BUSINESS: Asia's competitive companies
A groundbreaking survey by Asia, Inc. and Arthur D. Little names Asia's 50
most competitive companies*
Sony Corp. is hardly Asia’s biggest company, nor has it been particularly
fast-growing or profitable in recent years, as it struggles to sort out problems
in its Hollywood entertainment business and develop new generations of blockbuster
products. Yet the Japanese electronics giant boasts such an impressive arsenal
of strengths that it emerged at the top of Asia, Inc.’s first ranking of
the region’s most competitive companies.
This groundbreaking project - conducted in partnership with the Singapore
office of U.S.-based Arthur D. Little Inc., the world’s oldest management
consultancy - sought to determine which Asian companies are best prepared
to excel in the global marketplace of the 21st century. To do that, we surveyed
4,500 listed companies from 14 countries and ranked the best overall competitive
performers (for the results, see the Top 50 list, pages 34-37). Previous
surveys, like Asia, Inc.’s annual Growth 88 list, rank companies based on
sales growth, while others measure sales volume, profits and even name recognition.
But all those reflect past performance, while this analysis was intended
to identify which companies have the ability to remain at the top. And in
the long term, what keeps companies ahead are competitive advantages such
as cost leadership or product differentiation, usually underpinned by a strong
Competitive advantage is becoming more important as regional and global trade
agreements chip away at trade barriers. Indeed, the writing is on the wall:
Asian executives will not be able to rely much longer on government support
or time-tested guanxi (connections) alone to assure their success. Says Sree
Kumar, an independent regional strategic-management consultant in Singapore:
“Many Asian firms have political wisdom which is exploitable locally and
makes them competitive at home, but which cannot cross the border.”
For top-ranked Sony, the most powerful advantage may well be its name, a
50-year-old brand that’s internationally recognized and respected. Thanks
to its products and its world-class marketing skills, Sony’s brand ranks
on par with elites such as McDonald’s, IBM and Coca-Cola. Renowned for its
innovative product-development and precision-manufacturing skills, the company
has a unique ability to bring technology from the digital world of computers
and chips into the mainstream consumer audiovisual markets. Sony had remarkable
success in years past with products like Trinitron televisions, Walkman stereos
and handheld camcorders. While its latest hits have been less dramatic, recent
sales of its Playstation video games and direct-broadcast satellite receivers
have been surprisingly strong. In another year, it hopes to do even better
with digital videodisk players.
“Sony should do well in those [electronics] businesses. It knows that industry
and there are few brands as well-known internationally as Sony,” says U.S.
marketing guru Philip Kotler of Northwestern University’s Kellogg School
But there’s more to competitiveness than savvy marketing and a well-known
brand. To select the companies for our list of Asia’s 50 Most Competitive
Companies, Asia, Inc. and Arthur D. Little started by analyzing companies’
sales, profitability and asset growth, as well as their overall financial
efficiency, to arrive at a preliminary list of 600 outstanding companies.
(Banks and financial-services companies were excluded, because regulations
for the banking sector differ so widely across the region.) We then tested
these for their relative strengths in eight strategic and tactical areas,
an approach based on the concepts pioneered by Harvard Professor Michael
Porter in his classic book Competitive Strategy.
Porter has identified several key factors related to competitiveness. Those
factors, and a few of the companies that emerged from our survey at the top
of each category, are:
COST LEADERSHIP Ð ability to control costs and prices: Acer Inc., Giordano
International Inc., Samsung Electronics Co.
DIFFERENTIATION Ð a company’s ability to distinguish itself from rivals:
Shangri-La Asia Ltd., Sony, Taiwan Semiconductor Manufacturing Co. (TSMC).
ENTRY BARRIERS Ð ability to prevent competitors from entering the business:
Keppel Land Ltd., Sundram Fasteners Ltd.
STRATEGIC FOCUS Ð the ability to focus on a well-defined business strategy:
Canon Inc., Ranbaxy Laboratories Ltd., Television Broadcasts Ltd. (TVB)
COMPETITIVE ENVIRONMENT Ð the ability to thrive in an intensely competitive
industry: Evergreen Marine Corp., Fuji Photo Film Co., Toyota Motor Corp.
ECONOMIES OF SCALE Ð efficiency gained from a high-volume operation:
Arvind Mills Ltd., Charoen Pokphand Feedmill PCL, Reliance Industries Ltd.
