition and second-guessing), to have to fightturf baftles with iealous, thr€atened co-€m-plovees, will evenh.rally kill innovative driveind' evmtuallv kill its 6wn future.

4. Sound itelief in Marketing Research'Addine value for customer satisfaction lookslike ani sounds like a simple task, but therearccritical requi€ments:

o the ;roduct diffurcnce (or value added)mwt be meaningfir.t and attractive enough forthe tarset rnarket to act with inter€st;

. the target market must Perceive theadded value as authentically incremental totho6e currently experienced from availablecompetitive products; and,

o the target mark* must accePt the added

all dav and niqht wher€ cold tempemhles can-n 6eatitrgtl food -anulacturcrs swear byBaldor and so do many others who buy over$300 million of its motoE annually.

Repackaglng To Add MoI€ ValueAs one marketing consultant remarked,

"Packaging is the lasffive seconds of market-ine." In tho6e crucial seconds, a marketer ofoa"cl<ased eoods may miss siqnificant salesiolum"e dG to a weai impuli signal, a dullDr€sentation, a now too familiar and/or old-?ashioned tabel design now virtually invisible- or packaging simPly inconvenient to theintended usei

A candy company called Just Bom, Inc.carri€d thei Hot Tan;les, Jelly Jos and Mikeand Ike candies in black and white Packagesfor a long tirne. ln 1988 the comPany decidedto inkoduce a new package featuring acolorful cast of animated graPes and cherries.Result sales advanced 25Vo. when inter-viewed, the kids thought the product wentfrom dul and boring to "definitelyawesome "

Markets are splintering while consumersare becoming more knowledgeable and de-manding. \ tth media likewise prcMelatingwith myriad cable channels, newspapers andmagazines, Point-of-sale Pres€nce now be-comes cmciallv important to the rnass mar-Kerer,

Proctor & Gamble makes surc its familiaracne medication, Clealasil, gets a new look -

a packaging change - every.few years. Thereason: its teen target market likes novelty intheir lives, and obviously in their Pulchases.

Wheatena, a brand of hot cereal over ahundred yeaE in the market, rcceived a newface featurint the picture of a modem striPedbowl with a modem spoon. Wleatena rran-agement wanted to take advantage of thegrowing popularity of high-fiber dias espe-ciallv among yourq urban-upscale adults. So,ttre ite* ta6i ae.ifrr rcplaced the visual of a

nation prcducts are sold, this company hassimilarl]' instatled a consumer hot line so con-sumers can qet answers tb their inquiries andalsoorder pfuducts. Nikonindudd with theirvideo camera a free videocass€fte teaching thebuver how to use the camera, how to view fiLnani how to take care of the prcduct.

Addlng ValusAs exhitanting as it is to read examPles of

valueadded marketing, it is chalengin8 -

even daunting - to develop successhi va-lue-added lequircments.

Frcm the success stories we have studied, itappears that these arc the critical ingi€dientsfor success with this shategy:

l. Vision and Diripline. The comPanieswhich consistendy employ value-added shat-egy and win, succeeded first in conceptualiz-in! and then communicahng the vision thattheir company will provide high customerxtisfaction. Tte company's PeoPle activelysupport this vision and will not allow waver-

"Adde&value marketingmearc taklng theresoulces of the companyto exploit perceived gapsin - or opportunities toenhance - customelsatisfactlon."

.THE A9IAN MANAGER NOVEMBER/DECEMBER 1992

' @

value as worth (ideally worth more than) theadded exoense.

To be able to ass€ss and influence the targetbuyer's behavior, the marketing people mistunderstand consumer needs, wairts, ittitudesand curlent and past usage of the product.They must also iinow hdw to maie a gapanarysis to detiermine the level of current sat-isfaction of buyers needs and uncover areasof opportunity whelesatisfaction has notbeenoptimized by producis already avai.lable.

All these questions arc arswered by sys-tematic rcsearch that consistendy monitorsand measures the parameters'identifiedabove. It is an inconsGtent and unwise man-agemmt that provides logistical and materialsupport to the rnarketing people for value-added products and yet iiihh<ilds money forr€searching the target consumer and testingproducts, concepts ard comrnunication cam-Pa.rgns.

5, A Systematic Prcc6s for SceeningVa.lueAdded ldeas and Nourishing a Mabl-Few to Market. While 3M allows continuous,relatively u$tructurcd experimentation andproduct development under the supervisionof alJ 45 division presidenis, another market

"Evelyone is famlllar with3M's wondrous ptoductsof the '8G, Post its. Fewpeople know that thls newproduct falled miserably inbur urban malket tests."

leader company, Frito-Iay, has a more higtllystrucfufed manner of screenins ideas.

goes through tests in the kitcher! consumertaste testing, brandnaming package design,aqverflsrnS postnomnt and planmn& manu-tacturing and test marketing. A poor grade inany one category can hold back or e*n kill the

Frito-lay has to develop new products tocontinue to lead the billion dollar snack foodmarket in the U.S. Frito-tay is sood at thiscmcial activity and is ils t-ough"est critic inscreening hundreds of prod ucts-each year. TheFrito-Lry system is sotough only five or susurvive the process each vear. A new snackchip has to fass numenrw strict criteria as it

Sometime a product that fails in a maiorp€rlormance category can be revived bychangrng iust one aspect. Everyone is familiarwith 3M's won&ous new product of the '80s,Post-its. Few people know that thrs newproduct failed miserably in four urban markettests. The Ploduct Ploponents never lo6t faith,shrdied what was going wronq and dirov-ered that this wonderful6ffice p6duct neededtust one simple rnarketingactivity: demonsha-tion. 3M marketing people had to show thetarget buyers how to use i t in order to genemteinter€st and to rclate the poduct to perceivedneeqs.

This story tells a lot about value-addedmarketing: You have to keep the fai0r, collectI€qufued information and act on it quickly.

Urban Asian consurness will see-more-andmorc value-added poducts in thecamingy€arsas more companies develop the expertise,cultue and organization to develop tirem. I

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Reengineering business processes...

Making Change\4lork

By Teoflo R. Asunclon, Jr.PrincipalAndersen Consulting

su.ltants did not try to male incremental im-provements in branch operation systems andprocedures. Instead, they computeriz€d tllebackruom tasks ard moved them to a centrallocation. The move fteed exDensive commer-cial space, allowing the banlio meet its clientsneeds more efficiently and precisely whileottlng co6ts.

Lessons fiom Developed CountrlesThe solutions that worked for FEBTC apply

"Business, produet, job andcaleel cycles have sped upso much that keedlEhsiness prccesses andhuman resources in step withmpid development hasbecome a pdority blman4ement tlrc wodd over."

iust as well to other s€ctors. Asian maragers inmanulacturing, health care, defense and gov-emment can - and should - taD into vastglobal resoulres and leam from ihe erperi-ences of more develoDed nations.

Even now, Wetem consultants arc work-ing feverishly to rcengineer Russia's food supply system and shorten bread lines. Simplechanges, such as wrapping preservative-fteebrcad in plastic bags to prolong shelf-li.fe andrequiring fewer forms from delivery truckdrivers, have made head more readily avail-able to Muscovites.

In health care, productivity lessons learnedfrom manufactuiing have 6een applied tomajor US hospitals. Like work cells in marlu-fachrring plants that contain all the equipmentneeded to produce a prcduct focused carcunits containins all the heatrnent facilitiesneeded for relatid cases were set up by l€eMemorial HosDital in Florida.

A patient n6 longer has to be moved fromroom to room or floor to floor Care centerspecialities are on the floor with their patients,with common resources close at hand. Eachteam is responsible for heating specilic groups

ull-sen'ice telephone banking. Befter-designed banl lobbies. Shorter andquicker-moving teller lines. On-lines€tup, approval, and credit scoring of

new accounts. On-line rcsearEh capabilities.Accurate account information and activitv uD-dates. Quick error resolubon and account ad-iustments. Products, services and pricingtailor-fitted to sDecific customers.

A survey conducted by Andersen Con-sulting in the US has revealed t}rat these arethe banking services and featurcs that cus-tomers will expect by the year 2000.

Customer demands and cus tomerdemographics have been changing togetherwith shifts in politics, economics and trade,sending unsuspecting, ill-prepared and inllex-ible organizations into tailspins. A few haverccovered onlv to be buffeted anew bv techno-logical progress.

Business, product, job and career rycleshave sped up so much as a result that keepingbusiness processes and human resourles rnstep with iapid ilevelopment has become a roppriorilr for management the world over, rn-cluding Asia. And many Asian CEOs havedemonstrated the will to make the necessarythough sometimes paintul, changes in theirorganizahons.

FEBTC DaFs to WlnIn the Philippines, the Far East Bank and

Trust Company (FEBTC) was one of the fustamong the countq/s largest banks to make thedrastic changes rcquired to strengthen cus-tomer service and cost-eff€ctiveness.

FEBrc management, with the help of Fili-pino and global experts and technology, un-dertook a comprehensive review of itsobjectives and shatiegies. The bank's leadersand consultants examined its opeFtions andset clear market goals. They evaluated each ofthe bank's service lines, looked for way ofmaximizing profitability and fine-tuned theorganizational shuctuie to rnake sur€ that itwas marketdriven and that it suDDorted theoverall objectives of the bank.. FEBTC'S bus iness Drocesses were

reengineered. The branches used to combinetellering with backrcom operations. The r:on-

IHE A.SIAN MANAGER NOVEMBER/DECEMBER .1992

of patients from admission to discharge.Combinint advanced manufacturing tech-nology with old{ashioned customer sewice,the focused care conceDt ho6ts l€e Menori-al's productivity savinls and help6 to rnake itone of the best-rur hospitals in the US.

Pood6 are Our Most |rpofm A$otkading organizatioru everywhere have

also come to recognize a long-overdue dehrt -to iheir people, indisputably their gr€atBt a&set - and have taken step,s to r€pay this d€bt.They are taking a second look at the way theirpeople relate to the organization and are re-thinking and overhatdhg their personnel syetems and strategy.

