BUSINESSWEEK ONLINE: JULY 3, 2000 ISSUE

International -- The Stars of Asia -- Managers

Keiichi Enoki (int'l edition)

Keiichi Enoki
Keiichi Enoki
Director,
Gateway (Internet) Business Dept., NTT DoCoMo
Japan
If there's one person responsible for the mobile Internet revolution sweeping Japan, it's Keiichi Enoki at NTT DoCoMo. The 51-year-old chief of Internet operations is the mastermind behind I-MODE, a pioneering wireless Net service taking the country by storm. ''I knew [the service] had to be convenient to use and instantly accessible,'' says Enoki. With a few clicks on a handset, I-MODE users can do everything from online banking and stock trading to purchasing concert tickets and booking karaoke rooms.

Enoki's achievement has put Japan into the fast lane of the mobile Internet and made the company a model for others to follow. More than 7.5 million Japanese now subscribe nationwide, and the total is expected to hit 15 million by yearend. The company conservatively estimates $3 billion in subscriber and other fees this year if enthusiastic Japanese keep signing up at the rate they have been. Meantime, NTT DoCoMo plans to take I-MODE global. Hong Kong will be first, with service scheduled to start later this year as part of a venture with Hutchison Telecom. In the future, I-MODE will be upgraded and packaged with a next-generation cell-phone system that DoCoMo hopes to transplant around Asia and Europe.

Enoki came up with the idea for I-MODE back in 1997, when he was asked to find a way to expand DoCoMo's voice service into data transmission. He figured gadget-crazy Japanese cell-phone users would embrace wireless access to the Net. So Enoki hired Internet experts, while company engineers raced to build a packet-data network that would offer users a constant connection all the time, without the need to dial up. In February, 1999, Enoki and his team rolled out I-MODE, making DoCoMo the world's first mobile carrier to offer subscribers commercial Net access service.

Becoming a tech maven was not Enoki's first choice. As a teenager growing up in Tokyo, he contemplated an unconventional career as an actor. But he showed a talent for math, so his parents encouraged him toward technology. He studied electrical engineering at Tokyo's prestigious Waseda University, and he joined the bureaucratic phone monopoly Nippon Telegraph & Telephone upon graduating in 1974.

Enoki, though, didn't like to conform. He took to wearing blue shirts--still his preference today--instead of the traditional white. He also developed a reputation as a free thinker, someone who wasn't afraid to contradict his bosses on company strategy. In 1992, when NTT spun off its wireless unit, few wanted to move to DoCoMo, which was regarded as a risky venture. Not Enoki, who was keen to join the new business at a time when Japan was just beginning to liberalize its wireless-phone market. ''Enoki isn't your typical NTT employee,'' observes DoCoMo President Keiji Tachikawa. ''He's very creative.'' He quickly proved himself a capable manager, setting up regional operations for the newly independent carrier. When DoCoMo wanted to branch into a new business, Enoki got the call.

A family man, Enoki credits his children for waking him up to the potential of mobile Net service. He observed his young son playing with his portable game machine and his teenage daughter engaging in ''chat'' with her friends, using a pager outfitted with a tiny keyboard. ''I saw that they had no built-in barriers to using digital gadgets as information and entertainment tools,'' he says. So Enoki thought the public would take to the wireless Web if they could do it simply, by using their cell phones.

FIXING BOTTLENECKS. Enoki is the first to admit that I-MODE is far from perfect. Because of the slow transmission speed, it's not possible yet to quickly download images or music. Much of the content is text-based and lacks vivid graphics. Given the avalanche of new subscribers, the network's servers have jammed repeatedly, leading to disruptions in service. That's part of the learning experience, counters Enoki. ''We're pioneers,'' he says. ''We're fixing the bottlenecks and paving the way for the development of the mobile Internet.''

His next challenge is to upgrade the service to complement a new broadband cellular service that DoCoMo plans to launch next year. That will make possible high-speed data transmission, as well as video. In this new wireless age, Enoki sees I-MODE emerging as a major portal and e-commerce platform. ''I'm not saying everything will be wireless,'' he explains. ''But it'll be one of the main information highways.'' And if Enoki succeeds, I-MODE will be one of the major entry points.



Yun Jong Yong (int'l edition)

Yun Jong Yong
Yun Jong Yong
CEO,
Samsung Electronics
South Korea
A 34-year veteran of a staid South Korean chaebol hardly seems the person to pull off a radical transformation. Yet since taking the helm of Samsung Electronics in 1997, soft-spoken Yun Jong Yong has done just that--managing to reverse many of the inefficient practices that have long characterized the chaebol. The result: a sleeker and more profitable company.

