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“How shall freedom be defended? By arms when it is attacked by arms, by truth when it is attacked by lies, by faith when it is attacked by authoritarian dogma. Always, in the final act, by determination and faith.”

― Archibald MacLeish

Saturday, March 29, 2014

Henry Sy and John Gokongwei: How Tsinoy Taipans built their empires.

Henry Sy and John Gokongwei
Their Common Traits:Vision, Frugality and Hard Work

SM Investments:Banks, Malls, Property and Retail
JG Summit: Food, Property, Airline, Petrochemicals & Banking
The Heirs Apparent
Henry Sy
Speech of Tessie Sy:
Our company, SM, as many of you may already know, came from the hard work of my dad, Henry Sy, Sr. It is a rags to riches story that even myself did not realize until I went to trace his roots in China.

His journey from the thatched hut I saw there to the shopping centers he has today is something that amazes even myself.

His determination, his discipline and his thriftiness have produced an astute and street smart businessman who has influenced a lot of people. Including us, his children.
“Don’t just be our shopper or our customer. Be the owner of some of the worlds' largest malls, or the leading bank in the country, or Southeast Asia's largest property company, or the largest copper producer in the Philippines, or the country's most progressive holding company.” Henry Sy Sr.

My father’s perseverance during the different crises our country has gone through has made our active business pursuits possible for a half century. True, he was disappointed with the economy many times, but he never saw the reason to quit and instead pursued his goals relentlessly.

He had many obstacles – both external and internal – in his business, and there were times he could not understand why things had to be so complicated for him to pursue his business objectives.

It has been written – and I can attest that it is true – that Henry Sy started from the bottom.

He came to the Philippines at the young age of 12, and worked in his father’s small sari-sari store more than 12 hours everyday to help him. It was located on Echague St., which is now Carlos Palanca Sr. St. in Quiapo, Manila. There, he devised ways to increase his income by developing small portions of products – much like the sachets we see today in the supermarkets.

He was able to make multiple sales in order to make extra income, spending so much time in the store that he had no time to go out and play with friends in the neighborhood. It did not take a long time for him to realize, however, that he can only do so much in a sari-sari store environment.

WWII came and the sari-sari store was looted and burned. He did a lot of buying and selling of odd things during the war to enable the family to survive.

After the war ended in 1945, he ventured into selling American shoes imported by enterprising Gis.

He later saw the opportunities of opening a shoe store, and not long after he was managing three shoe store in partnership with friends.

With the pleasure of a growing family while at the same time pursuing studies at FEU in the early 50s, he sought more ways to augment his income.

He studied the market and decided to be different. While other young men went to the US to pursue a higher education, he went on a long business trip to the East Coast, and came home with a lot of merchandising ideas.

For a time, he was selling a lot of shoes, accessories, and leather goods, hoping to change the way shoe manufacturers look at the industry.

Sensing a lot of opportunities, he decided to open SHOE MART – “SM” – the first air-conditioned shoe store that merchandised shoes in a very inviting and classy format. With the success of that store, he went on to open more shoe stores, but he could not get enough suppliers.

He was continuously learning from his customers, suppliers, and employees. This on-the-job research gave him enough confidence to expand to a department store chain. Many things in life grow out of needs, and to meet the needs, you become determined. With determination you will take extra challenges and do things differently – which will most likely bring success.

Unaffected by criticism, and armed with sheer determination and optimism, he persisted and opened in 1985 with our department store and supermarket and a few tenants. Many potential lessees were saying no to lease offers.

Later, we expanded, slowly building malls at that time to get our formula right. The expansion was not without difficulties. When constructing Sta. Mesa and Megamall, we were faced with delays in construction due to cement shortages and the 1989 coups.

We grew in numbers instead of size, serving different smaller markets. We have also expanded our retail business beyond department stores to include supermarkets, hardware stores, appliance superstores, and other retail formats.

At about the same time, we looked into the banking business – both at our bank and at the industry. At the time, our main bank, Banco de Oro was a medium sized bank. Because we were quite conservative in lending, the deluge of bad loans that characterized the times did not affect us. 

Opportunity is where you find it, not where it finds you. Crisis and weakness indicate one can look for opportunities. Transforming problems into opportunities can bring good returns. Prosperity and growth come only to a business that systematically exploits its potentials and systematically optimizes its performances.

Our business – especially that of shopping centers is a long term business. It takes at least eight years to pay back. We feel that the country will always be around, and with Filipinos’ love for shopping, there will always be customers we can sell to.

Our group’s policy is to look for opportunities at all times, and to be ready to act when it comes. While crises may have brought opportunities, we continue our plans in good or bad times with some changes to suit our demands of the time.

May Henry Sy’s success rubs off to us as well. As a final note, I would like to leave this quote from Henry Sy: ““There is no such thing as overnight success or easy money. If you fail, do not be discouraged; try again. When you do well, do not change your ways. Success is not just good luck: it is a combination of hard work, good credit standing, opportunity, readiness and timing. Success will not last if you do not take care of it.”


JOHN GOKONGWEI Jr.
Speech delivered during the launch of the Ateneo de Manila University John Gokongwei School of Management
I am John Gokongwei, Jr. I am not an Atenean but I feel at home with you. Today, at least. 

Sixty-two years ago, I could not have dreamt of appearing before the Jesuits and their students to tell the story of MY life. I was no more than a student then, at San Carlos University in Cebu, when my father died suddenly. It left me, the eldest, the responsibility of taking care of my mother and five siblings. That was tough for someone who was 13. Creditors had just seized our home and business and I had no experience with earning a living. 

