留學生dissertation網-瑞典斯德哥爾摩大學留學生MBAdissertation定制。ASIA PACIFIC JOURNAL OF MANAGEMENT, VOL. 17, 103-132 (2000)
A typified, culture-based, interpretation of management of SMEs in Southeast Asia
BJ~RN VIDAR BJERKE
School of Business, Stockholm University, 106 91 Stockholm, Sweden
E-m& bjorn. Our knowledge of managing small and medium-sized enterprises (SMEs) ispredominantly based on Western world, in particular U.S., thinking. This article presents the results from a survey of the overseas Chinese SME businessworld, i.e. SMEs in seven Southeast Asian countries, where Chinese dominatebusiness (Indonesia, Singapore, Malaysia, Thailand, Hong Kong, Taiwan, andthe Philippines). A typified picture of overseas Chinese SME management (i.e.a picture of management behavior, when and if participants are true to theirculture and general economic environment) is provided. Management is seen inits general organizational role as well as in its role in the financial andmarketing business functions. Some similarities as well as differences with theWestern view of management of SMEs are noted.
1. INTRODUCTION
Business management is a universal phenomenon. The way it is done, however, isnot universal. Some managers are fond of planning, others take a more intuitiveapproach; some businesses are managed by very autocratic founders who cannot letgo of control of any operative details, others are run by teams of truly egalitarianmembers; management means innovation and leadership in some places, while inother places, management is not much more than routine. Also, management does
not take place in a vacuum. Not only are management procedures and habits adapted
to the needs of the people concerned (inside participants as well as outside beneficiaries);those procedures and habits are also developed within a specific cultural context.
How much do we know of management? In one way, quite a lot. But, what weknow is heavily biased towards managerial thinking in the Western world.
This paper attempts to addressth is problem. It presentst he results of a study of how smalland medium-sized enterprises (SMEs) are managed in Southeast Asia (in the remainder of
this paper the study is called ‘the project’). In order to get a focus on this large topic of‘managing SMEs in Southeast Asia,’ the project concentrated on the management cultureof the overseasC hinese( ethnic Chinesew ho live outside mainland China). ‘SoutheastA sia’was therefore defined as sevenc ountries, where overseasC hinesea re most prominent inbusiness, i.e. Indonesia, Singapore, Malaysia, Thailand, Hong Kong, Taiwan, and thePhilippines (referred to in the text as ‘our seven countries’). One reason why the projectCCC 0217-45611001040103-29
0 2000 BY JOHN WILEY & SONS (ASIA) LTD
104 B. V. BJERKE
limited itself to SMEs was due to the increasing interest in such enterprises in SoutheastAsia. Another reason was that the researcher (the author of this paper) expected themanagement culture in enterprises of small and medium size to be more ‘genuine,’ i.e.#p#分頁標題#e#
more ‘true’ to the culture of its participants than larger, more mature and maybe internationallyoperating enterprises.
2. METHODOLOGY
The project was a combination of five routes:
(a) Getting a picture of the Western world’s understanding of SMEs by studyingmajor existing literature on the topic.
(b) Generating an overview of the SMEs’ situation in the seven countries by:
(9 studying recent material from various institutes in these countries concerningtheir economy in general (extremely rich material) and on their SMEs inparticular (surprisingly poor material);
(ii) visiting all seven countries (approximately one week each), meeting, interviewing,and discussing with representatives from appropriate government agencies (forexample, the Malaysian Industrial Development Authority; Ministry of Industryand Trade, Agency for Development of Small Industry, Indonesia; and Bureauof Industrial Promotion Policy and Planning,Department of Industrial
Promotion, Thailand), with representatives from supranational institutions
(the APEC office in Singapore), from industrial interest groups, employers’confederations, industrial associations (for example the Chinese Chamber ofCommerce, Singapore, and Pusat Data Business Indonesia) and from universities
where research on small and medium-sized enterprises had been or was beingdone (the National Cheng-Chi University, Taiwan, National University of
Singapore, Universiti Pertanian Malaysia, and Bangkok University). In somecases, contacts were made over the Internet or through traditional mail (the
Hong Kong University of Science & Technology, and University of the Philippines
Institute for Small-Scale Industries).
(c) Studying as much as possible about Chinese business culture, mainly in publishedliterature, but also, to some extent, through interviews and discussions whentravelling in the seven countries.
(d) Getting a picture of academic research being done on SMEs in Southeast Asia
(books, articles, research and conference papers) during the past five years or so.
(e) Collecting as many existing overseas Chinese SME case studies from the 1990sas possible. Overall research on SMEs (of an institutional as well as of anacademic kind) in all seven countries was not impressive, in some of thecountries it was practically non-existent. In addition, most of the seven countriesconcentrated on policies for larger firms hence, there is not much support forSME research. http://www.400190.com/dissertation_writing/MBA/Finally, overseas Chinese are, for various reasons, a secretive lot,
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 105and very few inside stories of their real-life management are available. Theresearcher collected 43 cases, of which some had to be translated into Englishfor the project. Six cases were commissioned from a consulting group, whichinterviewed local SME managers.#p#分頁標題#e#
The research approach in the project followed Figure 1:
c I
Western understanding
of SMEs
CHINESE MANAGEMENT
OF SMES
Economic climate and SME
situation in countries dominated
by Overseas Chinese business
Fig. 1 Understanding overseas Chinese SMEs
A solid line indicates a direct influence; a broken line indicates an indirect influence.
The idea was to get an understanding of the synthesis of direct contributions
from three sources, i.e.:
l Research on SMEs in Southeast Asia;
l The Chinese business culture;
l Overseas Chinese SME cases.
留學生dissertation網-瑞典斯德哥爾摩大學留學生MBAdissertation定制The synthesis of these three should, in principle, be ‘overseas Chinese managementof SMEs’ (management is here seen in its general organizational role as well as in its rolein the finance and marketing business functions). This synthesis is supposedly improvedwhen placed in the context of ‘Economic climate and SME situation in countries dominatedby overseas Chinese business’ and when compared with ‘Western understanding of SMEs’(see Figure 1).
The reader should keep the following methodological aspects of this paper inmind as he moves on:
106 B. V. BJERKE
The researcher does not deny the importance of the environment to generatea picture of an economic phenomenon. However, nothing takes place in societyunless somebody acts, and acts are based on understanding, whether relevantor not. This author believes more in research for the purpose of understandingthan for the purpose of explaining.
This article is more of an interpretation made by the author than a strictlyobjective picture of overseas Chinese management of SMEs.
As mentioned earlier, management does not take place in a vacuum. Thecontext of management of special interest in this paper is the culture to which
its participants belong.
The purpose is not to provide a statistically representative average or a typicalpicture of ‘overseas Chinese management of SMEs,’ but a typified picture of thesame, i.e. where participants are looked upon as types (behave as if they were‘true’ to their situation and values). Overseas Chinese business in real lifeindividual cases always differs (more or less) from this typified picture.
The reader should also understand that this paper covers only some centralaspects of what was found in the project. The findings from the project are reportedfully in Bjerke (1997).
3. WESTERN UNDERSTANDING OF SMEs
Western understanding of SMEs is intended as background to this paper. There istherefore no need to elaborate on this understanding. A possible summary is providedin Table 1 on page 107.
Further aspects of Western understanding of SMEs appear in Table 11, where
Western and Eastern understanding of management of SMEs are compared.#p#分頁標題#e#
4. ECONOMIC CLIMATE AND SME SITUATION IN COUNTRIES
DOMINATED BY OVERSEAS CHINESE BUSINESS
ECONOMIC CLIMATE
Many Asian countries have obviously been good at putting together the elementsthat contributed to economic growth (Rohwer 1995: 17-18). Several countries inthe region have also gradually upgraded their economies and export structure frombeing commodity-based to becoming more related to high-technology in computers,telecommunications and so on, (L3~~sine.n Week 1992). Furthermore, all our seveneconomies have a growing service sector, a sector which contributed more than 50%of the economy in Hong Kong, Singapore, and Taiwan.