Earnings were in a slump at Samsung when Yun became chief executive--just as the Asia crisis began. He quickly pushed for change, knowing that boosting profits depended on ending the company's decades-old practice of growing fast at any cost.

Carrying months of unsold inventory had devastated the company's balance sheet. So, among other initiatives, Yun ordered home-appliance factories shut for weeks, until orders were in hand and profitability was assured. Overall, he instituted tighter inventory controls that slashed costs by $2.7 billion.

Yun then cut the workforce by more than a third to 54,000, sold or spun off dozens of noncore companies, and trimmed debt down to 78% of equity from three times equity when he took over. ''The crisis jolted the mindset among employees that changes are inevitable,'' says Yun, 56, an electronics engineer educated at Seoul National University.

The numbers say it all. In the first quarter of 2000, aftertax profits increased more than fourfold, to $1.4 billion from a year earlier. Market cap has quadrupled to $49 billion over the past year.

Yun helped make Samsung Electronics into a global VCR powerhouse in the 1980s. Today, the company is also one of the world's largest and most profitable chipmakers, with a growing strength in display panels and cell phones.

Yet Yun won't be content until Samsung Electronics ranks right up there with the consumer-electronics giants of Japan and Europe. This is not a man to rest on his achievements. ''You must maintain a sense of crisis to stay competitive,'' he says. That's advice his Korean competitors would be well advised to consider.



William Fung (int'l edition)

William Fung
Group Managing Director,
Li & Fung
Hong Kong
It's tough to make a living as a Hong Kong middleman. Just ask William Fung, the 51-year-old group managing director of trading company Li & Fung. Back in the 1970s, he recalls, his family-run company supplied blue jeans to Gap Inc. for $28 a pair. Today, with customers constantly demanding that Fung keep his costs down, that same pair of blue jeans is going to the Gap for--you guessed it--$28. ''The pressure is tremendous,'' says Fung.

But he keeps finding ways to ease the cost squeeze. Li & Fung, whose U.S. clients include Toys 'R' Us, Avon, and Gymboree, has sailed smoothly through the Asian crisis into the Asian recovery, all the while profiting in a notoriously low-margin business. Sales rose 14% last year, to $2.1 billion, and profits were $74 million--up 26%. Fung predicts even better times ahead. ''In the last three years, we doubled our profits,'' he says, ''and we will double them again in the next three years.''

Fung is part of a high-powered team. His older brother Victor is Li & Fung's chairman and one of Hong Kong's consummate insiders: chairman of Hong Kong's Airport Authority, the city's Trade Development Council, and Prudential Asia's direct-investment arm. Day-to-day operations at Li & Fung are William's responsibility.

The brothers can thank their grandfather for picking the right market when he started nearly a century ago. While others in British-ruled Hong Kong tried to link up with big English firms, the Fung family focused on products for free-spending Americans. That U.S. concentration has seen the company through three generations. ''Our tendency has always been to work with the Yankee traders,'' says Fung, who graduated from Princeton University in 1970; at the ceremony, he wore an armband to protest the killings at Kent State. He went on to Harvard Business School.

To slash costs, the Fungs play a global game. Now operating in 30 countries, they are adept at buying components from high-cost countries and assembling them cheaply elsewhere. To sell a ski jacket to a customer, Fung gets microfiber from South Korea, lining from Taiwan, tags and labels from Hong Kong, and zippers from Japan, then finds a factory to put them together in China. ''That's a multinational joint venture,'' he says.

The Internet, Fung insists, won't change his tactics. While a host of dot-coms is creating online exchanges that match Asian suppliers with Western buyers, Fung says they won't undermine his business. ''People want fewer suppliers, not more,'' he says.

He is always looking for new frontiers: most recently Swaziland and Madagascar, now that a new U.S. law makes it easier to export to the U.S. from Africa. Where there is a cost-cutting opportunity, you can bet Fung is not going to miss it.



ONLINE ORIGINAL: A Chat with William Fung

William Fung is a proud New Economy skeptic. "I'm not an Internet guy -- I'm a business guy," says the 51-year-old Group Managing Director of Li & Fung, one of Asia's biggest trading companies and Hong Kong's hottest stocks. Even so, Fung is now making a big push into one of the trendiest areas of the Internet -- business-to-business e-commerce. He recently spoke to Asia Correspondent Bruce Einhorn. Note: A slightly modified version of this interview first ran in Business Week Online's weekly column, Online Asia.

Q: What do you think about the development of Asian Internet companies so far?
A:
The problem that I find with the Internet in general in Asia is that they all seem to be pale imitations of American models. They are all basically copying American models. The popularity of B2B now is because that is what is popular in America now.

