Strategic Development of Hong Leong Group That Operates in the Asian Region - Case Study Example

Strategic Development of Hong Leong Group That Operates in the Asian Region Name of Student: Name of Course: Name of Instructor: Date of Submission: Strategic Development of Hong Leong Group That Operates in the Asian Region Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 Brief History of Hong Leong Group 3 3.0 Relevant Business Traditions of Hong Leong Group 4 3.1 Guanxi 5 3.2 Chaebol 5 3.3 Mianzi? 6 3.4 Western Management System 6 4.0 How the Relevant Business Traditions Have Developed And How They Operates Today 6 4.1 Chaebol 6 4.2 Guanxi and Mianzi 7 5.0 Challenges Faced by the Hong Leong Group 8 5.1 Globalization 8 5.2 Management 9 6.0 Solutions to the Above Challenges 9 6.1 Sustainability 9 6.2 Strategic Development 10 7.0 Conclusion 10 References 11 1.0 Introduction Growth and development are core aspects of any business organization that dictate the way in which an organization is able to cope with the challenges that occur during operation. In as much development is beneficial to an organization, it is equally a threat to it (Taylor & Cooper, 2007). This gives the need for strategic development. Strategic development is a development approach in which an organization has a clear outline of how it will achieve its developmental goals and objectives. Strategic development is usually guided by an action plan that outlines the vision and mission of an organization among other crucial elements of development (Brown, 2005). Heong Leong Group, one of the major conglomerates in Asia is an organization whose strategic development is worth writing home about. The following report discusses about the strategic development of Hong Leong Group. It will relate the development of Hong Leong Group to the relevant business traditions and cultures that it has developed over years, the future challenges to the organization and possible solutions to the challenges. 2.0 Brief History of Hong Leong Group Hong Leong Group is a business conglomerate with its headquarters in Malaysia. The group was founded in 1963. It started off a s trading company, dealing with building materials and other associated materials. Over time, Hong Leong Group ventured into industry in line with keeping up with the fast economic development in Malaysia. The company is committed to its old business values of honor, quality and integrity; hence its ability to stay afloat in the market over years of operation (Hong Leong Group, 2013). Key to the growth of the company is its inherent entrepreneurship spirit. Under various ventures and business prospect, the group has been able to provide a solution to the country’s industrialization needs. Currently, the Hong Leong Group boasts of a wide range of business interests in the ASEAN region. The company is home to several reputable organizations listed on the stock exchange. In addition this the company has over 40, 000 employees worldwide (Hong Leong Group, 2013b). One of the areas where the company has interests in is in the financial and banking services. The group has over the years developed a strong reputation in banking and financing and is home to Hong Leong Bank, which provides comprehensive banking and financial services. The group has also ventured into manufacturing and distribution where it engages in the manufacture and distribution of semiconductors, steel, concrete products, furniture, ceramic tiles, building materials, newsprint, flour, detergents. Fiber cement, motorcycles and edible oils (Hong Leong Group, 2013c). The group has also has prospects in property development in Singapore, Vietnam, China, Malaysia and Reit. The company also has interest in hospitality and leisure and is also astute investor. Hong Leong Group has invested highly in technology and other modern management systems so as to grow to its current size. In addition to this, the group has great organizational culture which upholds the values of quality, honor, entrepreneurship, innovation, human resource, unity, social responsibility and progress (Hong Leong Group, 2013a). 3.0 Relevant Business Traditions of Hong Leong Group In order to reach to its present level of success, the Hong Leong Group’s activities have been governed by the organization’s business traditions. The following section will discuss some of these key traditions. 3.1 Guanxi Guanxi is a business term which originated in China. Guanxi is a network of important business connections which are able to assist an organization to get favors or assistance in times of need (Lu & Reve, 2011). In a guanxi network, business activities are based on strong business toes which exists amongst the various stakeholders in a network (Zokiewski & Feng, 2012). Looking at Hong Leong Group, it can be acknowledged that the group has the most important business services for any organization in business. The strong ties between the banking and finace, manufacturing, investing, property development, hospitality and leisure enable the organization to do business within itself; hence eliminating third parties and ultimately getting more profits. On this point, it is important to note that business in a guanx network is dependent on strategic business networks (Gong, He & Hsu, 2013). Over years, the group has always sought to strike great relationships with other business partners hence leading to the strong guanxi today. 