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 107
Table 1 Westernu nderstandingo f SMEs
l In all economies, a majority of firms are small or medium-sized;
l As aggregates, SMEs are important to the development of any economy; they may not feelimportant individually;
l SMEs are found more in retailing and service than in manufacturing; some SMEs are in craftsbasedmanufacturing or subcontracting; a growing field is franchising;
l SMEs are net providers of new jobs and an important source of innovation;
l SMEs can open up new markets and expand the customers’ choice;
l Most training of workers takes place on the job in an SME;
l There are many kinds of SMEs, classified by industry or otherwise; most of them are marginalfirms, but some fit the lifestyle of the founder, and some may even have a high potential forgrowth;
l SMEs are often started on the premises to substituting income for an individual, often with hisor her spouse;
l Benefits associated with owning and running an SME include an opportunity to self-development,making money, contributing to society, and having a more enjoyable life;
l Drawbacks associated with owning and running an SME include uncertainty, economic risk, hardwork, lower quality of life (at least in the beginning), and a greater burden of responsibility;
l SMEs are intimately associated with the style of the founder/entrepreneur/owner, and this style isa common fault factor if SMEs fail;
l When the SME senior manager is good at spotting opportunities, action-oriented, knowledgeablebut willing to seek help when necessary, the chance of the SME survival is improved; SME seniormanagers should generally acquire skills to spot new opportunities as well as running existingbusinesses;
l For the sake of the progress of an SME, it is unwise to ignore the expertise, opinions andknowledge of its employees; however, most owners of small firms are reluctant to delegate;
l SMEs at their best are run with non-sophisticated, non-bureaucratic, flexible organizationalstructures, where all employees are working in a creative team and are able to contribute;
l Financial planning, in particular cash management, is important to an SME; a creative approachto financial management is necessary;
l Market-focused SMEs, close to their customers, have a greater chance of surviving; the primaryfunction of an SME (indeed, the major reason for success of any business) is to create and maintaincustomers;#p#分頁標題#e#
l There are several possible marketing advantages of SMEs, including close customer interface,flexibility, speed, and ability to find a market niche;
l Understanding of marketing management is generally limited among SMEs; this may differ withthe maturity of the firm.
Two of our seven countries have grown to join the league of the richest countries
in the world (Table 2):
Culture has probably been one factor behind the growth of Southeast Asia(recent economic crisis and present downturn in the region does not deny this factand, above all, does not rock the basic conclusions in this paper around a typified/culture-based interpretation of management of SMEs in Southeast Asia. The present
Asian turmoil is more of a financial, institutional and, in some cases, a politicalcrisis). The existence of a market and an adequate political context have been othernecessary factors (Hofstede and Bond 1988: 18-19). However, it is important tounderstand that the most distinctive feature of Southeast Asia’s business regime ishow much it has depended, and still depends, on private business. During the 1970sand 198Os, private investment in East Asia accounted on average for almost two108
B. V. BJERKE
Table 2 GDP/person in our seven countries
(PPP basis, 1994, US$)
Hong Kong 23,080
Singapore 21,350
Taiwan 13,022
Malaysia 8,610
Thailand 6,870
Indonesia 3,690
The Philippines 2,800
In comparison
U.S.A. 26,000
Japan 21,000
OECD average 20,000
China 2,500
Sources: World Bank; The Economist
thirds of total investment (Rohwer 1995: 55). A large part of this money is overseas
Chinese money. It is not possible to understand the Asian ‘miracle’ without
understanding the overseas Chinese (Naisbitt 1995: 3-4). The overseas Chinese did
not create the boom in Southeast Asia, but they were uniquely placed to take
advantage of it (Seagrave 1996: 15-16).
The overseas Chinese number only around 50 million in our seven countries (Lasserre
and Schiitte 1995: loo), but are very dominant in business (see Table 3):
Table 3 The overseas Chinese empire
Number (million) % of total population % of business output
Indonesia 8 4 50
Singapore 2 76 76
Malaysia 6 32 60
Thailand 6 10 50
Hong Kong 6 98 80
Taiwan 21 99 95
The Philippines 1 1 40
Sources: Lasserre and Schiitte 1995: 100; EIU; INSEAD
Ethnic Chinese controlled US$541 billion in ten Asian stock markets in 1994
(Naisbitt 1995: 3). A Singapore banker claimed that overseas Chinese controlled
liquid assets of as much as US$2 trillion in 1990 (Seagrave 1996: 15)! A safe
conclusion is that the overseas Chinese are a new economic superpower (Drucker
1995: 177); probably the third largest economy in the world, outranked only by
U.S. and Japan. The World Bank has estimated that GDP of Greater China (China#p#分頁標題#e#
itself plus Taiwan, Hong Kong, and Singapore) in 1990 was USg2.5 trillion (calculated
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 109
on a PPP basis), already ahead of Japan (USs2.1 trillion) and almost half of the
American figure of USg5.4 trillion (Rohwer 1995: 229).
The overseas Chinese started as traders or, to some extent, as contract workers
(Wang 1992: 4-9; Limlingan 1986: 158-159). Many Chinese left their homeland
(in particula r b et ween the First Opium War and World War II) because their lives
were impoverished due to economic pressure (Tanaka et al. 1992: 3-5; Rohwer 1995:
230-231). They were often treated harshly and as outsiders in their new countries
(Tanaka et al. 1992: 3).
The growth and economic power of the overseas Chinese has no precedent in
history (Drucker and Nakauchi 1997: 7). They are scattered all over Southeast Asia,
concentrated in family businesses kept together by strong ties of blood, geography,
and business (Tanaka et al. 1992: 3). They might be called ‘a prosperous multinational
middle class with a small superclass on top’ (Seagrave 1996: 15). They run an
extremely efficient opportunity-seeking machine (The Economist 1996), moving funds
around in networks. They have turned the Pacific Rim into a borderless world
(Seagrave 1996: 16).
This generally Chinese-dominated pro-business economic climate is where
Southeast Asia SMEs are operating. Let us look at the SME situation in our seven
countries in more detail.
SME SITUATION
A trend in the economies of the seven countries is that they have moved from being
commodity-based to being manufacturing-based - and in some of them even further to
become service-based. SMEs have generally followed this trend in all countries. Our seven
countries, however, differ from each other in terms of how far they have come on this
development road.
In the least developed of our seven countries, i.e. Indonesia, agriculture, energy and
mining account for over one-third of GDP and manufactured goods contribute just over
20% (Ng 1996: 56-57). However, only some 9% of SMEs in Indonesia are in manufacturing.
Most of them are in agriculture (APEC Committee on Trade and Investment 1994: 140):
Table 4 The 1992d istribution of SMEsi n variouss ectorsin Indonesia(% )
1. Manufacturing 8.79
2. Construction 3.29
3. Commerce 17.42
4. Service 4.99
5. Agriculture 63.66
6. Others 1.85
100.00
SourceA: PEC Committeeo n Tradea nd Investment1 994: 140
110 B. V. BJERKE
In the Philippines, agriculture’s share of GDP is down to one-fifth:
Table 5 The Philippines’ GDP by sector (% of total)
Sector 1970 1993
Agriculture SO 22
Manufacturing 25 24
Other industry 7 9
Services 38 45
Total 100 100#p#分頁標題#e#
Source: World Bank
Malaysia has also transformed itself along this development route and its economy
is becoming less and less agriculture-based:
Table 6 Malaysia’s GDP by sector (% of total)
1955 1975 1994
Agriculture
Mining
Manufacturing
Construction
Services
Less imputed bank charges, plus import duties
Source: Malaysian Ministry of Finance
40.2 27.7 14.8
6.3 4.6 7.5
8.2 16.4 31.5
3.0 3.8 4.2
42.3 47.5 44.6
22.6
In the case of Singapore and Hong Kong, the two most developed nations of
our seven, the proportion of service in GDP (and among SMEs) is over two-thirds.
To develop a small island-state of three million people (like Singapore) is very
different as compared to a country of 200 million people spread over 13,000 islands
(like Indonesia).
Some countries, like Singapore and Hong Kong, have been able, due to their
geostrategic position, to act as a channel and an entrepot for trade in goods and
services (Wong and Edwards 1996: 135). S ome of them, such as Singapore and
Taiwan, have been ‘designed’ by public policies more than others. In the case of
Singapore, development has taken place by keeping the door open for multinational
corporations (Theng and Boon 1996: 47) and by an active interventionist government,
while in Taiwan, through directed efforts promulgated within the structure of economic
plans picking favorite industries (Naisbitt 1995: 167), and in the case of Hong
Kong with minimal government intervention. It is no surprise that the proportion
of SMEs is highest in the third case. In Singapore, on the other hand, SME proportion
of number of establishments is lowest among our seven countries (Theng and Boon
1996: 47).
Some of these countries have developed a dualistic structure.