Q: But later this year you're planning to launch an Internet subsidiary targeting the B2B market. Aren't you guilty of being a copycat, too?
A:
First, this is an outcrop of our business. It's not something we are trying to clone from the U.S. Our business has always been B2B. It's not something that is just the flavor of the month. We are not just inventing a biz. We are not doing a portal or an exchange. The Internet plays in Asia and Hong Kong in particular seem to be pale imitations of U.S. counterparts.

Q: What's wrong with the B2B exchange model?
A:
When we first looked, we looked at exchanges and portals. What we decided was that that was not a biz model that we think makes money. Most of the exchanges are still in the matchmaking stage of development. That's a very low-value-added biz. The first thing that you read about with supply-chain management theory is that people want fewer suppliers, not more.

Q: So how will you be different?
A:
The [original] idea of a trading company was that a middleman, either because of his language skills or his knowledge of the market, was the broker between the buyer and the seller. That was from my grandfather's days till after the War. Then in my father's days, the trading company was the one that supervised quality and put the people together in the market.


The [B2B] portals today don't do that. A lot of the people putting together portals don't even have that basic thing, introducing quality control. We have decided to use the Internet to aggregate the small and mid-sized guys and leverage them off our traditional supply base -- 6,000 suppliers globally -- and leverage that supply base to service the small and midsized guys.

Q: But doesn't that risk cannibalizing your main business?
A:
Li & Fung has done private-label manufacturing for a long time. But we can only do this if the customers are very large and they have the scale, since you need intensive interaction when you do private-label work. In order to capture economies of scale, we need large customers, not small ones. That's the bedrock of Li & Fung's biz. [Before] the Internet, we haven't been able to service the smaller retailers and manufacturers because of their lack of scale, it's not cost-effective. The cutoff is $100 million in sales, too small to buy directly from us. We haven't been able to touch that whole market at all.

Q: What do you figure you can offer those smaller customers on the Net?
A:
What the Internet does for us is allow us to reach the small and mid-sized guys we could never reach before. What do they want? What the big guys have: a private label, their own differentiated line, and at the same price as the big guys. If you own a small chain of clothing stores in the U.S., one of the basic building blocks is "own line,'' your own polo shirt. There's no glory in selling Tommy Hilfiger.

The Internet allows us to reach those people -- without intensive interaction -- and to aggregate their orders. We can allow you different style, limited customization using American yarn, knitted in China, assembled in Bangladesh. In order for us to achieve economies of scale, [we] can't allow you to change everything. But we can allow you to put in our own label, embroidery, colors, package, box. We can reap the economics of mass production, but with enough customization.

Q: How big do you figure to market this?
A:
One of the beauties of B2B is that there is a finite number of customers. So the marketing costs are much different. You don't have to take out Super Bowl ads, or plaster the New York subway system. We have the names and addresses of these people, we can reach them through direct mail, sales force. Our preliminary target is to reach 1,000 of these guys. We expect to do $2 million with them each, or $2 billion total in 5 years. By end of 2001 we can roll out to Europe, a much more fertile market than the U.S.

Q: Meanwhile, your traditional company has been soaring. What do
you see next?
A:
In last three years, we doubled our profits. We will double again in the next three years. We can have 50% increase in turnover and an increase in operating profits from 3% to 4%.

Q: If the U.S. Congress approves Permanent Normal Trade Relations for China and Beijing then joins the World Trade Organization, what will be the effect for you and others in Hong Kong?
A:
You will see a boom in Hong Kong that you haven't seen in a long time. With this thing, China will open up and the beachhead is definitely Hong Kong. In distribution services, in China foreigners are not allowed wholly to own retail or wholesale operations. With WTO, those rules will be abolished in three years. You will be able to go in there direct your own thing. People who were just in the export business are saying they will put in larger factories. I know a guy who, instead of building a 400-machine plant for export, will put in a 1000-machine plant because the domestic market is opening up. It's going to be such a boom.




Joseph Fan (int'l edition)

Joseph Fan
Joseph Fan
President,
Taiwan Cellular Corp.
Taiwan
Cracking Taiwan's cell-phone market takes some doing. ''This is not a level playing field,'' says Joseph Fan, president of upstart Taiwan Cellular Corp. He faces competition from companies backed by AT&T, as well as state-owned monopoly Chunghwa Telecommunications Co. Chunghwa has a lock on fixed-line phones, which makes it impossible for Taiwan Cellular to bundle fixed and mobile services. Yet in three years, Fan, 39, has made Taiwan Cellular the leading mobile-phone operator on the island, with 3.9 million subscribers and $845 million in revenues last year.

Fan, who learned the phone business in Hong Kong, decided to distinguish his company by focusing on connection quality. While cost may be key in Europe or the U.S., Fan believes that in Taiwan, clear connections to enable over-the-phone business transactions are most important. ''We are bringing Hong Kong quality to Taiwan,'' he says. As a result, Taiwan Cellular regularly scores high marks for service in government surveys.