MARKETING SKILLS Ð the ability to attract and keep profitable customers:
Nintendo Co., Shangri-La, Singapore Airlines Ltd. (SIA), Sony.
TECHNOLOGY LEADERSHIP Ð the ability to develop, acquire and exploit leading-edge
technology: Broken Hill Proprietary Co., Honda Motor Co., Rohm Co.
To minimize bias toward established industries, extra weight was given to
the tactical scores of companies in embryonic or growing industries, and
somewhat less to those in mature or declining industries. The resulting strategic
and tactical scores were then combined to give each company an overall competitive
(For a full explanation of the methodology used, see Asia, Inc. Online’s
Internet site at: www.asia-inc.com).
The members of the Top 50 list offer a telling indicator of corporate Asia’s
real competitive strengths, which for many companies lie in adapting technology,
improving processes and perfecting the mass production of goods the world
wants, at attractive prices.
Manufacturers account for more than two-thirds of the list and all 10 of
the top spots. The electronics sector is particularly dominant, with 17 companies
included. Also well-represented are auto makers and auto-parts suppliers,
with 7 companies on the overall list and four - Honda, Toyota, Suzuki Motor
Corp. and Hyundai Motor Corp. - ranked in the top 10.
Of the electronics firms, No. 2-ranked Acer has made some of the most impressive
strides, transforming itself in barely a decade from a little-known maker
of IBM-clone computers to an innovator with one of its industry’s strongest
brand identities. Says Chairman Stan Shih, who founded the company in 1976:
“We want to be among the top-five PC brand names in the world by 2000.”
Another technology innovator is auto maker Honda, whose engineering skills
helped it edge into the No. 3 spot, just ahead of rival Toyota. Honda is
famed for its product innovation, particularly in its engines. Says Managing
Director Fukatsu Kensuke: “Our ultimate corporate goal is to constantly improve
our ability to respond quickly to change.”
No. 4-ranked Toyota is no slouch either. Taguchi Toshiaki, a Toyota director
and board member, credits much of his company’s competitiveness to its swift
product development. “We took our Ipsum minivan from design to production
in 15 months - possibly the shortest development time in the industry,” he
Considering Japan’s sheer size and well-developed manufacturing sector, it’s
not surprising its companies dominate the rankings, grabbing six of the top
10 spots and 13 places in all. Not far behind, though, is Hong Kong, with
seven companies in the Top 50, followed by Singapore with six, Taiwan and
India with five each, the Philippines, Korea and Indonesia with three each
and Thailand with two. Malaysia, Australia and New Zealand each had one.
Hong Kong’s companies are among the list’s most diverse, with interests ranging
from hotels (No. 12 Shangri-La) to retail (No. 14 Giordano International
Ltd.) to media (No. 23 TVB), while just one manufacturer (No. 31 Gold Peak
Industries) made the list.
Shangri-La, the territory’s top-ranked company, has set itself apart in Asia’s
fiercely competitive hotel industry. Not only do guests praise its top-notch
service, but management was quick to identify a market for no-frills Asian
business hotels, resulting in the successful Traders chain. Tycoon Robert
Kuok, who retains management control of the hotels, has impeccable connections,
which open doors across the region.
Giordano, however, has suffered from an ongoing dispute with Beijing officials,
angered by disparaging remarks made by founder Jimmy Lai, who has since left
the company (see “The Willing Target,” Asia, Inc., February 1996). Despite
Giordano’s political problems, its chain of casual-clothing stores is one
of Asia’s most innovative, known for its inventory control and customer service.
“Our vision is to become the best-managed company in Asia, if not the world,”
says Chairman Peter Lau.
Food and agribusiness companies make up the Top 50’s third-largest industry
category, with five companies. Jollibee Foods Corp. (No. 15) leads the group,
and also is the top-ranked Philippines company. For a decade this fast-growing
restaurant chain has fought off challenges from U.S. giant McDonald’s Corp.,
and remains the Philippines’ most popular fast-food choice. Says Jay Visco,
Jollibee’s marketing director: “Our success has forced McDonald’s to introduce
products they don’t offer elsewhere, like spaghetti and dough-burgers. We
still lead them two to one.” Meanwhile, Jollibee has expanded into five Southeast
Asian countries, plus the Middle East, and most recently to California.
