Saturday, 7 March 2015
JUST like the three Chinese New Years before, my wife bought me another red shirt from British India. She has always insisted I wear a new shirt for the CNY. I do not mind too much as long as I am allowed to wear it over my old comfortable jeans.
So on the first day of CNY, feeling casually smart in my only new very red shirt with nice prints, I went to “pai neen” or pay my respects at Datuk Tan Chin Nam’s open house. Though slightly frail as he nears 90 years young, Tan’s memory was still good as he told me about his foray into building his first houses in Penang back in 1948 with just RM5,000 capital at that time.
I would describe Tan and his elder brother, Kim Yeow, as pioneer entrepreneurs, having started their business during World War II in pre-independence Malaya. Just like post-war Japan, Korea etc, our country was dependent on pioneer entrepreneurs like Tan and many others to invest and contribute towards the economic development of a fledging nation. As Tunku Abdul Rahman was busy setting up the civil service and education system, he relied on the pioneer entrepreneurs to set up financial institutions and invest in providing goods and housing for the population.
This was a race blind partnership between the government and its Malaysian business community. Tunku Abdul Rahman and his Cabinet needed all the capable entrepreneurs he could gather and the government issued all the necessary licences to kickstart the development plans. Just as you have pioneer entrepreneurs in Honda and Hyundai in other countries, we had our local champions in Malaysia.
Tan’s most memorable contribution must be the Mid Valley integrated development where he envisioned building the biggest shopping mall in Malaysia at that time, integrated with multiple office and residential blocks plus three hotels. His tenacity to complete the project during the major recession of 1998 has been well documented. The Mid Valley Mall to date is still the most popular mall in Malaysia based on foot traffic. With a smart merchandising mix of local and foreign brands, it is indeed a mall for all Malaysians and unsurprisingly popular with tourists due to its affordable hotels.
Pioneer entrepreneurs would not have been successful if not for the close partnership and support of the government and its agencies. Back then, the government was not competing with the business community. Fast forward to today, the government (federal and state) is the biggest business organisation in Malaysia. It is the largest employer with the largest ego. It is also the largest borrower with the highest debt. And that is not counting 1MDB.
When I decided to launch our local mass cosmetics brand, I knew that success depended on the two major pharmacy and beauty chain stores providing retail wall space to house our cosmetics alongside the top international brands. Despite the fact that Guardian Pharmacy and Watsons were both Hong Kong-owned (Dairy Farm and Hutchinson), their general managers and merchandising directors were far sighted and they believed in our local brand story.
Even though we have had excellent partnership and success with our retailers since the beginning, the pressure to perform has been unrelenting. We are measured constantly against the leading international brands in terms of volume and margin contribution. The landlord of our wall space measures our brand contribution on a per sq ft basis so the pressure increases every time the mall increases its rental costs. There is no preferential treatment for local brands and we do not expect any.
So it came as a surprise to me recently when two Cabinet ministers called on Petronas to be supportive of local brands like allowing British India to retain its shop space in the iconic Suria KLCC which is majority-owned by our national oil company.
At first glance, I thought it was a little bit unfair to label Petronas as unpatriotic for not supporting local brands. After all, Petronas has been our local brand champion since airing those race blind TV advertisements inspired by Yasmin Ahmad of Leo Burnett.
Petronas has spent billions promoting its brand both locally and overseas and with the success of its F1 campaign last season, it has truly become Malaysia’s most famous brand internationally. So this accusation of being not supportive of local brands has been a public relation disaster and, honestly, brand dilutive to Petronas.
I have been inspired by Royal Selangor Pewter and British India since 20 years ago and consider them as our “pioneer” Malaysian premium brands. It is a fact that they were among the first companies to venture overseas and that on a premium image. And iconic Malaysian brands like these deserve their prime location in an iconic mall like Suria KLCC. What has been a solid Malaysian partnership which started 18 years ago has somewhat turned sour for whatever reasons.
It is my fervent hope that both sides take a step backwards, stop this legal charade and recognise the importance of maintaining our founding fathers’ vision of a great partnership between the state and pioneering entrepreneurs. For a few ringgit less, Suria KLCC can show Malaysians and the world that we are united in presenting our best brands forward in an ever competitive global retail landscape.