With the right methods and reeourtes, thequick-to-leam, highly+killed alrd hard-work-ing Asian workfor€ can become evm moreed-ucated, erubled and mrpowered - a 3Esworkforce. As their knowiedge steadily im-prove though continuing trainin& they cando morc and better work given the necBsarytools and prccessel Clearly defined rcsponsibilities and authority arc also critical motiva-tors.

Moving from excesively tradition-boundard stsatified structures to flafter, less auto-cratic ones should Sready improve the ptoduc-tivity ofAsian organizations, render them morercsponsive to their dients, and bring thern instep with worldwide triends.

Cha€e Man4ofliont at Wor*FEBTC'S shategic review and ortaniza-

tional hansformation, for instanc€, also en-tailed an extensive rcthinking of personnelprccesses and issues. Pooition classifications)stems and salary struchf€s were r€vised toconform to changes in work flows and irbcontent. A new performance appraisal sysiernwas designed and implemented, with the a9-sistance of human rcsoulEe sDecialists. Thenew system combines quantitaiive and quali-tative performance criteria that support thebank's new goals.

An assessment of haining systems, PIoc-esses and methodologies and the skills of thein-house haining staff led to a two-year plan tobe implemented by the bank's harning depart-ment and outside consultants. The Dlan in-cluded the development of a tiainingcuriculum for each business unit and apackage of courses to equip trainees with Fb-

specific skills, instill in them desired values,and inform them of new policies, Procedurcsand standards of performance. Prioritycourseswere defined, designed, developed, pilotedand packaged for ease of delivery and consist-ency of instruction.

iTEBTC manaeement realized the need forradical ctunge and was commitd to making it.FEBTC people, operations and teclnok8y arecontinuor,rslybeingmtegratedand reengineeredfor the futue.

ForwardJooking leadership is sirnilarly theLev catalvst for change in the public sector'Re'nato Vilencia of thdsociat s.i,rrity Syttem(SSS) is one of the Philippine govenunenrsmost progressive administrators. His agenryhas over 3,000 cieil rrvice employees servinBfive million active SSS members. Valencia hasa very specific goal zero rcspons€ hmebut lie is well aware of the aifficulties his

solve concems at an early stage. Detailedworkflow analyses were made; unnecessaryactivities were scrapped and other activitieswere sheamlined. Suitable elements of newtechnology were incorPorated in iJbs to im-prove work quality and enhance job satisfac-tion.

The consultins team then qeated a modelotfice prototype to test the new iobs and proce-d ures'using i care load from a rea I office. Fortyvolunteers rotated through the office for up tosix months studying the ergonomics of thework environment, assessing new work meth-ods and testing trainin8 Prograrns and re-porting on their etfectiveness. The team thenperformed trials in 23 pilot offices so staJt at allievels could gain hands-on experience beforenationwide implementation.

Comprehensive computer-based tlainingwas devllooed to enable the DSS staff to usethe new sysiems quickly. Some 34,000 employ-ees went thrcugh the l Gday training programover a 2 l/2-year Period. SPecial hainingprograms for managers helPed them adFst tolheir new roles as the local offices were Srantedgreater rcsponsibility for their finances andrecruitment. Regional imPlemmtation teamswere also formed to coordinate baining andprovide gujdance in cost reduction.'

With the skategy in place, DSS has savedmore than $290 million annually and increasedefficiency by more than 20 Percent. Enor rateshave dropped ftom ten to two percent. It for-merly took ftom three to four months forbeneiits to be cleared; now it takes thr€e to fourdays. Some q) perrent of all inquiries arc nowhandled imnediately by accessing a singleterminal, mther than by calling back the nextday Impressive gains have also been achievedin job satisfaction.

Tunlng GlobalThese success stories from arcund the

world - and there are many mole across allthe mator industries-conf irm the advantagesthat effectively managed change Srves anyorganization. The fasFrisinBAsia / Pacific tigereconomies are bright e\amPles of how busi-ness reengineering can helP entirc nationsleapfrog traditional stages of development.

The Asia/lacific tieers have also shownthat developing countries need not follow thetedious development paths forged by now-maturine economies. lsolationism and in-ward-looking nationalism as ideals are longpast their prime. To grow and, indeed, to sur-vive in anera of intensecompehtion, orga za-tions must hrm global and outward-looking

withthetechnology,iniormatioryandlnowl-edgeavailabletoAsian nationsft ombothrcgionaland worldwide sources, forwardJooking or-ganizations need not iust strive tio catci uP withthe intormation society which isexPected to Peakin the mid-2000s; they c a n now sta rt PrePa nntfor the biotechnology society of the 2lstcentury and beyond. I

orsanization must overcome to achieve itHe is confident that value formation is the

answer. Beyond documenting, reviewing andsheamlining SSS work Prccesses, Valenciabelieves that clearly defining the organiza-tion's goals and communicating them to itspeoplewill make the critical difference. PeoPleihould be gluen opportunjties to understandfully the reasons why thet organization eistsand the cmcial role they play in it. From this,Valencia says, everything else will follow

Valencia feels that his organization's goal ofzelp r€sDonse time js specific enough hD beimpbmdnbble yet chaleriglng enougtrio fire ttreirnaeirution of hisDeople. Fromhjsmany yeanofer.di"nce-ottit.ig*lth privdtebanksiiMdnila,he hds leamed thaiwhm peoPle in an o€aniza-tion are excited about somethin& they are moh-vated.

Asian orsanizahons such as the SSS can leamfrom the wiy the uKs DeParhn€nt of SociatSecuity (D65) handled maiu change within theintegrated framework of strateSy, Focesses,tecnnobgy and people development D6S, likeSSS, wanted to r€shape the way it did busines soit codd serve the public hter, Sive ta{Pay€rsmore value for their money and imProve )obquality. This meant taking a whole person apJt r"il to ur"aaiu"* of b;nefits. DSSstafircuidirstantly actess on a'terminal all the informahonpertaining toa person, includingall hisbenefit\and payrnents. Transactions were thus proc-essed more quickly and accurately.

To achieve DSS obje'ctive, comPuter systemshad to be updated, intqfated and extendedthouehout the LK. More than 70 mainframecomputen fourareacomputercente6and60,fll0terminals were installed over a Period of five toseven years. Change management wasdeemed critical to the success of the Pro,ect.

The DSS consultinq team first communi-cated the change stlatagy to all the organiza-tion's 80,000 people working in 450 officesthroughout England, Scotland, and Northemkeland. The team erplained the changes tosecure every employee's commitmmt and re-

NAtvlE

POSITION

COMPANY

ADDRESS

IEL. NO.

FM NO.

SENDTO:CORPORATE PUBLIC COMMUNICATIONS

Asian Institute of l\4anagementEugenio L6pez Foundation

Joseph R. l\4cMicking CamPusP0 Box 2095

123 Paseo de RoxasMakati, Metro Manila

PhilioDines

OR FAXTO:DAPIKIN/PINKY

(6iP) 8L7 912ffi iTHEASTANMANAGER NOVEMBER/DECEMBERl9S2

Going global and thinking big...

Thailand in the Year 2020

By lbara C. GutierezManagjng Editor

al ha and, one of Southeast Asia's fastestI growing economies, fully e\pects to be-I come a rnaior business center in theI region by the year 2020. According to a

muntry scenario drawn uD in connection witha project of the Asian hstihrte of Management,Thailand will achieve this goal primarily bygoing global and by thinking bit.

This scenario was incorporated in a papet"Asia 2020: A ftenario of East Asia in the Year2020," which was presented byAIM professorVictor A. Lim in the conference "In Search ofthe Asian Manaqer for the Year 202Y' (See TreAsian Mnnagu, Aprt\/May /Jrne 192 issue).The conference, held in Manila, was sponsoredby AIM and the Asia Pacific Economic Cooperationls Human Resources Development-Bwiness Management Network.

A Ma*et EconomyBv the vear 2020, Thailand will have com-

plet6d lti tlansformation into a marketiconomy This traruformation will beachievedthrcugh gover4rnent's liberalization poliryaimed at encouraging competition both withinthe domestic market and in Thailand's exter-nal trade.

Increasingly, the private sector will take thelead in determining the dircction the Thaieconomy should take. The govemment's rcleas controller will weaken considerablv Gov-emment intervention witl ocol only duringunanticipated shocks and only for the purposeof maintainins overall stabilitv.

The private sector is expected to play abigger role in Thai politics. While the form ofgovernment will remain a constitutionalmonarchy, it will become increasinglydemocractic. The House of Reprcsentahves,for instance, will be composed more of busi-nessmen and represeniatives of businessgroups. As a result, parliament will become thestage where influential bwiness gloups strug-gle against each other to enhance or prctectthei respective economic interests.

As the clout of the private s€ctor inqeases,the influence ofthe militarv in Thai politics willdecrease. Thus, the possibility ofseeing an-other mililary coup in the future will be Featlyrectucect.

Thailand's economic $owth rate will not

be very high but will remain rcbust enough toFovide stability in the s'stem. Price stabilitywill be the top priority of poliry-makers toensue that Thai prcducts rcmain competitivein the world market and to s€e to it that infla-tion does not urdermine the country's realProsPenry.

kspite the increase in population to some80 million, iobs will be more readilv availableand the standard of living witl rise. 6y 2020, theper capita income is expected to rcach between

"Wlth its strong potentialto become the buslnesscenter of Southeast Asiaand the gateway to theuntapped Indochinesemarket, Thailand willcontinue to attract forelgnlnvestors,"

US$l2,0m and $14,000 at the current exchanqerate of one US dollar to 26 bait.

Blgigor and Mo|€ Global CompanlesThai companies will become bigger and go

international in order to attain economies ofscale and eain better matket access. Busrness-men will liave to think globally and formulatelong-term plans. As competition intensifies inthe local market, they will also have to look atopporhmities abroad, especially in neighboring

corurtrie, both in the Association of SoutheastAsian Nations (Asean) and Indochina.

