Corporate Entrepreneurship - Li Ka-Shing - Case Study Example

The Chinese youth in the mainland believe that money makes wonders while the Hong Kongers have a penchant to become millionaires. They have a high passion for money and making money is their highest goal in life (Ang, 2000). This is partly because the cost of living in Hong Kong is very high. The social elite in Hong Kong come from wealthy families such as Li Ka Shing who has accumulated wealth over generations. The economic development in Asia has at its core the business leadership – managers and entrepreneurs have been able to sustain and create Asian companies. In Asian business political connection and family control are common. Li Ka Shing, of the Hong Kong-based Hutchison Whampoa and Cheung Kong holding group, is one such example of an entrepreneur who runs his companies closely and intends passing on the leadership to his two sons (Mills, 2005). Asia usually has directive leadership style where the executive provides the direction to the firm and its people. The entrepreneurial traits embedded in Li Ka Shing turned his fortunes from rags to riches in just one generation. He had his hands in different areas of business such as telecommunications, security and high-end IT. Ka-Shing is very keen to become a contractor in the emerging homeland security construct in America but the threat to his success is the reliance on an international concern to be the significant contractor. Li Ka-Shing, the ninth richest man in the world, nicknamed “Mr. Money”, with a reputed worth of US$23 billion, made his money the old-fashioned way (Chan, 2008). Today his fortune is an estimated $26.5 billion, which has fetched him one of the top spots on the Forbes’s list of the world’s richest people (Youngentrepreneur, 2010). Li started his work life in a plastics factory at the age of 12 soon after his father’s death. Soon he was the leading salesman working 16 hours per day and this helped him understand the fundamentals of business. He even used his leisure time to continue his education at a night school, which shows the passion and sincerity in him to succeed. To succeed, entrepreneurs must have a passionate vision which distinguishes them from their competitors (McIntyre, 1998), and it is this passionate vision that urged Li to turn all his dreams and aspirations into reality. Li was industrious and intelligent. Besides, he had the will to live and succeed. Within a decade he had his own plastics company, which he later leveraged into a real estate and investment concern. His strategy in real estate was to avoid debt by raising capital before building (Referenceforbusiness, 2005). He raised capital through joint ventures with landowners and by preselling apartments to friends and colleagues. He had the propensity to take risks but not knew what could be avoided. This perhaps is the reason that today he has no personal debts. Fewer risks enabled him to earn profits for both Li and his co-investors, which also ensured rapid growth. He soon became the market leader in the telecom and the IT sector as well (Mills, 2005). Having started his own factory in 1950, by 1958, Li attained the millionaire status just on the basis of his plastics flower business. After reaping benefits in plastics and real estate, Li strengthened his bank account by moving fast into the supermarkets, electronic stores and pharmacies (Chan, 2008). Entrepreneurial attitude can be measured in terms of achievement, innovation, personal control, self esteem, and opportunity recognition (Lindsay, 2005). Li wanted to rise above the other Hong Kong firms selling plastic flowers and he found this opportunity in the plastic factories of Rome and Naples. He toured the factories and gained knowledge on everything worth knowing about the flowers. This was the innovative entrepreneurial trait in him that took him miles ahead of others. Opportunity Recognition (OR) is another important entrepreneurial trait, again, found in Li. By the late 1950s, refugees from People’s Republic of China were streaming into Hong Kong and this terrified the Hong Kong entrepreneurs who fled to the West. They left behind their real estate properties at throwaway prices. Li recognized this as an opportunity to sift through a catalog of offerings and settle on ones that would be highly profitable once order returned to the colony. The achievement of Li speaks volumes of the entrepreneurial characteristics that he had in him. He gradually moved into container ports, oil and gas, and television, telecommunications and the internet. He now has interests in China, Southeast Asia, the Americas, and Britain (Chan, 2008). Li seeks to establish a positive legacy. In 1980 he created a foundation to help young Chinese students have the educational and other opportunities which he was deprived of at the age of twelve (Mills, 2005). In 1981, he set up his own university with the same purpose. He started nurturing his two sons in business from the tender age of eight and nine (Chan, 2008). Entrepreneurship is an act of creating value by seizing opportunity and utilizing human, social and financial resources (Chan, 2008). Entrepreneurship involves a certain amount of risk taking by the entrepreneur. Li wanted to attain the leading position of a hong in Hong Kong and the John D. Hutchison Company gave him the commercial power and the influence in Hong and Kong and the whole of Asia. When the Hutchison Whampoa was running at a loss and 22% of its shares were held by the Hong Kong Bank, Li Ka-Shing