Fan studied electrical and biomedical engineering at the University of Southern California and earned a master's in management from the California Institute of Technology. Then he started out with billionaire Li Ka-shing's Hong Kong-based Hutchison Telecom. In 1993, he jumped to Pacific Electric Wire & Cable Co., Taiwan Cellular's major shareholder. Using his experience bidding for mobile licenses everywhere from India to the Philippines, Fan helped put together the winning bid in Taiwan, working with executives from Pacific Electric and minority partners, such as giant Acer Inc. and U.S. telecom operator GTE Corp.

Taiwan Cellular still is privately held, but investors have given Fan a thumbs-up by boosting the share price of Pacific Electric 34% this year, compared with a measly 4% rise on the overall index. Taiwan Cellular may get spun off; Fan is also plotting the company's Internet strategy, unveiling 1,000 wireless access protocol services for subscribers.

Despite a hectic schedule, Fan finds time for calm: As a student, he covered half his expenses teaching Tai Chi, and now he teaches the ancient art at his daughter's elementary school every other morning. Then he races to the office. ''It's 9.7 kilometers,'' he says, ''and I drive fast.'' Taiwan Cellular's users are glad he does.



ONLINE ORIGINAL: A Chat with Joseph Fan

Joseph Fan is president of Taiwan Cellular Corp., which has jumped ahead of longtime state-owned monopoly Chunghwa Telecom in just three years to become the leader in Taiwan's mobile-phone business. He recently spoke with Bruce Einhorn, Business Week Asia correspondent. Here are edited excerpts of their conversation:

Q. What was the strategy when you started with TCC?
A.
You need the right kind of shareholders, the right kind of money. We got together with Acer, Fubon, and Evergreen. And we have been very careful selecting vendors and equipment suppliers, because we need a huge build-out for Taiwan.

Q. That's something that others would do, too. What made TCC different?
A.
All the other companies were looking at 200,000 or 300,000 [subscriber] capacity. But we decided early that we were building a system for 1 million. We started a massive build-up effort.

Q. And you quickly became No. 1 in the market. What was the key to that success?
A.
We were just doing what a telephone company is supposed to do, nothing fancy. At that time, a lot of people were waiting for new phones, they were out of capacity: There were 1.3 million users and 800,000 people waiting for mobile phones. And Chunghwa Telecom couldn't handle the capacity.

In the first three months, we had 300,000 subscribers. In our business plan, that had been our target for the first year. We then hit a million in a little bit over a year, hit the second million within seven months after that, and hit the third million five months after that.

Q. How did you manage that?
A.
We are not the cheapest operator here. We don't deliver based on the lowest price. I don't think the lowest price is what consumers are looking for. Superior network quality is the most critical issue. We have the best network here. In the U.S., price is definitely the issue: the price for handsets, the price you pay per month [for service]. Those things are not a consideration here in Taiwan. Here, the most important thing is quality, a phone that they can always receive a call and make a call.

Q. What's next?
A.
Third generation. The trend in our industry is to provide Internet access and mobile portals. We are largest WAP [wireless application protocol] provider here already, with over 1,000 types of services, from stock quotes to banking to restaurant reservations to pizza orders to theater reservations.

Q. But WAP hasn't taken off as it has in Japan. What's wrong?
A.
There is a shortage of WAP handsets here. There are less than 12,000 handsets. NTT DoCoMo can dictate the specifications of handsets in Japan because of their scale. But in Taiwan, we still don't have color handsets, and we won't have them till early next year. And WAP phones here are quite slow.




Toshifumi Suzuki (int'l edition)

Toshifumi Suzuki
Toshifumi Suzuki
CEO,
Seven-Eleven Japan
The Japanese have Toshifumi Suzuki to thank for snack food at all hours. Suzuki, 67, is chairman and CEO of Seven-Eleven Japan and the father of the Japanese convenience store. A country boy from Nagano, Suzuki worked in publishing before joining retailer Ito-Yokado Co., where he led the fight to win a Seven-Eleven franchise in Japan from its U.S. parent. Suzuki helped open the first store in 1974, led the drive to computerize operations, and pushed his way to the top of the chain and of Ito-Yokado itself.

Not content with 10 million customers per day, Suzuki keeps looking for ways to attract more. The latest: pushing into cyberspace. Seven-Eleven is installing Internet kiosks and depot centers in its 8,000 stores so that millions more customers will come in to pick up goods they order on the Net. Suzuki's goal isn't to make money on pickups but to snare extra foot traffic to boost sales. Suzuki will never stop redefining the corner store.