By the year 202Q the Indochinese countriesar€ expected to have become members ofAsean, with regional econornic cooperahonalready at the free trade or even the commonmarket stase.

To fund corporate growth, large sums ofcapital will be needed. Mo6t Thai companieswill choose to be listed in the stock market andtobonow directly by issuing more commercialpaper in local and overseas financial markets.Thailand's good credit rating will make for-eign loans easy to ot'tain at rcasonable rates. Asa rcsult, the oveEeas borrowings of the privat€sector are expected to approxinate that of thegovemment.

With mega-companies dominating thebusiness scene, many small fims will be forcedto close shop or mer8e with the big ones. Theremaining few will have to be very efficientand will have to cater to well-defined marketniches. Still, they will need government assist-ance and financial support in order to sureive.

With its strong frtential to become thebusiness center of Southeast Asia and the sateway to the hitherto untapped Indochinesemarket, Thailand will continue to attract for-eign investols. Many of these investo$ areexpected to form ,oint venhrres or to put upreglonal offices in the country.

Foreign companies seeking to expand intoThailand will prefer to link up with the biggercompanies. Being big and strong, Thai compa-nies will be in a better bargaining position.Hence, negotiations arc expected to benefit theThai side more and result in such advantaeesas better and more appropriate technologres,more favorable conditions for technology

THE ASIAN MANAGEB NOVEMBEFVDECEMBER '1992

hansfer and human resource develoPmentand larqer volumes of capital inflow.

Ioinl ventures witl actept more Thars ontheir executive boards. Weli-educated youngThais will be appointed to high-ranking posi-tions. The proportion of Thais to forcign ex-ecutives will increase.

lndustdal DocertrallzatlonThe govemmenf s industrial decentraliza-

tion poliry is e\peded to create several newind uitrial'boom iowns all over Thailand . LiShtindustries will rise in the count!/s northemand northeastern rcgions with hubs at ChiangMai, Nalhon Sawan, Phitsanulok, NakhonRatchasima, Khon Kaen and Udon Thani.Heaw industries, led by the petrochemicaland its downstream industries, wil locate rnthe eastem and southem reglons.

Manufacturint will outpace all other eco-nomic sectors, with its shar€ in the gloss do-mestic product (GDP) projected to rise to 3570.The electronics and Fwelry industries, a lreadymairr foreign exchange eamen for Thailand,will become even more important by the year2020.

lndustries are likely to become mor€ caPi-tal-intensive and more hi8h technoloty-ori-ented. Multinational corporationsare exPectedto play a key rote in the industrial develoPmentof'Thaitanii by providing Uottr the neeaedcapital and technology.'

Despite the thrusioward industrialization,agriculture will remain an imPortant activiryIn 2020, Thailand should still be a food-surPluscountry. Prcduction ofbasic croPs, such as rice,will remain sufficient to meet domestic con-sumDtion and export commitments

fio*erre4 as -ages become higher andland more expensive, Thailand will graduallybecome less competitive in agricultur€. By theyear 2020, the country will cease to be a maiorfood exDorter in Asia. lnstead Thailand will beimporting agricultural commodities andpniesini these into high value-added prod-ircs for rdxport. This divelopment will havea signficant'impact on the grawth of the Thdiagricultural and manufacturing sectors.-

Meanwhile, the service sector's role inThailand's economy will grow in imPortance.With the qpening up of Indochina, Bangkok isexDected to become the financial and businesshub of continentat Southeast Asia. Mor€ for-eim banks will operate in Thailand and inter-naitional bankinj, such as offshore banking,will become more active. The Securities Ex-change of Thailand, which is exPected to listAsea n as well as some lnd ochinese comPanies,is likely to become the regional market forIndochina.

The financial market wi.u become moresophisticated, of{ering a variety of assets andsenrices. ComrnerciafUanLs wttt come to resemble supermarkets Providing comPlete fi-nancial services. There wi lJ be a high degee olcompetition among Thailand's financial insti-

"Despite the thlust towardIndustriallzation, agdcultulewill remaln an impoltantactivity. ln 202O, Thailandshould stlll be a foodsurPluscountly. Ploductlon of basicclops, such as ilce, wlllremain sufflclent to meetdomestic consumption andexpolt commitments."

tutions as well as. hween local and forcignfinancial gloups.

As thdeatiwav to lndochina, Thailand isalso prcjded to

-become the hansPortation

center of Southeast Asia. Tourism will rernainan important industry particularly as the Thais'

incrcasing incomes enable them to havel morcftequently.

The D,ownslde of l)evelopmontThe future, however, is not all rosy for

Thailand. Notwithstanding the govemment'sdecen tra lization policy, ind ustrialization is e\-pected to result iir urban congestion. This willgive rise to problems of inadequate suPPlies ofwater and electricitv. Banekok's notorious traf-fic iams are also likely to be rcplicated in otherlarge towns. Howevel, the lessons of Bangkokshould provide useful inPuts to Thailand'surban plannen.

Poliution and the rapid depletion of Thai-land's natural resource, will become maiorconcems for both the sovernment and theDrivate sector The Thais will have to learn toutilize their limited natural rcsources in themost efficient way and show Sreater conc€mfor their environment.

hsum,theforecasteconomicdeveloPmmtofthe cor.mtry will cause proirund changes in Thailociew Hv'r'een now and the vear 2020. It isimperative that the peoPle leam to ad iust to tlEsedranees and find a happy balance between ecanomic prosperity and siial resporsibility l

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Thriving democracy and dlstressing symptoms...

ResilientThailand: Refiing on itsBest-Managed CompaniesBy Kin GaibontonAssistant Nlanaging Editor

I n the late '50s and early '60s, it was fash-I ionable among intell igentsia and activistsI alike to see any loreign investment as d- form of neocolonialism. Todav this viewis larsely anachronistic.

Forcim investment infusions have beencredited with the growth of Hong Kon& Thi-wan and South Korea - countries which havedeliberately encouraged the inflow of foreigninvestments. As we get well into the 1990s,Asians on the whole have developed a morepragmatic, Iess ideological apprcach to thecosts and benefits associated with foreisn di-rect investment (FDl). Happily, this generalreceptivity has been matched by a healthyinterest by both the West and Japan in theregion's economic affairs. Frcm 1959-1989, forinstance, Japan invested approximately $40billion in Asia, 43 7o of which went to theAseancountries. The Asian Development Bank(ADB) estimates that frcm 1985-89 alone,Japanese FDI incrcased by 62% per annum.

Over the last two decades, Asian nationshave grown in impotance in terms of FDIS -perhaps none inore so than Thailand, whichhas long been regarded as Asia's Cinderella.

Bendlng with the WlndIt is a source of pride among the Thais that

their nation - alone amons the six SoutheastAsian nations - has managed to preserve itsindependence of the West.

"We bend with the wind," goes a popular

EGAT: Genelatlng ol6ctricity and lob6.

Thai saying. And indeed, thismalleability and openness tocompromise has served the Thaiswell. Throughout the country'slong history, Thailand has man-aged not only to skilfully main-tain its political ffiom, but hasalso managed to oltivate a mul-tiplicrty of contacts with bothAsiaand the West.

Until this May, it was thoughtthat this same sbrt of resilieiryextended to domestic affairs aswell. The Thai coups - therewerc some 15 govemments andseven military coups between1932 and 1968, and there havebeen eleven morc since then -are generally of the benign varietv "Nothing

morc than political hiccups" sniffed one politi-cal observer, "All sound and very little fury"

Not so however, the May disturbances.When General Suchinda Kraprayoon finallyrelented to popular demands that he stepdown, sheet demonshations and a confronta-tion with the armv had left moie than 100people dead and 589 reported missing.

Since spring, new que.tions about the Thdlpolity have begun to emerge. Violent thoughthe prcvious coups werc, they were largelyclurnsv attempts at settling major conflicts ofinterest and nothing quite as cathartic orcleansing as the military takeovers in LatinAmerica, or more rccentl, Peru.

The thriving democracy movement anctthe ferocity with which the generals clamped

down on the Mav demonstra-tions have made ihais warv ot

the milita{y's role and paving the way for agovemment backed by popular vote. Anand'spleas for fair and orderly elections "played tothe favor of the so-called'angel parties,'acoalition of four parties which openly sidedwith democracy demonstators during thectacKoowTl.

The new prime minister, prcdemocmcyleader Chuan Lee Pai, is a 53 year-old lawyerand veteran polihcian. Like Anand, Chuanenioys widespread popularity and is knownfor his integrity and his ability to fo€e comPlo-mise. Chuan has said repeatedly that he willcontinue Anand's pro-growth, pro-reformeconomrc Pollqes.

For the fiIst time in a year and a half ofpolitical instability, the Thais have reason to becautiously optimistic. "Business leaders," re-ported the,4irfi Wnll Strcet loumal last *Vtemberare"paficularlvsupportiveof a Chuangovemment because he is viewed as a prag-matist." Although political observers suggestthat the new govemment is likely tobe weakerthan its pi€decessor's in their grasp of eco-nomic affairs, a maioritv of Thais seem com-fortable with Chuan, who during the ele(nons"distanced himself from the more dogmaucChamlomg Srimuang and painted himself asa moderate."

Investments Forthcomlng?Prior to the events last May, the economy

was already showing signs of cooling down.From 1987-92, the Thai economy grcw an aver-age of l07a amually. By the late'80s, Japanesefactories were sprouting at the rate ofone every

futurc prcspects. Similarly, po-tential investors are now askingthemselves whether the mili-tary's penchant for extralegal in-tervention is a manageableelement of Thai politics or a dis-tressing s''rnptom of the latentinstability of Thai society.

In te r im Pr ime Min is te rAnand Panyarachun, a widelyrespected and popular figure -his eleventh hour appointmentlast June occasioned great rejoic-ing in the capital - wisely usedhis three.month term to rcsolvethe political crisis by reducing

Bangkok Bank: Chalklng up ff]sts.

