On Your Own

The writer is an entrepreneur who hopes to share his experience and insights with readers who want to take that giant leap into business but are not sure if they should.

8/2019 – When looking east means China

A trip to watch cherry blossoms in Japan requires precision planning with loads of good luck. The unpredictability as to when the cherry tree will blossom in spring has made planning for the trip much more difficult, as the cherry blossom lasts for only two weeks in a year.

The other unpredictable factor is the weather. When we landed on Sunday night, it was 6ºC. It was the end of the previous week’s temperature of 6ºC to 17ºC. In the last few days, the temperature plunged to 2ºC-8ºC. My daughter told me that the temperature for the following week would be 6ºC-17ºC. Just my luck, as I did not sign up for a winter trip.

With the cold weather, having a bowl of hot ramen is a must and the average cost is about 1,000 yen (RM40) a bowl. So, using the noodle/ramen index, a bowl of noodles in Kyoto costs four times as much as in KL. Rental of property would be six to 10 times more, depending on the city you are in vis-a-vis Kuala Lumpur. Generally, salaries in Japan are three to four times higher than in Malaysia, so I believe middle-class Malaysians (excluding the B40’s) have better purchasing power parity compared with middle-class Japanese.

After getting the samurai bonds guaranteed by the Japanese government, Prime Minister Tun Dr Mahathir Mohamad is encouraging a Look East policy again. He feels that Malaysians should learn about adopting the work ethics and value system of the Japanese. Back in 1982, six months after becoming Prime Minister, Dr Mahathir launched his Look East Policy, an initiative to learn from the experience of Japan in the nation-building of Malaysia. He wanted to send young Malaysians to Japan to pursue undergraduate programmes and train in technical skills/technologies.

Only Volkswagen plus a host of other merged brands sell more. The latest big player is the merged Renault/Nissan/Mitsubishi conglomerate.

But the Japanese have conceded leadership on electronics, household appliances and television sets to Samsung and LG and also to Haier of China. The same goes for the microchip industry, etc. The domestic market has been well protected all these years by numerous trade barriers. Now, Japan’s international image is being upheld by investment visionary Masayoshi Son, the SoftBank CEO who first invested in Alibaba almost 20 years ago. Son has also invested in Uber, Didi and Grab, to name a few of his continuous mega-investments. Now, they have started Alibaba Japan with a 65%:35% JV with alibaba.com. Japan has four million SMEs, almost 10 times the number of SMEs in Malaysia. SMEs account for 25% of the country’s export value and 63% of its import value, but it is an ageing society. Japan’s growth has been driven by local consumption for many years now. Many legacies from its manufacturing past have not been transformed fast enough to counter the growth of South Korea and China. I do not believe Dr Mahathir is making the right call now to Look East-Japan. He should adopt a Look East-China policy. The sale of 49% of Proton to Geely China is bearing fruit now, as it has garnered 25,000 bookings for the X70 SUV within a few months of its launch. This must be the biggest success of Proton in the last 10 years.

China can help us rebuild KTM’s national railway line at a fraction of the cost as compared with Japanese or French technology. We can build a fast-train network from Thailand to Johor Baru, assuming that Dr Mahathir still cannot agree to work with Singapore on the JB-Singapore segment. Huawei can help install 5G network in Malaysia ahead of other Asean countries or even earlier than the United States.

On a bilateral exchange arrangement, China will absorb all our palm oil production that Europe threatens not to buy. Alibaba can set up a regional Asean HQ with an R&D team in Malaysia, and fund digital schools to train Malaysians on e-commerce and e-wallets besides its earlier promise of using Malaysia as its launchpad into other Asean countries. Besides the white coffee and Musang King durian, I am sure we can launch authentic Malaysian products in the world’s biggest market, including halal products for their 21 million Muslims. Malaysia has only 18 million Muslims.

On Dr Mahathir’s fear of the rich Chinese moving into Malaysia after buying our high-end condos, this phenomenon has happened in all the major cities of the world. The Chinese have been buying property in Singapore, Australia, the United Kingdom, Canada and the United States. They have been the biggest investors in global property in the last 10 years.