Nita Ing (int'l edition)

Nita Ing
Nita Ing
Chairman and CEO,
Taiwan High Speed Rail Corp.
Taiwan
Nita Ing has always cut her own path. As a teenager in the 1970s, she was expelled for rowdy behavior from the mostly expatriate Taipei American School. She ended up first at a Massachusetts boarding school, then at the University of California at Los Angeles studying economics. Ing's U.S. experience, particularly the American penchant for openness and institutional accountability, marked her indelibly.

Three decades later, the 45-year-old Ing is still making waves. Issue No.1, she says, is smashing the ''black gold,'' or corrupt links, between Taiwan politicians, gangsters, and big companies, and ushering in a more democratic age. ''It affects business, and it affects government policy,'' she says. As chairman and CEO of the $15 billion Taiwan High Speed Rail Corp., the island's high-speed train program, she considers it particularly important that she set an example by running a squeaky-clean operation.

To demonstrate her desire for change, Ing broke ranks with most of Taiwan's business elite and served as an economic adviser to Democratic Progressive Party candidate--and now President--Chen Shui-bian. Ing felt that Chen, as an outsider who opposed the formerly ruling KMT, would be best suited to clean up Taiwan's corrupt practices. She now serves on a blue-ribbon national strategic development committee and maintains close ties to the President.

Ing is determined to keep the train project on the straight and narrow. The new line, which when finished in 2005 will whisk passengers from one end of the island to the other in 90 minutes, is one of the world's most costly. Ing is instituting a series of anti-corruption measures for the embryonic project, ranging from competitive bidding to seminars aimed at inculcating an anti-graft culture. She has learned about gangsters and extortionists firsthand, running up against them in her other role as president of Continental Engineering Corp., a construction company founded by her father. She fought those toughs--and she'll keep on fighting them.



Edward Tian (int'l edition)

Edward Tian
CEO,
China NetCom Corp.
China
Edward Tian vividly remembers how, as a five-year-old in Shenyang in 1968, he was not allowed to wear one of the Mao badges popular during the Cultural Revolution. He came from a family that had been wealthy intellectuals before the founding of the People's Republic of China. So he and the grandparents who raised him while his mother and father worked as scientists in China's western deserts were ostracized. Red Guards burned the family library. Those experiences ''gave me a feeling of strong rebellion,'' says Tian.

Fortunately for Tian, that feeling is now serving him well. He's playing a key role in transforming China's stodgy state economy--first by building one of China's strongest Internet infrastructure companies, and now by shaking up the telecom sector as head of China NetCom Corp.

Tian, who studied at the Chinese Academy of Sciences in Beijing, was fascinated by the spread of personal computers in Beijing's university district in the 1980s. He went on to Texas Tech University in 1987 for his PhD. There he was first exposed to the Internet--and recognized its importance. ''I felt this to be a fundamental, profound technology,'' says Tian. ''I told my friends we can't miss this chance'' to be part of bringing the technology to China.

So finally, Tian, along with another Chinese student in Texas, returned to Beijing in 1993 and founded AsiaInfo, a company providing infrastructure solutions and software products for China's booming Internet sector. But just before AsiaInfo listed on Nasdaq a year ago, Tian, eager to play a role in reforming China's telecom sector, left the company for a new position as CEO of NetCom, China's newest telecom player. In accepting an 85% pay cut at his new job, Tian also demanded--and won--the right to have control over hiring and firing. That's rare even for a CEO in China's state sector, where political concerns often determine staffing. With 320 employees already working at NetCom headquarters, Tian plans to hire 700 more by yearend to meet the company's ambitious goals of laying 8,000 kilometers of fiber-optic cable by December.

Just as important, Tian has a license to operate an international gateway for China's Internet and hopes to expand into traditional telecom service. NetCom can then be a tougher competitor to monopoly China Telecom. ''I'm a true believer in competition,'' says Tian. ''Only with competition can China build modern enterprises.'' Plans call for NetCom to seek dual listings on Nasdaq and in Hong Kong next year. ''I want to prove to the outside world that in China, we can build a new-generation company,'' he says. Tian certainly has a good shot.



K.S. Wong (int'l edition)

K.S. Wong
K.S. Wong
CEO,
SembCorp Industries
Singapore
This is a man who knows the Jack Welch corporate growth model by heart. That is, if a company can't be tops in its field, sell it. K.S. Wong's interpretation, modified for the tiny city-state of Singapore: Identify companies that rank second or third and make them No.1 by merging them with bigger players. ''General Electric is one of our benchmarks,'' says Wong, CEO and president of SembCorp Industries. ''You have to be a certain size to survive.''

