Jürgen Chrobog, State Secretary of the Foreign Office of the Federal Republic of Germany and Chairman Designate of the Board of Directors of the BMW Foundation Herbert Quandt, warmly welcomed the forum participants at the Restaurant Beau Rivage.
He stated that this was the fourth forum of its type. New individuals had been invited to attend with the view to enlarging the network. He outlined the topic for this year's conference - "Seeking the Competitive Edge: Europeans and Asians in Global Competition". He felt this was an appropriate time to discuss such an issue since the question of globalisation was troubling a lot of people in Europe. Globalisation was presently viewed as a threat causing a loss of jobs, he explained, and competition was getting tougher worldwide. "Outsourcing" was a "nasty word", but a phenomenon of our time. Referring to the recent referenda results in France and the Netherlands, where the electorates in these founding EU member states rejected the Draft Constitutional Treaty, he underlined that these No votes might have been linked to voters' apprehensions of an increasing globalised economy.
He then introduced Prof. Zhang Weijiong, Vice President and Co-Dean of the China Europe International Business School in Shanghai, who observed that, because of entrepreneurs, we were enjoying an industrial revolution in information technology exchange.
Prof. Wong Poh Kam, Director of the Centre for Entrepreneurship at the National University of Singapore, said that "there may be 50 ways to leave your lover", but there could only be one way to leave this forum, and that was "with fond memories".
SESSION ONE
EUROPE AND ASIA IN COMPARISON:
What are the competitive advantages and disadvantages of both regions? Why is production moving to Asia? Do countries need 'National Champions' to succeed in global competition?
Dr. Kai Schellhorn, from the Board of Directors of the BMW Foundation Herbert Quandt in Munich, welcomed both newcomers and alumni to the first session of the Europe Asia Young Leaders Forum. He said that this day was likely to affect the forum participants profoundly - it might even "change their lives". Last year's forum looked at trust-building, whereas this year's forum was about to consider how Europeans and Asians act in global competition.
Jürgen Fitschen, a Member of the Group Executive Committee of Deutsche Bank, began his presentation by noting that competition did not occur in isolation; it was subject to the behaviour of the public sector, and to rules. An understanding of the institutional framework was crucial. He pointed out that there was no such thing as the "Asian miracle" - it was possible to explain everything that had happened. The reason why some countries in the past had poor performance records was because they were insulated. Why did these countries open up? Singapore showed the way, he said. The leader of Singapore at the time realised that in order to thrive economically, you had to "open up" and "face up" to the harsh life of a competitive environment.
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Other countries followed suit eventually, but their economies had been marred by corruption, high indebtedness, slow growth and unfair income distribution before they decided to do so. In Central and Eastern Europe, countries had growth rates of 5-6% - their leaders were bolder than their Asian counterparts. They allowed all financial assets to be controlled by foreign financial institutions. Consequently, the banking industry made a quantum leap in this region. Thriving banking industries were important for developing economies, as they were concerned with the allocation of capital.
He described the European Union as a success story - the best export article that Europe had to offer -, believing that something similar could be created for Asia in the future. Europe was producing a completely different definition of the market place - it was no longer thinking in terms of national boundaries. The EU countries were merged together in the hope that Europe would produce better economic results. Europe was also the birth-place of two World Wars - no generation before his had had the privilege of not having to go to war on their home turf.
He felt that there had been a change in thinking recently. There were encouraging signs that something similar could happen in Asia - sovereignty would not be surrendered to the same extent as it had been in Europe, but a partial transference of sovereignty might be accepted.
He acknowledged two very important things that had occurred this century so far. Firstly, the treaty between India and China: this is, he said, the beginning of a different kind of relationship between the two most populous nations in the world. Secondly, if India were to be added to the 'ASEAN plus three' (Japan, Korea and China), this would potentially be the biggest free trade area the world had ever seen. Could APEC be superseded by the "ASEAN plus three plus one"?, he asked.
While arguing that the European institutions would not be replicated, he affirmed that something similar could be created. Under Chinese leadership, there was now a natural leader who was committed to developing the financial markets - this would result in new momentum for intra-regional trade.
