Standard Chartered Bank and the banking environment in Asia

A couple of events took place in the banking sector across Asia. In Singapore, a major shareholder of Standard Chartered Bank (SCB), Tan Sri Khoo Teck Puat, 86, has died. Forbes rated him as Singapore's richest man. He died suddenly on Saturday afternoon, February 21, 2004 and leaves his 14 children a US$5 billion fortune, including just over 13 per cent of Standard Chartered. It is said that his children have no interest in running the bank, which might leave it as a takeover target.

Asia’s banking sector is red hot. Just a day after above event, Citibank in cooperation with JP Morgan and the Carcyle Group acquired Koram Bank for US$2.7 billion – not much, for this voracious acquirer. Interestingly, Citibank was in competition with Standard Chartered Bank for Koram Bank, in which it has a 10% stake. This is a continuation of Citi’s continued expansion in Asia, which it sees as crucial for it future. In addition, it fits nicely with Citi’s recent taste for consumer markets and creditcards – it acquired acquire Sears' US$29 billion portfolio of private label and bankcard credit card receivables in the US in July 2003. The acquisition included Sears' Financial Products business and credit card facilities with approximately 8,300 employees (5,800 full-time employees). In Korea, the creditcard market is pretty hot, as many banks moved into the segment after the Asian crisis of 1997/8. However, it got verymuch colder recently as many creditcard holders defaulted – as such, Citi might bring appropriate knowledge to the market.

And HSBC just placed a bid for Korea First bank – is it to counter Citigroup?

The interesting part is that while SCB also expanded rapidly in Asia, it had been in discussion as takeover target for a longer time already. Sources say that Barclay’s Bank, Bank of America, Citigroup could be interested, while HSBC and Royal Bank of Scotland might have the firepower to place a bid as well.

(By Asia Business Consulting)

Anti-Spam - The Chinese could pull it off

Business Today, a magazine in India quoted a market research group that the cost of spam - installing software, scanning mail, the time to delete it)l rise to US$US$20.5 billion in 2007.

Everybody is complaining about it, companies install more and more software to prevent spam from entering their server, and that countries don't do enough.

Don't say?

China pounces ahead and it was said that the government gave senders of unsolicited mail an ultimatum to clean up their act or face digital exile.

According to the Chinese News Agency Xinhua, mainland authorities have identified and blacklisted 656 spam servers worldwide with 65 being in Taiwan, 6 in Hong Kong and 63 in Mainland China itself. And this is not the first time - it happened already in 2003 - and shows that a country can take steps to stop spam.

Okay - China earlier blocked sides like Google, and is is concerned about anti-government propaganda and controls the Internet with a tight fist. But may be, sometimes, this is the way to pounce the bad guys?

(By Asia Business Consulting)

A continuation - AT&T Wireless and the decline of corporate reputation

There is a relation of this comment here to two earlier ones - the declining image of companies in the US, and the sale of AT&T Wireless to Cingular.

I read in the Seattle Post yesterday that despite the sale and despite a not-up-to-the benchmark performance of AT&T Wireless (poor service record, low stock valuation), executives at AT&T Wireless Services Inc. were given shares worth millions of dollars as performance bonuses last month. That award came a week before they moved to sell the company for a price that renders nearly all the employees' options worthless. The Seattle Post continues: “The bonuses were paid under a stock-based performance-incentive plan approved by the board of directors more than a year ago, so analysts said they don't constitute before-the-sale manipulation. But their amount and timing is interesting considering that the move to sell the company automatically will vest employee stock options -- at a price to exercise that's more than their current value, which renders them worthless.”

I think that this is sad - after all the discussions that took place in the US about accounting frauds, and corporate governance and so on. Wouldn’t it be great, if those executives would forego their stock options or give the earnings to those employees that will loose their job due to the transaction? This would be strong leadership and a show of strength. Feel free to give your comments.

(By Asia Business Consulting)

Corporate reputations are falling

Well, just to confirm our recent posting. The weekend edition of Asian Wall Street Journal (February 20-22, 2004) reports that the accounting scandals that have hit America over the last 2 years, take their toll.

In writes that Harris Interactive and the Reputation Institute found that three quarters of survey respondents (>6,000) graded big business's image either "not good" or "terrible".

The anger of the respondents runs deep - they also feel less positively inclined about customer service, the treatment of employees and the environmental policies at many companies measured in this survey.

Wow - that is bad. But what could be expected? After more than 2 years of ongoing retrenchments? Reports that millions of jobs will be outsourced oversees? I am not saying that retrenchments or outsourcing of jobs are bad in itself - reinvention is sometimes needed and demanded of companies and countries.

But ongoing communication and rational explanations are needed that clearly outline business cases for moves of the corporations.