To reach that goal, the 53-year-old Canadian-educated engineer has done a lot of pruning and rebuilding. It all started in 1998, when he was chairman of Nomura Securities in Singapore. The government needed someone to revive its ailing Sembawang Corp. The company had piled up losses by following government directives to expand out of its core ship-repair business and into ventures ranging from a delicatessen chain to an industrial park in China. The government tapped Wong to take Sembawang and merge it with a healthy Singapore Technologies Industrial Corp. (STIC), where Wong had earlier been president.

Wong lost no time trimming fat. He sold Sembawang's retail and food units and merged the rest with STIC, calling the new company SembCorp Industries. ''Strategies are not things to be hung on the wall; they're meant to be executed,'' says Wong. The remaining ship-repair, construction, engineering, information technology, and logistics businesses are now among the most efficient in Asia. The revamped SembCorp exceeded government targets of 12% return on equity by 2%, and Wong's asset sales helped log profits of $215 million last year, compared with a $302 million loss in 1998. Wong meets with his five division heads individually once a month to measure their progress and hold them to their goals. ''I take a helicopter view and let capable people run the show,'' he says.

His next step is to transform SembCorp into a multinational by merging remaining divisions such as marine engineering, which can dry-dock gargantuan oceangoing vessels, with foreign partners. And he's scouting for other partners to create a worldwide system on the Internet for supply-chain management. Wong's rapid progress is raising the bar for other Singapore companies--indeed, Semb- Corp is now one of the most profitable in the government's stable. ''My benchmarks are global companies,'' says Wong. If he continues along this track, he may soon have one of his own.



Peter Lau (int'l edition)

Peter Lau
Chairman,
Giordano International
Hong Kong
Giordano Chairman Peter Lau is the first to admit that he pales in comparison with his predecessor, the flamboyant entrepreneur and publisher Jimmy Lai. An accountant by training and by disposition, Lau, 48, describes himself as a man ''of limited talents.''

Fortunately for Giordano, customers disagree. Thanks to Lau's efforts to upgrade quality, simplify colors, keep up with new styles, and relentlessly cut costs, sales at the casual-wear retailer jumped 20% last year, to $400 million, while profits quadrupled, to $46 million. ''We are religious about reducing waste,'' he says.

Now, the modest manager is pushing into Calvin Klein territory, with a racy ads featuring buff models. But Lau won't go too far. ''You have to stand out,'' he says, ''but you don't want to antagonize your customers.''



ONLINE ORIGINAL: A Chat with Peter Lau

Over the past few years, Peter Lau, chairman and CEO of Giordano International, has steered the Hong Kong-based retailer through economic and political storms. Now the company is on the rebound. An accountant by training, Lau recently spoke to Asia Correspondent Bruce Einhorn. Here are edited excerpts of their conversation:

Q. A lot of Hong Kong retailers went out of business following the Asian crisis. But Giordano not only survived, it thrived. What was the trick?
A.
The situation presented an opportunity for us after 1997. After the start of the recession, we looked at the market and saw that everybody was going to go down-market. But a lot of the down-market customers were suffering the most. So instead of joining the crowd in the down-market, we decided to target the middle market a little bit more.

Q. How did you do that?
A.
We raised our quality. Our workmanship had been fairly good anyway, but quality always starts with the fabric. So instead of using our traditional weight in cotton -- 170 grams -- we raised it to 210 grams. On average, that raised prices 5% to 10%. But the fabric feels better. We also stepped up the changes of our styles. We probably change every three weeks now, compared to every two months before.

Q. Why?
A.
You want to create a perception that you have refreshed your merchandise often enough for people to feel it is worth their while to make a trip to Giordano again.

Q. How have you managed to keep costs down?
A.
Find ways to reduce waste. We are very religious about reducing waste. There are a lot of administrative procedures that cost money and time.

Q. Like what?
A.
Petty-cash expenses. Every company has an elaborate system of monitoring petty cash. But why have an elaborate system to monitor something very petty? So we are trying to use a simplified procedure. And we are pushing things to the back office and away from the shops.

We used to deliver garments to shops every morning in boxes and plastic bags. Then the shop girls would have to open the boxes and the bags and find ways of disposing them. We deliver close to 100 boxes each morning. Imagine the energy that they have to expend to open the boxes and dispose of the garbage! By the time they are finished, they are tired. We want them to focus on customer-related work. Now the clothes arrive in reusable heavy-duty bags. That saves them another hour each morning.

Q. How does the Internet fit into your cost-cutting plans?
A.
We are doing away with all the fax machines in the shops. We will force everybody to be on the Internet. Faxes are an outdated mode of communication. Each person in the shops used to take a lot of time going through, and filing, faxes. We can save an hour, two hours, per shop per day. That should free them up to do customer-related things.