Detailing the relationship between Europe and Asia, he underlined that Europe was not a threat to Asia. However, Europeans had been generous with regard to the provision of scientific and technological know-how, whereas Japan and the US had not been so forthcoming in this respect.
When looking to how corporations viewed the market, Mr. Fitschen stressed that "growth must always be on the agenda: you will not be successful if you instruct people otherwise." He cautioned that statistics vis-à-vis growth should not be given as much credence - statistics do not always communicate the real picture.
As he saw it, globalisation could be defined as an unprecedented exchange of goods, services, labour and capital. These latter two components of globalisation were at the heart of the present debate in Europe. He observed that it was unlikely that you would find clothes in Europe with a label "made in Germany", because there was a reluctance "to pay three times the price" for German products. It was easy to mourn the loss of jobs but European consumers contributed to this loss by their preference for goods manufactured cheaply.
Many companies took advantage of the basis of globalisation, he said. "The growth of goods beyond borders was outperforming national production in leaps and bounds." It was cheaper for a company to manufacture a product in 5 or 6 places, instead of manufacturing it solely in one location, (despite transportation costs incurred).
Regarding the boom in Asia, most multinationals used China as a workbench. Two thirds of Chinese exports were controlled by foreign multinationals. However, there had been a shift in emphasis - companies now moved to China because it was cheap to produce there and because of the sheer size of the market. However, he underlined that the dominance of foreign multinational cooperations was coming to an end - they would soon be defeated by their Chinese competitors.
He remarked that it was likely that Europe would underestimate its Chinese competitors, as it had done so in the past. Europe, he stated, is either good enough to compete, or does not deserve to dominate at all. India followed China as another prospective competitor. There were three world powers emerging from Asia - China, India and Japan. If companies realised that the dominant market might one day soon be China, India and Japan, it would only be a matter of time before production moved there.
Mr. Fitschen underlined that the existence of multiple economic powers was a healthier state of affairs, as each region would be under pressure to perform properly. Globalisation was not something to be feared - it could ensure that more people would benefit from a material improvement. However, the increasing gap between the rich and the poor should not be ignored, he said.
Prof. Maximilian von Zedtwitz, Tsinghua University, raised the issue of China and Japan's historical relationship, which was not a unilaterally positive one.
Mr. Fitschen admitted that the Sino-Japanese relationship was in very poor condition. In Europe, a process was put in motion to face up to what went wrong and peaceful co-existence was achieved. However, in Japan, textbooks still included historical passages that were unacceptable to many in China. He stated that Japan would have to make greater efforts, while China should attempt to curb its nationalistic feelings. The emergence of China as an economic power-house rivalling Japan had also created political tensions.
Prof. von Zedtwitz also queried whether China might be considered a risky partner because of such internal issues as social unrest in the country, disparities in income levels, financial and banking systems and inverted pyramids. Mr. Fitschen again admitted that China could be a precarious partner - such economic growth had repercussions, such as large numbers of workers moving from the villages to the cities, for instance. He also mentioned that demographic effects would soon be visible, resulting from the "one child per family" policy imposed in the past.
Dr. Tu Qiyu, Shanghai Academy of Social Sciences, felt there were huge opportunities for regional integration in Asia, but a lack of political courage among political leaders inhibited any hope of such integration being realised. On this point, Mr. Fitschen highlighted the reality that Europe had experienced greater atrocities historically, yet still managed to maintain better neighbourly relations. This was largely due to great European leaders of the past such as Jean Monet and Robert Schuman. Asia needed leaders like these.
Prof. Dr. Miriam Meckel, State Chancellery of North Rhine-Westphalia, referred to capitalism and the roles that should be played by politicians and companies. German politicians were afraid to communicate harsh realities to the electorate, Mr. Fitschen replied. There were certain jobs that could no longer be maintained in Germany and politicians needed to own up to such truths.