There is no fear of an influx of China nationals into our country. Our immigration department already has a strict anti-China policy in place. We should encourage the Chinese investors instead, as we have a huge surplus of high-end condos that is killing our property developers. A short-term solution to solve a major problem in the property sector.The Look East-China policy can be profitably managed for the next 10 years while we transform our education programme for our national schools. The rise of Japan, South Korea, Singapore and China in the world economy is mainly due to their high-level education system which starts from primary school. Their focus has always been on Maths, Science and Technology, so they have been building a talent pool to sustain their advancement in building their economy.

Just looking east at China is but a short-term solution. As Tun Daim Zainuddin said in his recent speech on the “National Narrative: Malays within the national context” at a local university, excerpts from his speech included that for Malaysia to get the four sectors of politics, economy, culture and religion right, we must first change our education system. Malaysia’s future depends on giving our children the right type of education that will allow them to be confident to face the best in the world. Expose our children to the world, then they will want to excel and they will protect the best of our culture.

Dr Mahathir and Daim are gravely concerned about the declining standards of our national schools which have a 80%-90% Malay student population. Too many religious classes compared with Maths, Science and Technology. Students are thinking emotionally rather than critically. As Malays form 60% of our population, there is a tremendous shortage of a talent pool which has adequate knowledge of Maths, Science, Technology and English.

How are we then as a nation to compete with Singapore, Japan, South Korea and China without a continuous supply of relevant talent? Or are we happy to strike some short-term deals with Japan and China just to tide through difficult economic times?

Short-term economic success for a nation is like a cherry tree blossoming for two weeks in a year. I would prefer to grow the hibiscus that will flower throughout the year. We should predict our own destiny and not rely on unpredictable trade partners, no matter how profitable it may seem

Published: https://www.thestar.com.my/business/business-news/2019/04/06/when-looking-east-means-china/

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7/2019 – Right leaders at right time and right place will produce positive results

Just two days ago I had an interesting chat with Daniyar Sarekenov, Ambassador of Kazakstan regarding the topic of leadership. Nursultan Nazarbayev, President of Kazakstan had relinquished his duties as Head of State/President on March 19 before the next presidential election scheduled for 2020.

Nursultan had been President since the fall of the Soviet Union Empire when Kazakstan declared independence in Dec 1991. For 28 years Nursultan ruled in an authoritarian manner, won five presidential elections with massive landslides and his Nur Otan party and affiliates dominating the lower and upper house in Parliament with minimal opposition.

This is reminiscent of the leadership style of Lee Kwan Yew and his PAP party dominating the Singapore Parliament for 30 years after Singapore broke away from Malaysia. In his last address to the nation as the Head of State, Nursultan recallrf how the Soviet empire fell, leaving behind a ruined economy without a political system, GDP fell by half, major shortage of food and essential goods and all major factories stopped operating.

Nursultan and his comrades in arms’ first task was to build a market economy, dismantle the communist totalitarian system and ideology, and set about putting in place an economic development plan with the growth of citizen’s welfare at the forefront.

With a population of only 18 million people over a large land mass, Nursultan has managed to create peace and stability within a multi-ethnic (131 ethnicities) and multi religious society of 70% Muslims and 26% Christians. Investments were made to build infrastructure and set up a modern education ecosystem resulting in a top class national university in Astana, the capital of Kazakhstan.

Nursultan now hands over the Presidency to Kassym-Jomart Kemelovich Tokayev, 66, who has held the cabinet positions of Foreign Minister, Deputy Prime Minister, Prime Minister and even having a stint at United Nations as the deputy secretary-general. The leadership succession plan seems to be in place with the right candidate but Nursultan remain as Head of Security Council and his party. Similar to the appointment of Senior Minister Lee Kwan Yew after handing over his reign to Goh Chok Tong.

I mentioned to HE Daniyar Sarekenov that this transition looks orderly but Nursultan should play his role as an advisor and nothing more. His leadership style and ideas have been relevant through the last 28 years but the needs of the country is very different now. He should allow the next generation leaders to emerge, give them responsibilities and let them lead the new transformation programmes.

Singapore government is at the forefront of leadership succession planning. Their next generation of politicians are being groomed and in the civil service for example, their army leaders are only in their 40’s. The older generals and colonels have been phased out while in their 50’s. Our current Malaysian government has the weirdest combination, from a 26-year-old Minister to a 94-year-old Prime Minister. Leadership succession planning is in turmoil with all kinds of

speculation and power play among the motley crew of leaders in the coalition. Tun Dr Mahathir Mohamad’s leadership qualities was suitable for restoring law and order in this country but his economic policies looks outdated and irrelevant to the new economy.