THEASIANMANAGER NOVEMBEF/DECEMBER 1992

two and a half days. This year, the economy isexDected to clow 7-870 - hadlv what oner,u6uld ."1.1 u ilu.k"nit s-off, but stili a letdownto the hard-working Thais who have grownacostomed to double-digit Srora'th. Thenumber of Japanese ventues filed before thelocai Board of Investments decreased from1285 in 1989 to m5 in 1990. To cover existingand future capital needs and to Paper-over thecountrv's worrisome $8 billion cu[ent-ac-counts deficit, the country needs close to $40billion over the next five years to be able tomatch previous growth levels.

However, Thailand still d raws a substantialamount of foreisn investments. Thtd in thereeion - follov,ring Singapore which man-ag;d to Uring jtr ttr" lion'isirare of $4.8 billionaid Malavsia. some $2.9 billion -Thailand's

FDI in l* totalled $2.3 billion, representing a14% insease over the prcvious year. By con-trast Indonesia brought in$964 milion, rcPre-senting a significant 22% change over the 1Ql9figure of ffi2 rnillion.

Attncting oveEeas investments may bedifficult at a time when Indonesia, with itstarge population and imPortant raw materi-als, is prcving more alluring to JaPaneseDockets - now even morc so as a result ofihailand's crisis damaged economy.

"It help6," he says "that w€ ar€well regarded and accepted byThai societu otr products alewell thougirt of ana tnrsted byour customers. Reliability is arcputation we have built over theveaus,- "The same qoodwill extendsfrom our employees. Weareveryconscious of emplovees' healthand safety needi ai wel as theenvironmental aspects of ourown ooeratioru and of those ofour dealers, contractors and cus-tomels. Ourslogan,'Shell meansvalue and integrity,' is somethingwe've tried to take very seriously.So much so that She[ rec€ndylaunched a new international standard systemfor is luboil blending and $ease Plants in theeffort to steer the company towards total qual-itv rnaragement." The program, knom astSO 9OOO L a oualitv staniards svstem devel-

"Potentlal investorc alenow asklng themselveswhether the mllltary'spenchant fur extralegallnteruention is amanageable elementof Thai polltlcs or adistresslng symptom otlatent instabillty.'

oped by the Intemational Organization forStandardisation.

Under the new svstem, Shell Thailand

badges of consumerexcellmc€,'1SO9000 accreditation," says SakdiKamchamnong, She[ MarketingEconomics and Planning Managet"will give our custome6 ftuther as-surance that they are usint toPquality prcducts."'

Thi-greening of business hasprcmpted Shell Thailand to intro-iuce "environmentallv-friendlY

goducts.' In 190, Shell i"ttoauceitur eaded gasoline (LILG) into thelocal market and at present conh'ols39V" ot tJLG sales.

- ln addition to

ULG, Shell also laurched a line of

'1ow smoke" lubricant poducts and is cur-rentlv workins on a new hDe of fuel whichR&d experts frope win be bis harmJul to theenvtonment.

Such enlightened policies have atbactedthe risht soi of atteition. Just before Shellcelebrited its centenary in early 191, the com-oanv received one of the highest accolades itiouid posslblv trox for. h August l9O, ShellThaitaird was awirded the Roy;l hsignia (theSeal of Garuda) by King Bhumibol Aduyadej,makingShell the first in theoil industry tobesohonored.

Poople DayeloFnent and ilanagement:Thal Intematlonal AldaYs

To hear the mo6t seasoned haveller tell itthe efficiency and comfort of Asian airlinessoes v tualiy unchauenged in an industryfnown for i-s overdeveloped aPPetite forcompetition. Among the Asian carriers, ThaiIntenrational is among the best; distinguishednot onlv bv its sophisticad operations andmoaeni n,i'et but

'by the graciousness of is

employees. "Smooth as Silk " as the sayinggo;, ;"a Thai's charming flrght aftendanband reliablefFound clew work hard at Prcvid-ing the seamless service that satisfies today'sfickle and disaiminating havelleF.

How does the company keeP its Etaff evergmcious and smiling? Says Chatrachai Bunya-Ananta, Dresident of Thai htemational,'lrVithall our computerized s'Etems and soPhisti-cated equipment and aisaft, it is easy to lo6esight ofihe fact that ouls is a service industry.AiThailnternational, we recognize this Mostof our investments, in terms of time, moneyand other resor.uces are dkected towads stafftrainins. As far as we re conceme4 the effortswe've fut in are solid investrnents with Provenr€sults.

"Our organization has develoFd severaltraining proglams, a large number of whichael rnitir titrnicat or commercial skills re-quhed bv staff to enable them to performHteri"a to irepate them for proniotions in thefutue."

Employees are given carcer develoPmmt

In thjs month's issue of Tht Asian Mtmgowe tale a look at the Thai winners of the 191ManagementAwards Program, eachof whichis a pairas.on of manaqenient ercellence andon r.ihoi 'houlders iruch of Thailand's tu-hIIe prooperity rests.

Ma?ketlng Management: The ShellCompany of Thalland

The management ot the Shetl Company ofThailand attribu tes a large measure of its cur-rent success - the comPany has 25.7% of themarket share in refined oil fuels, lubricantsarld indwhial chenicals - to its cor?orateimase and what one Shell executive calls "a

quaItvapproach to mdnagement." At ptesent,dtreu itr.iiiand is amone tne handful of hdu"-try leadeF that include the state controlledPfi and ESSO.

Thal Alrway3: Smooth as sllk.

Shell Company of Thalland: Royal 6ndots€m€ni'

THE ASIAN I\,IANAGER NOVEMBER/DECEMBER 19Sz

plans that fit into company-wide businessstrategies and that indude sweral personaldevelopment paths.

Each of Thai lntemational's departmenttfrom Marketing to Ground and Rigtrt Opera-tiorrs, have their own specialized

"o-.rr-.tions, have owr specialized programs.The programs - which vary ftom i fiie-day

encourage positive work attitudes and to moldemployee behavior to fit the companys exist-

orientation to more indepth workshops andseminars - ar€ designed by Thai's PersonnelDevelopment and Training Department.Among the va rious programs' obiechves are toencourage positive work attitudes and to mold

ing corporatecultu re. Thai's training programsutcorporate classroom instruction and on-the-job experience.

Vr'h e cabin clew haining is an arca of"special importance," - says Bunya-Aranta,'"They are the face ofThai International and weput them thigugh extensive courses to developtheir communications and rrvice skills,'-Thai has not neglected its other employees.Marketing trainees for instance are allowed tofurther develop thet skills in cources taughtat local and overseas universities. "A shonepersonnel develooment program is invalu-ible in trelping us handie"organizationalchange. -ln addition to keeping employeesdormed , our training programs prepare staffto meet fuhue challmges with Freater confi-dence in their own abfuties," Binva-Aruntasays.-

Thai's advertising pitclr, "Reach for thesky'' clearly appears to apply to the compa-nys emproyees as weil.

Infomatlon Technology Managemontand Flnanclal Management: BangkokBank

The winnerof both the 191 award in ITManagement and Financial Management isthe largestcommercialbankinThai6nd. Withover 21,000 employees. Bangkok Bank pravides the most-complete ra;ge of finaicialseruices in Thailand - from oedit card serv-ices to custodian rrvices - and has an exten-sive overseas network of branches andcorresponding banks.

As an industry leader, Bangkok Bank was apioneer in the computerizahon of banking applications, and the bank has chalked up anumber of firsts. For instance: it was firsi inautomating front teller sereices; the ftust inexpandint computerization to over 400 pio-vincial and rural branches and 2000 workstations; and the fust in automatine trade fi-nance applications as well as share registration.

To cope with ib over eight million accor.rntsand an average of one million transactions per

9y, Bangkol us€s stateof-theart technol<fuy.Currendy the bank uses Unix servers with M57DS computer s)st€rns for high volume applica-tions, a domstic network ushg X,25 and SNA/SDLC protocols with landline, mioowave andsatellite media as well as non-fault computers for2,I-hour servicing of ATM rantholders.

]HEASIANMAMGER NOVEMBEFVDECEMBER'1992

To facilitate overseas kansac-tions such as international fundtlansfels and trade harsactions,the bank is connected to theSWIFT network and the Amexand Msa networks which serveall American Express and Visacardholdem worldwide.

Straightforward inquiriessuch as balance inouiries or ex-change rate updaies are nowhandled by electronic neh.vorkswhich are conrected to telephonesystems with voice response, fac-similes and rcs.

At prc6€nt, 95% of the banksentiie transactions ar:e dealt with

"The tasks Prlme MinisterAnand Panyalachun facesas arbiter of the old andnew older ate fotmidable."

elechonicallyBangkok Bank's exhaustive apprcach to lT

ertmds to financial managemeni as well. lnthe last thrce yeaE, the bank's retum on saleshas averaged 25%. In I 990 alone !€hlm on salesro6eto33.61%. Gro6i sales q'enues are equallv

cr€dit card seruices, custodian services, erc.More impoftantly it means charging our cus-tome$ reasonable rates while rna intaining thelowest costs possible. '

General Management: BangkokInsurance Ltd,

TheThai l9l General Manasement awardwent to Bangkok Insurance Lfu., one of thecountl/s largest and most progressive insur-ance firms. Sales and qross revenues amourtedto $57.8 million in 1990 when total industrvrevenues stood at $66c million. By contrasi,Bangkok lnsurance s closest comfttitor, theAmerican Intemational GrouD, had sales of$36.5 million for the same veal

Among the company's iliensare blue chipcorporations such as the Bangkok Bank GroupofCompanies, the Saha Union group ofcom-panies, Siam Cement and the CharoenFhokapan group of companies.

Bangkok Insurance's portfolio includescomprehensive fire insurance, marine insur-ance, motor insurance and miscellaneous in-surance which includes, coverage foraccidentt travel, workmen's compeisatiottand livestock and crop insurance.