Training programs should be offered for affected employees - they worked for the good of the company some many years.

If employees are scared, and worried to be the next on the bench, than something is wrong. And after all the retrenchments, when remaining employees do two jobs at once, who wonders that customer satisfaction is suffering?

And what about the environmental perspective? I am not that clear, but one respondent complained about Ford Motors. He says that its advertisements "show trucks and SUVs driving through beautiful landscape, but it fails to mention that by driving these vehicles, you are actually killing that beautiful landscape."

(By Asia Business Consulting)

AT&T Wireless acquired by Singular - Another icon gone

Last week marked the continuation of the ongoing decline of one the greatest company icons in American history, when Cingular Wireless one the bidding war for AT&T Wireless against Vodafone.

Cingular stated that, if the sale goes through, it will phase out the name AT&T Wireless. Gone – another one.

I found a quote in an older Fortune Magazine (Oct. 1, 2001) that describes the situation "nicely":

"AT&T's era began to end in 1984 with the breakup, and it is in a period of longlasting decline. Nature is running its course."

(Scott Cleland, Analyst of the Precursor Group)

Look around you – the landscape is full of companies that managed to rewrite company history – EBay, Amazon.com, even Dell, which is a somewhat new company.

Which company failed or nearly failed over the last couple of years?

Polaroid, the once mighty company of instant photography, which declared bankruptcy in 2001. The name has been bought by a Hong Kong company, who plans to relaunch the company in a different market segment.

Xerox – a company that struggled for years and once declared to have an unsustainable business model and Kodak, which in January 2004 declared that it won’t support R&D in traditional photography anymore. Only recently have they been able to get their footage back.

McDonalds – whose revenue declined for many quarters – and now also tries to relaunch itself.

IBM – nearly failed in the early 1990s, when the market forces overtook it.

Microsoft – which embarked on the Internet only after Netscape was tremendously successful. Or, a company in an even older industr- Bethlehelm Steel, which went bankrupt in 2003, despite being protected (for a while) by import taxes imposed by the Bush Administration.

What about the American Record Industry, which still fails to embark on a new business model and hopes that following Apple’s successful online shop for music downloads will help it succeed – and which doesn’t realise that the public voted with its feet for a different business model.

You will ask, what is happening? Well, frequently, company leaders deny acknowledging changes in their business model will affect their company. Everything is then blamed – bad economy, market turbulences, currency speculations, and everything else possible (which statements have you heard?).

Companies don’t realise that underlying technology is changing their “livelihood” and that everything changes faster by the minute. That early-warning systems don’t work as they did earlier, if the information required is falling behind the overall noise of change and too much information. Or when leadership ignores signals and believes that its company is isolated from the overall market.

Here, we can call upon Cisco, which claimed to know everything about its markets, back in 2001, and said that the dot.com bust wouldn’t affect it. In April 2001 (when I remember correctly), Cisco had to write off US$2.5 billion, and laid off 8,500 employees soon afterwards.

Can we believe Clayton Christensen, who stated, in the innovator’s Dilemma, that companies fail, because they stay too close to their customer, and didn’t foresee the rise of new technology?
As you can imagine, there are plenty of situations, when companies fail, and how they fail. Clear is that no company is isolated, and that no company is protected from the forces elsewhere anymore. Change is everywhere, ongoing and accelerating.

Countries in Asia realise this- they face different challenges, namely the rise of China and India, while they embark on their own journey to venture outside of their country.

Just yesterday was announced that Temasek Holdings - a conglomerate in Singapore -is interested in purchasing a stake in a smaller Malaysian bank, called Alliance Bank.

Singapore Telecommunications (SingTel) is making moves outside of Singapore and invests heaviy acrosss the region in other companies - Optus in Australia - which already resulted in strong profits. Right moves, and companies in other countries should follw - which, however, would inrease competition and might lead to failures.

But Abduallah Badawi, the Prime Minister of Malaysia stated correctly on January 14, 2004, namely, that “Protected companies or monopololies are rarely ever leaders in innovation and creativity.” So the opening of markets are good for the region, for the countries, and in the end, for the individual consumer as well.

What do companies and countries need?

1.) Clear, ongoing information on which they can act.

2.) Besides this, they also need the right channels. It does not make sense to get good and accurate information but the knowledge goes to the wrong persons

3.) Ability to change earlier positions – Flexibility and agility is needed

4.) Empowerment – company leaders need to be open to suggestions from their employees. Frequently, they just want to hear what is good for them – no more. Engage and empower your workforce to listen, report and change – if you are a small company or a big company.

There is more that could be said here - but this trait is way too long already!

(By Asia Business Consulting)

MBA's bleak future? Why art graduates and designers transform the workplace

Do you love this or is this frightening?