There is no succession planning in place probably due to the fact that they are a new setup and also due to the lack of quality among their members. Some ministers are raw, young and inexperienced whereas some are just plain unintelligent. It will be good if Tun M for instance bring back Tan Sri Rafidah Aziz as a Mentor Minister to the Education Minister. Rafidah’s reputation as a no nonsense leader will be crucial in revamping the Ministry of Education, our national school system and remove the religious bigots who have planted themselves into our national syllabus.

Like any entrepreneur, my biggest headache in managing the company has always been identifying leaders suitable for the job at any given time. In the early years, sales managers must have good relationships with wholesalers, then with the advance of modern trade they need to learn technical skills in negotiation, spreadsheet presentation and logistic planning.

Brand managers only need to understand the 4P’s then 5P’s and 6P’s over the years. Now the e-commerce have thrown them off balance, forget about the P’s and just make sure the influencers and key opinion leaders sell your products.

Do we have the national leaders to take us into Industrial Revolution 4.0? Do we have brave new leaders to lead Malaysians to the path of equal rights for all and off the path of race and religion?

Whether in business or government, placing the right leaders in the right place at the right time will only produce positive results. If you are an old leader, make sure you stay in touch with new trends and new technology shifts. If you are not able to cope, it is best you step back and remain as an advisor and let the younger leaders take over.

That is probably the best advice that an outdated entrepreneur like me can give to outdated leaders out there still plying the trade dishing out outdated ideas to the public. Getting old is a blessing. Being outdated can be pathetic.

Published: https://www.thestar.com.my/business/business-news/2019/03/23/right-leaders-at-right-time-and-right-place-will-produce-positive-results

6/2019 – Good and bad news about airlines hog the headlines

Over the last two weeks, we have had so much news about airlines. They include the crash of the Ethiopian Airlines’ Boeing 737, Cathay Pacific announcing its results on its latest turnaround plan and Prime Minister Tun Dr Mahathir Mohamad’s announcement on the possible closure of Malaysia Airlines Bhd (MAS).

Cathay Pacific has announced its latest financial results for 2018, with the airline making a profit of 2.1% on a sales revenue of HK$111bil. In only its second year of a three-year turnaround plan, it has reversed its losses incurred in 2017. Net profit margins are thin, though, almost like the hypermarket retail business.

Meanwhile, back home, AirAsia X Bhd has been incurring losses for five consecutive quarters. AirAsia Group Bhd, however, turned in a profit for its full-year 2018 despite incurring a loss in the last quarter of 2018.

The airline business is notoriously tough, with high capital expenditure (capex) , volatile fuel prices and stiff competition driving down ticket prices. Airline operators need to drive down CASK – cost per available seat km – while at the same time driving up RASK –revenue per available seat km. Operating profit can only be achieved if RASK is higher than CASK. Simple as that.

Low-cost carriers (LCCs) like AirAsia survive because they keep CASK down as low as possible by filling up the seats on every flight ( high load factor). That is only possible by selling the seats at prices low enough to attract more passengers to fill up the seats. Even if RASK equals CASK, the airline would still make a profit from ancillary income, through the sale of food, beverages and baggage space.

While LCCs are set up with lean operational costs, full-service carriers (FSCs) have legacy issues of high operational costs built up over the years. FSCs like MAS, Cathay Pacific and Singapore Airlines have a higher CASK and thus a higher RASK, as they have to sell tickets at a higher price due to the full service provided.

MAS has been fully owned by Khazanah Nasional Bhd since December 2004. To understand what Dr Mahathir as chairman of Khazanah has said about the unknown fate of MAS, one must go back to the day when a series of unfortunate events affecting MAS started.

Back in 1994, Dr Mahathir approved the sale of a controlling stake (29%) in MAS to businessman Tan Sri Tajuddin Ramli (Naluri Bhd) at RM8 a share. MAS was reported to have a cash hoard of RM600mil at that time.

hen the Finance Ministry (MoF) bought back the same stake in February 2001, it was reported that MAS had accumulated RM9.4bil in losses.

