e-revolution lives and this time, Asia's largest corporations
are leading the charge
1000 Biggest Companies
Stowers for Asiaweek.
Peter Tang is transforming Berjaya Group, one of the
many old-line companies going online.
no surprise that the reinvention of Berjaya Group as an
e-business was the idea of a young man. After all, the icons
of the Internet are 20-something hotshots who made millions
during the dotcom frenzy. So when Robin Tan, 27, told his
dad, Berjaya chairman Vincent Tan, that the family hotel-and-gaming
conglomerate one of Malaysia's biggest old-line companies
needed to change, the older man asked him to oversee
the initiative. Robin asked another yuppie, 28-year-old
Peter Tang, to help. The two of them drafted a plan for
online procurement. The young are at the fore in Manila's
JG Summit Holdings too. Lance Gokongwei, 33, persuaded his
father, chairman John Gokongwei, that the property-and-food
group must turn to e-commerce. Given the go-ahead, Lance
hired his 29-year-old best friend, Christopher Po, to work
on online purchases.
So what are we to make of Seguchi Ryuichi? The president
of Hitachi Construction Machinery is a 66-year-old non-engineer
who bought his first computer and started using e-mail just
five years ago. But it was during his watch that the hydraulic
excavator maker, which was founded in 1970, transformed
itself into an Internet player. "Times have changed," he
says. Buyers were asking for customized features
a certain foot mechanism, a longer mechanical arm
and shorter shipping times. Hitachi delivered by migrating
to the Net. In the process, Seguchi cut 600 jobs and restructured
the top-down hierarchy into a flatter organization in which
everyone has real-time access to company information.
If you think the bursting of the dotcom bubble has killed
the Internet, you're wrong. The e-revolution lives
and this time, the rebels are Asia's biggest companies.
They may not mean to be, but the region's top corporations
are actually a key force in the emergence of a New Asia.
When they complete the integration of their internal and
external operations with the Internet, Asia's companies
will help change the way we live and work. For the better?
Possibly, if the reinvention promotes corporate transparency
and empowers workers. U.S. investment bank Goldman Sachs
estimates that e-commerce can add nearly one percentage
point to annual GDP in Singapore and Taiwan, and more than
half a percent to growth in Hong Kong, Malaysia and South
There is a downside, too. The poorer countries could end
up on the wrong side of the digital divide, hampering the
global competitiveness of their enterprises. Slow-moving
companies could collapse. Others could bungle their Internet
strategy. Those that do get it right could be victimized
by cyber-crime, as Microsoft learned to its dismay last
week when a hacker got into its systems. Jobs could be lost.
Asia's traditional relationships-based business ethos could
prove a liability. "How do you transfer the existing business
model [based on family, ethnic and personal ties] to the
new one without losing market share?" wonders Ali Farhoomand
of the University of Hong Kong's School of Business. "Can
this entrenched way of doing business adapt to the open
nature of the Internet?"
Nobody knows the answers yet. Asia's e-business transformation
is just beginning and will take years to complete. At this
point, the rising profits at many companies in The Asiaweek
1000 (the main tables start on page 74) come primarily from
restructuring. But most of the giants, from No. 1 Mitsui
to No. 417 Hitachi Construction to No. 577 Berjaya, are
also putting Internet strategies in place. In a June study
of 70 of the region's biggest corporations, Goldman Sachs
discovered that more than half are starting or have completed
the implementation of their e-commerce plans (see chart,
page 44). Another 27% are talking with consultants. The
rest say they are still conducting internal studies (read:
endless memos and meetings.)
The strategies differ depending on the company, industry
and country. But two reasons are often cited for becoming
an e-business: cost savings and revenue enhancement. The
first comes from squeezing inefficiencies out of the supply
chain, from the purchase of materials to the processing
of those materials into finished products to the delivery
of those products to customers. Some companies target savings
of as much as 30% of total costs. Many have high hopes for
the Internet as a sales enhancer, too. While retailers do
not expect droves of individual Asian consumers to buy online,
companies that sell directly to businesses believe they
will be able to broaden their customer base locally and
Hitachi Construction is a case in point. The arrival of
powerful computers and software in the last three years
has allowed the company to link its internal systems and
various branches through the Internet. The results have
been dramatic. Company president Seguchi says inventory
costs have been halved as real-time tracking of procurement
and stored materials prevented wastage, duplication and
maverick buying. The new efficiencies made the company more
competitive, helping it secure a 30% share of the Japanese
market for earthmoving equipment, up from 23% three years
ago. Seguchi estimates total spending on information technology
over 10 years at $138.8 million and savings and new
sales in the past three years at twice that amount.