purchased 90 million shares of this company for a sum of HK$ 639 million. In return, he received the Hong Kong Bank’s entire stake of 22 percent, which was the biggest interest of any shareholder. This strategy immediately brought Li into global prominence and connections. By 2004 he increased his quality in Hutchison Whampoa to 49.9 percent and then moved into a variety of other businesses. He even expanded beyond Asia and moved into Canada where his sons were educated. This also brought him the respect of his peers, which had always been his main objective in life. Lindsay confirms that self-esteem in an important entrepreneurial attitude. Based on the Asian characteristic of directive leadership style, Li maintained firm supervision over Hutchison Whampoa. The company was totally under Chinese thought and action, after replacing the European expatriate staff (Chan, 2008). Culture plays a vital role in the stages of development of any organization (Mills, 2005) and perhaps, replacing the expatriate staff and grooming his own sons were based on the premise that culture would dictate that only the sons of the Chinese tycoon would fit the bill. ‘Youth entrepreneurship’ has been defined as the “practical application of enterprising qualities, such as initiative, innovation, creativity, and risk-taking into the work environment (Schnurr and Newing, 1997 cited by Chigunta, 2002). This requires the use of appropriate skills necessary for success in that environment and culture. Li’s grooming his sons at a tender age confirms this principle. The need for achievement is the driving force behind human action and this influences entrepreneurial behavior (Koh, 1996). They have the propensity to take risks as has been amply demonstrated by Li. His greatest strength has been his vision which has provided him the power and continuity of thought (Youngentrepreneur, 2010). His determination would lend shape to the unknown future and he focused on taking over the underperforming companies to develop them into multinational corporations. Managers perceive and solve problems in different ways, depending on their preferred problem-solving style (Buttner & Gryskiewicz, 1993). The entrepreneurs invariably have a logical, analytical thinking process with a focus on the specific details of the situation. They have a distinctive decision style. Entrepreneurs differ in their style of analysis of information as they have a high level of networking and information seeking ability, and interest and tolerance of ambiguity. Entrepreneurs are usually open to innovation, and spend a high percentage of their time on boundary-spanning activities. They seek information from varied sources and they are open to innovation. Corporate entrepreneurship is essential to family firm survival, growth and profitability (Kellermans & Eddleston, 2006). Entrepreneurial activities can revitalize a firm’s business by changing its competitive profile or by emphasizing innovation. Technological innovation is at the core of entrepreneurship. Entrepreneurs should be able to anticipate, embrace and induce change. Li can be called a change leader as he was always willing to innovate and invent. He did not remain stuck to the past and faced the challenges bravely. Despite moving as a refugee from China, he is today among the riches in the world. He controls the Husky Oil Company of Canada and the Hong Kong Electric Company. Hutchison Whampoa owns a controlling interest in Cavendish International and Cheung Kong is the family’s basic holding company (Weidenbaum, 1998). Leaders of growth initiatives should have in-depth understanding of customers and markets, apart from sustained personal and organizational interest (Connell, 2007). The Li Ka-Shing conglomerate is the largest business group in Hong Kong consisting of 25 companies, with operations that span over fifty countries having more than 220,000 staff worldwide (Evancarmichael, 2006). Entrepreneurship also requires maintaining connections and how this is executed differs across cultures. The Western managers and expatriates are legalistic and contract-oriented while the Chinese managers and entrepreneurs give precedence to guanxi over contracts Pearce II & Robinson, 2000). Because of his strong guanxi with high officials in Beijing, Li could win the battle over real estate property and McDonald’s was forced to relocate despite having the contract. Li continued to expand by starting new ventures and acquisition of businesses. However, the optimism, opportunity and growth of the new economy in 2000 were replaced by caution, cost-cutting and security issues in 2003 (Connell, 2007). This again is the time when entrepreneurs have to adopt a different leadership style. Li, with a firm hold on the steering, grew businesses and sold non-strategic and non-performing assets. During such times, the best decisions have to be taken to save the assets and to keep growing. This ability to grow, to push into new markets, and to develop strategic alliances and joint ventures, depends upon the insight, assessment and vision of the manager-entrepreneurs, which has been amply demonstrated by Li Ka-Shing. He demonstrated perseverance for core businesses, and withdrawal from non-performing sectors so that reserves for the future could be secured. Li set himself goals and made himself accountable for those goals, which ensured that at the end he was able to achieve them. Taking advantages of opportunities is the greatest quality that an entrepreneur must possess, and Shing believed