Despite the huge losses, MoF still paid Naluri RM8 a share. That was the first major bailout of MAS by the government.

The second period of losses for MAS was from 2001 till June 2014 where the accumulated losses came up to RM8.4bil. During the same period, the government and Khazanah extended an additional RM9bil via Penerbangan Malaysia Bhd (PMB), which took over aircraft assets and liabilities, loans, redeemable convertible preference shares, rights issues, sukuk bonds etc. The total funding came up to RM17.4bil.The third episode was from August 2014 to 2018 when Khazanah announced the MAS recovery plan, where subsequently another RM6bil was spent on the airline and lost. From 1994 to 2018, a total of RM32.8bil had been spent on bailing out MAS over 24 years, or an average loss of RM1.38bil a year.

So, should Khazanah divest MAS from its portfolio of investments? Divestment could mean selling MAS, selling PMB with its assets and liabilities or closing down MAS if there are no buyers and selling off its assets and paying off its liabilities. Both exercises could cost Khazanah a few more billion ringgit. The last option is to launch another turnaround plan, pump in another RM6bil and restore national pride that we have kept our national airline flying again. Looking at the burn rate of RM1.38bil a year, this RM6bil might just last another four years and four months. Then what?

Then, there is the sensitive issue of MAS’ 14,000 employees. I am sure the government will be able to find places for these employees, or Khazanah can find them employment in their many GLCs. Just leave the unions behind.

Khazanah should divest because the airline business is not sexy anymore. High capex, low margins and low-cost competitors all around. Investing further would be like good money going after bad.

What price to pay for national pride? RM1.38bil a year can do wonders for our economy. Bringing in tourists is the job of the Tourism Ministry. There are sufficient airlines with spare seating capacity.

The current management team seems to be clueless as to any other turnaround strategies, missing all the conditions set by Khazanah. Khazanah perhaps has set too high a CASK and RASK target for MAS to reach.

MAS has always been subjected to political interference to the point that no capable manager can operate on their own. Old habits die hard.

Dr Mahathir was in some ways responsible for the sale of MAS shares to Naluri. He was the prime minister at that time. His decision led to the series of bad fortune caused by poor management. So, it is his karma that as the chairman of Khazanah, he now has to decide on closing down our once iconic airline.

I hope his decision will be the first of many that will move the government away from managing businesses, as otherwise, we will continue to hear about billions of excuses for mismanagement for the next 44 years.

Published: https://www.thestar.com.my/business/business-news/2019/03/16/good-and-bad-news-about-airlines-hog-the-headlines/

5/2019 – Identify your target-market mix

Last Sunday, I met up with two professors from the Medical Faculty of Universiti Malaya.

These two effervescent ladies want to save the world. Their dream is to eliminate cervical cancer by providing free cervical screening services to Malaysian women, prioritising the under-screened population – the B40 group.

They plan to set up a foundation to raise funds from donors, corporates and individuals. My only advice to them was that it would be difficult to rely only on donations year after year. They would have to identify the different target segments, and charge those that can afford to finance those that are not able to.

They need to understand about different target segments, a logistical model to deliver their services and set up a viable financial model for the foundation.

I agreed to help them with their initial set-up because of their passion for the mission, their holistic values and their contribution to help Malaysian women, irrespective of race and religion.

With limited funding, social enterprises and young entrepreneurs must identify the market segment that they want to serve. Market segments based on demographic criteria like age, gender, income, education, nationality, ethnicity and religion.

Once you have identified your specific target-market mix, you need to devise a practical action plan based on your financial resources and organisational capabilities. I always advise small startups to focus their main competitive advantage on a narrow and specific target market in a small geographical area.

Only when they have been reasonably successful should they expand to another area whose population mirrors their target segment mix.

After building market share in one market, make sure you keep your gains and then only move to another market. This is a simple steady growth strategy, building block by block. You cannot grow your market share by losing what you have gained when you spend all your resources to fight in another market segment.

Always gain, retain, gain in another market, retain and repeat this exercise until you have achieved market leadership.

Even in politics, understanding market segmentation (voters) is crucial in ensuring long-term success for the political parties. The recent Semenyih by-election is an example.