Like the foreign investors in our stock market, foreign brands are also fair weather business partners. While the foreign brands will withdraw from our market during “strategically” non-viable economic times, tenacious local brands will always stay back and fight together through the good and bad times. That is why local brands are also known as home brands.
If it is of any help, I will ask my wife to buy two red shirts from British India–Suria KLCC come next CNY. That is only if the store is still there.
10 thoughts on “4/2015 – Local brands and pioneers”
Reviving the lost art of working capital management
In an environment where every cent counts, businesses are finding new ways to make working capital work as hard as it can to contribute to cash flow – and, ultimately, the bottom line.
On one level, having the right products at the right price in the right markets are vital ingredients for success. But they are only part of the recipe – since the piece that has been overlooked by many is the corporate imperative of watching like a hawk how quickly invoices are settled by customers, that bills are paid on time (and not before), and that stock doesn’t gather dust on the shelves after production.
As the global economy continues to search for sustainable growth, more and more businesses are being squeezed between ever slimmer margins and increasingly complex supply and sales chains. This drives many to focus attention on tough pricing discussions to drastically reduce costs – for example, of raw materials. Yet the simple basics of collecting cash on the due date, ensuring invoices are paid on time and managing stock tightly will yield far bigger benefits to a company than a few cents off unit costs of supplies.
Attention to working capital management has become a lost art. There is a fallacy that it’s a magic formula. But there are a number of levers that are freely available for companies to pull – like simply making sure that the teams in financial operations are carefully following basic cash management discipline when preparing payments with the correct value date, and collecting in a timely manner.
These connect to cash management basics and recognise that process costs are not simply a matter of squeezing the right tariff; rather, making sure staff are attentive to clear operating procedures far outweighs a few thousand dollars of savings generated from lower fees.
Calculating how much working capital a company needs, and optimising its deployment, are related challenges. Businesses are being trapped between suppliers who are asking for earlier payment and customers who want better credit terms. The key is to focus on the cash flow needs of the business – cash starved will be of no benefit if the outcome is insufficient funds for payroll and local taxes.
As MNCs seek to expand, widening their supply chains and moving into new markets, inevitably the potential for inefficiencies in the cash management system rises exponentially, which in turn impacts on efficient working capital management.
The individual sums may be relatively small: an overdue issued invoice, a payment remitted from the account a couple of days early, finished goods delivered late elsewhere – all these factors add up, with a huge cost to the company.
Then, there is another issue: sloppy management of balances left in operating accounts at the end of each working day.
Fact: there have been a range of powerful liquidity management tools and techniques available to treasurers for many years. So why are so many companies still borrowing so much – despite having sufficient cash to cover their debts? Proper and active control of such balances in different markets and different currencies, even in low-interest-rate environments, will yield big benefits directly to the bottom line.
The old barrier to this, often known as “trapped cash”, is coming down. Even China, which has a legacy of capital controls, is now allowing international companies to move currency in and out of the country as part of their global treasury management operations.
As if life wasn’t complicated enough, operating in Asia in particular is further hampered by the incidence of multi-banking: local banks and banking infrastructures forcing the use of many non-core relationships upon an unsuspecting company as it breaks into several markets.
Even simple activities (like receiving and reading a bank statement) become near impossible tasks due to language and local practices for charging fees, which can be a mystery to some. Suffice to say that using a single global bank can significantly reduce the financial friction both within MNCs, and between companies and their suppliers/customers.
To a large extent, the thread that ties all these developments together is technology; it imparts a new level of transparency and speed that has transformed cash management. Centralised treasury and financial process operations – which give businesses a transparent real-time view of their position and the ability to optimise cash deployment – were once the preserve of large multinationals. However, in recent years, technology has put great global cash management within reach of all but the smallest operators.
Borderless online corporate banking systems allow treasurers and CFOs to see cash movements as they happen near real time, allowing underperforming cash and expensive liabilities to be set off against each other even if they are in different currencies on different sides of the world.
Growing commercial pressure is forcing companies to find ways to do more with less. Yes, technology has given traditional cash management tools new power and reach, enabling treasurers and CFOs to find new savings. However, first take a good look at what is happening in the financial flows of the business: collect on time, pay on time, and make good use of the range of these tools as enablers of sustainable growth for many years to come.
