Survival Guide of a “Small Market” Nation
With Taiwanese companies losing global presence and opportunity, Jack Hou, the vice general manager of UNEO, thinks there must be a realization amongst ourselves that Taiwan is a small nation that and we need to develop a survival strategy that is fitting of our status in the global market.
Survival Guide of a “Small Market” NationBy Jack Hou
There has been concern lately about the competitiveness of Taiwanese brand companies as their performances have fallen as new challengers in China have risen.
With our companies losing global presence, public sentiment has sunk into a state of defeatism and escapism. In paranoia, instead of looking for cause and solution, media and politicians have instead sought for piñata and scapegoats for struggle session like public shaming to score petty political points.
There must be a realization amongst ourselves that Taiwan is a small nation that and we need to develop a survival strategy that is fitting of our status in the global market. Two of our biggest sources of influence, China and the United States have given us the detrimental mentality in believing that we are a country of significance like them, that we ought to be catered to and appreciated.
In reality, we not only lack the natural resources to reap benefits from, we also do not enjoy a sizeable domestic market to serve as the pillar of our domestic corporations. Therefore, to survive in the new era of international competition, we should instead model ourselves like a nimble small market sport franchise with a clear identity and resolve; then embrace steep challenges the global marketplace presents by being smarter, more resourceful, and more versatile.
Being a sports fan, I often see a lot of similarities in sports team and corporate management.
For example, in baseball, fans often marvel at the continued success of powerhouse teams such as the New York Yankees, LA Lakers and Dallas Cowboys . These are teams that are rich in history and the staple of their leagues for decades. Based in big cities with an abundance of fans and sponsors, they are also known for their high spending way in luring big name talents to join their clubs. As they have endless resources, one mistake can easily be covered by another big signing, and thus expectations tend to be "championship or bust" for them.
As someone who attended college in New York, I have been a long time Yankees fan and have been long acquainted with their “evil empire” way of management. However, since my return to Taiwan and joining the business world I began to realize and appreciate how small market teams sustain success by carving out a pragmatic roadmap and strategy.
As a small market team, in order to maintain success, they have to be clever in resource allocation and team building. The Oakland Athletics are known for its "Money Ball" strategy of assembling a cost effective team via Sabermetrics and analytics to stay relevant in the league while having one of the lowest payroll.
In basketball, one of my favorite team the San Antonio Spurs were creative in their roster building, being the first team to extensively scout talents from Europe for under the radar talents. At the same time, they have also built a strong team culture that attracts like minded free agents who would even join at a discounted price. How these small markets team managed to build a sustainable model are something that is worthy of our reference.
A successful franchise can make a city famous, much like Green Bay, a city of one hundred thousand people are made famous by the Green Bay Packers who have been perennially competitive with top tier quarterbacks who have served as icons of the sport in Brett Favre and Aaron Rodgers.
Sprouting from a small island, our companies can ill afford to only feed off our domestic market. Chinese mobile phone makers can become top ten phone makers without even expanding their operations oversea. As they feed off a huge domestic market, they can afford to use the best components and be wooed and pampered by these suppliers.
Needless to say, global brands are in an even better position in negotiation with their supply chains and sales channel though similarly they also face rising challenges from Chinese competitors. Much like a big market sports team that can simply sign the best free agents on the market, theses companies do not need to devote too much attention to their research and development to be in a good position to compete for market share. To them, research and development of advanced technology is an added bonus but not paramount.
When there is a big market team who rejects analytics or is poorly managed (LA Lakers and the New York Knicks for example), they might underperform and have poor records, but they are still well known, financially solvent and attracting talents. However, the same privilege does not apply to a small market team, and one can simply refer to the fate of my home town Vancouver Grizzlies.
We need to be cautious but at the same time innovative as lack the bargaining power to garner the attention of top tier suppliers and thus need to adapt to the "money ball" mentality. Innovation refers to several fronts, internal product development, finding new suppliers, research, and also product marketing and sales.
No matter how politicians stress the re-developing, re-focusing of our domestic market, local firms can not merely rely on local market as it is simply is not enough to reach an economy of scale. The truth is we need to actively look for opportunities abroad while not over bloating our budget as there have been failed examples of overseas expansion by Taiwanese companies which were due to an over ambitious agenda.
At the same time, product planning needs to be carried out with surgical accuracy by either closely following or redefining trend as Taiwanese consumers tend to be trend followers instead of trend setters. Operations wise, globalization would be a misnomer without a presence in the Chinese market due to its sheer size, but often too much focus on China will exasperate attention that can better used in other markets as well.
Resource allocation is penultimate in both business and sports management, a small market team can ill afford to sign a big name free agent, drying up salaries to sign other players, and these acts often lead to poor results. Internally, it is also equally important to foster a culture that retains talents.
Much like in sports, small market teams tend to struggle in retaining talents when their contracts expire. While they are definitely entitled to entertain more lucrative options, if both the ball club and their stars share an affinity and bond, they can serve as the cornerstone of the franchise to build a team around.
Taiwanese companies are the Vancouver Grizzlies. If one chooses to live in content, be conservative and stay within the confine of our paltry domestic market, one will be stuck in limbo and purgatory. In order to compete globally with sustained success though is a tall task as over the past decade, we have witnessed the fall from grace of several once prominent consumer electronic giants.
However, there are also those who have managed to stay relevant, so one would naturally ask, what does it take to survive? The company mentioned above is very cost conscious, its leadership maintains a tight control of the company's direction.
On a chance encounter with its company brass, he told me his management philosophy is to always "first decide your cost structure, then decide what features and selling points you need to make you stand apart from your competitors."
A small market team can never lose control of its cost structure, or splurge aimlessly as if we were an international powerhouse. I often recall a story from Money Ball, Scott Hatteberg, an often injured catcher on the fringe of falling out of the league was signed and converted to play first base despite protests from scouts while the current big name first baseman was traded away.
One cannot afford to only "play by the books", instead one needs to be instinctive, at the same time be versatile and even creative. The end goal of today’s arena of global competition is not to be the biggest, products commodify at a very fast rate, so rather it is more important to be smart enough, fast enough and nimble enough to adapt and survive.
There is a sport truism made famous by former NFL coach Herm Edwards, “The greatest thing about sport is, you play to win the game.” Such logic is also self evident in business.
Being a small island nation with a limited domestic market, we cannot pretend that we are someone or some entity of importance; we need to earn our spot, climb and work our way to become relevant. Without realizing our limitation then finding ways to be counteract, be competitive with limited resources, our companies will not be successful no matter if go west, south or north as the empty rhetoric our politicians have suggested.
Ultimately, we are who we are, only we can decide our own destiny. Strong enterprises are the best representation of a nation's icon and the testament to a nation's competitiveness, I sincerely hope that one day we will read more success stories that can make us proud.
Jack Huo is a columnist at Crossing.
Crossing features more than 200 (still increasing) Taiwanese new generation from over 110 cities around the globe. They have no fancy rhetoric and sophisticated knowledge, just genuine views and sincere narratives. They are simply our friends who happen to stay abroad, generously and naturally sharing their stories, experience and perspectives. See also CrossingNYC.