The Pakatan Harapan candidate lost by 1,914 votes to the Barisan Nasional candidate who had the support of PAS voters. The Pakatan leaders blamed the loss on the swing of Malay voters to Barisan/PAS.

In the 14th general election (GE14), Pakatan had 23,428 votes whereas in the recent by-election, its votes went down to 17,866, a shortfall of 5,562 votes. Barisan/PAS, meanwhile, saw their combined votes going down from 21,430 in GE14 to 19,780 votes, a shortfall of 1,650 votes.

The total registered voters in Semenyih was 54,503, with Malays making up 67.7% of the voters, Chinese 16,7%, Indians 13.7% and others, 1.9%. The total non-Malay voters was 17,604.

The voter turnout was 73.3 % (39,218) in the by-election versus 87.4% (46,572) in GE14, which is a shortfall of 7,354 voters. It was reported that the Malay voters turned out in high numbers, as they were more motivated to vote. So, the shortfall in voters in the by-election was mostly due to the non-Malay voters staying away.

If only an additional 11% (1,936) of the non-Malay voters had voted, Pakatan would have won the by-election. Statistically speaking, Pakatan was let down by the non-appearance of the non-Malay voters who had voted for it overwhelmingly in GE14.

From a political viewpoint, why did the non-Malay voters stay away from the by-election in such big numbers? What had caused such a big shift in sentiment within 10 months of Pakatan’s rule?Open protest

Is it because in the last three months, Prime Minister Tun Dr Mahathir Mohamad and Parti Pribumi Bersatu Malaysia have taken on board ex-Umno MP’s despite the open protest by its coalition partners? Is it because of the change of Bersatu’s strategy to champion Malay rights over the original Pakatan manifesto of multi-racial policies?Or is it that the non-Malay voters are disillusioned by the non-recognition of the ICERD and UEC certification? Or are the Chinese voters disappointed with our Finance Minister for cutting allocations to University Tunku Abdul Rahman, or has DAP simply become arrogant because it is now in power?

Are the voters disillusioned with the PKR leadership infighting? Will Datuk Seri Azmin Ali cross over to Bersatu? When will Pakatan fulfill its manifesto?

From the marketing viewpoint, Pakatan won GE14 with the solid backing of the non-Malay and moderate Malay voters. Dr Mahathir did convert a few per cent of Malay voters that caused the tipping point to cross over the 51% popular vote.

The multi-racial manifesto of PKR and DAP appealed to the target market mix. Bersatu and Dr Mahathir were used to nullify Umno’s strength. Amanah was up against PAS, and Warisan was up against Umno in Sabah. Great marketing strategies which were well deployed.

However, instead of consolidating its gains from GE14 and earlier by-elections, the Pakatan alliance seems to have gone one step forward and two steps back. The change of direction to outdo PAS/Umno in championing Malay rights has backfired, as Pakatan will lose its core base of non-Malay voters.

Pakatan should consolidate its gains from its previous victories before going into enemy territory. Just pure marketing sense.

Counter the Malay agenda with the Malaysian Agenda and your core voters will be back with their full support. The Umno-PAS marriage is gaining momentum, drawing Pakatan into a dog fight in their home territory.

It is never too late to withdraw from the target market that you have no chance of winning. Play to your strength, regroup and revert to previous successful strategies. Reorganise your alliance. Remove the deadwood that do not support your holistic philosophy.

If you need to hire brilliant marketing minds, I would recommend that you hire these two medical professors that I have just met. Their passion to build a better Malaysia might just provide you with the right dose of energy to retain your market share in GE15.

Published: https://www.thestar.com.my/business/business-news/2019/03/09/identify-your-targetmarket-mix/

4/2019 – Time to do some soul-searching

As you grow older, you tend to appreciate quiet moments to reflect on the past, present and future.

Even though I enjoy such solitude, I always look forward to chatting with families, friends and business associates. I have a preference for small gatherings as it is a great opportunity to re-acquaint old friendships and make new friends.

I attend corporate events and seminars because of business commitments but I do have the opportunity to meet up with friends whom I seldom meet. It is the same with weddings and funerals, meeting up and catching up with friends and families that you seldom meet.

The last few years, weddings and corporate events have been held on a larger scale and require event planners to put together an entertaining programme for the evening.

At the last wedding I attended, the decor was magnificent and the mood in the ballroom was properly lit with romance and love in the air.

