Asia Business Conference: fueling sustainable growth
Stephen Chien, WG'06
Issue date: 12/5/05 Section: News
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On Saturday, November 19th, more than 350 students, executives, and other guests arrived at the Park Hyatt Philadelphia for the 11th annual Wharton Asia Business Conference. One of five distinct conferences comprising the annual two-day Wharton Global Business Forum (along with conferences covering Africa, Europe, India and Latin America), the 2005 Asia Business Conference's theme was "Fueling Sustainable Growth." The Conference examined a question rarely asked in the wake of China's phenomenal growth: how long are these high regional growth rates likely to be sustained - and why?
Opening keynote speaker Ho Kwon Ping, Executive Chairman of the Banyan Tree luxury hotel chain, started off by noting that sustained growth through paradigm shifts is difficult for any one company, since major economic changes often render traditional business models obsolete. In the postwar period, Asia has seen two major paradigm shifts. First, from the 1950's to the 1970's, many Asian economies successfully followed import substitution strategies; in this paradigm, Asian companies were often merely local partners to international firms, with few unique capabilities of their own. From the 1970's to the 1990's, however, the paradigm shifted to strategies of export-led industrialization, leading to the rise of contract manufacturers, among other types of firms. While these business models required much greater skills than in the prior paradigm, they were nevertheless still based on low labor costs.
The second paradigm shift, happening now, is threatening these business models. What is causing this change? In a word, China. For decades, countries comfortably migrated up the economic ladder, with countries like Korea and Taiwan starting with basic industries like textiles and moving steadily toward advanced manufacturing of semiconductors, mobile phones, etc. while other countries took over the more basic industries. China, however, given its vast pool of skilled labor, is becoming the low-cost alternative at all levels of the economic ladder simultaneously, disrupting the value migration that has worked until now, and indeed China's rise makes any strategy based on low labor costs (other than Chinese labor, that is) unsustainable. Therefore, proprietary advantages will be key in this new paradigm, Ho argues. His own company, Banyan Tree Group, has tried to develop sustainable competitive advantage through a strong brand, a strategy he thinks could be applicable to many other firms in the region.
Opening keynote speaker Ho Kwon Ping, Executive Chairman of the Banyan Tree luxury hotel chain, started off by noting that sustained growth through paradigm shifts is difficult for any one company, since major economic changes often render traditional business models obsolete. In the postwar period, Asia has seen two major paradigm shifts. First, from the 1950's to the 1970's, many Asian economies successfully followed import substitution strategies; in this paradigm, Asian companies were often merely local partners to international firms, with few unique capabilities of their own. From the 1970's to the 1990's, however, the paradigm shifted to strategies of export-led industrialization, leading to the rise of contract manufacturers, among other types of firms. While these business models required much greater skills than in the prior paradigm, they were nevertheless still based on low labor costs.
The second paradigm shift, happening now, is threatening these business models. What is causing this change? In a word, China. For decades, countries comfortably migrated up the economic ladder, with countries like Korea and Taiwan starting with basic industries like textiles and moving steadily toward advanced manufacturing of semiconductors, mobile phones, etc. while other countries took over the more basic industries. China, however, given its vast pool of skilled labor, is becoming the low-cost alternative at all levels of the economic ladder simultaneously, disrupting the value migration that has worked until now, and indeed China's rise makes any strategy based on low labor costs (other than Chinese labor, that is) unsustainable. Therefore, proprietary advantages will be key in this new paradigm, Ho argues. His own company, Banyan Tree Group, has tried to develop sustainable competitive advantage through a strong brand, a strategy he thinks could be applicable to many other firms in the region.