^Of all its

product lines, the company has its highestmarket share (13.97c) in fireinsurance. Ifalsohas a particularly strrng portfolio in marineinsurance with a comfortable 12.7% of indus-try market share.

Says Chai Sophonpanich, chairman andmanaging director of Bangkok Insurance,'The basic principle on which we operate isthat insurahce is a business built on trust andespecially on confidence that futureclaims willbe paid promptly and fatulla Oneofthercasonsior our success is that we enjoy a good reputa-non among our customers. Our record ofservice, hnancial strength and prompt claimpa)'ment has further r€inforced our policvholders' confiden<e in us."

. The company, says Sophonpdnich, place:rts pnonheron customer service, sound finan-ciai management and human resource devel-opment. Like its hundreds of policy holders,the company invests in its own insurance - its

imprcssive: in 1990, revenues amounted to$797.15 rnillion, up from 9535 million the pi€-vious year. Similarly, the bank's rehrrn on-stockholder

equity improvd from l2.9qq to17 .d'6V. in 1990.

Bangkok Bank atbibutes its success ro pru-dent and laryely conservative financial policies.

Says one bank official, ',VVe always make ita point to adherc to BOT r€gulations. Thebankalso manages its assets and liabiiities by sln-chronizing maturities with cash inflow dndoutflow We also manage ou r interest structureso that the bank can tak; advantage of the mostcost effective interest rates. Arrd finally, wenever take risk on foreign exchange.""Our corporate strategy," sayi executivevice prcsident Sura-\ak Nananukool, ,,is togrow thrcugh our standards of quality andsen/ice excellence. This of course means pav-ing attention to capital strensth and tiouidiivcontrol as well ai emphasiiing profi;biliriover growtn.

"Profitabfity to us means constant innova-hon in new products and new markets such as

Bangkok Insurance: Busin€3s built on trust.

nearly 600 employees. "W'e like to think thatwe run our operations in a working mvfuon-ment that encourag€s active participation.'Our organization policy is to prcmote ftomwithin the ranks of our own employees. Fornew rccruits, we provide systematic FainingandadevelopmmtprcgramtofuIyintegratethem into the company. Ou middle marng-ers arc constantly rotad amongthe differ€ntdepartrnmtssothatthevarefamiliarize<twithfairgkot Insunnc€ s pitlicies, ai-s and prac-tices. Wdrecontrdmtthatourpr€sentpolicieshave made for a responsible, effective teamwhich will ensure Bingkok Insurance s con-tinued success and prcperity"

operatlons ilanagoment: Electdcltyceneratlng Authorlty of Thslland

After years of consolidatioD the Thaieconomy eventually rcsponded by becomingAsia's superstar during the mid-'8os. Alongwith Malaysia and much later lndonesia Thai-land built up its manufacturing ard exports ata furious pace. Suddenly Bangkok was satu-rated with new prcFcts and infrastructue -particulady communications and energy -b"--e *i.i.t i" g"u-oteeiry that indirstri-

"Thal's advenblngpltch, 'Reach fur the Sky'cleaily applles to thecompany's employeesa3 well."

alization would continue. Since then, eco-nomic growth has made increasing dernandsonelectsicpowercorsumpion. In190,maxi-mum Dower demand rose to a rccord 7,091MW Tlre averageincrease per annum hasbeenapproxirnately 14%.

Much of the burden for meeting this de-mard rcsts with the Electric Generating Au-thorityof Thailand (EGAI), a fu llystate-ownedenterprise responsible for generatint andtransmitting electricity to distributors

throughouttheKingdomof Thailandandwin-ner of the 191 MAP award in OperationsManagemmt.

EGAfs cullent capacity is 39,639 millionkwh, up from 25,828 million kwh in 1987.Gross revenues anounted to nearly $2 billionin 190 and r€turn on sales increased by 24.97ofrom 1.8.9E" in 11t88. To inclease prcductivityeven more, EGAT has introduced highly sophjsticated systems for monitoring and con-trolling power plants and power Plantefficiency systems. Simil,arlt the comPany hasinvested heavily in extra high voltage trans-mission lines, gas insu.lated substations ardimproved protection systems to inceaseEGAI'S existing transmission capacity withthe lowest risk possible.

Adapting the latest technology into thecompany's operations has proved enormouslysuccessful. Like many of his colleagues, how-ever, Deputy General Manager CharmonSuthiphongdui prcfers to attribute his comPa-ny's continuing growth to EGAT'S 32,000employees. "Their skills h plaming manage-rnst and opentions have made it Pcsible iorusto faithfully serve Thai soci*y and povide effi-cimt and reasonably priced power service." I

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52 THE ASIAN MANAGER NOVEMBER/DECEMBER 1992

- E @

Thriving democracy and distressing symptoms...

Thailand's Competitive Advantage:Ethic, Educatiori, and 0pportunrTyBy Hls Excsllency PrlW CounclllorGeneral Prem TlnsulanondaFormer Prime Minister, Thailand

Gmeral Prem rws gtest of honor at the Maruge-ment k)mrdsDimerinThailand last March, Hisremarks, partkularlq those on rutionhad andludenhip, are pfticilarly prescient , gtzxn May'sdanonstrations.

I am pleased to leam tlut the rnanagementI a wa rd s, cond ucted by theAsian I ns[itu te ofI Management forThai companiesaswellas! other companies in the legion, are deter-rnined in a highly competitive mannet asthousand of companies were nominated fortheir outstanding ichievements. It speaks wellfor the country and the region that we rccog-nLe the greai importanie of managementskills in our development DrDcess.

Management is indeed the key factorwhichmakes an organization or a nation more com-petitive and must be accepted as a drivingiorce behind progress and development. Thisuccess or failure of a nation in the globaleconomy of interdependence in the years tocome can only be measured by the degree ofits competitiveness in the intema tional market.

The mles of the marketplace - unlikethoseof the bureaucrary - ireclear, consist-entand absoluter compete or perish. Achieveercellence, or be left behind.

AE a nation, we are all competing forinvestment ftrndt for iob qeation, for marketexpansion and for gr6wth. Failue to athactinvestment - for whatever rcason - willstunt iob opportunities. Failure to create hbswill stunt market development. Failure todev€lop rnarkets will stunt economic trowthand raise the speche of sustained povefirather thdn 5ustained prosperiry

Distlnctlve CompetenceIt is thercforc imperative that our market -

the Asian market - integrate in order to nur-ture the growth of highly competitive Asianrnanufdcturers and io Drovide the economiesof scale necessary to manufacture h.igh value-added, high-quillty products at re"asonablecosts. Obviously, we should provide the sameaccess to our markets that we demand of theAmerican, Japanese and Eurcpean markets toef{ectively exploit the competitive advantageof Asian manufacturcrs ouiside Asia.

Genelal Prem: "Cutivate a sustalned,bonsvolent leadeBhip."

The question is, have we developed poli-cies which capitalize on our distinctiva compe-tence? Our development policies andprograms should draw on the distinctive com-petence of our people and their orsanizahons.ttris is intendea to enhance our iompetihveadvantate over other natiohs and oiher Ie.qlons,-.

Comparative advantage is no longercheaplabor, real estate and power It is people, ethic,education, opportunity and uniry People wilalways be our greatest resourri beciuse oftheir intelligence, not the cost of their labor.Our work ethic evolves ftom oblieation tofamily and rntiorl and not materialism.

-Education is the great equalizer that prc-\rdes the greatest retums on the intelligence ofourpeopleand genera tes opporhrnifv. Oppor-tunity lrovides for the de'vilopment of newprcducts, organizations and iridustries. AndfinaUy, it is unity of purpose rather than ethnicheritage wfuch provides the s)'nergy both na-tions and industries rcquire to become the bestin the world.

Understanding our distinctive competencealso means that we have bezun to understandthat the time when we couid create develorr

ment policy in a vacuum has long passed. Thequality of our economic, development andtrade policies no longer determines how fastwe will grow or whether we will Fow. Itdetermines whether we will survive.

For no domestic industry or organizationwill survive in an era of Egionaly integratedand globally interdependent maikets until itdevelops the capacity to eftrively competewith ils peers in the markehdace. The AseanFree Traie Area agreement is important pri-mariiy because ii acknowledges'these newrealities: the need to freelv comDete to stimu-late the development of*o.lddass -,ut u-facturers and that a united trade flont isimperative to compete with other similar yetmorc advanced hade ftonts.

Commltrnent R€qulEdAnother question is, "Arc we conunifted?"

Specifically, are we committed to r€sional de-vilopmeni and the short-term sacrifices thatdevdlopment demands?

A Japanese executive has thoughtfullystated tfut the underlying caus€ for

-the eco-

nomic success of Japan is pefiaps not theprcpensity to work hard on the pan of itspeople, but that government and the privates€ctor have created an envlonment in whichhard work_- and sacrifice for the greater good- Davs oll.-And

I would suggest that this is somethingwe mwt still work to achieve in Thail,ard.

So perhaps I would rephrase my questionand ask, "ArE we ir govemment and privateenterprise buly commifted to our people?"And then, 'What is that commitmeni?"

'

And I would say that commihnent - toexcellmt A5ian nvmageE - mearu severalthings. FiBt, that we believe in people - bothThai and foreign investors, the laboler and hjsmarager, the farmer and the industrialist -not only a s€lect or distinguished elite, andtheir equal right to participate in the cultiva-tion and harvesting of the fruits of development.

Second, that we work towatd clear, meas-urable goals - the "ideal" we wish to achieve;leading to posperity and equiry

Thir4 that we provide opportunity andsupport to students, en hepreneurs a nd indus-trial pioneers who demonstrate the vision ardresolve to take the risk rcquir€d to achievegreatness. So that they will.

THE ASIAN MANAGER NOVEMBEF/DECEMBER 1992

Fourttl, that we cultivate sustained, be-nevolent leadership politically and bureau-cratically which demonstrates the dignityinherent in public service.

