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June 9, 2000 VOL. 29 NO. 22 | SEARCH ASIAWEEK
A Malaysian institution moves online, slowly By ARJUNA RANAWANA Kuala Lumpur PLUS: Laptop Backlash Asia's Internet fever has subsided with the market selloff of tech stocks, but old-line corporations continue to view e-commerce as a fountain of youth. Among the latest to inject tired businesses with an online strategy is Malayan United Industries, Kuala Lumpur's 30-year-old conglomerate. The sprawling company operates retail outlets, hotel chains, real estate arms, stock brokerages, even a chocolate factory in India -- elements for a concerted bricks-to-clicks transformation. But unlike the headfirst Internet plunges of other venerable Asian companies such as Samsung in South Korea and Hong Kong's Cheung Kong Holdings, MUI has chosen to dip a toe in the fountain before getting completely soaked. Indeed, MUI is avoiding heavy investment in unproven ventures such as e-tailing and content portals. Although officials do plan an experimental online presence for the company's chain of Metrojaya department stores and specialty retailers this fall, business-to-consumer ventures are largely absent. Instead, some $3.6 million has been set aside to streamline the way Metrojaya buys its merchandise. The company is establishing an "extranet," a private network through which store buyers can interact with some 1,500 vendors. Not much pizazz in that, but according to senior vice president Sally Cheong the B2B capability is geared towards cutting costs rather than boosting sales. With improved communications, the company will be more responsive to shifts in consumer demands and will be in better control of inventories, says Cheong. The hope is to cut procurement expenses by up to 30% -- an achievable goal. According to a recent global survey of 200 corporations by Deloitte Consulting, more than 90% of companies said a shift to online purchasing is part of their ongoing business plan. The average company was spending between $2 million and $4 million on "e-procurement" in expectation of a return on investment of at least 300% within several years. The desire to be trendy -- or to appear so to stockholders -- is not foremost in the minds of cautious MUI officials. The company was rocked by the regional economic crisis and posted massive losses over the past two years including a $109 million loss in 1998. Now the search is on for ways to overhaul inefficient, ingrained business practices, and the Internet plays a crucial role. "Most of our 1,400 staff have been with us for 15 to 20 years," says Cheong. "They will have to learn new ways." Metrojaya is conducting training seminars and has recruited IT-savvy management trainees to "pass on their knowledge to the old-timers," Cheong says. Malaysian consumers aren't numerous on the Internet and aren't ready to buy a lot of goods online, she adds. But that doesn't mean the company isn't positioning itself for the future. Metrojaya in September plans an e-commerce site that will sell a handful of specialty items. Moreover, MUI sunk $26.3 million in a new subsidiary charged with helping the group move online. Funds will be used to invest in Net start-ups perceived as synergistic with established operations. MUI also owns a two-year-old Chinese-language lifestyle portal, Zhaodaola, and plans to give its Hong Kong travel agency, Morning Star Tour and Travel, an online presence. Vincent Khoo, an analyst with SG Securities in Kuala Lumpur, is cautious in his assessment of MUI's Internet prospects. "Management and the staff are slowly coming around to the idea," he says. "We have to see what level of commitment they will show." But, he adds, Metrojaya's B2B portal could demonstrate the company's ability to use technology to cut costs. "It is a giant step for MUI," Khoo says. "We have to do this because of efficiency and because that is the way of doing business in the future," says Loy Yet-king, chief of the group's Internet subsidiary. "If you don't move with the current, you remain behind." Just try not to get carried away in the rapids.
Japan's Toshiba Corp. can't seem to hit the right public relations notes. The giant consumer electronics maker last year lost an online spat with a disgruntled Japanese customer who purchased defective VCRs. Now the company is stewing in another product-liability controversy that is stirring anti-Japanese sentiment in China. The dispute revolves around a lawsuit filed in the U.S. over an alleged glitch in disk drives in some Toshiba laptop computers. To settle the suit, the company agreed to issue to affected owners some $1 billion worth of $100 coupons, redeemable upon purchase of other Toshiba products. Similar solutions are standard procedure in the litigious U.S., where it is often cheaper for firms to settle consumer suits (without admitting liability -- Toshiba did not) rather than risk exposure to high legal bills and exorbitant damage awards. But China's prickly official media and consumers were outraged that the offer wasn't extended to the mainland, where Toshiba is the leading laptop brand. The manufacturer has been under fire in print and online. One Net complainant warned that Toshiba's "arrogance would cause it to lose China" and another called Toshiba-backers "running dogs of the Japanese." The website for Sparkice, a Beijing e-commerce company, stopped selling Toshiba products and brought up Japan's brutal wartime occupation of China last century -- an issue that continues to haunt Sino-Japanese relations. Toshiba keeps pointing out that the offer was valid nowhere except in the U.S., not even Japan. Company vice president Masaichi Koga was dispatched to China to explain, though not to apologize. So far, the mainland isn't buying anything short of a payout. Last week several Beijing consumers sued Toshiba in what could become a test of China's emerging consumer laws. Write to Asiaweek at mail@web.asiaweek.com
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