The first article of the last issue of the Harvard Business Review (February 2004) presented a list of breakthrough management ideas 2004. And what we always thought would happen comes true: MBA’s are somewhat out in the professional world while creative arts is in. The article states the following facts

· Admission to UCLA's fine arts graduate school is 3%, while Harvard admits 10% of the applications. Apparently, corporate recruiters have begun visiting top arts grad schools - places such as the Rhode Island School of Design, the School of the Art Institute of Chicago, the Michigan Cranbook Academy of Art - in search of talent.

· Even the bluest of the blue consulting firms – McKinsey - hires outside their traditional domain. It is stated that in 1993, 61% of McKinsey 's hires had MBA degrees and that around now this ratio is down to 43%. They state that McKinsey says other disciplines are just as valuable in helping new hires perform well at the firm.

Amazing? How come you ask?

Well, a function of demand and supply is one thing. There are just too many MBA’s in the world – when everybody studies the same, salaries drop, at least for those who are not able to distinguish themselves. However, companies demand an MBA – and as such, such a degree might just become the entry ticket to the working world anyway. And if there is someone living on the other side of the world (from the US, so to speak), whose salary is small compared to his or her American colleagues, well, corporations go for it!

But this doesn’t quite explain everything.

The basic is that in a world, where products, services companies and probably employees look the same and think the same, where consumers are flooded with offerings and advertisements play the same card over and over again – what does a company need from its employees?

Over the last couple of years, an increased number of studies indicate that design and innovation becomes crucial – but how to get it from same-looking, same-thinking, same-developing employees that are coming out from universities? Well, look for someone who stands out from the crowd. Someone, who is different, has done something different and is able to bring the "Difference" to the table. To enhance the thinking in your company.

And to create great products.

Just listen to auto industry legend Robert Lutz. When Lutz took over as chairman of General Motors North America, a journalist asked him how his approach would differ from his predecessor's.

Here's what he said: "It's more right brain.... I see us as being in the art business. Art, entertainment, and mobile sculpture, which, coincidentally, also happens to provide transportation." General Motors-General Motors!-is in the art business. So, now, are we all."

Design is everything in the Brand New World


(By Asia Business Consulting)

Fight against corruption in Malaysia

That is good news for Malaysia. Prime Minister Datuk Seri Abdullah Ahmad Badawi, the successor to Dr. Mahatir, has, in the first 100 days of his reign, started a major campaign against corruption in the country. Last week, Last week, two prominent were charged separately for corruption and more cases were promised by the PM.

We believe that the drive for a cleaner country promotes the country, and as such, provides it with a new and strong competitive advantage. It comes close to Singapore, where a clean environment resulted in a buoyant economy, and, naturally, a richer per-capita income. Singapore's civil servants are highly paid, well regarded, their profession a clear career path for many graduates - compare this with other countries in the region.

If Malaysia is able to clean up and stay on course, the country has surely found a way to compete against other giants in the region - those that are perceived as much more corrupt - Indonesia or China comes to mind.

Thinking about efforts to reverse declining foreign direct investment, this could be just a road that brings new riches to Malaysia.

Election and the Internet

A recent BusinessWeek has two stories that reflect how the world is changing. It is about the upcoming elections in both, the US and Korea and the role that the Internet plays in the two events. The player in the US is former Vermont Governor Howard Dean while in Korea, it is President Roh Moo Hyuan.

The major difference? The Koreans know how to play the game and their candidate did not only make decisive online moves in the last election but is coming from behind in this election as well - and quickly gaining ground. He is coming from behind, because the party he is representing is actually a split from their former party.

Dean's campain, on the other hand, is falting - he seems to be out of the race, while about two months back, he was the frontrunner.

What could have been the difference between the two that in one country, Internet campaigns are successful, while in the other one, it is failing?

Could it be that Korea is THE county? The country is full with broadband connections - more than 70% have such fastspeed connection. A lot goes through the Internet, and there are plenty of support communities. Individual activists take matters in their own hand - develop campaigns, even blacklist candidates that are corrupt. This is experience economy at its finest. When community groups work together and become decisive.

I can only imagine how it looks in the States, but I believe, that Koreans are more vocal, while in the US, elections are much more decided via "old economy" moves - voter come together in an hall and listen to the candidate. Donations are collected through the web - not more, probably. So it is a very one-sided affair. Less connection of the candidate with the people.

Or - Kerry, the current front runner, was able to copy all the right moves by Dean and shot ahead, while in Korea, the other parties just don't get it, and THEY are the one, who fail to jump on the wagon of the New Economy.

Makes me think! But it is clear - the old economy and the new economy clash in one more area - and change the landscape, how elections are run, forever!