Report points out family businesses need to restructure

The China Post staff

Taiwan’s labor market and geographical position will allow the country to emerge as a leading player in information technology under the conditions that traditional Chinese-family businesses (CFBs) restructure their business models in order to compete in the global economy, stated a recent report from Andersen Consulting and the Economist Intelligence Unit (EIU). Despite CFBs’ past success, traditional patriarchal companies are now facing problems as the familiar marketplace is becoming increasingly complex and the forces of e-commerce and globalization are ousting traditional rules of conducting businesses. The report “Beyond the Bamboo Network” states that the traditional strengths of CFB’s, based on middlemen and their contacts, will matter less as organizations will now be tested against their ability to build up markets and acquire new customers.

“Who you know”, though still important, will eventually matter less than “what you know” and CFBs need to build partnerships and strategic alliances that transcend the limitations of the “bamboo networks” that used to bind them together,” stated the report. Asian businesses are no doubt in lead with high market shares however, recent success is derived from the new trends in the economy as companies have yet to adapt to factors such as globalization, e-commerce and liberalization to stay ahead of the game.

The report addresses a revamp of traditional business models so that they are exposed to e-commerce, which will force CFBs to acquire marketing and brand-building capabilities. This will enable them to reach out to global suppliers and markets at a lower cost. The report also focuses on companies moving away from command-and-control systems, which transmit orders down from the top of the hierarchy, towards a people-centered strategy, allowing the focus on the effective management of human capital.

Currently, CFBs are downplaying the importance of e-commerce, as the report depicts a low penetration rate of Internet usage. Thus CFBs are encouraged to create a new network that is both Internet and technology-savvy.

Also, CFBs are encouraged to transform the rule-based governance system into a relationship-based one to maximize the potential of staff members.

For example, the Acer Group in Taiwan is a representative of one of the few CFBs in Asia where hierarchy and strong interpersonal relationships in the workplace were substituted with power decentralization and an emphasis on employees’ performance.

Overall however, Joseph Lobbato, managing partner of Andersen Consulting concludes “the outlook is bright for CFBs across Asia. The first step is recognizing areas that will need to be transformed. Even with the best business models in place, an organization without the right to corporate culture and leadership talent will not be able to deal with competitive pressures. Once this is accomplished, CFBs can move full-speed ahead with aggressive change programs aimed at increasing their competitive advantage.”