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 111
- Malaysia is characterized by transnational and foreign firms that are located in
modern enclaves (free-trade zones) and SMEs that are dominated by domestic
investors, lacking capital as well as modern technology and management skills
(Doraisami 1996: 89);
- Thailand is characterized by a capital, Bangkok, accounting for almost threequarters
of the country’s industrial production and SMEs more dominant in the
rest of the country (Akrasanee et al. 1988: 267);
- The Philippines is characterized by a large number of SMEs being found in the
rural areas where handicrafts and cottage industries are important, being labor
rather than capital intensive, using relatively less imported materials and
equipment, not being involved in the export market, and catering mostly to
the basic needs such as food, clothing, farm implements and housing of the
majority of the population (Conti 1990: 84).#p#分頁標題#e#
Generally, SMEs are very much part of the economic picture of the seven
countries - and in some cases believed to be growing in importance. Indonesia is
a small enterprise economy (Bank Indonesia 1994: i-iv). Within each of its sectors,
the SME’s share of number of establishments is estimated to be 98-990/o (APEC
Committee on Trade and Investment 1994: 140). It is also estimated that there are
about 34 million independent commercial establishments in Indonesia (Bank Indonesia
1994: i). In absolute numbers, the so-called micro-enterprises (employing less than
five workers) are by far the largest group. Their share of the number of total enterprises
is 98% and of total employment 84% (ibid.).
The economy of Hong Kong is made up mostly of small and medium-sized
firms. Only about 2% of the business establishments employ more than 200 workers
(Wong 1995: 137). Table 7 shows the percentage share of SMEs in the manufacturing
and services sectors, based on the public definition of SMEs in Hong Kong as
enterprises engaging less than 100 persons in the manufacturing sector, and less than
50 persons in other sectors:
Table 7 Exposureo f SMEs to variouss ectorsin Hong Kong
No. of enterprises No. of employees
(1996X%,) (1996X%)
Sales volume
(1994X%)
Manufacturing sector 98.35 64.44 47.81
Services sector 98.18 61.19 69.19
Source: Hong Kong Government Industry Department
The production establishments in Taiwan are dispersed (China External Trade
Development Council 1995: 44) and not controlled by monolithic entities such as
Japanese keiretsu and South Korean chaebol. SMEs are credited for having played a
major role in the ‘Taiwan Miracle’ (Tsai 1990: 40). And they still do. Between
1990-94, SMEs accounted for over half of Taiwan’s total exports (Lin and Kirchhoff
112 B. V. BJERKE
1996: 1). It is generally believed that the lower transaction costs which SMEs face
and their cultural background are the main factors underlying the rapid expansion
and growth of SMEs in Taiwan. Conditions conducive to the success of SMEs in
Taiwan can be summarized as the following (Liao and Kao 1995: 99-101):
1. A high literacy rate and widespread education;
2. Social and cultural influence;
3. High level of savings;
4. The atomistic and flexible business structure;
5. Government support and assistance programs; and
6. Entrepreneurship and niche markets.
Even in Singapore, which has traditionally relied on big businesses, it has been
suggested that its next phase of growth needs to be supplemented by more SMEs
(Theng and Boon 1996: 47). This has been recognized by several government officials
and suggested by some scholars (Tan 1990, 1994).
Hong Kong’s small and medium industries (SMIs; equal SMEs in manufacturing
only) differ from their Asian counterparts by being almost wholly geared to export#p#分頁標題#e#
(Sit and Wong 1989: 3). Also, like in Taiwan, Hong Kong SMIs are highly integrated
among themselves and with the larger firms through a system of subcontracting. In
a situation that is almost classic Laissez-faire, there is a high degree of dynamism and
intensive activity generated mainly by a large reservoir of entrepreneurs.
Taiwanese firms have also developed elaborate subcontracting networks connecting
factories of all sizes; family workshops and homeworkers have been established all
over the island. But companies in Taiwan have gone one step further and formed
business groups, a new organizational form, which is largely a result of the opportunistic
diversification of prosperous family firms. As a result, a large number of small and
medium-sized firms, specializing in tasks and functions, make up a highly competitive
market of suppliers in Taiwan (Lin et al. 1995: 6-18).
The public definition of SMEs differs among our seven countries as well as
their public SME policy. In the Philippines, definitions of SMEs have evolved over
the years, but always on the basis of either asset size or the number of employees.
One definition originates from the University of the Philippines, Institute for Small-
Scale Industries (UP-ISSI):
l Micro: l-4 employees;
l Cottage: 5-9 employees;
l Small: lo-99 employees;
l Medium: loo-199 employees.
In Indonesia and Malaysia, public definition of SMEs (and public SME support)
is restricted to manufacturing only (SMIs). In Singapore, small and medium-sized
establishments in the eyes of the public sector in the 1980s also equalled firms in
manufacturing only, not employing more than 100 (Chee 1992a: 10). Today, however,
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 113
such establishments include small and medium-sized firms in the commerce and
service sectors as well, if the number of employees does not exceed 50 (Theng and
Boon 1996: 48).
The official stance concerning SMEs varies among the seven countries from almost
completely laissez-faire in the case of Hong Kong to being comprehensive and elaborate
in the case of the Philippines. There are no special policies or laws directed specifically
at the development of SMEs in Hong Kong and there are no institutions or systems
which assisto r managet heseb usinessesH. owever, many industry-support organizations
provide various services to all enterprises (APEC Committee on Trade and Investment
1994: 137). The Singapore Government also has no policy for SMEs alone, but has adopted
several approaches to assist local firms in need (Min 1995: 14-2). At the other end we
have the Philippines, which is one of the few Southeast Asian countries that has established
a comprehensive institutional infrastructure for small industries (Tan 1990: 50). And
its history is, compared to the rest ofour seven countries, relatively long (APEC Committee#p#分頁標題#e#
on Trade and Investment 1994: 2 14-2 15).
The in-between position as far as public involvement in SMEs is concerned can be
illustrated by Thailand. Its official guidelines for the authorities when acting in SME
matters, concentrating on SMIs, are (Asia-Pacific Economic Cooperation 1995: 2 1):
l To assist SMEs to improve their operating environment;
l To promote mutual cooperation among SMEs; and
l To guide SMEs to grow independently.
Problems among Southeast Asian SMEs commonly revolve around (Sit and
Wong 1989: 242; APEC Committee on Trade and Investment 1994: 136-137, 140,
142, 237; Ghosh and Kwan 1996: 217-218):
1. Financing;
2. Competition;
3. Market access;
4. Labor; and
5. Technology.
SUMMARY
The earlier section can be summarized as in Table 8. Note that in this table (as well
as in Tables 9-11) aspects are included which cannot be found elsewhere in the
limited space of this paper, but which came out of the original study, on which this
paper is based.
114 B. V. BJERKE
Table 8 Economic climate and SME situation in countries dominated by overseas Chinese
business
l Southeast Asian SMEs operate in a part of the world, which until recently has shown a growth
pattern, unprecedented in history;
l Governments are heavily involved in the economy of all our seven countries (except in the case
of Hong Kong), but have only recently become active supporters of SMEs; there is an
understanding in all our seven countries today that continuing development must rely more on
domestic entrepreneurship and less on growth generated from outside;
l Neglect of SMEs has had several effects:
- SMEs may have been crowded out in some industries and regions;
- There is a kind of duality in many countries from a geographic point of view, i.e. transnational
and foreign firms together with a few successful large domestic firms operate in modern
enclaves or in the main cities, with SMEs dominating the rest of the country;
- Several of the countries’ governments pick favorite industries, preferably in high-technology
related to computers and telecommunications with export potential; firms not in these
industries, including SMEs, may suffer or at least be left on their own;
- One country (Malaysia) has introduced a quota system to prevent overseas Chinese from
becoming too successful (at the expense of other groups), which might have led to a less
dynamic SME sector than necessary;
l Most SMEs in Southeast Asia started as family firms; entrepreneurs in Southeast Asia are generally
sole proprietors and less often enter business in partnership; many SMEs are based on craftsmen
turned entrepreneurs;
l SMEs in Southeast Asia often specialize in light, labor-intensive, industries, because labor exists
in abundance, even though there might be a problem finding skilled and educated labor;#p#分頁標題#e#
l Sector-specific aspects of SMEs in Southeast Asia include:
- SMEs commonly operate in a grey, even black, informal sector of the economy;
- An increasing number of SMEs are in service, a decreasing number in agriculture and food
processing;
- Extensive subcontracting exists; this is one way for the buyer to stay flexible and avoid
investment risks; this may work against long-term technological development of the SME
sector;
- The development stage of many Southeast Asian economies makes them suitable for
franchising;
- There are enormous opportunities for SMEs in tourism;
l Definitions of SMEs differ in all our seven countries: some are based on employment, some on
assets or capital being deployed, some on a combination; some restrict the public interest in SMEs
to the manufacturing sector only (SMIs);
l All our seven countries are dominated by SMEs in terms of number of establishments (97-99%),
less so in employment (40-80%) and sales or value-added of the economy (30-50%);
l There is quite a range of the average size of SMIs in out seven countries in tetms of number of
workers employed, from two in the Philippines to more than 40 in Singapore;
l Specific characteristics of the SME style in Southeast Asia include:
- The owner/manager is very dominant in decision-making;
- The entrepreneur is generally no great risk-taker, but tries to find a place to fill orders for other
firms already established; technical competence and ability to fulfil orders on time is more
important than a pioneering or innovative spirit; on the other hand, for the country at large,
inventing new technology may be less important than being quick to adopt the best available
technology across all sectors;
- The initial capital to start usually comes from informal sources;
- The firm tends to produce or resell products mainly for local needs; to have a narrow horizon
of the market and to produce largely to satisfy regular customers - which may inhibit their
chances to grow;
- Marketing is often looked at as a relatively insignificant function compared with finance and
production; there are, however, signs that marketing (in the Western sense of it) is accepted
as of increasing importance;
- Within marketing, pricing is most important; within promotional activities, personal selling is.