That's all thanks to the Internet. Armed with a portable
PC, a Hitachi salesman is now able to customize any product
depending on a customer's needs. For a hydraulic excavator,
for example, he can offer 280 different combinations. Once
the customer has made a decision, the salesman calls up
a three-dimensional image on his computer screen. Software
from American developer Fire Bond instantly presents a list
of parts that would be needed. The system will also generate
an estimated price.
It gets better. The salesman's PC is connected via the Internet
to Hitachi's manufacturing plants. The system checks the
warehouses for availability of the needed parts and the
production schedule. Then it tells the salesman when the
excavator can be made and shipped directly from the factory
to the customer. The average order-to-delivery time: four
days. It used to be 15 days. And if the machine is an "e-excavator"
from the latest ZAXIS series, Hitachi's website can track
its operating hours, fuel consumption, location and performance
history for the customer. The e-excavator transmits the
data via satellite to Hitachi's Internet system.
It will take years for Berjaya and JG Summit to get this
far. Both are newcomers to the e-revolution. The Malaysian
hotel-and-gaming company bought Internet enabler My2020.com
this year from young Peter Tang then named him executive
director in charge of Berjaya's e-business initiative. A
$2.6-million pilot procurement project is due to roll out
this month. Three of Berjaya's 300 companies will link up
with 30 suppliers of computers, office equipment and stationery
via a new website that can generate product quotations and
receive orders. At present, each purchase manager negotiates
on his own and must contend with red tape as he goes through
requisition requests and seeks approval for big-ticket items.
JG Summit, the Philippine property-and-food group, is focusing
on procurement too. Po, who is CEO of Summit Internet Investments,
wants all JG companies to use the Internet to source $326-million-worth
of goods and services the conglomerate as a whole buys every
year. To further cut costs, JG Summit has also partnered
with five other Philippine conglomerates to form business-to-business
e-procurement site BayanTrade. Po has so far spent $2 million
to put Universal Robina online. The snacks subsidiary asks
local suppliers to participate in a reverse auction, with
the bidder offering the lowest price winning the contract.
Universal Robina says it has cut procurement costs by 7%
to 18%, depending on the product line.
Both Berjaya and JG Summit have had to contend with resistance.
Some Berjaya managers whose relationships with suppliers
go back decades worried that the Internet could unravel
those cozy ties. Newcomers might offer more competitive
pricing, which everyone could see over the Net. "We have
to get about it in a very diplomatic way," says Tang. "We
told them these relationships could be maintained. We asked
them to keep an open mind. People have a fear of change."
JG Summit has had more success persuading its purchase managers
to use the Internet. But Po had to work on its suppliers.
"Some did not even own PCs, let alone have I.T. departments,"
he says. "We had to provide a lot of training and support."
Other constraints can bedevil an Asian e-business initiative.
Take Indian telecom company Videsh Sanchar Nigam Limited
(No. 701), known by its initials VSNL. "We have built the
necessary firewalls [to keep out computer hackers] and secured
the area where e-business will take place," says development
director Vinoo Goyal. The problem: as a state-owned company,
VSNL must go through the bureaucratic mill to get things
done. "Our actions are scrutinized by Parliament and the
Comptroller and Auditor-General, and so we have to follow
certain rules for procuring hardware," says Goyal. VSNL
employees, who as civil servants cannot be fired, are resisting
the Internet because they think they will lose their jobs.
As to the idea that e-business will promote transparency,
Goyal has this to say: "Government confidentiality laws
govern everything [in VSNL]."
To win the race, it seems you must be a private company
in a place with excellent Internet facilities, skilled knowledge
workers and liberal online policies. "You really have only
five economies in Asia that have stable [physical and legal]
infrastructure and strategic investments in the Internet,
and these are Japan, Korea, Singapore, Hong Kong and Taiwan,"
says Greg Pelling, a partner with PricewaterhouseCoopers,
which does consulting work for e-businesses. Even then,
few companies have followed Japan's Hitachi Construction
and Ricoh (see story page 50) in exploiting these advantages.
"A lot of Asian businessmen are very pragmatic," explains
Pelling. "They will proceed carefully because relationships
are so important. If I tell my suppliers and customers that
I can take better care of them over the Internet and I couldn't,
I'd be in big trouble."
Hong Kong's Dairy Farm (No. 193) learned that the hard way.
It launched a business-to-consumer online shopping site
for its Wellcome supermarkets last year. But the response
was so overwhelming that the system could not cope, disappointing
many customers. "The timing could not have been worse,"
recalls Vijay Yajnik, Dairy Farm's chief information officer.