that one can overlook opportunities if one is lazy and whiles away time. At the same time, an entrepreneur should have the capability to be prepared for the worst, which Li had. This acumen could see him through the Asian financial crisis in 1977 (Shawn, 2005). This is also one of the reasons that Li’s companies have never run into financial problems in the fifty years of their existence. He carries no personal debts and he considers this to be a hallmark of success. The fastest growing family firms have been those that have pursued first-to-market and early follower market timing strategies (Kellermans & Eddleston, 2006). This again suggests that visionary leadership is essential along with opportunity recognition. The authors also found that first generation family business is based on innovative ideas but after a few years they lose their entrepreneurial momentum. However, Li has been sensitive as far as succession is concerned. A brilliant dreammaker, his instincts are impossible to duplicate (Time Asia, 2004). He is one of the most forward-thinking and global-minded businessmen. His management style demonstrates a departure from the Asian and eastern cultures. He uses the services of non-family professionals to run his complex empire. Despite the modern management approach, the succession would be taken over by his two sons. This approach speaks of the family firm survival, growth and profitability, being at the core of an entrepreneur’s vision. In the Chinese business culture, the family has inherent traits such as uniformity, constancy, durability, and continuity, all of which are essential for progress, (Chan, 2008). Social hierarchy in the tradition families indicate that power is passed on from one generation to another which actually means movement from the past and present to the future. This ensures family firm survival and this is precisely what the visionary leadership of Li has maintained. His relationships with his sons leave no doubt of where the powers are going to be transferred and the sons too are aware that they would be joining the business to maintain continuity. Leadership is the “natural and learned ability, skill and personal characteristics to conduct interpersonal relations, which influence people to take desired actions (Eric, n.d.). Effective leadership would thus require accomplishment and influencing. It requires trust and commitment of others, which can be achieved through one’s behavior and integrity. Leaders create and deal with change; leadership requires vision, direction, strategies, motivation and inspiring. All these innate qualities can be found in Li who had no opportunity for formal education. He was an entrepreneur who had the skill in reading the market, in recognizing and hiring talent, in creating and divesting investments (Chan, 2008). Li Ka-Shing engaged in philanthropic activities has pledged on-third of his assets to philanthropy (Richter, 2010). Li has granted more than $1.45 billion to projects worldwide in philanthropic activities. His contribution towards the Stanford University School of Medicine is expected to change the way physicians are trained. Li, being an entrepreneur and thus innovative at heart, was attracted to this project because of innovation in health-care sciences. Thus, Li Ka-Shing had inherent leadership as well as entrepreneurial traits. This also shows that formal education is not necessary to succeed in life. All it needs is a drive, the right vision, dedication and devotion to work. Opportunity recognition is important in becoming an entrepreneur which can be overlooked if an individual is lazy. True to the Hong Kong spirit, Li had the passion to become a millionaire and worked towards it. His days of hardship were his greatest strengths and perhaps also the reason which urged him into philanthropy. Li demonstrated directive and transformative leadership. Directive leadership is necessary in emerging economies and Asian cultures as people need to be directed due to unequal distribution of power in the Eastern societies. This enabled him to retain firm supervision over his companies. He demonstrated transformational leadership as he could steer his investments to growth through periods of turbulence and change. He earned the recognition of his peers, which satisfied his self-esteem, an important entrepreneurial trait. Other entrepreneurial traits that have seen him through include his ability to recognize talent, and utilize human and financial resources optimally. He knew exactly when, where and how much to invest or divest. He had the need for achievement and this influences entrepreneurial behavior. He firmly believes that corporate entrepreneurship is essential for family survival and hence employed nonfamily professionals as managers. He has not overlooked the succession of business and started grooming his sons from a very young age. Li, at each step has demonstrated what determination and vision can lead one to. His achievements and leadership have been exemplary and would serve to guide many more. References Ang, S. H. (2000). The Power of Money: A Cross- Cultural Analysis of Business- Related Beliefs. Journal of World Business, 35 (1), 43-60 Buttner, E. H., & Gryskiewicz, N. (1993). Entrepreneurs' problem-solving styles: an empirical study using the Kirton adaption/innovation theory. Journal of Small Business Management, 22 (10). Chan, A. B. (2008). Creating Wealth in Twenty-first Century China: Li Ka-shing and His Progenies. 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