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 115
Table 8 (Continued)
l Common problems among SMEs in Southeast Asia are:
finding bank financing for expansion;
increasing cost of production and operation;
susceptible to the fluctuation in local economy;
tight labor market, and difficulty in recruiting competent staff;
advancing technology (using a low level at the moment);
weak management;
occasionally high land prices;
no appreciation of marketing (the Western way);#p#分頁標題#e#
lack of a comprehensive national policy framework and infrastructure promoting SMEs, but
SMEs are, on the other hand, not using available assistance as much as they could.
l Many Southeast Asian SMEs are weak in developing networks and alliances; on the other hand,
they often have to deal with a primitive banking sector, and have less clout to handle corruption;
l There could be several national goals behind supporting SMEs, for instance:
- One national goal could be to get the unemployment down. Singapore, Hong Kong and, by
and large, Taiwan and Malaysia, have reached full employment. It is, however, still an
important goal in Indonesia, Thailand and the Philippines;
- Some of our seven countries, notably Indonesia and Thailand, hope that SMEs will level
regional differences, or differences between urban and rural development - to contribute to
a more balanced economy;
- Some of our seven countries, especially Indonesia and the Philippines, hope that SMEs will
narrow the gap between the rich and the poor (related to previous point);
l Common ambitions with government SME support are:
- to help them improve their situation;
- to have them to cooperate;
- to have them to link up with larger firms;
- to make them more competitive;
- to guide them to grow independently.
l Several countries, Malaysia and Thailand in particular, concentrate on helping SMEs in the
manufacturing sector only, i.e. SMIs. They count on small and medium-sized enterprises in the
trade, commerce and service sectors to be able and flexible enough to manage on their own;
l Support of SMEs is, in some countries, a real challenge for many reasons: size, traditions, uneven
development of cities and countryside, to name a few;
l Common steps of support from government (however, no specific support for SMEs alone in Hong
Kong and Singapore):
- service from various institutions designed to help these enterprises to develop their potential,
including training and consultancy;
- financing, production and marketing assistance;
- tax incentives and allowances;
- creating awareness;
- promoting role models;
l Due to limited resources, SME support might have to be restricted to those, who:
- have outgrown the informal sector;
- attempt on their own;
- have a potential for learning;
- have a potential for industrial linkages.
116 B. V. BJERKE
5. THE CHINESE BUSINESS CULTURE
It is easy to see that the American business culture is embedded in what has been
presented as ‘Western understanding of SMEs’ (see Table 1). Some obvious examples
are (compare Bjerke 1999: Ch. 4):
l The Need for Progress. Americans foster a cult of progress (Samovar et al. 1981:
71-72). Their belief in progress involves change and the idea that change can be
controlled, mainly by technological means. This American orientation is based on#p#分頁標題#e#
an economy of abundance, stemming from the immense physical and natural
resources of an entire continent (McMillan 1985: 20). In business, American
managers not only value change relatively high but also value caution lower
(Davis and Rasool 1988: 17). Growth is seen as a vital need in the U.S. in its own
right (Peters 1989: 13; Humes 1993: 112).
l The Importance of Innovation. One aspect closely associated with American progress
and growth is that it is a society where youthfulness is appreciated (Ferraro 1994:
109). Americans tend to emphasize what is new and innovative by keeping up
with new trends (creating many of them), conforming to standards that are current
and up-to-date (Samovar et al. 1981: 79). On the businesss cene,A merican managers
endorse ‘modern’ management ideas (Hofstede 1984: 174).
l Individualism. If we should choose the hallmark of American culture, this would
probably be the value of the individual (Hofstede 1984: 158; Humes 1993: 113;
Ferraro 1994: 109), i.e. reliance on individual initiative, self-assertion, and personal
achievement and responsibility. The ideal of the individual is deeply rooted in
American social, political, and economic institutions. The ‘success story’ and the
respect accorded to the self-made person is distinctly American (Samovar et al.
1981: 77).
l Action-orientation. The American way is an almost perfect example of a culture
that stresses activity and work. A foreign visitor in the U.S. quickly gains an
impression of life lived at a fast pace and of people constantly active (Samovar
et al. 1981: 69). Throughout its history as a nation, the U.S. has been known for
its high level of human energy, its aversion to idleness, and its preference for the
person of action over the person of ideas (Ferraro 1994: 95). The failure of an
individual means that he or she did not try hard enough, is lazy, or even worthless.
Promotion and pay should be based on performance, not seniority (Schwind and
Peterson 1985: 71), and people should be removed, or even fired, if they cannot
perform (Hodgetts and Luthans 1991: 41).
l The Prominence of Efficiency, Logic and ‘Science’. In general, efficiency is a primary
value in the West (Sitaram and Cogdell 1976: 191). It is also highly praised,
having long emphasized adaptability, technological innovation, economic expansion,
mass production, standardization, up-to-dateness, practicality, expediency, and
‘getting things done’ (Samovar et al. 1981: 70). We may even say that American
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 117
problem-solving is scientific instead of traditional. Logic and scientific methods
have been internalized as the means of solving new problems, and solutions are
perceived as progress or improvements. American corporations have developed a#p#分頁標題#e#
disposition for sophisticated structures and systems (Humes 1993: 114). Marketing
is a very American skill. American culture has been characterized as ‘cybernetic’
(Trompenaars 1995: 156), appreciating the use of planning and quantitative
techniques, looking for feedback and considering mistakes as moments of learning
rather than failures.
. Informality and Equality. Informality seems to be a theme that runs through the
U.S. value system, assuming, among other things, that informality is a prerequisite
for sincerity (Ferraro 1994: 101). It has been suggested that frankness is a primary
value in American culture (Sitaram and Cogdell 1976: 191) and that, therefore,
company information should be available to anyone who needs it within the
organization (Hodgetts and Luthans 1991: 41). There are also no generally recognized
social classes in the U.S.. Income and achievement act as main differentiators, and
American culture emphasizes equality in social relationships. The value of basic
human equality and democracy is so ingrained among Americans that many of
them become shocked and even frightened when they perceive that a nation
undermines such a value in substance and pretends otherwise in form. Increasingly
popular in the American business society (which corresponds well to the calls for
informality, to the democratic norms prevalent there, and to its increasingly
better educated workforce) is to use task forces, integrating managers, and project
structure.
Much of what is said here about the American business culture does not fit the
Chinese one. There are similarities as well as differences between American and
Chinese culture. The following themes could be one way to characterize Chinese
culture (compare Bjerke 1999: Ch. 6):
l Power and autocracy;
l Familism;
. Guanxi;
l Face and prestige;
l Flexibility and endurance.
Power and Autocracy. It is an interesting fact that the Chinese business
organization has so strongly retained its original basic character in spite of very open
economies where overseas Chinese are in place, and in spite of potential influences
by outside connections by deliberately courting Western technology for many years
(Redding 1993: 116). Ch’ mese management is even in modern times a top-run, oneman
show by an autocratic boss assuming responsibility for all management functions
(Chee 1992b: 44). The Chinese manager is very ‘boss-centered’ (Sheh 1995: 27-28),
but self-reliant as well (Naisbitt 1995: 73). We could also say that Chinese culture
is a very power-centered culture (Hofstede 1984: 77).