"We had just finished testing when a price war [with old
rival Park 'N Shop and newcomer @adMart] broke out and order
volumes went through the roof." The glitches have been repaired,
but Hong Kong's flirtation with Internet shopping has cooled.
Maverick businessman Jimmy Lai, who started @adMart to break
the Park 'N Shop and Wellcome virtual duopoly, now wants
to sell the money-losing venture.
Most online shoppers simply do not buy enough to justify
the business. "If customers order only $10 worth of goods,
the company isn't even breaking even," says Angela Moh,
a consumer analyst with Morgan Stanley in Hong Kong. "It's
just as easy for people to dash into a real store in Hong
Kong as it is to actually order something online." Dairy
Farm is keeping the website open because the competitors
are doing the same, but Yajnik is testing other models
cautiously. He hopes to hold Dairy Farm's first business-to-business
Internet auction by the end of the year. He is ready for
the inevitable bumps. "There are a lot of nuances and quirks
[in business-to-business] that you can't always account
for," says Yajnik. "You have to be comfortable with failure
Not everyone has given up on business-to-consumers, though.
"Over 90% of our passengers use the Internet," says Tim
Fitzsimmons, general manager of the e-business program at
Hong Kong's Cathay Pacific Airways (No. 322). The airline
offers online ticketing on its website. But Cathay's B2C
program is complemented by a business-to-business initiative:
it will spend more than $256 million on a top-to-bottom
e-business reinvention that will include systems maintenance
and electronic procurement. Airlines have one of the most
complex supply chains in the world, so streamlining the
process can bring big dividends. Fitzsimmons estimates that
Cathay will save some $64 million a year by 2003. Says he:
"Our corporate strategy is to have e-business as part of
our corporate DNA."
Singapore Airlines (No. 208) is also on the move. It recently
signed a $57.1-million deal with German e-business solutions
provider SAP for a complete overhaul of its internal business
processes even if it means chucking existing systems.
"Singapore Air wants to integrate all operations, but some
equipment and software used by its subsidiaries are not
compatible with each other," says Sun Whye Mun, SAP's business
development director in Singapore. It is not clear whether
the carrier will also offer online ticketing, but that seems
only a matter of time given the high Internet usage of international
Korea's Samsung Electronics (No. 28) is in both B2C and
B2B, too. Its all-in-one enterprise portal, which went live
in May, sells electronic products to consumers and components
to businesses. "We are just in the first stage, covering
the basic management decision-making and e-commerce infrastructure,"
says Lee Kwang Seong, who oversees the chipmaker's e-business
reinvention. But Samsung can now dispense with the tojang,
the business chop used by Korean companies. "Somebody actually
counted 32 chops for one decision that Samsung made a few
years ago," recalls Lee. "It took five years for the final
chop to be stamped." Under the new system, an employee can
receive electronic approval for an overseas trip in four
steps, doing away with the previous 16-chop paper process.
Cathay, Singapore Airlines and Samsung aim to change themselves
inside and out. Hong Kong property-and-telecom group Hutchison
Whampoa (No. 168) is following a different tack. "Our emphasis
is on 'commerce,' not on the 'e'," says managing director
Canning Fok. By most accounts, the company is lean, decentralized
and well-managed, so Fok does not see the need to "reinvent
the wheel," as he puts it. Hutchison sees the Internet more
as a way to create new revenue streams. At the height of
the dotcom mania, for example, chairman Li Ka-shing rushed
the listing of Chinese-language news-and- entertainment
portal tom.com, even though the website practically had
no content at that point. Hong Kong punters queued for the
Now that the bubble has burst, Hutchison is focusing on
a number of B2B ventures. One is bigboXX.com, a subsidiary
that sells office supplies and equipment over the Internet.
"We're their first customer," says Fok. He estimates that
Hutchison is spending 30% less on stationery, printer ink
and other items because bigboXX is able to negotiate lower
prices with suppliers. That's a bonus. The real aim is to
make money, so bigboXX, which now just serves Hong Kong,
will go regional next year.
Hutchison is an example of an Asian company that wants to
keep some traditional ways such as the supremacy
of personal ties. "Staring at a cold computer screen can
never replace relationships with customers," says Dominic
Lai, who heads the group's e-commerce division. Gerard Boey
understands that attitude. "We Asians rely on long-standing
relationships," says the senior business manager at Malaysian
e-business solutions provider Globetronics Technology. "People
worry that the Internet will break them off." But he argues
that, if used properly, the Internet will enhance and not
destroy these ties. Surely an order filled in four days
instead of 15, as is now the norm at Hitachi Construction,
is a big positive in a business relationship? Of course,
but all this means nothing if the relationship being talked
about is more about what personal favors the suppliers can
give, rather than the advantageous deal they can arrange
for the company.