3.2 Chaebol Chaebol is a business conglomerate structure which involves the establishment of various corporations with global business operations under one umbrella (Mathews, 2006) (Park & Yuhn, 2011). Under the chaebol structure/ family, an organization is able to venture into various business interests under the same original company, hence being able to control the market (Minor, Patrick & Wu, 1995). Initially, Chaebol was meant to enable an organization to monopolize the marketing by getting rid of third parties. Looking at the Hong Leong group, it can be acknowledged that chaebol is upheld. The companies making up the group enable the group to be one of the largest conglomerates in the world. 3.3 Mianzi? Mianzi is another business tradition practiced by Hong Leong Group. The tradition has its roots in China and it involves the creation of a good face of a company. Mianzi and Guanxi are interlated. Mianzi is involved in creating a good image for an organization so as to enable it to establish a good relationship with other organization (Zokiewski & Feng, 2012). Hong Leong Group upholds Mianzi in its practices. Looking at its core values, it can be appreciated that the organization has been able to create a good image of itself by engaging with its partners well. In addition to this, the group is responsible socially; a crucial aspect which improves the groups image. 3.4 Western Management System Western management systems are those which are practiced in west (Europe and USA). There is a great difference between western management systems and Asian management systems. Western management systems focus on business relationships arising from business transactions while Asian management systems are focused on creating business relationships commonly known as Guanxi in Asia (James, 2012). Looking at Hong Leong Group, it can be acknowledged that it uses minimal principles of western management systems but instead has embraced Asia systems which are by far some of the most successful approaches in the recent pasts. 4.0 How the Relevant Business Traditions Have Developed And How They Operates Today 4.1 Chaebol As discussed above, Chaebol is focused on creating conglomerates. Chaebol originated from Korea and has over time become one famous in Asian multinationals in addition to the rest of the world. Hong Leong Group is a perfect example of an organization which upholds the Chaebol principle. Hong Leong Group started off as accompany which focused on selling building materials in Malaysia. Over time, the founder of the Group Mr. Hong saw the need to expand into other business which would compliment his building materials industry (Mathews, 2006). This led to the establishment of the companies’ one after the other under the same group name (Suehiro, 2008). It is noted that Hong Leong group has focused on expanding its business activities around the globe and boasts of over 100 companies under the group name. This is a manifestation of the groups’ commitment to Chaebol. Currently, the company has companies’ operating under finance and banking, investment, manufacturing and distribution, property development and hospitality and leisure (Hong Leong Group, 2013). In accordance with chaebol, Hong Leong group established company’s which complement each other. From the group’s history, it can be seen that the manufacture of concrete products was done in a bid to compliment the building materials business. The manufacturing business was ventured into so as to compliment the construction materials industry while the banking and financial venture was meant to service the group’s financial needs. Therefore, it can be concluded that chaebol is a crucial business tradition for Hong Leong Group. 4.2 Guanxi and Mianzi As seen in the discussions above, Mianzi is about creating a good image ‘face’ for an organization which enables it to enter into important business relationships and networks (Guanxi) hence being able to increase its chances of succeeding in the market. Looking at Hong Leong Group, it can be acknowledged that the group has invested a lot in a good image. The group values social responsibility, a factor which has had a positive impact on its face. The group’s culture is developed along core values which enable it to relate with other stakeholders in the market effectively hence maximizing its chances of getting into good networks. The development of the conglomerate was also in a bid to create a business network which would shield the group from third parties hence gaining maximum returns on investment. Guanxi and Mianzi traditions have enabled the organization to be able to withstand the forces of the market. Owing to the fact that Hong Leong Group developed in the Asian region where guanxi and mianzi are upheld in the region’s business world, Hong Leong did not have any other option but to conform to the region’s business practices. Over time, the group has focused on producing quality products, providing services with the highest professionalism and engaging with the immediate society and environment in the most appropriate manner. This has inturn given the group the right ‘face’ (mianzi) and enabling it get into the right partnerships. 