118 B. V. BJERKE
The very idea of class is an ingrained part of Chinese life (Chu 1991: 185-186).
Dependence on ‘class’ and importance of power is shown in many different ways
among the Chinese. One is a general lack of communication across positions, particularly#p#分頁標題#e#
in a vertical downward direction (Ibid.: 194). Withholding information to gain or
maintain power is acceptable among the Chinese (Hodgetts and Luthans 1991: 41).
Openness is, in fact, often considered to be a sign of weakness in the Chinese culture
(Samovar et al. 1981: 41).
Another way to show ‘class’ is through money and things. Chinese culture is
generally very materialistic, and the Chinese have difficulties letting go of money
(Jansson 1987: 26; Yang 1991: 111; Redding 1993: 39).
One aspect of the Chinese organization is that it is not informal, as some
authors claim (for instance, Jansson 1987: 28; Lasserre and Schiitte 1995: 105). The
organization is not informal in the sense of ‘unconventional’ and ‘unconstrained.’ But
nor is it formal in the sense of ‘planned’ and ‘impersonal.’ The proper word for a
Chinese business organization is rather personalized or personified.
Familism. Asian tradition puts the rights of the group ahead of those of any
individual (Hofstede 1984: 158; Seagrave 1996: 237). In Asian cultures, individuals
have a very deep attachment and sense of belonging to social groups (Hoon-Halbauer
1994: 85; Lasserre and Schiitte 1995: 270). The importance of the family and
strong family ties among Asians in general and maybe particularly so among the
Chinese is certified by many commentators (Chau 1991: 161; Chu 1991: 200-201;
Harris and Moran 1979: 3 1; Hoon-Halbauer 1994: 89; Lasserre and Schiitte 1995:
271-272).
One reason why the Chinese family system is so important is that it provides
security (Jansson 1987: 27). For the Chinese who left their homeland (often forced
out) and tried to settle abroad, environments were not always conducive. Except for
Singapore, the society was often outright hostile and the government was less than
benign to immigrants. As a consequence, Chinese family self-interest is rampant in
many of these societies and, perhaps not surprisingly, it is only in Singapore that
strong declarations have emerged about the social responsibility of the businessman
(Redding 1993: 188).
Family businesses dominate in the economies of many countries, of course
(Braadbaart 1995: 179-180). However, ‘family’ for a Chinese is something special.
A Chinese family is of an extended type in the sense of including not only blood ties
but also other ties, such as clan, shared surname, home village, region or education.
And in a Chinese firm, family and non-family members differ both in attitude and
behavior. Also, growth in Chinese business is commonly done not by expanding the
same firm too far (then possibly losing family control), but by mushrooming another
family unit, run by a ‘relative.’
Gzldnxi. The Asian business environment can be best described as a series of#p#分頁標題#e#
interlocked networks (Lasserre and Schiitte 1995: 124). It is a key element of Chinese
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 119
business (Hoon-Halbauer 1994: 85). The distinctive feature of the overseas Chinese
model has never been the individual firm, but the network of them (Rohwer 1995:
240-241). In Chinese this is called guanxi, which can be translated as ‘relationships’
or ‘connections.’ Guanxi tends to be more utilitarian than emotional.
Everywhere in the business world you need contacts. But you must magnify its
importance many times to understand guanxi (Chu 1991: 199). Hundreds of books
have been written about guanxi but it takes a lifetime to master. Every society in
Asia is built around relationships and it is more than a matter of degree compared
with the West. In the West, there is business first, then the networking; in Asia,
there is networking first, then the business (The Economist 1997: 73). Good gzlanxi
both inside and outside the firms is a guarantee of success at the personal as well as
at the professional level for a Chinese (Hoon-Halbauer 1994: 88-89).
For Chinese, networking is a natural thing to do (Seagrave 1996: 341). It is
a natural tendency for a Chinese manager to focus on the person who can best resolve
the particular problem or clinch the deal (Lasserre and Schiitte 1995: 124). Business
with Chinese over and above simple buying and selling, is to a large extent based
on trust. The Chinese society is neither individual-based nor society-based, but
rather relation-based (Liang 1974: 95).
The importance of influential contacts is a characteristic of all Asian societies
(Chu 1991: 200), but more so in some societies than in others. Guanxi is more
important in China, the Philippines and Indonesia than in Hong Kong and Singapore
(Lasserre and Schiitte 1995: 127).
Face and Prestige. An important aspect of Chinese culture is ‘face’ (Hoon-
Halbauer 1994: 85). The fear of losing face is the fear of having one’s ego and
prestige deflated. It can be caused by a broad range of things: having an expected
promotion fall through, one’s child failing an examination, one’s daughter marrying
a poor man, one’s brother working in a lowly position, to receiving an inexpensive
gift. The list goes on and on (Chu 1991: 197). In general, a person will lose his face
if he is found to be unable, or unwilling, to satisfy the claims imposed upon him
by his friends or subordinates (Sherriff 1989: 27).
The logical counterpart to ‘losing’ face is to ‘gain’ face. The prestige of a
Chinese may. be inflated by working in a large company, surrounding himself with
influential ‘friends,’ displaying wealth and so on.
Chinese cultures stress ‘shame’ and Western cultures stress ‘guilt.’ Shame is#p#分頁標題#e#
associated with public disgrace and loss of prestige, guilt carries a sense of individual
responsibility and conscience (Lasserre and Schiitte 1995: 273). The importance of
shame for a Chinese prevents him from admitting to a mistake (Jansson 1987: 17;
Yang 1991: 14), asking for help (Lasserre and Schiitte 1995: 273) or being told how
to do things, especially not in public (Jansson 1987: 17).
Flexibility and Endwance. Chinese enterprises are often impressive in terms of
market capitalization and growth. But looking deeper, management may appear like
120 B. V. BJERKE
a mess to the Westerner (Hoon-Halbauer 1994: 298; The Economist 1996: 345).
There is often no formalized personnel management to speak of (Hoon-Halbauer
1994: 298) and constant supervision of staff is common. Furthermore, employees
expect it. Chinese SME leaders also often have a narrow perception of the marketing
function (James 1988: 15) and do not believe in advertising and promotion. There
are few standard trademarks in Chinese business, less standardized displays, almost
no sales policy, little market research and less organizing of distribution (Redding
1993: 171). The promotional method of choice is personal selling and free samples
(James 1988: 10). One reason for this limited marketing management orientation
could be that Chinese business managers often have a trading background and
remain traders at heart.
One thing Chinese are good at however, is financial management. Chinese
entrepreneurs ‘have an excellent mastery of financial levers’ (Lasserre and Schiitte
1995: 106). And in their daily business dealings, they pay close attention to cash.
The Chinese do not apply formal long-term planning very often (Sheh 1995:
31) and they are even resistant to formal planning in general (Redding 1993: 173).
The common belief that the Chinese are good strategic thinkers, and that modern
Chinese business strategies can be seen as updated versions of old Chinese texts on
military strategy (see, for instance, Chu 1991: 12), is probably a myth! Another
story is that Chinese businessmen can be long-term in the sense of having the
‘ability to persevere on the basis of a steady accumulation of small returns’ (Pan
1991: 241), being extremely hard-working and disciplined, and that they see the
business as something their children (particularly sons) will ultimately inherit (Sheh
1995: 31-32).
The Chinese replace strategic thinking in business with flexibility. Whether
this could be called strategy is a matter of perception. We prefer to say that Chinese
business people are very good tacticians. Chinese business leaders are highly adaptive
and pragmatic (Jansson 1987: 28; Seagrave 1996: 17), especially when it can lead
to a business advantage. Modern Asia in general has a passion for change and for the#p#分頁標題#e#
future (Rohwer 1995: 78). Willingness to learn and to change should not, however,
generally be taken as creativity and innovativeness here (Chu 1991: 190). Chinese
business leaders are cautious about accepting risk (Redding 1993: 171). To cushion
themselves against failure, many of them seek support in religion or, more often, in
superstition (Wong 1995: 144).