Q. Now that you've gone upscale, have you written off your original customer base completely?
A.
We have a multibrand strategy now. We opened last fall Bluestar Exchange to target the more budget market, people who are not as fashion-oriented. The clothes are 30% cheaper. Now have 13 in Hong Kong and 4 in Taiwan. The real big roll out plan is later this year. It will be bigger than Giordano in five years time.

Q. Giordano founder Jimmy Lai angered the Chinese government in the mid 1990s by insulting then-Premier Li Peng in print. Ever since, Giordano has suffered setbacks in China. Can you ever recover?
A.
We are going strong in China, with 300 shops. The increase from December is 30 to 40 shops.

Q. But not in the prime locations, right?
A.
We are in Shanghai, and we are looking into Beijing.

Q. Are you interested in teaming up with a well-connected Chinese partner?
A.
A lot of Chinese partners are interested in us -- for the wrong reasons. They claim that they can "solve our political problem," when I am not even sure we have one. In some countries, the systems work in mysterious ways. China is not the only country where we run into bureaucratic problems. In Asia, rule of law is not as defined. Giordano is always treading in uncertain waters. I have no problem with that. I am comfortable living in a world of uncertainty.

Q. What's been the biggest influence on your management philosophy?
A.
I was part of team that had to keep the bankers at bay during the bankruptcy of oil-and-gas company Dome Petroleum. That's why, when you look at Giordano balance sheet, we have no debt. I promised myself that I would never let Giordano have any debt. I'm very distrustful of bankers. They are your best friends when you have money and your worst enemy when you are broke.




Liu Chuanzhi (int'l edition)

Liu Chuanzhi
Chairman,
Legend Holdings
China
Back in the early days of Legend's struggle to become China's leading PC manufacturer, co-founder Liu Chuanzhi repeatedly found himself cheated by middlemen. On one occasion in 1987, an agent in Shenzhen disappeared with $1 million without delivering Legend's order for foreign PCs. The man was found, and Legend got its money back, but the incident caused Liu to awaken at 2 a.m. every morning for a month with the recurring nightmare that his money was gone. ''I was in a sweat because of the scare,'' recalls Liu, 56, who spent several weeks in the hospital to recover from stress and fatigue after that incident and others like it.

Liu no longer has such worries. In the 13 years since, he has built Legend into one of China's first internationally renowned companies. With sales of $2.2 billion and profits of $62 million last year, Legend is by far the leading PC manufacturer in China. Liu, who as a child in Shanghai and Beijing dreamed of becoming a fighter pilot, outmaneuvered such rivals as Hewlett-Packard, IBM, and Compaq in the quest for market share, and now commands 21.5% of China's domestic market.

Liu originally worked as a computer engineer and founded Legend with 10 scientists from the Chinese Academy of Sciences in 1984, turning their professional research to commercial use. Over the years, he introduced an extensive stock-options program and pushed young talent into higher management.

With margins in PCs narrowing, Liu isn't resting. He is busy moving Legend into Internet plays in portals and e-commerce. But as he passes day-to-day control on to deputies, he is planning to focus more on the big picture. ''My role will be switched from a film director to a producer,'' says Liu. ''I want to focus more on finding venture capital and nurturing young talent.'' And on sleeping peacefully.



Morris Chang (int'l edition)

Morris Chang
Morris Chang
Chairman,
TSMC
Taiwan
Taiwan's September earthquake made last year one of Morris Chang's toughest since he started Taiwan Semiconductor Manufacturing Co. in 1986. As the world's biggest contract manufacturer for computer chips, its ability to deliver is vital to Taiwan's high-tech reputation. ''Taiwan's credibility was at stake,'' says the avuncular, pipe-smoking 68-year-old.

It passed with flying colors. Within an hour of the quake, which struck about 2 a.m., TSMC engineers raced to the company's two plants to survey damage and start cleanup. Chang was soon on the phone to Taiwan's Premier, seeking help in getting the power back on. Production fully resumed after only 10 days, and TSMC won kudos from customers for quickly getting lines up again. Net profits this year are forecast at $2 billion on $5 billion in sales, more than double last year.

Chang, who jump-started Taiwan's chip industry in the '80s after returning from a successful career with Texas Instruments, is now advising the government on how to improve Taiwan's universities to produce better entrepreneurs His answer: the private sector.



Toshi T. Doi (int'l edition)

Toshi T. Doi
Toshi T. Doi
President,
Digital Creatures Lab., Sony Corp.
Japan
Success seems to come naturally to Toshi T. Doi, 58, Sony Corp.'s top computer engineer. One of his first major research efforts, a joint project with Philips Electronics, yielded the compact disk in 1980. Next, Doi oversaw the development of Japan's first popular computer workstation. Then, in 1988, Doi set up Sony's Computer Science Lab, the first corporate-funded institute in Japan dedicated to pure computer research. His early successes are now rivaled by his latest project: Aibo, a robotic dog that can sit, heel, bark, fetch, and avoid furniture.