Fifth, thit we listen to our peoPle.It is popular these days to say that PeoPle -

not brick and mortar or orsanizational chartsor products - are the orgirization. I beliwethis is also true in the case of nations. Like themost successfiI - excellent - enterPrises, themost successftrl nations s€em to me to be those

"Undelstandlng ouldlstlnctive competencealso means that we havebegun to underctandthat the tlme when wecould create develoPmentpolicy In a vacuum haslong passed."

that listen to their people, and act on theirrecomrnendations.

Thee are some- there arc of course manymore - of the ouestions that rcquirc answeEifwe are to realiiticallychart the-nationls Pathto development; if we arc to Perpehrate theprogress we luve made in uplifting the livebf oir people, and providing the ofportunityto tivea life ofd igniry A life both tulfilling a ndmeaninsful.

To those of you who have received awardsthis evening goes much honor, but also muchrEsDonsibilitv For i t is vou who will determrneoui tevel of irroauaivity - our caPacity forgenerating wealth -and therefore the quality6f Me attainaUte for our people. This is aburden you have thus far bome with muchdignity, and it is one that will continue todernand much sacifice.

The rccognition of this evening is of a con-tsibution you make to your organizations, butit is a contribution that affects the lives of allThais. Perhaps wen morc importantly, yourexample of leadenhip - and Asian manage-ment - will trspire young managers. Andtiese managers will make their own contribu-tioru tootheiorganizations, enharcing the rateat which our capacity to generate wealth -

and posperity - grows. I

l '

;

Now accepting applications to its

MASTERS PROGRAMSSchoolYear 1993-1994

Since its founding in 1968, the Asian Institute of Management has had one mission:

to train professional managers for Asia It seeks to accomPlish this mission mainly

through its maste$ Programs.

The Master in Business Management Program (MBM) is an intensive, full-time two-

year couse designed to transform young men and women into Professional manag-

ers equipped to manage comPanies in Asia. Preference will 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 managers PreParing 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, develop-

ment assistanie agencies, cooPeratives and Private firms. APPlicants must have a

bachelo/s degee and at leasfsix years development work experience with 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, Joseph R. McMicking CamPus, 123

Paseo de Roxas, Makati, Metro Manila, PhiliPPines, TelePhone: 874 011 to 19 or

877 631 (direct line) or from AIM overseas rePresentative offices Or mail in coupon

below to THE ADMIS$ONS DIRECTO& Asian lnstitute of Management'

. risr ce rensHongrtu !. Ms F.E@,h sh,nE.Dnedo, Ge_.e,a' Horc fj#l;I#H,*'"ii:,',i,Ti:.tfii:?.iiF.""

^'"r(6n! Manaeement Assocralro. . 14lf farmonr nousii"c;i;;t;E; ;;. c;;ui ;io.e xi,ne. rer: rsr zoo iie :jL.Jj:1,:E:T:,:ei#i"j"1Tr"itr'ff33#*hdL. Mrs.lessie Lazfado. coordinato., Admissions and p.*lil|[ Mr. s. A. Shah, Managemem Association ofAlumniRelat ons, AIM Alumnr Asso.iation {hdra)fi;ll;#:';'i ;fr";;;i'di iiii.e zzr'reIo P'rrqtdn P'or r\o 1a rarazarAtea MoJrv Tamizuddi'ffi;6;;;;fi;;!j: 8,;;;i 4tioort. rno'" r"r, tsriit KhanJQuere Road) r<.ehi-2 Pakist*' rer: (e221)

49+3347 /49+3344

lndonola. Ms, chnstins F. Fe(eros, AIM Representarive slntryr' Mr' Gan Cheong Enc Preedent' AIM Alumniol

if[ii-:ji.iii,iie-"li, dJt'iojii"loGr. s,,t" zsa, - -

sr"eaitre 54 Maude Road r0]o3 Townshend auirdingas r-,r"n r"nirjr siiai^a. t;kana 10220. hdonesia, s,naaio.e oa2o lel: 165) 291n265/1123 24

Iet: 16221) 570-2305/570-4444 Ei 254 t{r.n. Or. Shyh-Bao Lai, p,ofessor and Seret.ry

l(ot... Dt. Don* h' Krm oean co rege of Bushess Geaeral chireie ManaS€ment Assooarror' 13th/F'iriiir""i,"t'o",_x-* u."e"rty. .t. i.am Dons. Bu,ro,ng B. 4 Roosewhload. Secno^ 1. ra,pe R o csLngbur..Ku, seoul. south horea, lel: lo2)942541 T€l: (021 39G52o7

ttdlra. Khun Teerachai Chemnssii' AIMReoresentative Ofiice Ihailand, 2/F QlalitvBuirdinr. 262.264 LardDrao 132, BanSlapi' BangkokTharlan-d, Tel: (062)377 7080/4

ASIAN INSTITUTE OF MANAGEMENTEugenio [,6P€z Foundation

Please send me more information on (please check):

n MBiil

Position

Company

Address

Telephone

n [4N4 ! MDM

@Sonny Coloma

Tapping inner resources...

Business as Art Form

"The starting point forcreativity is self-discovery and self-knowledge."

I f at 6rst you don't zucreed, zur-I l.rder. Destoy iudgment qr-

I ate curiogity. Payattention. AskI dumb quetions. Doonlvwhafseasy, effortiess and miryabie. Don'tthink about it. Ask yowself if ifs ayes or a no. Be ordinarv Beinthe;odd but not of it.

Th€searc not Dr€sqiDtions fioma modern book 6n tov6, caurtshipand marriage. These are clnptenhc/'nakJr,�k- CrutiviU in Businas--+hatdocuentstheStanfordUni-veEitycor[sebearingthesametide.And by the way, the coulse is taughtto stud€nb in the master in businessadministration MBA) pmg-am.

The ideas are culled not exclu-sively from mystics or psychicsbut from some of America's busi-ness leaden and gurus who haveappeared a5 resource speakers inthe Stanford course, amont them:Tom Peters (co-author of In Searchol Ercellence), Steve Jobs (co-fomder of Apple Computer), Rof.Harcld J. Leavitt, Ph.ilip H. Knight(fotutderandCEOof Nike Inc. ). andNolan Bushnel, videogame tmo-vator and founder of Atari.

\ny'hy emphasize qeativitv inbusiness?

Simply because business is art,sayMr. Rayand Ms.Myers,quotingWayne Van Dyck, founder ofWondfarms, Ltd:

"The highest art form is ieallybusiness. It is an extemely qea-tive form... In business, the toolswith which you re working ared)'namic capital and people andmarkets and ideas. (These tools)all have lives of their own. So totake thosethings and to work withthem and rcorsanize them in newand different ways tums out to bea verv creative proces."

Cieativity nieans tapping intoa Derson's inner r€sources whichare, theauthors say, enormow andunJathomable: "the kev to Der-sonal oeativity in busiries is ineliminatine the conflict betweenfalse personality and Essence."

Vylng tu SuperlodtyThe starting point is selfdis-

covery and self-knowledge, butthis is a painstaking process that isoften blocked by fear, negativeperonal iudgment and the chat-terine of bne's rnind. The falsepersonality - also called ego orexternal self - invariably comesinto conflict with the irmer seltalso know as the hidden mind, thedivine spark or simply, Ess€nce.

If at fi6t vou don't succeed,surrender This goes against thegrain of traditional businessthinling which underccores thevalues of persistence, pelsever-ance and stick-tcit-iveness. Oncloser analysis, what the authorsrcallv mean is not Dassive subrnis-sion; but that oni must 'timplv

work with absorption, surrendli-ing to the task at hand, not tosomeone else or to striving."Again here, striving is viewed in adiffercnt context from the usualdefinition (to make efforts, toendeavor with eamestness) and istaken to mean constant conten-tion and r'ying for superiority

In explaining this unorthodoxapprcactL the authors cite find-ings ftom scientific res€arch on thebrcin which r€veal the vast poten-tial of the creative mind, amonq

whichar€: Karl Pribam's study onthe holographic bEin; theoreticalphysicist David Bohm's (AlbertEinstein's prot6g6) study onholomovement which, the au-tho6 claim, validates their Der-c e p t i o n t h a t t h e r e i s - " aconvergence of the in4od-we-tmst Gtifications for individualsurrendering to internal cleativ-ity;' and Belfran physicatchemista d 19n Nobel laureate IlyaPrigogine's theory of dissipativestructues foroDen svstems whichsuggests that

-people's creative

responses are triggered bydisequilibrium in energy flows.

Unseen Culp'ltAr inner Voice of Judgment

(VOD is the useen culprit thatreshains us ftom attaining self-confidence which is so essential tocreativity VOJ is a composite offour levels of negative Fdtment:self-iudgment, judging ftom oth-en, collective iudgment and judg-ment tudging the iudgment. VOJis a voice from the past (a parcnt, ateacher, a role model) or a charac-ter in the prcsent (a spouse, abo6s),or a societal norm (e.g., fashionhemlines) which collectively im-pinge upon one's consciousnessand gets expr€ssed or translatedinto personal beliefu, values andattitudes.

Quoting Pablo Picasso, the au-thors state that "Every act of qea-tion is filst an act of destruction."Destroy iudgment; seate curios-ity. One must recapture a child'slove of wonder so that one canstart being creative without beingdetened by VOJ.

The next pr€scription for cIea-tivityis: payattention. Thismeanssens i t i z ing onese l f to theenvircnemnt, beinS on the look-out and listening well for cues thatlead to oppor tun i t ies . Thebuzzwords for this process arequite familiar: MBWA (managingby walking about, coutesy ofTom

THE ASIAN MAMGER NOVEMBER/DECEMBER 1992

Peters) and MFBU (managingfrom the bottom up by ReneMcPherson).