NETWORKING IN NATURE
The participants departed for Island Sainte Marguerite shortly after the first session. They were each given a team colour, back-pack and picnic lunch. Having decided upon a team name, chant and flag, the Pirates of the island introduced themselves to the team. They explained what had to be accomplished upon the island. Each team had to complete a number of difficult tasks. Precious gems were rewarded after each task performance on the basis of merit - the stronger the collective performance, the more gems each team received. These gems could eventually be used as bargaining chips at the beach rendezvous later that afternoon. The participants performed well, approaching each task strategically and collectively. A team was only as strong as the collective performance of its members. Each team member was notably supportive of one another during the execution of each task. Members were willing to push themselves that bit further - however risky it might have been - in order to gain the maximum amount of gems for their team. The games culminated in a race to the beach. Each team had then to construct a raft out of the apparatus provided. The gems could be used to secure further tools to aid in the building of the raft. Upon finishing the respective raft constructions, the Pirates signalled for a relay race to begin. The teams boarded their rafts and proceeded to paddle enthusiastically. The winning team was heartily congratulated.
After such an active and competitive afternoon, the participants enjoyed a delicious barbecue dinner, music and dance on the shores of the beautiful island of Sainte Marguerite.
SESSION TWO
COMPETITION IN THE BUSINESS WORLD:
How can companies create new competitive advantages? What roles do innovation and low labour costs play in a company's competitiveness? How to cope with the tension between cooperation and competition?
Prof. Wong Poh Kam, Director of the Centre for Entrepreneurship at the National University of Singapore, opened the session by highlighting the tension between cooperation and competition.
Prof. Michel Bernasconi, Director of the Entrepreneurship and Innovation Centre, introduced Sophia Antipolis (SA), "the entrepreneurial dynamic of the French Riviera". This region had very little industrial tradition prior to the creation of SA. SA now hosted 1,272 companies and provided 26,600 jobs, he said. It was a hub for European capital with a conveniently located airport. It boasted high-level educational institutions, scientific park and innovation centres, much software development, key entrepreneurs, big companies with significant activities in manufacturing and R&D, technological policies, fairs and many good international engineers.
For the future, he affirmed that if SA, as part of Europe, was to continue to be globally competitive, it would have to think differently. SA would have to learn how to be part of a worldwide consortium of team development. The region might expand westwards to Marseilles; therefore, SA had to make the transition from a local to a regional vision.
The second speaker of the session, Yoshimi Ogawa, President of the Index Corporation in Tokyo, explained that her company offered mobile content and service development on a global scale. It had three business departments: content, solution and commerce.
Index would merge in March 2006 with Tomy and Takara, the main toymakers in Japan, she said. Index would then be their largest shareholder with 20% of the shares. Index and Tomy and Takara would establish one joint-venture company. This new company would control the advertising budget. TV animation in Japan was a generator for content; therefore, Index sponsored TV animation. If Index were to advertise, it would subsequently acquire the toy rights. "Being a sponsor means being a rights holder." This endeavour was an opportunity to generate new content.
According to Ms. Ogawa, Index had four main important markets: Europe, the US, China and South East Asia. To be a leading mobile service provider, business must be expanded worldwide. Index had opened small offices in Paris and Beijing but competition with other companies was very tough.- Lacking the business know-how of each area and the knowledge how to recruit talented people, they realised the importance of having a partner in each area. They decided to acquire similar companies to Index, for e.g. 123 Multi-media located in Toulouse. They initially underestimated the differences between the European and Japanese markets. SMS was a hugely popular messaging system in Europe, while people in Japan preferred to use mobile email. This preference had to be recognised and accommodated.
She stated that Index aimed at global expansion. In order to achieve company goals, completing a solid partnership foundation was essential to the global distribution of mobile content. Index would like to develop strategies for the new businesses due to succeed the mobile content business. Drawing from experiences in the Japanese market, Index aimed to assist the development of its international partners.
Tang Yue, eLong, commented that US companies like Google and Yahoo were pure players whilst Japanese companies such as Index, collaborated with toy companies, for instance. He asked Ms. Ogawa what she considered to be the core competence of Index. She replied that Index was not a technology-driven company but a service/market-driven company.
