1/2015 – After a tough 2014, it’s time to move on

by Tan Thiam Hock

Saturday, 24 January 2015

I WOULD like to wish all readers a belated Happy… no… a “Better” New Year – 2015.

The year 2014 has not been a happy year. In fact, it has been disastrous for Malaysians and I particularly.

It is with a heavy heart as I start writing this column again. AirAsia QZ8501 has been found with no survivors. After two dreadful aircraft incidents involving MAS, we now face another air disaster. A terrible ending to the year.

It is also with utter disbelief that racial and religious bigotry was allowed to sink to a real low in Malaysian history. The absence of political will to show strong leadership was especially worrying. Thank goodness the campaign for moderation gained traction and we now have a more balanced discourse on religious harmony and national unity. May common sense prevail.

Personally, a colonoscopy procedure and a CT scan in January 2014 revealed that I was inflicted with Stage 4 colorectal cancer. Suddenly, I was learning new medical words and in my first meeting with an oncologist, was briefed on survival terms of two years, five years and “if you are lucky” additional years. It was like having an expiry sticker stuck to my forehead and I now have a shelf life. I was too busy moving in and out of hospital throughout the year to worry about after life.

If indeed there is a God, he sure moves in mysterious ways. Three aircraft disasters in a year inflicted upon a nation is unprecedented. The most massive flood in living memory devastated large parts of our east coast. Maybe God is angry with the many misdeeds of some mere humans for imposing their superiority over other human beings in his name. No one is born equal anymore.

In comparison, my misfortune and well being seems insignificant as the gravity of the problems facing our country sinks in and seems insurmountable. So if you are the CEO of the nation or for discussion purpose the CEO of MAS and AirAsia, what would you do? What can you do? And what should you do?

After getting over the shock of discovering the big C, I acted in the only way I know how. Acknowledge the problem and act on it. Without delay. Just like most problems in any company are created by humans, it will spread like cancer ( pardon the pun ) if left unchecked.

My first move was to surgically removed the primary tumor that caused the problem. If it had spread to other departments, I will have to use additional methods like radiotherapy and chemotherapy to arrest and eliminate the malignancy. Inaction will not cause the problems to go away. You have to act fast and decisively. And then pray that you have done enough so that your company stay alive… a little longer.

Another major disappointment in 2014 was the loss of the Revlon agency. Having rescued the Revlon brand from oblivion 14 years ago, we have built Revlon from scratch to masstige (premium mass) leadership in Malaysia and Singapore.

If you are in the agency distribution business, you know you will lose the agency when you are doing poorly and you will also lose the agency eventually if you are doing too well and making good money. Just like Mercedes Benz and BMW Germany taking over the importation and wholesaling of their cars in Malaysia from their long-term distributors some years back. This is a normal interplay of commercial players jostling for additional margins along the value chain.

So I encourage you to always build your own brand whenever possible. In nine years, we have grown Silkygirl franchise to a strong leadership position in mass cosmetics and as brand owners, we are able to control our own destiny in the value chain process. As a rule of thumb, a company with own brands is valued twice as much compared with a company with just an agency distribution business. The valuation is based on the longevity of infinite earning potential of the brand whereas the earning potential of an agency business is limited by the term of the distribution agreement.

So this year with the goods and services tax to be implemented in April, what should entrepreneurs do? With an additional weak ringgit problem fueling imported inflation, it looks like a very tough year ahead.

Weak economic conditions forces the middle class and the poor to trade down their purchases of essentials if there are cheaper alternatives. Consumption behaviour is now income sensitive as goods become more expensive and cost of living goes up faster than wage increases. There is no change in consumption patterns of the super rich whatever the economic conditions. So in a tough market, shift your offerings to mass value for money propositions or stay super luxury. The middle market will shrink more in Malaysia than Singapore.

Be prepared to work on lower margins but stay profitable. Crucial to maintain market share so that you can grow quickly upon an economy upturn. A good example is the shift to affordable housing by most property developers. Better to stay afloat generating positive cash flow now than hanging on to high margin properties that is slow to sell. Lesson learnt from last recession.

Despite having a tough 2014 year, we Malaysians must look forward to the new year with optimism knowing in our hearts that our voice of moderation and righteousness will triumph over extremism and our two airlines will soar in the international skies once again. As entrepreneurs, we must face adversity head on with hope and decisive actions. Realistic optimism is our best defence.

As for me, I have survived the first year of my personal battle. Rather than thinking of the long war ahead and fading away quietly, I am reinvigorated to push on with new businesses and hoping to start a new initiative to help our young entrepreneurs face the uncertain future. Staying alive is not an option. As entrepreneurs, we must continue to push forward always.

God, wherever you are, please come forth and help us heal our divisive country so that moderate Malaysia can once again stand tall amongst nations.

The writer wishes to thank his doctors, medical staff, family and friends for all the thoughtful care and prayers, meaningful advice and encouragement throughout the eventful year. Hopefully, this column will appear on a fortnightly basis till death do us part. Cheers!

Published: http://www.thestar.com.my/business/business-news/2015/01/24/after-a-tough-2014-its-time-to-move-on/

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