This brief characteristic of the Chinese business culture makes it possible to
provide a typified, culture-based interpretation of a Chinese business (Table 9). It is
a typified description in the sense that ‘Given the Chinese business culture, this is
how a firm will be structured, managed and behave.’ Generally, this is how culturebased
discussions are commonly held, because cultures do not refer to individual or
specific cases, but to tendencies in a group of people, who have intersubjectively
learnt common and shared values, assumptions and beliefs from each other.
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 12 1
Table 9 Characteristics of the Chinese business culture
A typified Chinese business:
.
.
.
.
.
.
.
.
.
.
.
.
-
is run by a person who belongs to a very old civilization and who has very definite cultural values;
has an owner/manager who is at least half philosopher, worrying about the present but being able
to accept fate; who is very superstitious, fatalistic and intuitive (may have problems thinking in
abstract terms), daring and risk-willing only under the right circumstances; who has replaced
strategic thinking with tactical flexibility; time is time, and money is money;
is often started in trading - and holding on to trading values, transaction- and negotiation-based;
product and price of primary importance, very little of the rest of the traditional marketing
technique portfolio is used (or even known); avoids industries and business fields which require
complex integrative management and marketing skills; marketing is limited to sales, not
including after-sales service; service of less importance;
is often a second-generation business as part of the inheritance from the first-generation patriarch;
can survive in an industry on a very small profit margin as long as the turnover of sales is high;
its owner can be satisfied with a steady accumulation of small returns; he or she likes to grow in
size, if possible, but then multiplying existing style of leadership, general, financial, and
marketing management up to the limit of centralized control, and then by multiplying number
of units; a big overseas Chinese firm is just a larger copy of a small overseas Chinese firm in the
way it is run, possibly a conglomerate of many micro-businesses, run the same way; the size or
age or stage of development of the firm makes no difference to style of leadership, general#p#分頁標題#e#
management, financial and marketing management;
has an owner/manager who values frugality and thriftiness, who is patient and persevering in
business, but not in private, who is very self-disciplined and works hard and long hours - and
expects the workers to do the same;
is raising funds through family and clan connections through an informal ‘market,’ not through
banks or other public financial sources; interest could be high but defaulting on loans is out of
the question: there would never be a second chance if that happened, reputation would be spoiled,
and existing networks would dissolve themselves and business contacts would no longer be
operative; strict financial discipline is therefore a must; anything but paying creditors and
suppliers is a waste of money; is very good at financial management, especially at cash
management; owner/manager never gives away authority for spending; is hawk-eyed about cost
control;
is run by people who are natural networkers; business boils down to contacts and transactions;
connections (guanxi) are everything, without them you are nothing - anything can be done in
a network - as long as there is money to be made; social network coincides with business
network; this may lead to fast decision-making, acute sensitivity and access to crucial information;
different networks may be needed for different functions; one for finance, one for securing supplies,
one for distribution, relationships count more than market efficiency; networks make it possible
to enter a variety of businesses with a variety of local partners; foreigners have problems to enter
an insiders’ network;
is based on the principle that trust in business relations is an investment to draw from; friendship
is a variable to be manipulated by a Chinese; senior members of the firm trust only the inner
(extended family) circle; they are unable to cooperate well with others; people are reluctant to trust
others in the organization; there is a lack of communication between members, particularly
downwards in the hierarchy;
is run as a family business; family above all; strong ties in extended families, which are seen as
the bedrock of the business; key positions in the firm held by family members or close relatives;
promotion and appointment from inside; sign of success is to raise the social status of the family,
to gain recognition and to accumulate monetary and material wealth;
has an owner/manager who acts paternalistically - an autocratic, centralized style of management
without involving workers in decision-making; individual initiative is suppressed; personal, but
mutual, obligations are more than individual rights; the right of the group (as long as it contains
insiders) is ahead of the right of the individual; employees fear to disagree with the boss;
has an owner/manager who is very self- and power-centered and secretive (openness is considered#p#分頁標題#e#
122
Table 9 (Continued)
B. V. BJERKE
a weakness), who expects loyalty, obedience and respect in strictly ordered hierarchical
relationships; authority (and status) is very important; respect for seniority, young managers are
rare; there is generally close supervision and a high degree of control of employees - employees
expect and appreciate this; no personnel management to speak of; generally low qualifications of
workers and large wage differentials between owner/manager and the rest;
l has a creative attitude to laws and rules; is governed by Man, not Principles of Management -
a very pragmatic approach;
l is flavored by an optimism and passion to imitate and to learn - but not to innovate - especially
when it can lead to new business or to business advantages;
l has relations to the outside based on honor, reputation, shame and prestige - in order to gain
face, not losing it; inside the firm, face is more important in horizontal social and business
relations than in other relations.
6. OVERSEAS CHINESE SME CASES AND RESEARCH ON
SMES IN SOUTHEAST ASIA
Most of the 43 cases were taken from published books and articles and unpublished
research papers. Some of these were translated into the English language. A few were
commissioned from a consulting group, which interviewed local SME managers. The
studies varied greatly in terms of quality, coverage and depth.
Combined with what could be found in terms of research being done during
the past five years or so on SMEs in Southeast Asia by other scholars, the following
table (Table 10) can be compiled:
Table 10 OverseasC hineseS ME casesa nd other researcho n SMEs in SoutheasAt sia
l Overseas Chinese SMEs:
- could be domestically oriented, but also export-driven (T&o Plastics Zndustries Pte. Ltd.;
Dpmadi Mardz Hartono; Creative Furniture; Peter and Paul Enterprises);
- are commonly in subcontracting (Industrial Products (M) Sdn. Bhd.; Indextron);
- could be franchisees (Make-Over Photo Opportunity);
- are often supported by the family to set up (Kzat Lim Plastic Pte. Ltd.; Halina Mountain Resort);
- are often based on crafted skills (S&an Agung Craft; Haji Damang: The Herbal 011 Businessman);
- are often traders (0. C. C. Public Company Ltd. ; La Dolce; Phong Farm) and remain traders at heart
(Generoso Pharmaceuticals -5 Chemicals, Inc.);
l Chinese SME leaders:
- let their business grow slowly (Mu/i&); are stubborn and reluctant to change (Myer
Woodworking); do not modernize if it could be a waste of money (YY Beads Work Trading
Company); might show some innovativeness (Aneka Karya) and even capitalize on an invention
(SV Agro-Industries Enterprise, Inc. );
- build networks (Budi Katya) and thrive on contacts (Generoso Pharmaceuticals 6 Chemicals, Inc.);
operate through a network of enterprises rather than in the unitary company in the West#p#分頁標題#e#
(Weidenbaum and Hughes 1996: 56) and rely on ties of personaiistic networks and loyalties
which develop in societies where mutual obligations are common currency (Redding 1993:
171);
- do not apply formal long-term planning very often (Sheh 1995: 31) and prefer to think
operationally rather than strategically; however, might do well by seriously applying strategic
planning (JK Technology Pte. Ltd.);
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 123
Table 10 (Continued)
- keep their family-based, loose but paternalistic style even if the business grows (Brown 1995: 2;
Sheh 1995: 3 1, 69-70; Mechmar Garments); set the limit to growth as to the possibility to keep
the business within the family; some of the weaknesses of the Chinese firm start to show when
it grows too large or too complicated (Sheh 1995: 58); may even fail when it gets too
complicated (NCR Papers Sdn. Bhd.);
- are pursued by individuals who take a low profile in the commercial world and shy away from
publicity (Weidenbaum and Hughes 1996: 55);
l Overseas Chinese SME general management:
- operates in family-based firms and relies on strict, centralized control and person-to-person
transactions to minimize bureaucracy and paperwork (Weidenbaum and Hughes 1996: 56);
- may be neglected as so much time is spend on external networking (Future Furniture); however,
may be inadequate even when applied (Chee 1992b: 44);
- is more informal and intuitive than in the West (Weidenbaum and Hughes 1996: 57); is
personalized (Myer Woodworking), neglecting standard procedures (Mechmar Garments) and
hardly uses any written policies or rules (Sheh 1995: 25);