The next imPerative, askingdumb questions, is not as dumb asit seems. Recall the child whobared that the empercr did notreally wear new clothes becausehe was in fact, naked. lf the childdidn't ask the dumb question,"lsn't he really wearing nothinS?"the farce would have gone unde-tected. The ability to raise evenseeminglv dumb questions is farmore irijortant tha n knowing theright answers. In a highly fluidworld where business virtually"thrives on chaos," the authorspoint out that dumb queshons t€-iult in a cirorla r or heti.r.ica I spiral-ting upwards to higher levels ofunderstanding and creativity:dumb quetions lead to meaning-firl answers, which in hrm lead ioinsights; meaningful action; rcso-lution; new beginnings; morequestiorF; tnore creativity; and(full circle) dumb questions.

While Dun and Bradstreet areconcemed with TiiPle A or hiShercredit ratings, Ray and Myersshess the importance of the TripleE: doing only what's easy, effort-less and enPyable. The TriPle E isthe antidote to the Triple D: anY-thing that is difficult, distasteftd ordepressing. They quote educatorWaren Bennis:

'"When we love our work, thenwe don't have to be managed bYforce or fear. We can build systemsthat facilitatecreativiry rather thanbe prcoccupied with checks andconhols on people who ale moti-vated to beat or exploit the system.I belive that everyone wants tofind both quality and love inwork."

The next PrescriPtion is: Don'tthink about it. This imPemtivedraws heavily from the Zen con-cept as described by ShunryuSuzuki: "lf your nind is emPtY, itis always ready for anythin& it is

open to evert'thin8. ln the begin-ner's rnind, there are many Possi-bilities; in the expert's mind, thereare few."

The last thr€e prescriptions in-volve expedencing balance inonds life, imbibing a sense of crea-tivity within the organization.

L:rdeed, creative and innovativedrn*ng - as contrasted to ana-lllrcal and logical thinking -hasbecome (to borrow Mctor Hugo'swords)somethingmoreformidablethan all the armies in the worldbecause it is (pardon the pun) anidea whce tirne has come. I

Crcotiaity itl BusinessMichael Ray and Rochelle Myers222 pages. Bantam Doubleday DellPublishing Corp., New York,l989

56

Readers Respond

Congatulatlom All Arcund

During my r€cent trip to Southeast Asia, I had the oPPortunity toread vouiercellent publication. I was impressed with the editorialconte'nt which addreised total qua tity in wo;ld class ma natement andin open market economies. Your magazine addr€sses relevant issuesand the articles wele well written.

Richard S. Wellins, Ph D.Senior Vice President, Plograms and MarketingDeveloDment Dimensions lntemational, Inc.Pmnsylounnia, USA

I am happy to know tha tThe Asisn Marr��serhEsnow employed theservice ofi reputed desiSn dirctor to imProve the magazine's coverand inside pages.

The magazine has certainly made progess, but I feel that one ar€awhich needs some amount of aftention is on enterPrises being Pra-moted by alumni; this is one way of promoting entr€PreneushiP. Ithink this needs a focus because as noted frcm the AIM BusinessDrectory, alumni have got skills h different areas which could beeainfuIv diss€minated so that fellow alumni can benefit.

K. SrinivasMBM'74

' Suunderafud,India

Concntulations on the new format of TIE,4J ian Marcger. T\elay-out is aiiactive and the materials arc excellent Your section on bookreviews and Quality Management make it worthwhile and assists mevery much.

Bernardo Godinez' General MangerHotel 50nt Klver Kwa IThailand

Congratulations! The new look is Sieat However, I'd like to

sugsest'that you start a new section entitled "Successful Companies/CfG.- You;re doing a great Fb.

Allad N. HashimFPM Sdn. Bhd.Ku4l4 Lurnryr, Mnlawio

To sav the least, the magazine's new "colorized" layout is very

impressive. Somehow it silently conveys that the articles therein arecredible and worth rcading

Edilberto GamboaMDP'73Prcsident/GeneEl ManagerFi$t Philippine Industrial ColPorationMnkati, Philipprna

]HE ASIAN MANAGER NOVEMBER/DECEMBER 1992

II

The right rhythm for your business

Ev6ry motion how small it may behas a meaning and gets the fullattention lrom this Bali dancer.ll nol, she is nol a real dancer.

a t t -rt !i.oa{:lllo ''dE5 hr rit , 2a - 06 UC AldEi siEF.. 016ttdF : 222@71 T& : 2*tl BEDE'g|N

. l{ oxoxotLFri.lEo -IButlort hrdo.ta f*.E rlrF.E r Ftrc C.d.. ?rn Fku. 16 HtEn t|d, C.|tl Bde Xo.ror*lE.:l-2t@ 5 - 2*131; 6'clElal i 5.2811 Tdt : Aa52a BCDE HXFd I rag2 Btttx $c Fcrmr€ : 5 ' 29013r

. Aast oilc.: -Yd|..ula35O Prk Ew nh Fbd, Nd Ydr N.Y rwz Fdli/. t2143r1arz,lLcE' I era 7g - 5e6r T.k : 17tYt EEoE {I l1v a5 - lzlE sFx l,lY

We like Bali dances. And ourex3cutives too pay lull attentionto small matters. Real bankers?See us and you will know.

rTrh lBankBumiDava- H6ad Ofnc6: Jl. lmem gonjolNo. 61 Jaksrta Pusat. Phone : 333721 (60lin€s)

Telsx H6ad Offica : 61 876. 6l,OO. 61896, 61 2Zt, 51 355 BDPST lAT6l9x Oporations D€vlslon : 611 I 7, 61765, 61 340, 61 760, 61 395

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@Prof, Rsne Domlngo

Riding the crest...

World ClassCompetitive Airlines

"Airlines must copewith two movingtargets: customersand competitors. "

I n order to survive and growI airtines, rcgadless of place ofI operatio4 have to be both in-I ternationallv comDetitive andmust continuously improve theircomDetitivene$s.

Passengers expect the samehish standards of service ftom allairlines -standards which are setby the world<lass airlines theyhave flown. Those airlines whichdo not strive to rcach these newworld standards of customerservice and efficiencv run the riskof losins - sooner oi later -boththeir local and intemational mar-ket shares to more competentcomDetitors.

Thus, airlhes have to continu-ously work to unde$tand andcope with two moving targets:changing expectations of custom-ers ard ever-imprcving s€rvice ofcomDetitoN. Because both cus-tomers and comDehtors deter-mine the criteria fbr service in advnamic fashion, airlines have toaiapt their organizations andshategies to these new realitiesand be more Droactive in theirshategic outlook.

In general, there are thrce areaswhere exce l lence must beachieved to stay competitive, aEDer€eived bv customels.'

L Cusiomer Servlcs Quallty

(pe-flight, in-fli8ht, po6t-fligh0d Safety,b) Efficiency,c) Consistenryd) Completmessi an4e) Convenience.

2. Custofl€I Sorvlca Delh/erya) Staff attitude;b) Tmeliness - e.9., depar-

turc/arrival times, ticket proc€ss-ing baggage retrieval

c) Trmely and accurate pas-senger information systems.

3, CGtorprcdeflted coDorate Culture

a) Corporate-wide commit-ment to quality and salety

b) CustomeFfocusedortani-zation and networks

c) Cooperation with stake-holde6, suppliers, and otherbusi-ness Darlners.

To achieve excellence in theseareas, airline management must:

a) constantly and continu-ously imprcve all aspects of operations to improve customersen ice; analyze prcsent systemsand determine their effectivenessin delivering competitive cus-tomer service qualiry enhancesystems accordingly, and get cus-tomer feedback on the changes,and repeat the cycle of analysis/improvement/ feedback continu-ously (fraizez process);

b) institute a corporate-wideeffort to initiate change and sus-tain improvements.

c) stay dose to the customer,understanding and anticipatinghis needs; use the total qualityapprQach and instihrte effectivefeedback information systems;and,

d) leam what the best com-petitoN or evm non-competingairlines are doing and emulatethem if not surpass them in qual-ity of overall service and effi-ciency; this process is calledcompetitive benchnarking.

Making an airline world dassrequires drastic and even painlulshifs in paradigms:

a) From flying planes toserving passengeF;

b) From hansporting peopleto serving people;

c) From treatint pas6enget6like baggage to heating baggagelike passengeo

d) From in-flight service tocompletesereice(pleflighttopostflight); and,

e) From the transporiationbusiness to the servic€ b!,rsiness.

Airlines should go beyondsatisfying pass€ngers - by dolighting, better yet, surprisingpassengers with exceptional,prompt, unforgeftable service.The ultimate benchma* that in-dicates if an airline has reachedworld class status is when its Das-sengers cease acting like custbm-ers and begin sewing the airline asits salespeEons - spreading thegood word around and convinc-ing their ftiends to fly the airline.Indeed, the best advertisement isnot a satisfied ostomer, but a delightedone. I

IHE ASIAN MAMGER NOVEMBER/DECEMBER 1992 50

Marketing Asiato theWorld

Should we sell Asia as a trading bloc or as a region comprised ofdifferent individual countries?! As a trading bloc ! As a region of individual countries

Do you believe conditions now exist which make the fonnation ofa regional bloc possible or feasible ?n Y e s l N o

Which of the following do you feel are most important in makingAsia attractive to foreign investors?a) comparatively cheap laborb) infrastructurec) growing consumer market and rising middle classd) incentives provided by govemmente) presence of abundant raw materialsf) low cost of doing business (i.e., rents, taxes, etc.)g) stable labor-management relafionsh) political stabilityi) others, please specify , -

4. As we continue to athact foreign investors, should we also regulatethem to give local industries more chance to compete?! Y e s l N o

5) Which tlrree countries are currently the most attractive to foreigninvestors? (Please runk in ordet of preference)

!D!ntrnn!

a) Chinab) Indonesiac) Malaysiad) Philippinese) Singapore0 Thailandg) Vietnam

Which three countries do you feel will attract the most investrnentsfive years frorn now? (Please rank)a) Chinab) Indonesiac) Malaysiad) Philippinese) Singapore0 Thailandg) Vietnam

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City in the South...

