Boustead chief, well known for turning around businesses, offers up some lessons
By JOANNE TANG
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FOR a lesson on entrepreneurship and reinvention, Wong Fong Fui, executive chairman of Boustead Singapore, narrated the story of Ping Yao at the BlueSky Festival yesterday.
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| MR WONG 'If we ... do not continuously reinvent ourselves, we may turn into another Unesco site.' |
This small town in Shanxi province flourished as the financial hub of China for three centuries in spite of the poor soil and poor accessibility.
Home to 22 banks which controlled more than half of the nation's wealth, its success lay in its people's ability to think out of the box. The people of Ping Yao ventured out to places such as Mongolia and Russia to trade.
However, reinvention is a continual process and complacency in their 'old winning formula' eventually led Ping Yao down the path of economic decline.
By refusing to participate in the formation of the Chinese central bank, Ping Yao got left behind by a developing China. Today, it plays a diminished role in the economy as a Unesco World Heritage Site.
Joking that the town was too poor to demolish old structures - which eventually helped it garner the Unesco label - Mr Wong said: 'If we as a people and as a nation do not continuously reinvent ourselves, we may turn into another Unesco site.'
He then shared practical tips with some 700 people in the audience on how to reinvent.
When Mr Wong took over the reins in QAF Limited in 1988, the company was overstretched in too many businesses - including car dealerships, food, newspaper, and property - many of which were unprofitable.
As a result, company suffered annual losses of about $30 million.
To reinvent the business, Mr Wong identified the food business as the core business and focused on making QAF the largest food company in the Asia-Pacific. In 'one brave and merciless exercise', he divested all the business segments that had no synergy with the core food business or long-term prospect.
Business turned around within three years with after-tax profit reaching $28 million in 1994.
The second key to business reinvention is brand equity. 'Brand will help you to improve your margins and create entry barriers against new competitors,' said Mr Wong.
According to him, Milo was able to outsell Ovaltine many times over because, based on his estimates, the former ploughs about 15 per cent of its sales revenues into brand building.
Recessions should not be an impediment to brand-building. LG Group - the South Korean conglomerate - had pressed on with building brand equity during the Asian Financial Crisis and is reaping the benefits.
He also cautioned against investing in sunset industries - citing it as one of the common factors of failed acquisitions.
When Easy Call - a paging business - was disrupted by the mobile phone industry, Mr Wong closed all its data centres and reinvested the capital into the Boustead College in Tianjin, reaping first mover advantage in the nascent education sector there.
After six years, the initial capital of $12 million spawned sales of $150 million.
Noting the wealth of opportunities in the global marketplace, he said: 'To me, it is obvious that the opportunities and chances of success are much greater in the emerging markets.'
Investments in emerging markets are more 'worthwhile' as a little capital can go a long way, while earnings growth will be boosted by high economic growth rates.
From his own experience, Mr Wong surmised that one should invest in emerging economies rich in natural or human resources, are politically stable, and carry moderate business risk.
'Change is the only constant' in the business world, he said. And it is the key to survival and growth.
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