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Domestic Demand Reshuffles the Deck

2010 Most Admired Company Survey Taiwan's growing domestic demand has invigorated the market. And in an unprecedented move, Fubon Financial Holding voluntarily relinquishes its top spot.




By Chao-yung Huang , Chien-yu Lai
From CommonWealth Magazine (vol. 482 )

In CommonWealth Magazine's 2011 Most Admired Company Survey, of the 24 most influential sectors in Taiwan, only 23 had benchmark companies named. The financial holding company category was left vacant after Fubon Financial relinquished its top spot over a recent scandal at subsidiary Taiwan Sport Lottery Corporation, a move unprecedented in the survey's 17-year history. (Table 1)

The survey was conducted between Aug. 25 and Sept. 17. A scandal involving fraud at Fubon subsidiary Taiwan Sport Lottery Corporation erupted after the survey results were out, with Fubon Financial Holding again shining as the top ranked financial holding company. However, in light of the scandal and after thorough consideration, Fubon Financial Holding chairman Ming-chung Tsai made the painful decision to renounce the most admired company honors.

CommonWealth Magazine undertook its Most Admired Company Survey based on data from the CommonWealth Magazine databank on Taiwan's Top 1000 Companies. The top ten in each sector were chosen based on the size of their revenue and profits in the previous year. Industry peers and experts then evaluated the selected companies based on a questionnaire that covers ten indicators such as ability to plan for the future and financial capacity to determine the most admired companies of the year.

Fubon Financial Holding's decision to voluntarily give up its most admired company honors not only shows that CommonWealth Magazine applies the strictest standards in selecting the nation's most admired companies, but also underscores the importance Fubon Financial Holding attaches to values such as corporate social responsibility, which is reflected in most admired company status, and improved management capability.

In a letter to CommonWealth Magazine publisher Diane Ying, Tsai stated, "In the past we were able to grow into a strong company thanks to the trust that our customers placed in us. Today, because an employee was afforded an opportunity to commit a crime due to a lack of proper control of internal procedures, we feel the deepest regret, concern and responsibility."

Tsai commented: "In addition to engaging in deep soul-searching and trying hard to make improvements, Fubon Financial Holding hopes that employees across all echelons of the company will always remain vigilant: Not only must we not permit the slightest laxity when it comes to honesty and trust, but also need to be perpetually cautious and conscientious, and strive to be the best." He also admitted, "We are still learning to be a No. 1 that lives up to the job."

Domestic Demand Governs Industry Trends

The survey also showed that major incidents such as mismanagement or accidents affect a company's image and reputation.

Computer giant Acer, which made negative headlines with "abnormalities" in inventory stored in Europe, and the Formosa Plastics Group, which is tarnished by a series of fires at its naphtha cracker complex in Yunlin County, both lost their leading positions in their respective industry sectors. They were replaced by Asustek Computer Inc., a rapidly innovating Taiwanese laptop maker, and U.S-based petrochemical company Dupont.

Similarly, electronics contract manufacturer Hon Hai Precision Industry, which has been hit by a series of employee suicides and industrial mishaps at its plants in China, lost its top spot in the computer industry to Quanta Computer. (Table 2)

In the overall rankings of all 24 industries, the four top spots were taken by domestic demand-driven sectors such as automobile manufacturing, car sales and services, telecommunications services, as well as the tourism and hospitality industry. The food industry also jumped up to rank six from rank 11 last year. (Table 3)

Analyzing these trends, Yu Chwo-ming, professor at the College of Commerce of National Chengchi University, notes that the auto industry is booming, thanks to the huge China market. In addition, Taiwan's Yulon Motor Co. has entered the domestic and China market with its own Luxgen brand.

The island's domestic car market is growing. As of the end of August, the number of registered passenger cars topped 5.8 million, following 20 months of uninterrupted growth. With a positive outlook for the car sales and service industry, the number of people employed in the sector is also on the rise. Yu believes this shows that in the wake of the exodus of the export-oriented manufacturing industry, the domestic demand-oriented sectors have proven their ability to create jobs. That's what society at large most cares about at the moment, Yu asserts.

Newly included in this year's survey were the three sectors optoelectronics, biotechnology and pharmaceuticals, and home electronics and communications services. The optoelectronics sector is lead by touch display maker TPK Holding, while contact lens maker St. Shine Optical tops the biotechnology and pharmaceuticals category and Asustek Computer is the most admired company in the home electronics and communications services category.

St. Shine Optical is currently the highest-priced biotech stock in Taiwan. Within two years the company doubled its share price, for a short time topping NT$400 per share. Despite the financial meltdown in European stock markets, the stock is still priced above NT$350 per share. In the first half of 2011, St. Shine Optical posted a gross profit margin of 53 percent, even outperforming semiconductor maker TSMC. After-tax net income stood at NT$520 million, a 26-percent year-on-year increase. For each of the last four years, the company's earnings have exceeded its paid-in capital.

Chu Ching-chung, general manager of Kobayashi Optical, the leading domestic distributor of disposable contact lenses, admires St. Shine Optical for daring to launch its own brand after starting out as a contract manufacturer. As Chu points out, contact lenses are an invasive product, and convincing customers to engage in an eye-opening experience requires a lot of energy devoted to communicating and winning the consumer's trust.

As much as 96 percent of the global contact lens market has been carved up by four leading brands – Johnson & Johnson, Ciba Vision, Bausch + Lomb, and CooperVision. New market entrant St. Shine Optical will therefore face an uphill battle in positioning its own Ticon brand, Chu predicts.

As the fifth largest contact lens maker in the world, St. Shine Optical has secured a market share of more than one third in Taiwan. But with just a little over one percent of the global market, the company is still at the starting line.

Translated from the Chinese by Susanne Ganz. Next One Key to Success – No Unions