Focus on the right issues: cash collection and payment execution processes ahead of squeezing supply unit costs and transaction fees; optimise idle cash; and invest in technology.
The writer is head of global payments and cash management at HSBC Singapore
– See more at: http://business.asiaone.com/news/reviving-the-lost-art-working-capital-management#sthash.GH0y1wdx.dpuf
Zaitun sold 50% to Colgate Palmolive and then bought back the shares a few years later. They then listed the company and it was common knowledge at that time that the owner Kamal Teh lost a lot of money supporting his counter at a high price. Subsequently, they lost market share rapidly and zaitun was sued by two different distributors for loading both distributors at the same time even though they have signed exclusive agreements.
Maybe still some distribution of toothpaste and soaps in the rural market but brand is unknown to the younger generation. Sad case of taking your eyes off the ball when it was doing well….
When I was growing up Zaitun industries has such a strong presence in the kedai runcit. (back in the late 70’s/early 80’s, hypermart was non existence)Whatever happen to this local champion?
U are talking about the people who came up with the “guna tanpa was was” tagline ad made dents to Colgate-Palmolive etc mkt? Apparently it worked by getting CP to buy them out.
Cash upfront is better than struggling for umpteen years to make ends meet? But the “katak di bawah tempurung” me don’t know how to do that. Pfffttt!
According to another analogy… entreprenuers are likened to “weeds, seeking its’ place among the giant boulders, that dominates the economy, locally and internationally, by finding and thriving in cracks that exist when the boulders are stacked up on one another”…
Please note that entrepreneuers should be more like “weeds” than “roses”.. Weeds are hardy, and can survive in any situation with limited resources… Roses on the other hand, required tender care and can die easily..
Malaysia should be growing more hardy, weeds-like entreprenuers instead of Roses-like wannabe entreprenuers that waste all their time complaining about the government “crowding out” the private sector!!
Even if the Malaysian government can address this issue of the BIG governmental GLCs crowding out the little private businesses, domestically, I don’t see how the government can help these private businesses when they have to expand internationally??
The international markets are full of BIG Boys – Multinationals with VERY deep pockets, some with revenues bigger than the Gross Domestic Product of Malaysia and Cash Reserves bigger than the Foreign Exchange Reserves of Malaysia!!
So, instead of complaining again!!! Find your niches, find cracks among the Giant Boulders and thrive like Weeds instead of trying to be like Roses!!
And hopefully, you will be one of the chosen few that will grow to be a giant someday..
The real issue is that having a strong reputable cornerstone investor such as the Government’s many Sovereign Funds in your company is good in attracting Big foreign institutional investors.. For foreign funds, reputation matters..
Without reputation, you can see many privately owned companies in the local stock exchange trading in low single digit P/Es…
Valuation is due to reputation..
i guess U have summed it up as -notwithstanding local or foreign- it all boils down to economics i.e. less money less talk, no money get lost. Sigh!
Well… in the knowledge economy, capital is supposed to be more of brain power and lesser of money…. In a knowledge economy, a lot of economic activities are supposed to be less money intensive… Businesses such as software development, consultancy, etc..etc.. requires very little money to start…
So, I was wondering, as the population gets more and more educated, they seemed to be using lesser and lesser of their brains…
What irony.. all their capacities seem to be wrongly applied in cheating, swindling, OUTSMARTING, their customers or their business partners???
Instead, what one should do is to positively use his / her brain capacity to identify and understand problems facing society or customers in large and coming out with innovative solutions to solve those problems… And you get paid too..
That is the true benefit of being educated!!
Maybe one of the reasons for the Government seemingly getting more involved in the local economy and thus “crowding out” the private sector, is that the government is becoming more and more entreprenuerial, while the private sector, long controlled by ageing Chinese Tycoons, is losing it’s entreprenuerial edge???
It is not my observation.. It is in fact, my American & Singaporean friends’ observations on the entreprenuerial spirits of the young Malaysian Chinese.. They seemed to be losing the enterprising spirits of their forefathers, the more educated they becomes…
That’s how the government will eventually dominates the economy in Malaysia …. when the private sector fails, the public sector takes over…. simple as that… a Darwinian process..