Shen Bing, China Central Television (CCTV), asked Ms. Ogawa which of the three business departments of Index was likely to experience the most growth in the future. At present, Content was at 40%, Solution was at 40% and Commerce was at 20%. Ms. Ogawa foresaw Content and Solution at 50/50 in the future.
Joshua Lau, YesAsia.com, was interested in learning about the key challenges to promoting Japanese content in the US and Europe. Ms. Ogawa responded by affirming that content had to be created with regard to the demands and preferences of each respective market, as content was very local in nature, she said. Local content had to be generated but it had to have a global reach, too.
Prof. Wong Poh Kam, the Chairman of the session, asked Ms. Ogawa how she felt being female and the youngest listed President of a company in 39 years. The situation was changing in Japan, she replied: There were more and more women in management and holding presidential posts in the IT and mobile sectors.
BREAK-OUT GROUP SESSIONS
Participants were broken into groups for the second part of this session. The first break-out group discussed the following question: 1) If innovation is the key to competitiveness, what elements are essential to an innovation-friendly environment within a company?
Rapporteur (Maximilian von Zedtwitz): This group deduced that innovation and efficiency were on two different sides of the spectrum; however, efficient innovation was key. Several elements arose here. The notion of obtaining information and making sense of that information was central to good innovation. Access to internal information about the company was also important. Innovation, however, needed to be structured. If individuals had access to information and could make use of it, this empowered them to make smarter and more informed decisions. Risk-taking required that a strong culture of innovation be embraced. There had to be an acceptance that tough decision-making was inevitable. Risk-taking should be rewarded. The final element concerned the innovation process itself, where the making of smart decisions and informed mistakes should be encouraged.
The second question up for debate was the following: 2) What traits of Asian and European companies make them more or less likely to enjoy worldwide success?
Rapporteurs (Joshua Lau and Miriam Meckel): Highlighting the differences, the break-out group representatives concluded that Asian companies were geared more towards the short-term commercialisation of products and product effectiveness, whereas European companies focused on longer-term technological break-throughs and expanding investment in research more proportionally. Asian companies were more conglomerate - they encompassed many different products and services. Such companies were more dependent on their founders/CEOs/top executives, whereas their European counterparts were more focused on process and not as dependent on their leaders. As for similarities, both Asian and European companies agreed on pushing for a more globalised world. Human capital was of utmost importance for companies from both Asia and Europe.
The third break-out group session tackled the following question: 3) How can conflict between competition in the job and the need for collaboration and teamwork be solved?
Rapporteurs (Melinda Natalia Wiria, Prima Foil): From the outset, a number of points were noted. Firstly, this question pertained to the internal dynamics of an organisation. Interaction between employees was a cross-cultural issue. There also may be differences between the internal competitive dynamics of small companies compared to large businesses. With regard to an organisational structure, there was no ideal company form; this depended on the nature of the business. It was for management to figure out the organisational structure and this was also dependent on the product or services on sale and employee interaction. The conflict between competition and collaboration was also affected by the existing management style - a balance had to be struck between autocratic leadership and weak leadership. A system for collaboration was crucial as management attempted to set the bigger picture. There was a need to build a lasting rapport among colleagues. A reward mechanism should be implemented where the deserving individual is acknowledged. When recruiting prospective employees, management should select those candidates that were more emotionally mature - "the emotional quotient over the intellectual quotient". Finally, a more humane approach needed to be adopted within the business world; employees were not automatons, but human beings.
The final question put to the fourth break-out group was this: 4) How to cope with the tension between cooperation and competition among business partners?
Rapporteur (Zhang Jianning, BP China): The group concluded that there had to be a balance between cooperation and competition which could be achieved by instilling a common understanding of trust at an institutional and personal level; by recognising that there existed a need to understand each other's value; and by nurturing relationships in creative and innovative ways.
In remarks after the break-out groups, it was underlined that as innovation was risky, management must also take responsibility for success and failure. A culture of innovation should be encouraged but no allowances should be made for a "second mistake".
SESSION THREE
LIFE IN A COMPETITIVE WORLD:
What is the impact of increased competition on our work and private lives? In a demanding job, do we work to live or live to work? Are there different approaches to this topic resulting from different cultural backgrounds?