But here I am--not all on account of my good looks or charming personality--but because I somehow survived. And when I look back, I know now that I did so because I recognized CHANGE when I saw it. 

The first change was war. I had turned 15. My mother had already sent my brothers and sister to China where the cost of living was lower. From Cebu, she and I had to make money to send to them. 

I turned to peddling. My day began at 5 in the morning. I would load my bicycle with soap, thread, and candles, and then bike to neighboring towns to sell my goods. On market days, I would rent a stall, lay out the goods from the bike, and make about 20 pesos a day, enough for me to survive and to buy even more goods for next time. Those days, you might call my BICYCLE AGE. 

After two years of biking and peddling, at 17, I entered my BATEL AGE. The batel was a small, very utilitarian boat that defied the open sea and would take me farther from Cebu and all the way to Lucena, from where I would take a truck to Manila, with companions twice or thrice my age. The sea trips could take two to three weeks depending on the weather, and the land trips another five to six hours. (I was lighter then, you can imagine.) 

On the batel, I read books like Gone with the Wind under the great blue sky to pass away the time, even if we traders were always in fear of sea pirates and the bad weather. 

Once, our batel hit a rock and sank. Thank heavens for my rubber tires! Those were the goods I had with me to sell in Manila. Well, we all held on to those tires, which meant I saved all those traders and those traders saved all my tires. 

At that time, the War was still going on. Ironically, I look back at the War with the fondest of memories. It was the great equalizer. Almost everyone I knew had lost big and small fortunes at the time. This meant we all started at ground zero. Ground zero meant living by our wits alone; ground zero meant starting equal; ground zero was where I discovered I was an entrepreneur. 

When the War ended, I was 19. Because of the war, the economy was more dependent than ever on imports. So when I set up Amasia, my first company, it was to import textile remnants, fruit, old newspapers and magazines, and used clothing from the US. 

There was a side benefit to this. I would wear some of my own stock, so I would have different clothes to wear when I went courting Elizabeth, the woman who would be my wife. But at the end of it, I made some money. 

The Bicycle Age was over. The TRADING AGE began. 

By then, my brothers and sister returned from China. Together, we worked in the trading business I had begun: as bodegeros, clerks, warehousemen, cashiers, and collectors. And all this while they were all still going to school; me, I stopped schooling. Like most Chinese-Filipino families, we worked where we lived, and at times, we had to endure the stench of rotten oranges and potatoes filling our two-story apartment. 

By the early '50s, we were importing cigarettes and whiskey as well. Business was good. But two factors made me change strategies again. First, I saw that trading would in time become a low-margin business BECAUSE we were at the mercy of our suppliers and buyers. Second, I saw that the government was working on import-substitution policies to encourage local business. President Quirino wanted to shore up the country's foreign exchange reserves that had been depleted as a result of the high importation of the post-war years. 

So I decided to enter the AGE of MANUFACTURING. In 1957, I started a corn milling plant producing glucose and cornstarch. Why cornstarch? Because I thought--and it turned out, correctly--that the unglamorous cornstarch would be in great demand from better known businesses like textiles, paper, ice cream, pharmaceuticals, and beer. 

Of course, the bigger cornstarch players did not give us an easy time. They engaged us in a price war. That is a nice way of saying they tried to kill us by selling low. 

But we prevailed, and started to get clients like San Miguel Corporation. It was my first real taste of competition. And I liked it. I think THAT first experience prepared me for the bigger, tougher competitors in my future. 

By 1961, cornstarch was becoming a commodity, and I saw that there was no future in a business where we had to keep lowering margins to survive. 

It was time to get into the bigger, and riskier, game played by big multinationals like Procter and Gamble and Nestle. I saw that all they did to capture the market was to brand their products, for instance their coffee and their toothpaste. That is, give their coffee and toothpaste a name, a face, and an image that customers would instantly recognize and identify with quality. Me, I dreamt that one day I would be the Philippine Nestle or General Foods. So the Manufacturing Age for me was giving way to the AGE of BRANDS. 

So, we put up CFC, and our first successful product was Blend 45, an instant coffee we put out to directly compete with Nestle's Nescafe. We positioned it as "the poor man's coffee," hired top movie star Susan Roces to endorse it, and employed Procter-and-Gamble veterans to sell it. Basically, we took a page out of the multinational book, and applied it to our business. We gave our coffee, snack food, candy, and chocolates a name, a face, an image. Today, Jack and Jill, Max candy, and Cloud 9 have become household names. 

The success of URC opened up many opportunities for our group. We had the choice to focus on food where we were very successful-or to pursue other businesses. We decided that there were too many good opportunities to pass up, and that remaining in our comfort zone would stunt our growth. So we got into the Age of Expansion. 

For the next two decades, we pursued businesses that answered positive on FOUR CRUCIAL QUESTIONS. 

First: Is there a market? 

Second: Could we compete against both local and foreign players? 

Third: Could we find the right people for the job and did we have enough capital to pursue the business? 

Last and most important: Did we have the stomach for it? That is, could we take the sleepless nights, the cutthroat competition? 

Call it trite--but, believe me, success CAN BE ACHIEVED through hard work, frugality, integrity, responsiveness to change--and most of all, boldness to dream. These have never been just easy slogans for me. I have lived by them. 

I hope that many of you in this room will some day choose to be entrepreneurs. Choose to be entrepreneur because then YOU create value. Choose to be an entrepreneur because the products, services, and jobs you create then become the lifeblood of our nation. But most of all, choose to be an entrepreneur because then you desire a life of adventure, endless challenge, and the opportunity to be your BEST SELF.