- is resistant to formal planning (Redding 1993: 173); common lack of management systems
exists in filing, recording, inventory and stock control (Sheh 1995: 61);
- is highly centralized (Redding 1993: 173; Sheh 1995: 26); authority is neither shared, nor
delegated; in decision-making, subordinates are not consulted; formal meetings are rarely
carried out; communication between superiors and subordinates is commonly direct, implicit
and one-way (Sheh 1995: 288);
- may be so personalized as to lead to confusion (Coca Food Sdn. Bhd.);
- may mean, because of poorly developed and executed operating systems that the manager
spends most of the working hours reacting to day-to-day operational matters and problems
instead of formulating and implementing long-range planning (Sheh 1995: 60-61);
- uses control of personnel and appraisal of performance with a harder edge than in the West
(Redding 1993: 170); needs tight supervision (Djzlmadi Mardt Hartono); tries to apply a formal
appraisal system, but may lack qualified personnel to do it properly (Kiat Lim Plastic Pte. Ltd.);
the most commonly used control tool in the West, i.e. budgeting, is not often practised (Sheh#p#分頁標題#e#
1995: 30); one of the most common control methods by the Chinese manager is rather to ask
one of the employees to watch another employee (Ibid. 1995: 31); a tight rein is kept on
supervisors in which their role is to maximize production (Redding 1993: 176);
- often operates enterprises along family lines where relatives and friends are commonly
appointed regardless of their competence and skills (Chee 199213: 44) in an organization which
can be charted as a family (Sheh 1995: 24), where a high percentage of the senior managers
are ‘related’ to the boss (Ibid. 1995: 29);
- commonly allocates assignments and responsibilities and promotes people from inside, based
on the subordinate’s reliability and trustworthiness rather than on capability and experience
(Sheh 1995: 25, 30); stresses paternalism and order (Ibid. 1995: 26); is short on formal training
and development of staff but expects the individuals to be self-motivated, non-calculative,
hard-working, cooperative and trustworthy (Ibid. 1995: 29);
is careful in saving face (Coca Food Sdn. Bhd.); reaction to disagreement by denying it (Sheh
1995: 28);
may lead to negative consequences like inadequate level of technology and managerial skills,
lack or inadequacy of R&D, and difficulties to gain access to technological information
(Promotion of SMEs 1990: 5), overprotection of one’s territory (Sheh 1995: 66), uncooperative
managers and departments (Ibid. 1995: 25; Dahlia Furniture Pte. Ltd.; Creative Furniture);
careless order taking due to inexperienced staff (1-2 Bakery), problems retaining workers
(Industrial Products (M) Sdn. Bhd.), or doubts whether workers can keep up with changes (Taiho
Plastics Industries Pte. Ltd.);
- gives priority to production (Redding 1993: 173) and commonly finds problems in production
management (James 1988: 1);
- concentrates on quality (Taiho Plastics Industries Pte. Ltd.); l-2 Bakery; Kiat Lim Plastic Pte. Ltd. ;
124 B. V. BJERKE
Table 10 (Continued)
Indext;ran) and may feel that the quality control system is inadequate (Industrial Products (M)
Sdn. Bbd.) and finds materials management important (The Chilly-Bob Sdn. Bhd.);
- may build up strength in R&D (Tsann Kuen Enterprises Company Ltd.), but is conservative in
design (1-2 Bakery);
l Overseas Chinese SME financial management:
- may suffer from financial constraints (James 1988: 1) or at least liquidity problems (Computer
Prints Sdn. Bhd.);
- often looks at financial institutions as a long-distance alternative (Akrasanee 1986: 9); most
enterprises have a low leverage ratio; they need short-term rather than long-term loans (Ibid.
1986: 9) in order to finance production and marketing; they use their own funds for equity;
denied of institutional credit, many SMEs are forced to finance their operations using their own#p#分頁標題#e#
capital, with shortfalls being met from relatives, friends or other non-institutional sources
(Chee 1992b: 40-41); inadequate access to financing institutions and high credit costs may be
due to inadequate collaterals (Promotion of SME 1990: 6);
- may take loans from financial institutions (Taiho Plastzcs Industries Pte. Ltd.; Ha&a Mountain Resort),
but often raises funds on its own, e.g. by selling private property (Supermarket Yumi Sdn. Bhd);
- is based on less personal control like in production, because the owner/entrepreneur takes care
of financial matters himself (Redding 1993: 169);
- is based on a strategy of low margin, high volume to penetrate markets and to guarantee a
steady flow of profit, reduction of transaction costs by use of networking within the Chinese
community and rigorous control of inventory to achieve low capital investment (Redding
1993: 170);
- believes in tight cost control (YY Beads Work Trading Company);
- relies on cash transactions (The Chilly-Bob Sdn. Bhd.) and operates on a cash basis (Taiho Plastics
Industries Pte. Ltd.); may have cash problem when inflow of cash is slow (Computer Papers Sdn. Bbd.);
- relies on bank statements, because it is no good at break-even or cost analysis (The Chilly-Bob
Sdn. Bbd) or at financial projections (NCR Papers Sdn. Bbd.); wide fluctuations in financial
performance may therefore exist (Creative Furniture);
- may take the financial function very lightly (Future F~rzit~re) or even be mismanaged (Chee
1992b: 42);
l Overseas Chinese SME marketing management:
- is often constrained (James 1988: 1) and may have problems in distributional matters
(Promotion of SMEs 1990: 5);
- often succeeds in finding a niche (Make-Over Photo Opportunity);
- is based on a narrow perception of the marketing function (James 1988: 1s); does not believe
in advertising and promotion (1-2 Bakery);
- tries to succeed by building up a core of regular customers by networking (Taibo Plastics
Industries Pte. Ltd.) or by relying on word of mouth (Haji Damang);
- may develop its own brand and style (The San Sun Company) and may succeed with a broad
marketing approach, Western style (Cleanair Systems Pte.).
Note: Names in italics indicate names of cases, e.g. Taibo Plastics Industries Pte. Ltd.
7. A ‘FINAL’ PICTURE
A synthesized picture of ‘overseas Chinese management of SMEs’ (compare Figure 1)
is provided in Table 11, where a comparison with Western understanding of SMEs
is also made.
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 125
Table 11 Typified Western (American) and Eastern (overseas Chinese) management of SMEs
Western Eastern
SME Roles in Economy
l (Same as Eastern)
l SMEs create most net jobs (large firms
contract);
l Very effective in using R&D money#p#分頁標題#e#
(very innovative); part of a national culture
where technology is a means for change and
improvement in its own right;
l Much training of country’s workforce on the
job;
l Can be major exporters;
l (Same as Eastern)
l SMEs more evenly spread geographically;
l The grey (black), informal sector is much
smaller;
Government Support
l Government has recognized the importance
of SMEs for at least several decades;
l An elaborate structure for SME support
exists;
l A wide range of SME support offered;
l Public definition of SMEs is established;
l No public priorities for SMEs exist;
l Government regulations may slow down
entrepreneurialism and SME dynamism;
SME Qualities
l Benefits from having an SME:
- on one’s own;
- make a difference;
- material gain;
- contribution to society;
- enjoy life (self-realization);
l Drawbacks from having an SME:
- financial risk;
- hard work;
- responsibility to others;
l Most of the establishments in an economy
are SMEs and have a huge share of its
employment and value added;
l Less creation of jobs, because large firms
expand (also some countries have had full
employment);
l Focus on existing local needs or link up
with large firms (own R&D is minor);
part of a national culture for adopting
latest technology as an end in itself;
l (Same as Western)
l Are rarely exporters (exceptions are
Hong Kong and Taiwan);
l Expand the range of choices among
customers;
l A dual geographic structure with MNCs
and GLCs in some areas and the majority of
SMEs in other areas;
l Many SMEs operate in the grey (black),
informal sector of the economy;
l Government has only recently become
actively interested in SMEs;
l Often more form than substance for SME
support;
l SME support often focused on technology
transfer and upgrading of workforce;
l Public definitions of SMEs differ from one
country to the next (sometimes even within
the same country), often only covering
SMIs;
l SMEs should often fit with national goals
and priorities to get support;
l Government quotas may slow down
entrepreneurialism and SME dynamism;
l Benefits from having an SME:
- on one’s own;
- material gain;
- keep up traditions;
l Drawbacks from having an SME:
- social risk;
- financial risk;
126 B. V. BJERKE
Table 11 (Continued)
Western Eastern
l To improve chances to succeed with an SME
- constant improvement;
- action-orientation;
- key business function skills;
- seeking help if needed;
- planning;
- managing people;
Entrepreneurial Qualities
l Moderate, calculative risk-taker; low value#p#分頁標題#e#
of caution;
l Creative and innovative;
l Self-confident and optimistic;
l Obsessed by opportunjties;
l Leadership;
l Partners at the start are common:
l Strict line between business life and private
life;
l The SME stands and falls with the quality
of the entrepreneur;
Reasons for Starting a Business
l Motivated by personal achievement;
l Unsatisfied with present work situation;
l Following role models and given support;
l Spotting an opportunity;
l (Same as Eastern)
Types of Businesses Started
l Most new businesses are marginal firms,