Prof. Zhang Weijiong, Vice President and Co-Dean of the China Europe International Business School in Shanghai, moderated this session.
He introduced Mr. Wang Shi, Chairman of the Vanke Group in Shenzhen, and an individual who had managed to balance his career with his personal life. In 1995, he was diagnosed with hemangioma in his vertebra. This diagnosis gave him the impetus to climb Everest before he became paralysed. He had climbed the highest mountains on seven continents - only approximately 100 other individuals had managed to do so. He was the third Chinese person to reach the seven summits and he managed to do this in two and a half years. He would like to add to these seven wonderful achievements by conquering both the North and South poles this year.
Referring to the relationship between a business career and mountain climbing, he felt that he had a distinct mental advantage over others, including more will and perseverance than other parties. When deciding which endeavour proved more difficult, he said that he found running a business harder - he had been doing so for the past two decades, whereas he managed to climb Everest in just two months. He explained that the stock market actually fluctuated when he took to the mountains: his death, as CEO, would affect the markets significantly. So confident was he of his return, that he challenged his shareholders to put their stocks up for sale. "If you think I'll die, sell our stocks now," he dared. In 1999, the stock price of his company fell whenever he climbed a mountain: it rose whenever he returned. The stock market had nevertheless finally accepted his hobby. He had worked diligently for his company and every year, they had made a profit.
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"Is there another summit?" he asked. Everyone had an eighth summit and it could be found in the heart - it could take the form of an objective in a career, for example.
The second speaker of this session, Professor Ruut Veenhoven, Professor of Social Conditions of Human Happiness at the Erasmus University in Rotterdam, spoke about the positive and negative effects of competition on the quality of life. He asked the participants if they believed that people were happier in competitive or non-competitive environment. As to the negative effects, economic competition supported a rat race where there were always more losers than winners. It could result in poor family life, marriage failure or damage to health. "There has been somewhat of a moral decline - we do not see our fellow man anymore, but his task in society." Economic competition had also given rise to environmental degradation, he observed. As to the positive effects, competition had created wealth. It had brought democracy and better government, had boosted technological and social progress and had created a better quality of life overall, he advocated. Economic competition provided a challenge and human beings needed to be challenged. There was logic in the two views just outlined, he said.
In order to assess how competition affected our quality of life, a distinction had to be made between chances for a good life compared to outcomes of a good life. Distinguishing between external chances in your environment (livability) and chances within yourself (life-ability) was necessary. As to outcomes, these were judged by reference to your environment and related to the utility of your life.
As to whether people could live a "satisfied" life in a competitive society, a distinction had to be made between "passing satisfaction" and "enduring satisfaction" to answer this question. A measurement of happiness could be deduced by questioning, Prof. Veenhoven explained. He gave an example of a survey question which was put to the general population in 90 nations: Taking all together, how satisfied or dissatisfied are you with your life as a whole these days? In Switzerland, a quarter of this country's inhabitants said they were happy (8/10 on the happiness scale) whereas in Zimbabwe, almost a third of this country's inhabitants were dissatisfied (1/10 on the happiness scale). Happiness measurements could be sensitive to real social change, he stated.
Happiness seemed to prevail in countries where there existed good competitive conditions, performance and values. People were most happy in countries where there was economic freedom; therefore, there was a positive relationship between happiness and freedom. There were more satisfied people in the more affluent countries.
The final speaker of this session, Ernst Baumann, a Member of the Board of Management, Human Resources, at BMW AG in Munich, outlined how parts of Europe were experiencing globalisation and a recession, both of which had intensified competitive pressure worldwide. Companies were responding with personnel cutbacks and reductions in benefits. "This type of pressure does not push performance, but has a negative effect on it." How could employee performance be maintained at such at time and at a consistently high level, he asked.
From a historical perspective, people were perceived as a source of labour that increased capital during the Industrial Revolution. In a later phase of industrial capitalism, the idea that a company had an obligation to provide for the welfare of its employees began to spread. This provision of welfare created loyalty and also preserved the employees' ability to work. Thus, a direct connection emerged between the performance of the employees and the success of the company. Cooperation with an emphasis on consensus developed. In Germany, a fundamental consensus had grown over the decades and was an immense advantage when it came to global competition.
