Two years ago, Datuk Teo Tong Kooi took up the position of CEO in Singapore’s Hong Leong Asia Ltd (HLA) that owns substantialinvestments in China. The job put his trouble-shooting ability to thetest.
StarBiz visited Xinfei Electric Co Ltd, HLA’s refrigerator manufacturing plant in central China’s Henan province, to find out how Teo has rooted out the problems in this former state-owned enterprise and transformed it into a professionally run company.
DATUK Teo Tong Kooi, chief executive officer of Singapore-based Hong Leong Asia Ltd (HLA), is hardly ever in the office.
Teo, a former Malaysian banker, is always on the move visiting the group’s 22 operations in Malaysia, China and Indonesia in order to know the latest happenings on the ground.
“You have got to be hands-on, especially in China. There is no way you could control your China investments from afar,” Teo told StarBiz in central China’s Xingxiang city, where HLA’s refrigerator plant is located.
In China, HLA manufactures refrigerators and air-conditioners in Henan province, diesel engines in Guangxi province and engages in industrial packaging.
Teo stressed that companies, which intended to invest in China, must have the best staff to lead the operations.
“You must have people who are senior enough to make wise decisions. They must have a high level of competency and can speak the language,” he said.
Teo noticed some companies had posted “under performers” to pioneer their operations in China, a move to test water in this new market.
To him, this is a big mistake.
“If the person can’t even perform at home, how could he or she do well in China? It is so competitive here.
“Worst still, when these people fail they blame it on others saying there are big cheats in China?the Chinese are not trustworthy and all that without giving the true picture,” said Teo.
Teo is indeed a familiar face in Malaysia’s corporate scene.
He became Tasek Corp Bhd’s managing director after spending 18 years in the banking industry with Hong Leong Bank and Deutsche Bank Malaysia.
Teo's success in turning around Tasek, an associate company of HLA, earned him his current job.
He has spent a great deal of time transforming Xinfei Electrical Co Ltd, the second biggest fridge maker in terms of capacity and sales volume in China. It is also HLA’s major income contributor.
When he took over Xinfei’s management in late 2004, the former state-owned enterprise had no proper business procedures and organisation structure, let alone corporate governance.
The company’s decision-making was centralised on a few ling dao (leaders).
“There was no performance appraisal system. Staff promotions and recruitment were based on how close you were to the decision makers.
“There was no limit on expenses claimed. Everyone could claim as much as they liked,” Teo recalled.
The first thing he did was to transform Xinfei into a professionally managed enterprise by implementing the “growth sustainability plan” that practically covers all areas from production to sales and recruitment.
He instilled a corporate culture of accountability, discipline and ownership in Xinfei.
Teo seconded managers from HLA and the local senior staff to assist him.
To garner the co-operation of the local staff, Teo patiently explained to them the rationale and benefits of the changes.
He said when dealing with the local managers in China, you must persevere.
“Don’t find fault with their wrongdoing. They will be cooperative to adapt to the new changes. Otherwise, they could backfire your plans,” he added.
Having formed a proper operational foundation in Xinfei, Teo is now focusing on research and development, brand building and human capital management. He is putting a growth accretion plan in place to boost market share and sales.
Despite China’s highly competitive white goods market, Xinfei’s earnings are on the rise. This speaks well of Teo’s two transformation plans.
For the last financial year ended Dec 31, sales volume expanded to 2.8 million units from 2.4 million in the previous year.
Sales revenue grew to 3.6bil yuan (RM1.67bil) in the last financial year from 2.9bil yuan (RM1.35bil), while profit after tax increased to 104mil yuan (RM48mil) versus 92mil yuan (RM42mil) in the previous year.
Teo admits that operating conditions in China’s home appliance industry are getting tougher.
Besides the entrance of foreign brands intensifying competition, he noted that the dominant electrical appliance retailers were also trying to squeeze the manufacturers’ profit margin.
“It is a survival of the fittest. I’m confident Xinfei will continue to do well,” said Teo, who sees huge potential in consumer-oriented businesses in this populous nation.
In September last year, HLA paid 425 million yuan to raise its stake in Xinfei to 90% from 51%. And the fridge maker is expanding capacity now.
Teo believes that one must hold the controlling stake when investing in China. “You must have a say in the day-to-day operations. This is very important in China.”
He concurs that guangxi (relationship) is essential. Knowing the authorities would help to solve certain problems, he added.
However, he pointed out that guangxi did not mean bribery.
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