Siu-Fung Ceramics Case Study
Introduction
Nowadays, core values and beliefs of different sectors in the society are being challenged and questioned. Different institutions such as government, economic, philanthropic and even religious institutions are facing inconsiderate and often justified scrutiny for fraudulent and abusive behaviors resulting to tremendous losses, financially and psychologically, for many innocent people. As leaders try to chart the direction for their organizations, they can not help but face these underlying concerns about their business.
More often than not, leaders plunge into a long-term strategic planning process without first deliberating on certain fundamental questions related to beliefs and values. These questions are often about the core ideology, values, purpose, envisioned future, vision statement and vivid description of what the business would look like. Reaching a common understanding about the inherent beliefs in the organization provides a platform for further explorations on the norms of behavior that help define the organization’s culture. This exploration can also help reveal the impact that the development in the organization with the help of performance indicators.
This paper is an attempt to understand business performance management in relation with the performance of Sui-Fung Ceramics. The paper will also look approaches, motivation and dysfunctional behavior of the administrators.
Discussions
The concept of management in a business can be described as a structured approach to individual, team, organisation and society transitions that move the target from a current state to a desired state (Jones, J. Aguirre, D. & Calderone M. 2008). If we are about to compare the nature of business in previous years to the current era i.e. 21st century, businesses are becoming more turbulent and that is due to the increasing competition, innovation and technological advancement in market. With this regard, management of business should be carefully observed and evaluated by business leaders. Business management in any firm is not only about assessment of the business processes and its advancement in terms of technology but it is also a process for managing its financial performance. It is the integration and adaptation of a new business model into an organisation to transform the organisational relationships with all its constituents (Jones, J. Aguirre, D. & Calderone M. 2008). Therefore, it is important that the managers/CEOs asses not only their business procedures but also the current condition of their financial status in order to identify the changes that the organisation needs and not only the business advantage of the company.
With regards to the development of Sui-Fung Ceramics, it can’t be denied that the organization created expressive progress at the start-up of the business. For their first three years of operation after going to public, the company surpasses other businesses within the industry in terms of development. Actually, in this period, the company’s IPO was oversubscribed 37 times. The leadership of Lee for these years created Sui-Fung Ceramics as leading company in market. However, despite of this expressive performance of Sui-Fung Ceramics, the company suffers from loss of profit starting in year 1996 and then in year 2001, Lee declared bankruptcy. Hence, the principal purpose of this paper is to analyse whether the management approach of Lee adheres to the achievement of organisational goals.
There are several factors that contribute to the bankruptcy of Sui-Fung Ceramics and these are mismanagement, business expansion problems and Lee’s actions regarding illicit trading of shares. However, the outstanding profitability performance of a growing number of firms like Sui-Fung is not accidental—these firms profit because they have built world-class management systems. This does not mean that there is anything mechanical or bureaucratic in the way they operate. Quite the opposite; these firms shape their processes and methods so that they work together for high performance. These firms perform well because they are designed to grow in profit, size and management capability. Their CEOs focus on the behaviours, strategies, processes and measures that must work together as a system to find and satisfy customers.
If we reviewed the business performance of Lee at the start-up of Sui-Fung Ceramics, there are many factors that can be considered to increase organisational performance in achieving organisation goals, and some experts are considering the concept of performance management. It cannot be denied that the only constant in this world is change, many people especially those in the business arena find themselves normally adapting. In this manner, no business is exempted with these changes. This is because change can bring about so much improvement in certain aspects. In many ways, change can make work easier, pave the way for future innovations or generally improve people’s lives. Similarly, change has been adopted by various work organisations for varied reasons. Known as change management, companies and businesses are integrating change into their work strategies so as to be competitive and more efficient.
Due to the problems and the target growth that have been distinguished by most companies due to stiff competition in the business market, some of CEOs or managers which is in our case is Lee’s responsibility to decide to create a plan in relation to change of management. He may employ change management for facilities, maintenance unit, manufacturing process and human resource management. Or try to utilise change management process in order to enhance their target market to satisfy their clients.
Actually, the leadership skills of Lee is important to Sui-Fung. The title of being chief executive officer (CEO) or manager can be utilised by any individual however possessing the title does not automatically makes a person a leader in a true sense. According to Haddock and Manning (1995) being a true leader which is vital in managerial task must be obtained through inspiring and motivating people to give their best and a successful leader commits himself to organisation or group and nurtures the same kind of commitment to its members. In addition, according to Haddock and Manning, a successful manager with good leadership in his heart has the following traits:
Ø Knows her job and her field thoroughly.
Ø Stays on top of current development, trends, and theories.
Ø Knows her people, including their strengths, weaknesses, hopes, and goals.
Ø Shares a vision of service, excellence, ethics, and achievement with others.
Ø Demonstrates by her words and actions strengths of character and integrity.
From these traits presented by Haddock and Manning (1995), any mangers or CEO and not only Lee should carefully evaluate his/herself and made the possible changes to become a successful CEO in their companies.