some are lifestyle firms, and a few are
high-potential firms;
l More new SMEs found in services and
commerce sectors;
l (The picture is more complicated than
Eastern);
l SMEs may be discouraged from starting in
some sectors, due to major investments
required to start there;
l No general restrictions to specific economic
sectors in terms of management and
marketing skills required;
l To improve chances to succeed with an
SME:
- action-orientation;
- opportunism and pragmatism;
- flexibility;
- networking skills;
l Less of a risk-taker, more of an opportunist;
more cautious;
l Less of an innovator, more of an adopter of
business concepts already existing
elsewhere; technical adequacy and timing is
more important than a pioneering spirit;
l More self-confident and optimistic than
Western, once willing to take the plunge;
l (Same as Western)
l Benevolent autocracy;
l Most starters are individuals (but familybased);
l No strict line between business life and
private life;
l (Same as Western)
l Motivated by social status and prestige of
family;
l More tolerant of present work situation,
even if bad;
l An even stronger motivator, especially
within the own family;
l (Same as Western)
l SMEs are often started with spouse to
supplement family income;
l (Similar to Western, except definition of
‘lifestyle’ is not the same;
l (Differs with development of society)
l SMEs often started in light-labor-intensive
industries, commonly crafts-based, in
subcontracting, or in franchising;
l SMEs may be crowded out from some
sectors, because the government has
earmarked the sector for major investments;
l Avoid economic sectors requiring complex
management and marketing skills;
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 127
Table 11 (Continued)
Western Eastern
Management as Leadership
l Committed, persevering, and hard-working;
l Knowing self;
l Looks at leadership as an ideal;
l Managers endorse modern ideas and
change style with type of business and size;#p#分頁標題#e#
l High value placed on the individual,
personal initiative, self-assertion, and
personal achievement;
l Guilt more than shame a motivator;
l Frank and open-minded manager;
General Management - Planning
l Planning can be formal, factual, and
detailed;
l No limit to growth;
l Business is seen as an isolated entity to be
optimized;
l Strategic planning provides an edge, but
senior manager only occasionally looks
further ahead;
General Management - Organizing
l Must have:
- opportunity-seeking skills;
- production-oriented skills;
l Adapted to need of all stakeholders
(outside as well as inside);
l Work division may take place;
l Informal, involving employees, getting
to know skills of organization members;
delegating and trusting;
l Using contacts to compensate for lack of
skills and resources;
l Less bureaucracy recommended;
l Individual initiatives encouraged;
employees speak their mind;
expects honesty, sincerity, and respect in a
professional order;
l Promotion and pay based on performance
more than on seniority;
l Flat organizations are operated;
l Application of sophisticated structures
and systems;
l Personnel management necessary to
motivate and keep people;
l (Same as Western, maybe even more so)
l Self-reliant to the extreme;
l Wants to be a role model (and the spider in
the net);
l Managers are more traditional, and use the
same style independent of type of business
and size;
l High value placed on the family, social
prestige, and loyalty;
l Shame more than guilt a motivator;
l More secretive;
l Limit to growth is fear of losing control;
l Business is seen as existing in a network to
be fully exploited;
l Planning is more personalized,
opportunistic, and intuitive;
l Tactical flexibility is an edge, but much
time is spent by senior manager in daily
operative matters;
l (Same as Western)
l Adapted to need of founder (insiders);
l The boss assumes responsibility for all
business functions;
l A personalized and autocratic approach;
more distance-taking to other organization
members; less delegating and trusting;
l Contact is everything (networking as a way
of life);
l Less personalism recommended;
l Individual initiatives suppressed; employees
fear to disagree, expects loyalty, obedience,
and respect in a hierarchical order;
l Promotion and pay could be based on
seniority, especially within the family;
l Steep organizations are run;
l More ud hoc, neglecting standard
procedures;
l No formalized personnel policy;
128
Table 11 (Continued)
B. V. BJERKE
Western Eastern#p#分頁標題#e#
General Management - Decision-making
l “Scientific”; l Personalistic;
l If trust, trust in people’s skills; l If trust, trust in people’s loyalty;
l Formal meetings common; l Formal meetings rare;
l A respectful attitude to law and order; l A creative attitude to law and order;
General Management - Controlling
l Delegating control to some extent to
trusted people;
l Problems in delegating and maintaining
control;
l Close supervision rare;
l Systems in filing, recording, inventory
and stock control commonly reduced to
b are necessities;
l Searching for feedback and learning from
mistakes;
l Close supervision common;
l Systems in filing, recording, inventory and
stock control commonly missing;
l Very flexible and willing to learn from what
others have done, but looks at own mistakes
as loss of face;
l Blame mistakes on own wrong-doing;
l Continuous change and improvement, if
for nothing else, for the sake of image;
l May blame mistakes on bad ‘joss’;
l Change and improve only for financial gain;
Financial Management
l Management of finances is important;
should be good at cash management;
l Developed venture capital sector exists,
which is sometimes used; however, more
common to use own funds and those of
relatives and friends as capital to start and
to expand;
l Overseas Chinese excel in financial
management, particularly cash management;
l Limited access to underdeveloped financial
sector generally; use contacts to find
capital on the informal market to start and
to expand;
l Highly leveraged;
l Defaulting on loans is not a disaster;
l Budgeting is common;
l May enjoy spending; less strict on
cost control;
l Lowly leveraged;
l Defaulting on loans is out of question;
l Budgeting is rare;
l Abhors spending; hawk-eyed on cost
cost control;
l Transactions in all kinds of money;
l Can survive only by showing favorable financial
results, at least in the medium term;
l Transactions often in cash only;
l May survive by accumulating small short
term gains over a long period;
Marketing Management
l (Same as Eastern)
l Have a limited use of marketing in
practice; however, have a customer focus
(where Americans excel);
l The whole range of marketing
management applied, if needed;
l A broader promotional approach;
promotion may even come first;
l Service is very important;
l What is new can sell in its own right.
l Should find market niches;
l Have a limited knowledge of marketing in
practice; production and finance
considered more important;
l Few standard trade marks, less standardized
displays, almost no sales policy, little market#p#分頁標題#e#
research, and less organized distribution;
l Personal selling (possibly product samples
given away) promotional tool of choice;
l Service is less important;
l What is popular can sell in its own right.
A TYPIFIED, CULTURE-BASED, INTERPRETATION OF MANAGEMENT OF SMES IN SOUTHEAST ASIA 129
Generally, some similarities between Western (read American) and Eastern
(read overseas Chinese) understanding of SMEs worth noting are:
. Most establishments in an economy are SMEs;
l The main benefit associated with having an SME is to be on one’s own;
l Seeking and exploiting opportunities is vital for an SME;
l Leadership (but defined differently in the West and in the East) is decisive for the
progress of the SME;
l Success of SMEs is intimately associated with the quality of the entrepreneur;
l Many SMEs are started as family businesses (but they stay more as family businesses
in the East);
l A major factor to succeed with an SME is to find a market niche.
Some noteworthy differences are:
l Providing jobs is a less important role for SMEs in the East (this may change with
the present economic crisis);
l Eastern SMEs operate more in a grey (even black) sector;
l More elaborated structures for SME support exist in the West. The range of
support is also wider in the West;
l Self-realization and personal achievement is a major factor behind having an SME
in the West; material gain and family status from having an SME is more pronounced
in the East;
l Social risk is more important than financial risk as a drawback from having an
SME in the East;
l Constant improvement and business function skills are major factors for succeeding
with an SME in the West; in the East, action-orientation, flexibility and networking
skills are more important;
l Creativity and innovation are more associated with SMEs in the West;
l Managers are more open to modern management ideas and techniques in the West;
l Management of SMEs is more of a one-man show in the East. Information is less
open there, and there is also less delegation and tighter supervision;
l SME organizations are steeper in the East;
l Contacts are important for succeeding with an SME in the West; in the East,
networking is a way of life;
l Application of sophisticated management systems (even a ‘scientific’ approach to
decision-making) is more common in the Western SME. Personnel management
is also more developed there.
l All planning is less formal in the East;
l Making mistakes is a way of learning in the West, but seen as a loss of face in the East.
l SMEs are more leveraged in the West;
l SMEs in the West are more customer-focused and service-oriented, and formal
marketing is more appreciated and applied there.
130 B. V. BJERKE
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