5.0 Challenges Faced by the Hong Leong Group 5.1 Globalization Globalization is the continuous interdependence among countries and organizations in the world. As globalization’s effects take toll on the global business world, it has become of utmost importance for business organizations to align themselves with the changes and opportunities which arise thereof by gong global. Although the Hong Leong group can termed as global, it still has a long way to go since it only has a strong presence in the ASEAN region. On this point, it is important to note that the group has structured its management style and culture along with the rich Asian culture. For this reason, the organization is due to face an undoubting hard task venturing into other regions of the world. Although the East has the best performing markets in the global market; the group has to take note of the fact that economies are due to shift. Before the shift of economy to the west, it can be noted that it came from the east. The current global scene shows that the shift is now towards the west. On this point, it is important for the group to relate with the west and also the developing economies in Africa. 5.2 Management The Leon Hong group is comprised of over 100 companies. Each of the companies in this giant conglomerate is involved in numerous activities. This brings the need for a strategic management system which enables the group to monitor its activities effectively towards success (Marsh, MacCormick & Robinson, 2007). The group should acknowledge the fact that there are challenges which come about as a result of creating large organizations. Currently, the group has a lot of bureaucracy which hampers innovation and pace in executing strategies. In order for the organization to avoid possible negative impact of the growth, it should establish a strategy which allows for strategic development of the organization. Strategic development enables an organization to engage in relationships which do not burden it hence evading possible instances of instability. 6.0 Solutions to the Above Challenges 6.1 Sustainability Sustainability enables an organization to take full benefits of the current business without compromising on its chances of doing so in the future. The organsation should come up with the following sustainable moves towards countering its challenges Mianzi and Guanxi Mianzi and Guanxi have been credited with the ability of enabling organization withstand the forces which come up in the market. Currently, the traditions are being practices in the Asian region only which has limited the group’s impact on the global market. As seen in the section above that globalization is major challenge to the Hong Leong Group, the company should consider prospects of taking its Mianzi and Guanxi practices to other parts of the world; hence putting it in a position to benefit from the global business markets. Cultural Competencies As seen in the section above, the group is built around the strong and conservative is a culture which limits the organization’s ability to tap into the rest of the world market which has a totally different culture (Roders & Oers, 2011). Such a move entails coming up with cultural competencies which enable the group to relate positively with the operational demands which come up as result of the cultural disparities. In addition to providing products which are relevant to the diverse cultures, the group should consider establishing appropriate human resource management structures which take into consideration the cultural demands of the diverse workforce. 6.2 Strategic Development As seen in the discussion above, the organization is currently comprised of over 100 companies which have resulted to a management burden to the organization. For this reason, it is advised that the organization should come up with an appropriate strategic development management system which ensures that the group only engages with organizations which are relevant to the organization’s activities. In addition to this strategic development will take into consideration the time, management and financial factors which are very critical in any development plan (Salonen & Bengtsson, 2011). 7.0 Conclusion In conclusion, this report has been able to give an in depth discussion into strategic development wit reference to Hong Leong Group. The report identified that the group is one of the largest conglomerates in the ASEAN region. The report started by introducing the topic and after which the Hong Leong Group was introduced. It was identified that the group has prospects in banking and finance, manufacturing, investing, property development, hospitality and leisure. The report ten gave a lengthy discussion on the group’s business traditions namely guanxi, chaebol, mianzi and western management systems. It came out strongly that the group has placed a lot of emphasis on cheobole, mianzi and guanxi. Cheobole principle lies in the establishment of conglomerates, mianzi focuses on improving and organization’s image while guanxi involves the establishment of business networks and relationships. The report then gave an insight into how the traditions have developed over time and their effect on the group. The report identified globalization and management as the key challenges to the group. The report concluded by giving recommended solutions to the challenges. From the report, it can be acknowledged that strategic development is a necessary to an organization which is focusing on increasing it’s in the market. However, development should be backed by an organization’s relevant traditions which are relevant to the development agenda. 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