Branding's not a cure-all

Taiwan doesn't have many companies with strong brands mainly because Taiwan's business model is based on flexible contract manufacturing. Chen Ching-Chih strongly associates brand-building with economic development. Chen also asserts that the Japanese had a positive impact on economic development in Korea and Taiwan, and suggests the government can help companies build bigger brands. Do companies with top brands contribute to economic development? The British economy has outperformed the German and Japanese economies over the last 10 years, but the UK has fewer top brands.

Many auto and electronic companies have strong brands but weak profits, such as Sony and Ford. We cannot assume brand-building by Taiwanese companies will automatically improve economic performance or create profits. Further, the Asian financial crisis in 1997 exposed many problems with Korean conglomerates modeled on the Japanese zaibutsu. Overlending and poor government oversight led to the bankruptcy of many prominent Korean companies such as Daewoo and Kia. Samsung, LG and Hyundai have managed to survive and prosper but government intervention in business is a double-edged sword.

Taiwan has a globally competitive electronics industry with its own fair share of top companies. The economic model for the industry is based on Silicon Valley -- not Japan -- because these companies were founded by Taiwanese engineers educated and trained in America.

Morris Chang (張忠謀), chairman of Taiwan Semiconductor Manufacturing Co, worked for US companies most of his life before coming here. In fact, Taiwan created the business model for integrated circuit contract manufacturing and now dominates that industry segment. Many of Taiwan's tycoons are self-made men that did not come from prominent families or benefit from government favor.

When Acer's Stan Shih (施振榮) retired, he handed control of his company to professional managers, not a relative. In South Korea, Hyundai experienced many family succession problems. So there's little proof that family-run conglomerates supported by governments can outperform companies run by professional managers. Brands are a good way to create and hold value, but they aren't a cure-all for Taiwan's economy. Attempts by the government to enhance national prestige probably would not benefit the economy in the long run. It's better off playing a supporting role by improving the investment climate and leaving the decision-making in the hands of business.

William Hoyle
Taichung