The question for the corporation was the following, as he saw it: how should human resources policy be established so as to ensure that people are not only viewed as workers, but as human beings? This question referred to balancing your private life and career, and appreciating personal achievement while on the job. Employees must not switch off their brains upon entering the gate; work should mean making a "personal contribution to a social fabric". He underlined, however, that the focus on employees had to pass the test of economic prudence. Three core elements were indispensable here:
BMW's Human Resources policy reflected the aforementioned convictions, said Mr. Baumann. The core principle of this policy stated the following:
Employees were the essential factors in BMW's success, he stressed. He outlined how BMW also rewarded performance. BMW was the highest success-based bonus payer of the entire German automotive industry.
"Long-term human resources policy" was BMW's solution to the difficult economic phase at the beginning of the 90s where there were 20% fewer jobs in three years. BMW was able to protect jobs by reacting promptly - the Human Resources department reduced capacity without making operations-related layoffs. Positive spin-offs flowed from these efforts to protect jobs, including employees being even more eager to perform because they were grateful to have retained their positions. A company had to communicate its appreciation for its employees: If employees felt that they were participating in the success of the company, this promoted and reinforced their identification with the company.
The BMW Employee and Management Mission Statement conveyed four central messages:
Finally, Mr. Baumann touched on BMW's flexible working time arrangements. BMW was the first company in the industry in Germany to make working hours more flexible. There were now over 300 working time patterns at BMW that applied to individual situations.
In conclusion, BMW's answer to the question whether we work to live or live to work "lies somewhere in the middle between both extremes," he said. BMW's low employee turnover, together with surveys taken of graduates and young professionals, demonstrated that BMW was one of the top employers in Germany and Europe. Mr. Baumann affirmed that BMW would like to retain this position of leadership in the future.
Barbara von Wnuk-Lipinski, Christian Democratic Union (CDU), asked whether the stock market ever pressurised BMW into firing people, as it had a tendency to do. Mr. Baumann felt that this was an oversimplification: the stock market was not the only factor that forced a company to fire its employees. A company had to adopt a long-term, sustainable and all-encompassing approach to the running of its business - it should not solely focus on share prices.
Prof. Wong Poh Kam questioned Prof. Veenhoven on the inequalities in happiness among the different countries. Prof. Veenhoven said that he had been investigating such disparities this year. There existed countries with great inequalities in happiness levels, but this was also typical in countries where people were unhappy.
Shen Bing asked Prof. Veenhoven if there was a relationship between happiness and welfare expenditure. The happiest people purportedly resided in Switzerland. This country had a good social welfare system, even for those without work. Was it problematic for an economy to give generously to those without a job? Prof. Veenhoven had come across no real relationship between average happiness and welfare expenditure. He pointed out though, that people were happier when they were active - "happiness is a side effect of activity."
Anna Herrera, CEP Ltd., questioned Mr. Wang Shi on his ability to find time for his extracurricular pursuits and whether he ever experienced pangs of guilt when leaving his employees in the office. He responded that he felt no guilt whatsoever; he felt confident that his company could be run smoothly without him.
The participants departed for the Hotel Hermitage in Monte Carlo for a festive farewell dinner. They were greeted at this gloriously extravagant hotel by a delightful cocktail reception. Much mingling and chatting was done, as the sessions of the day had provoked much food for thought. As for food for consumption, the dinner was delectable, the service impeccable and the atmosphere special. Dr. Kai Schellhorn, from the Board of Directors of the BMW Foundation Herbert Quandt in Munich, thanked the participants and the conference coordinators and expressed his hope that this event had fostered connections and friendships and had contributed to the overall networking goal of the programme. He even speculated on the destination of next year's forum to the delight of the participants. He hoped to see some familiar faces next time round, along with some new ones.
Despite being in global competition, these young Asian and European leaders had shown that collaboration and coordination was possible, and for the good of entrepreneurial endeavours worldwide.
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| Written by Diane Halley, Brussels |
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