The next step for Asia's e-businesses is to integrate their
electronic internal systems with their suppliers, at one
end, and with buyers at the other. They will face resistance
along the way from secretive suppliers and needy customers.
But in the long run, joining a web will reap them significant
cost benefits: they will no longer need to tie up working
capital in inventory. Linked to a company's supply chain,
suppliers will know when their products are needed and make
them available at that time. Similarly, the company through
its electronic links will know how many items a customer
wants and when to deliver them, which means it need not
stockpile finished products. But all this assumes that suppliers
and buyers also have e-business capabilities.
Suppliers are easier to persuade because their big clients
have leverage over them. "There was a lot of resistance
from our vendors," concedes Samsung's Lee. "But we used
our buying power to require end-to-end compatibility from
them." He estimates savings of $1.3 billion in the next
two years in part because of leaner inventories. Buyers
are another matter. But many are also suppliers to other
companies, including foreign ones. So is it possible that
Asian corporations will eventually become e-businesses anyway?
"They need to adopt the Internet because U.S. companies,
their customers, want them to do it," says John-Paul Ho,
managing partner of U.S.-based investment group Crimson
These changes could mean readjustments in the way Asia does
business. "Asia has a long tradition of vertically integrated
corporate families such as Korea's chaebol," notes Philip
Anderson, director of the Center for Digital Strategies
at Tuck School of Business in the U.S. They need not change,
but he suggests partnerships with Internet start-ups, as
Hutchison is doing. "Dotcoms have the great virtue of speed
and focus," says Anderson. "Incumbents have the guanxi [influence]
and network to get them off the ground. In order to learn
how to operate in Internet time, incumbents must work shoulder-to-shoulder
with their dotcoms, such as rotating people through them."
But what the Internet really requires is a whole new outlook
in which transparency, meritocracy and efficiency
are paramount. "I'm worried about the Asian way of thinking,"
says Hong Kong University's Farhoomand. A traditional Asian
company is run like a hierarchy, with the top people privy
to knowledge that their underlings do not have. This is
the source of their authority. But in the Age of the Internet,
says Farhoomand, "information is not power. Shared information
is power. And you have to share information not only with
your own people but also with those outside the organization."
Farhoomand says the issue goes beyond business: "It has
cultural underpinnings Confucius, Lao Tzu, respect
for authority and these are very difficult to shake
Everyone in the workplace will be affected. Don't think
that the jobs made redundant by internal integration will
be the end of it. As a node in networks of suppliers and
buyers, an e-business will find that keeping its place requires
a laser-like focus on what it does best. For that reason
and also to save costs, it will outsource functions like
accounting and phone call centers to others in the network
or outside of it. So tomorrow's call-center assistant may
handle customer complaints and inquiries for 10 companies,
not just his own, as is the case today. The transition could
be painful. When a company turns over call-center responsibilities
to an outsider, it may have to fire its old staff if it
cannot find new responsibilities for them.
This is where the state steps in. Governments should offer
retraining courses and encourage the private sector to do
the same. Computer knowledge will obviously be important,
says PricewaterhouseCoopers' Pelling. But so will people
skills. "You will see a big push toward knowing the customer
better," he says. "That ability is really enabled by the
Internet. But that does not mean the disappearance of the
sales force because you still need human interaction." Sun,
the business development director with SAP, sees another
upside: "You can unlock a lot of local skills and make them
available globally. A lot of foreign companies are setting
up call centers [for their customers at home] in the Philippines
to tap the ability of the people to speak English."
Clearly there will be losers. "It would be a lie if someone
tells you that ordinary workers will not be affected," says
Farhoomand. "In any transformation, some people will lose
their jobs. Others will have better jobs." This is what
happened when machines took over some forms of manual labor
in the Industrial Revolution. Knowing now how badly that
transition affected many lives and also the incalculable
progress that the new technology promoted perhaps
governments and corporations will manage the current e-revolution
With reporting by Alejandro Reyes, Yulanda Chung/Hong
Kong, Alexandra A. Seno/Hong Kong, Arjuna Ranawana/Kuala
Lumpur, Antonio Lopez/Manila, Sanjay Kapoor/New Delhi, Laxmi
Nakarmi/Seoul and Murakami Mutsuko/Tokyo
home | Asiaweek home
to the top