Returning to Bacolod

nBacolod City, like thePhilippines, is supremelyconfident of havingweathercd the economicand political crises,eagerly savoring thesuccessfi recovery andbusy planning for thefuture."

ugust 25, 192 we tmv-elld loBacolodCitywhichwe last visited nine yealsago. Then, we were con-

ducting a serninar for JardineDavies, aimed at coping with theonsl,ausht of an economic rcces-sion. Now we came as guest of theAIM dumni. In this, our Iatestvisit we find Bacolod City, like thePhilippines, suprcmely conJidentofhaving weathered the economicand political crises, eagerlysavoring the successful recoveryand busy planning for the futue.

My AIM hosts werc GeoBeZulueta, MM '80) vice pr€sidentand gmeral manager for Negrosof Gaisano, Eric Montinola, mar-ket planning manager for CocaCola (MBM '86), and EddiePestano (BMP79). Inspted bythesucces of the Executive LectureSeries conducted at AIM rmderthe sponsorship of theAIM MBMClass 192 they hoped to replicatethat succ€ss through their ownExecutive Lecture Series. I wasslated as the ftst sDeaker.

As an aside, M;. sally Flor€s-Aldaba, executive director forAlumni Relations, obEerv€d thatAIM Alumni Associations tfuivewhen they undertake such activi-tieo rather than rcmain merely so-cial dubs.

FrcmtheairDortweweretakento one of the tluee brand new hoteb the I- Fisher Hotel.

The next day we wmt to theseminar site, the University of St.la Salle, one ofthe co€ponsols ofthe lectue series which also in-duded the Meho Bacolod Cham-ber of Comnerce and Industry,the Financial Executives lnstituteof Negros Occidental and CocaCola Bottlers Phils., Inc. DeanBelrna Pestano gave us a quicktour of the ten hectarc campusbefor€ the moming lectue on theOverseas Chinese ManagementSystem.

During the lurch break, wemet Roberto Abello, a locat busi-nessmar, who rclated to us hispresent business of lending to themarket vendors of Bacolod, Chi-nese style; i.e., no colateral and nodocuments. This u/as quite aswitch,fu )m ruming the SouthemDeveloDment Bank. After ltmch,Mr. Abillo gave us a quick tour ofthe city showing that the city hasbeen rcvived - traffic iams haveforced the city recendy to installtraffic lights.

Mv aftemoon toDic coveredpublii policy wherel recountedmy experiences with the passageof ('alakalan 20, my proposedleapftog strategy of developmentfor the Philippines, the untappedmarket for computer progam-mers and mv present work withMayor Jeioniai Biruy of Malati. Iwas happy to be informed that thef'alakalar 20 law is being imple-mented in Bacolod Ciry

Mv audience was ouite inter-ested in the potential ofcomputerprogramrning. After all Negros,the prcducer ofsugar, prawnsandcut flowe$ for export, is oneofthefew provinces in the PhiliPPrnes,wherc busin€ssmen arc boti ex-port conscious and exPort profi-cient. My audience rightlypointed out that if comPu ter Pro-gramming work for Japan can be

done in Manila, it can also bedone in Bacolod City, and farmore cheaply at that.

The audience, as citizens ofBacolod Citv, wer€ also inter€stedin the implications of the newlocal Aut6nomy code which devolved substantial authority andr€sponsibility to the city govem-ment ofBacolod. They questionedme closelv on mv work withMayor Binay h thi setting up ofthe Makati Research and Devel-oDment Center and of the Makatiftvelopment Corporati,on.

After the seminar, my hootstook me and Sally to the House ofNegros. The Hous€ of Nqjroo isan irnovative rnarketing conc€Pt.It brings together under one roofthe prcducts of its exporter mem-bers, medium-sLed businesseswhich could not a.fford such anexhibit center on their own. Iradditio4 the House ofNegtosactsas meeting place between buyenand producers and as a messageand comrnunications centet AscomDensation, the House ofNegrcs gets a 15% override onpoducts sold to the public.

Our last evening in Bacolodbesan with a farewell dinnerho;ted by the Nego6 chapter andended rarith a tor-ri of the cisino. I

@. NOVEMEER/DECEMBER 19S2 THE ASIAN MAMGER

OF COI]RSD YOU IXITYT NEDID, G -IR. IN YO[]R' PRINIOII�II

BUT WHY PRESENT GRAPHICS LIKE THIS:

1990/ r991Prul�TER SAI;ES

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WHEN COLOUR CAN BRING TO LIFE!

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Don't knock it.....

Singapore's Surprising Success

iny Singaporc - a[ 633square kilq€hes of it-is livurg proof of the vir-hres of an open trading

sytun Just A yans aItg aweeping ke Kuan Yew an-nounced Srngapore's expulsionfiorn the Mal,aysian Uniot ttpisland rcpublic has long sincebeorme the eruy of its SouthestAsian neighbors,

With its FirEt World inha-structue, ar "airtrroDolis " thesize of several dozdn footballfields, and a per capita incomecomparable to that of prosper-ous Westem European coun-tries, Singapore stands a headabove other regional econo-mies. It's been said that theaverage Singaporean eni)ys alifestyle appr0ximating that oftheaf{luent Swiss and one onlyhas to look arourd OrchardRoad - Singapore's poshshopping district and home tohorrendouslv expensive doth-ing and leather girods shops -to see that this is true.Singapore in the yean directly

after its explulsion from the Fed-eration was vastly differ€nt towhat it is now. To rcsidents wholeft then only to Etum in the late'8Os, the city is virtualy uruecQg-nizable. KanporS bungalows andold colonial houses in the mock-Tudor black and whiE style havebeen rcplaced by higltsdse housingGtates ard ofice buildings whceonly dominant duracteristic is acold, impesonal sameness.

Eventoday I donJt particularlycare for Singapore's firnncial dis-tsict and I imagine much of itsstaidrcssiswhySingaporealwaysrnanages to land on the top ofevery traveller's most-boring-Dlace-tevisit 1ist, ADart ftom theirea close to the wateifront, whichis lovelv and verdant, downtownSingap6rc is a shivery expanse ofconcr€te and granite, much likeanv modem urban center, but

somehow bereft of the excitementof, say, Hong Kong's Cmhal dis-hict.

9ingaporc is great iorwalkin&the entire city is dean, green andpedestrian-friendlv. No manicieepneys or noisy liitle tuktul<sthatthrcaten to run you down everyhundred yards or so.

Although, perhapE less so thanHong Kong Singaporc is a city ofcontrasts. Arnid all the high-riseand high-tech gadgetry are litdercminders of why Singapore hasdone remarkably well.

Young people no matter howprcspercus or independent, stilladdress anyone rcmotely olderthan them as "Unde" or "Aury'

and still remove their shoes uDonentering their homes. At the bot-tom of our rcad sometime in Au-gust, the air would be RUd withthe heady smell of slowly bumingirs sticksand I would comeaclosslittle altals overflowing with riFening fruit lying on the waysideforsomehungryghostorwandePing spidt to consume.

Sudr vencation of anGtorsand rEspect br eldels are amongwhat L€e Kuan Yew likes to call tl€"irrtangibled' so ess€ntial b SuEa-pole's curlellt prosperity. Thisslured smse of traditbn and com-miknmt to ommon vahres pro.vides a c€rtain coheErKe to therclatively young sciety whid! noitoo long ago, was bekagu€red and"forced to l ive in a hosti leneighborhood (Robert Shaplen,TmeOut S lland)."

Foreigners make sport ofknocking Singapor€. When I filstarrived, fd spend lazy aftemoonswith other expats thinking ofwords that best described Shga-pole. Antiseptic was one, mad-deningly-oderly (if you'[ excusethe syntax) was another.

It's hue, Singapore in a way issrrangety,alrnGtinfuriatingly,anti-s4ic In thesubway (whidl by theway is er<cell€nt) you see sigrts kft

ploring the passer-by to disposeofhis Eash prcperly or to please rc-frain frcn bringing durian ontothe trains. Neady ev€ry week mybotherand I would be onthe look-outforne-t^r'sayingsoradmonifrons.Someof thesloganswoeinoediblyhits "Abit of c!:r.utesy," w€nlt one,"goes a lcng way."

Yet Singapore's remarkablerccord of progress is the perfurebuttal for whatever criticismtrickles in ftom the outside. keKuan Yew's increasingly authori-tarian bland of govenunent wonhim as many critics as admir€r:sbefore he stepped down in 190.Even my young Singaporeanfriends grouse about l€e's ownpeculiar brand of social engineer-ing. They fail to appr€ciate thecircunsianc€sof Singapor€'s bil thand only rcmember its recmt suc-cess€s,

My pamts, for instance, remember theE being sort of a siqjernmtality fotlowing the break upof thefederation Certainlvthedif-ficulties facing the ffirallGiand rc-public with few resources of itsbwn were immense. Its muchlarger neighbor iust minutesacroes the causeway h/as a gleatsource of concqn as was Singa-porc's own potmtially fractiolrspopulation of Chinese, Malays,Tamils and Flindw. l€e's rcactionto these problerru was dEracteristi-cathl,ee: Spiritedandbellicoee. Hisnuin conci:rn was always Sing&pore's survival as a selfgoverningsEte.

h my las summer there, SingaDoetumed 25, I runernberall thehokeylittlesongs('StandUpSinga-porc," "I/Ve are Singapote") thatwere played over and over again inthe suDernarkeb. Bv the time I wasace riretuminebo i\aanna, Ihewall the wods {-hea* 0 don't ihinkI was b'rainw"ashed ard when td

F[.rsh my shopprng cart down theftozcn iood aisle nobody sang thelyrics lor,rder than me. I

"Singapore's remarkablerecord ofprogress is thepedect rebuttal forwhatever criticismtrickles in llom theoutside."

64 lHE ASIAN MANAGER NOVEMBEFI/DECEMBER 1992

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