Business with Heart?
Is there justice in allowing an online retailer to cause the failure of thousands of local businesses? Does huge market capitalization give license to a giant enterprise to operate at a loss for so long so that a huge percentage of smaller competitors can no longer survive?
In the USA in the 19th century such monopolistic operators came to be known as "Robber Barons" because of their unfair domination of markets and the consequent ruin of their smaller competitors' businesses. Both Federal and State governments began passing laws that restricted many unfair practices such as the domination of one sector of the economy by one company or the collusion of companies to maintain uncompetitive prices in particular products or services. As late as the 1990s Microsoft faced criminal action in its attempt to dominate online browsing.
It is not the scope of this article to advocate some legal action to right the wrong, or even to promote a voluntary boycotting or other overt action. Rather it is to ask, "Is there a better way for business to operate?" "Is business such a cut-throat affair for which only hardened men and women are qualified?" "Should every other prospective business person resign himself or herself to be some big company's employee?" "Is there a higher way?"
How to Make Business Succeed?
It is true that more business entrepreneurs fail than succeed. But failure is largely due to lack of careful planning which can come from not soliciting good advice. Of course some people seem to have all the right instincts while others don't. But good instincts don't necessarily need to come from the right genes. Diligence and enough humility to seek advice from others who have been successful go a long way to start developing those instincts.
Here in Asia we were supplying products to our parent company, but the costs began to rise very quickly for the factories making them. The basic problem was that that country's economy was developing so fast that for the factories to keep their workers they had to keep increasing wages which began to raise their costs so much that the product cost was going to kill the product's marketability. Because the factory owners with whom we worked were good business people we tried to prod them into looking at some neighboring countries where the economies were at a much lower level and consequently had lower wage costs. In principle they agreed that was right, but practically they weren't ready to take the step.
What do we do? One scary option was to try to manufacture ourselves. The longer our suppliers loitered the more we realized that that scary option was our only option. But where should we go?
Where to Go?
China was a definite option, but at that point in time, even though they encouraged foreign entrepreneurs to come, the government still had a big say in how one did one’s business. Even the wages to the workers had to be handed over to the government before they got to the workers’ hands. We didn't write China off yet, but we hoped we could find something better.
Thailand was the next country on our list. Because the country wanted to get in on the rush to Asia of western manufacturers looking for a cheaper place to produce their products, the government set up an organization to provide incentives to manufacturers such as an 8 year tax holiday and a system for essential raw materials used for products made for export to be imported without paying duty.
Factory in the Boondocks?
That helped us think we were perhaps on the right track. Not knowing anything about Thailand, we went to Bangkok, the capital city, to see what we could find. I suppose our thinking was, "In a third world country we had better go to the most likely place to find what we needed technology-wise, what we needed for facilities, and a place where there were sufficiently educated workers." But after meeting with a couple of contacts to whom we were introduced, we found the consensus was that for what we wanted to do we would be better going to the northern provincial city, Chiang Mai.
Not really sure we were getting the right advice, and a little fearful we were being sent to the boondocks, we decided to go and check things out. So on Christmas day my colleague and I checked into a hotel in Chiangmai, and we managed to connect with a contact we were given who could speak English and was happy to show us around.
Good Choice or Bad?
We found a place we could rent in Chiangmai, a double shop house similar to the kind of buildings our current suppliers were using for factories. That, of course, meant we would have to be running up and down stairs, and equipment would have to be organized so that heavy machinery would stay on the ground floor -- not really convenient, but our present suppliers seemed to get by. So we were really almost ready to make a decision, but we asked if we could let them know after the weekend.
Leave Civilization Behind?
Then our contact mentioned that there was another smaller city nearby Chiang Mai where we might find more possibilities. All our ideas of staying as near to modern civilization as possible inclined us toward staying in Chiang Mai, but what would it hurt to go and have a look?
To our western eyes Lamphun was depressing. It was really an authentic Thai city. Of course they had their motorcycles and pickups, and shop house stores that doubled as houses for the owners. And if you were coming to Thailand to look at temples you would find a lot of interesting sites in Lamphun. But we weren't tourists, and we were looking for some place for a modern factory. But we weren't sure we wanted to go back to that Chiangmai shop house.
Manufacture in an Orchard?
Then a colleague of our contact told us about a man he knew who had a property with a longan orchard and a small house just outside of the city of Lamphun. So since our search in Lamphun had not come up with any other possibilities, we had him take us to have a look.
The orchard was quite nice -- a lot more pleasing to the senses than the crowded city. It wasn't remotely what we had in mind -- nothing industrial about it at all, but, but… to the imaginative mind there were possibilities. The house wasn't much, but it was all on one level and had several rooms which might make places for the different departments we would need.
House in a Longan Orchard for a Factory?
Here I will shorten this bit of the story. The owner was willing to let us rent the property with an option to buy. There was plenty of space. We decided this unlikely spot was worth trying particularly because the owner's terms meant our risk wasn't too great.
You may have guessed it. We are still on that property. And I do want to tell you more of how we made it go and what this business taught us. But those and other issues will have to wait for another time.Next article: Turning Talent into Productivity