The single MC could switch from English to Mandarin with ease and she was well-dressed in her gown, looking as good as the bride. Just like in all Chinese weddings, the bride would change from her wedding dress to an evening gown usually after the fish dish which is normally the fourth out of eight on the menu.

To announce the re-emergence of the bride in her gown, the MC herself appeared dressed in a new gown to the surprise of all present. I was suddenly confused as to who the bride of the night was. This was the hijacking of limelight which should have been accorded to the bride on her most memorable night. I was not impressed at all with the event organiser and the MC.

Just a few days ago, I attended the annual customer appreciation dinner organised by my old relationship bank. I had looked forward to meeting up with old business friends and the bank’s senior management whom I normally meet once a year.

My wife and I were greeted with loud Chinese New Year (CNY) songs at the packed reception foyer. I met some old acquaintances and we started shouting at one another to be heard.

I went into the ballroom and was seated near the stage. The same CNY music was broadcast with the amplifier working furiously.

To complement the noise level, the two MCs were equally loud bantering back and forth, doubling my misery by translating the bantering in full from English to Mandarin.

It was as if they were the stars of the night and the event organiser was paid by the amount of decibels they could output. Despite requests to tone down the amplifier, the whole act continued.

Maybe my recent chemo treatment has made me rather sensitive to continuous loud noises. I was feeling highly distressed. Finally after 2½ hours of loud pounding noises and after the second dish, my wife and I decided to leave and we had a quiet dinner in a restaurant in the vicinity.

I was disappointed beyond words. It was the first time I left an event early and most of all the lost opportunity to reconnect and chat with some really old friends. Such irony as the theme of the night was Timeless Reunion. It was more like chat-less reunion.

The MCs have hijacked our opportunity to converse with their loud, incessant and self-important bantering and music.

Event organisers and MCs must understand the objectives of hosting an event.

If it is a wedding, then the stars of the evening must be the bride and the bridegroom. No one else. It is not a gig for you to look good so that you can get new jobs. Same with the loud singing wedding bands.

If the corporate objective is timeless reunion and customer appreciation, create an evening that allows the guest to mingle and chat with their bankers and among themselves. MCs should stay in the background and ensure the evening moves along smoothly. The guests did not attend the event to listen to your bantering nor super loud music. We normally go to a night spot or concert for that.

Similarly in business, startups will only be successful if they stay true to their original objective of building a sustainable and profitable business.

The reason nine out of 10 digital startups fail is because they have veered from their original objective of building a profitable business to one that is unprofitable but built for an exit sale based on a large customer base. As soon as the venture capital pumps investment into the startup, they will hijack the original business model which can be profitable to one that suits their need for an early exit in five years.

Nine out of 10 entrepreneurs exit in disappointment having wasted five or even shorter productive years, taking down with them many disappointed employees who had believed in their cause. To me, it is a massive misuse of financial and talent resources. Pure wastage is the name of the game.

Our local politicians share similar problems of veering off from their original objectives. The Pakatan Harapan coalition was voted in by a decent majority based on the objectives of replacing a corrupt government, reinstating the rule of law, rebuilding the independence of the judiciary and reforming the economic, education and human rights issues.

It must be noted the two main parties, PKR and DAP, are multi racial in composition and control 75% of the winning seats in the coalition. Lately, Tun Dr Mahathir Mohamad has started recruiting former UMNO MPs on his outdated belief that political parties based on race would eventually rule the country again.

Our dear Prime Minister has hijacked the electoral success of Pakatan Harapan to rehash the political system of yesteryears of which he was the main architect. It is the same chemo treatment for new voters recommended for the old cancer that will reappear.

The voters of Pakatan Harapan are now feeling highly distressed. It is like hiring the same organiser and MCs which screwed up your last event.

If PKR, DAP and Warisan do not wake up, their voters will leave them before the next general election.

These parties will be organising parties without any guests present and they will just be listening to themselves talking at the top of their voices amid the loud background music of “Don’t leave me this way” by Thelma Houston.

Maybe it is time for these politicians to step back, enjoy some solitude and reflect on some soul-searching. Just don’t talk too loud when you can’t keep promises.

Published: https://www.thestar.com.my/business/business-news/2019/02/23/time-to-do-some-soul-searching/

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