Many of the Top 50 companies have evolved highly focused strategies. One
is No. 9-ranked Reliance Industries Ltd. of India, which began as a textile
manufacturer before expanding into making its own raw materials and then
into petrochemicals. By the end of the century, Reliance aims to be the world’s
largest polyester maker, with its own oil refinery. Despite its expansion,
says Reliance Joint Managing Director Anil Ambani, the core strategy hasn’t
changed: “Our strategy has been to achieve market and cost leadership in
all our businesses.”
Although Reliance makes a perfect example for one of Porter’s textbooks on
competitiveness, some Asian companies defy conventional theory by succeeding
at two strategies - cost and product differentiation - at the same time.
That’s one of the surprising findings of the Top 50 survey, says Peter Connell,
Arthur D. Little’s Singapore-based vice president. “In classic Porter theory,”
he says, “you must either compete as a cost leader or as a truly differentiated
niche player. Our rankings show that neither is sufficient for a company
to be truly competitive in Asia, and in many cases, world-class companies
here excel at both.”
No. 6-ranked Taiwan chipmaker TSMC, for instance, was conceived as both a
high-volume cost leader and a differentiator (it was the world’s first pure
“foundry” - devoted exclusively to making chips designed by customers). Spun
off from a government research lab in 1987, the company has, until the recent
semiconductor market slump, recorded some of the highest profit margins and
growth rates in its industry.
One reason so many of Asia’s top companies can pursue two strategies simultaneously
is the region’s phenomenal boom. However, it is yet to be seen whether they
can excel at both cost leadership and differentiation for long periods. As
Asian markets develop and new rivals emerge, it seems certain that many will
have to choose one strategy over the other.
That’s already happening at Singapore Airlines (No. 13). The company can’t
aspire to cost leadership, since it is based in high-cost, labor-scarce Singapore.
But SIA differentiates itself by excelling at service. It was the first airline
to offer frills like hot towels and free wine to all passengers at a time
when other airlines hesitated to pamper their economy class.
India’s Sundram Fasteners Ltd. (No. 16) has capitalized on a similar customer-focused
philosophy. “We consistently seek out very demanding customers, which challenges
us to perform even better,” says Managing Director Suresh Krishna. Sundram,
whose specialty is making auto radiator caps, has racked up nearly 40 percent
annual profit growth in the past five years from this seemingly mundane commodity,
recently landing a contract to supply General Motors Corp.
The earnings statements of Sundram and many other Top 50 companies may suggest
that competitiveness goes hand in hand with profits. But as top-ranked Sony
and several others on the list clearly demonstrate, one doesn’t always guarantee
the other. “In theory, superior competitiveness does lead to higher profit.
But there are a range of things that can make profits rise and fall,” says
Douglas Dow, associate professor of business strategy at Australia’s Melbourne
Business School. “Some industries are inherently more profitable than others.”
He adds that the biggest factor in financial performance is often a company’s
But whether it’s a young, high-growth business or a mature, sunset industry,
many of the same principles of competitiveness are likely to apply. As Giordano’s
Lau says: “We make only one assumption - we don’t know enough about the markets
- so we must continue to take signals from the market.” Just another of the
many strategies to remain competitive in the long run.
Additional reporting by Hans Katayama in Tokyo and Sandra Lam in Hong Kong
Asia, Inc., thanks the following schools, companies and individuals, without
whom this project would not have been possible:
Prof. Ted Azarmi and the International Univ. of Japan; Prof. Makino Shigefumi
and the Chinese Univ. of Hong Kong; Prof. Kulwant Singh and the National
Univ. of Singapore; Prof. Bruce Stening and the Australian National Univ.;
Prof. Patt Lontoc and the Asian Institute of Management. Thanks also to Abid
Naqvi and Taurus Securities in Pakistan, Yogendra Pratap and Equicorp Research
in India, Manager Information Services/Alpha Research in Thailand, Financial
Times Information and CompuCharts Corp. in Hong Kong, Dharmala Securities
Philippines and Citisecurities Inc. in Manila, Thomson Information in Singapore,
BZW Asia-International Ltd. in Taipei; and, most particularly, Asia, Inc.
Reporter-Researcher Sandra Lam.
* = Author's note: The Thai baht was floated on July 2, 1997. Asian economies
collapsed. This survey stands vindicated; nearly all the companies in this
list survived the crisis with head held high. -- ST.