Since its debut a year ago, Aibo has charmed the world, though relatively few fans have been lucky enough to adopt one. Sony has sold a limited supply of 45,000 of them--at $2,000 each, plus accessories--generating more than $100 million in sales.

Doi, a jazz buff who plays the alto saxophone and a South American flute, envisions a future populated with digital creatures. ''Ten years from now, there will be robots in each home and office walking around and entertaining people,'' he predicts. Doi is preparing for that day: He's working on full production of Aibo, along with other critters. ''My plan is to build this into one of Sony's main business fields,'' says Doi. That's how the tail wags the dog.



Carlos Ghosn (int'l edition)

Carlos Ghosn
Carlos Ghosn
COO,
Nissan Motor Co.
Japan
Shock therapy in Corporate Japan? Before Carlos Ghosn showed up at Nissan Motor Co. last year as chief operating officer, few thought drastic restructuring was possible at the money-losing and highly bureaucratic auto maker. But Ghosn, installed after Renault bought a 36.8% stake in Nissan, brought an impressive track record: He had overhauled Michelin's North American operations in the early 1990s and turned around a money-losing Renault in 1996, where he earned the moniker ''le cost-cutter.'' Still, even he had doubts about saving Nissan, which has lost money seven out of the last eight years. ''Six months ago, it was considered mission impossible,'' says Ghosn, a 46-year-old native of Brazil. Well, maybe no longer.

Ghosn, who will become Nissan's president later this summer, is applying his well-honed techniques and winning over skeptics. He's implementing a downsizing regime he unveiled last October and closing plants to cut capacity by a third. And he's weeding through Nissan's keiretsu-linked suppliers and dumping them if they don't meet demands to improve quality and cut costs.

Shareholders are optimistic that Ghosn can pull it off. Nissan's stock has jumped 50% from last fall's depressed levels. And the betting is that Ghosn will produce an operating profit of $900 million in the fiscal year ending next March. Of course, Nissan isn't out of the woods yet. Its balance sheet is terrifying: $12.7 billion in debt on the auto maker's books and an additional $10.7 billion linked to its sales finance companies.

But Ghosn, who grew up in France after leaving Brazil at 16 and studied engineering at the Ecole Polytechnique, says that in 10 months he has already made more progress on cost-cutting at Nissan than he did in the same time frame at Renault.

Ghosn is truly a car guy. When he's not test-driving Nissan cars, he's jawboning with the company's new design team to jazz up the company's image. ''The creativity of Nissan was always there,'' he says. ''Now, we are unleashing it.'' If he can engineer a turnaround, he will have unleashed more than that. In a land where gradualism is the norm, Ghosn's tough-love management is a shocker. But if it works, there may be Ghosn clones showing up all over Japan.



Koo Bon Moo (int'l edition)

Koo Bon Moo
Koo Bon Moo
Chairman,
LG Group
South Korea
Investors frustrated by the lack of chaebol reform in South Korea can find hope in Koo Bon Moo's bold move in March. The 55-year-old chairman of LG Group, Korea's third-largest conglomerate, agreed to fill half the eight-member boardroom at its Internet and telecom flagship, Dacom Corp., with independent directors. It's the first time outsiders have had a say in the management of an LG company. To make sure Dacom is run as an accountable, independent company, Koo also agreed to let the outside directors control its audit committee, with power to block transactions with its affiliates.

Dacom stands out as a model for improving corporate transparency and shareholder rights. By bringing in outsiders, Koo is sending a strong message that there will be an end to a chaebol practice that's outrageous to Western investors: shifting money from a profitable unit to bail out weak affiliates controlled by founding families. ''Dacom will continue to better its governance system and management transparency,'' Koo pledges. ''Other LG Group units will take similar steps in the future.''

Koo, who prefers to dress casually and is generally media-shy, is an avid bird watcher who keeps a telescope in his office so he can peer at the birds on a tiny islet in the Han River that runs through Seoul. He studied business administration at Ashland University in Ohio, and then honed his management skills for 20 years at LG Chemical and LG Electronics before he took over LG's helm in 1995. He immediately pledged to promote openness and transparency. A year later, he unveiled a reform plan placing emphasis on profitability and shareholder value, instead of expansion at any cost.

Koo has followed through at Dacom, which he took over in January after a fight for control with another chaebol. He immediately set up talks with shareholder activists to hear and accept their recommendations aimed at establishing a ''global-standard'' corporate governance system. Explained Koo shortly after taking the helm: ''Our society has learned a lot of lessons from the recent economic crisis. But what we businessmen must pay attention to is changing the corporate governance system.''





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