Apparently, the financial and expanding issues of the company directly hit their business operation. The financial report of 1997 and 1998 justified that the company financial performance declined at the start of 1996. Actually, the problem arises in Sui-Fung Ceramics was not only due to illicit transaction done by Lee but also due to over expectations of growth. The company focused on expansion in which their acquisitions of three German ceramics manufacturing companies lead them to loose their business. In accordance to the poor performance of these three German ceramics manufacturing companies, it created a net loss of $223m for the year ended December 31, 1997. Because of these performances other investors pulled out their shares and the Stock Exchange delisted SF, closing another chapter in the history of one of Hong Kong’s biggest corporate failures.
With regards to the use of power to provide socially responsible activities as part management in every business industry, the firms’ competitive advantage should be considered which is not present in Sui-Fung Ceramics. The competitive business environment within particularistic industries intensifies the need of business organisations to diversify the business procedures which considers socially responsible activities of the company recognising the importance of the conglomeration of assets, skills, and capabilities of the available resources that the company has in order to be successful. All these will be realised through the intervention of the corporate parent organisation to increase the value of its subsidiary businesses in the market environment (Jayne & Dipboye, 2004). In this light, owners of big business organisations operating in a competitive business environment should be in constant look out with its competitors and the overall status and events in the industry. Taking advantage of the opportunities and intensifying the strengths while minimising the risks and weaknesses of a business firm greatly helps in predicting the success in business enterprise (Goshal, 1997).
Similarly, one of the core characteristics of a successful organisation is focus. Since the business environments are fast becoming more and more complex added to the fact that it changes rapidly and dynamically, businesses need to concentrate on a few key elements that are most important to their organisations survival. Thus, it is not surprising the critical success factors keep the organisations from straying too far with external issues not relevant to their company’s success. Critical success factors (CSFs) in business, are the limited number of areas in which results, if they are satisfactory can ensure that successful competitive advantage for the company (Thierauf, 2001). Determining these factors is an old concept in business because there were great leaders throughout history who have identified and addressed key factors to achieve their successes. There is no one definition of CSF but it is considered that these are the areas which the company needs to concentrate on to flourish. Therefore, the activities should be carefully monitored and guided by the management.
Chung (1987) defined critical success factors as managerial factors that create a competitive edge for a company in its respective industry. There is no specific process in identifying and executing critical success factors in strategic management planning. This is the reason why Thierauf (2001) asserts that different companies which have similar structure can conduct its market entry forming different strategies which lead to the development of various critical factors. As the primary means for an organisation to achieve its strategy, critical success factors must take into account the differences in the environment and organisation that exists.
Synthesis
The results of the analysis carried out on financial and business expansion indicated very significant effects on business sustainability, even amidst the threats of unrest. The review of financial capabilities and resources towards business sustainability of Sui-Fung Ceramics revealed very little inconsistencies regarding its strategies. This is coherent with its traditional inside-out approach. However, the need to reconcile both the inside-out and outside-in approaches becomes imperative now for their development.
From the previous discussion, a number of conclusions can be drawn:
Ø In an age where the financial system has become simultaneously more complex and more accessible to the unsophisticated investor, it is essential that the challenge of effective corporate governance is addressed.
Ø Harmful incentive structures, conflicts of interests, and the absence of transparency seem to be key issues in addressing shortcomings in current corporate governance arrangements of Sui-Fung Ceramics. In addition, the interests of minority shareholders have to be protected as larger investors may abuse their power. These problems can effectively be addressed by the use of forensic audits after major bankruptcies or suspected accounting frauds, by encouraging whistleblowers, by fostering of a process of diluting ancillary links between audit firms and their audit clients as well as between investment analysts and their clients. Greater transparency in the process of credit rating by the relevant agencies is also required. Other suggestions for reform include measures to tackle concentration in the provision of audit services, perhaps by lowering entry barriers.
Moreover, it can be said that Sui-Fung Ceramics is a company whose financial situation of their first 10 years of operation is stable and highly likely to improve in the years to follow. However, due to irregularities of Lee’s transaction regarding their shares, the company suffers from downturn. Actually, in order for a company to sustain their development, they should regularly assess the value of their portfolio of its business. They have to be positioned on fast-growing opportunities, whether geographically or by market segment through choosing to invest in businesses with long-term tail-wind profiles. The comparison of the 1997 and 1998 financial reports of Sui-Fung helped in bringing out pertinent bits of information which led to the conclusion that mismanagement, leadership behaviour of CEO and business expansion adds value and contributes significantly to the progress and failures of the firm as a whole.
References:
Chung, KH (1987) Management: Critical success factors, Allyn & Bacon, Boston, MA.
Ghoshal, S (1987) “Global Strategy: An Organising Framework”, Strategic Management Journal, 8, 425-40.
Haddock, P & Manning. M (1995) Leadership Skills for Women, Thomson Crisp Learning.
Jayne, MEA & Dipboye, RL (2004) “Leveraging Diversity to Improve Business Performance: Research Findings and recommendations for organisations”, Human Resources Management, 43(4), 409-424.
Jones, J Aguirre, D & Calderone M (2008) 10 Principles of Change Management. Retrieved September 19, 2008 from <http://www.strategy-business.com/resilience/rr00006>
Thierauf, RJ (2001) Effective business intelligence systems, Quorum Books, Westport, CT.
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