Last updated: Wednesday, May 15, 2019


Sao Mai Group: Constant Cultivation in Business Ethics

Posted: Wednesday, February 07, 2018

With its proper behaviours to the market and to partners and its tolerance to new employees, Sao Mai Group has successfully restructured a series of enterprises and created stronger and more sustainable development steps than ever. That is the way, according to Mr Le Thanh Thuan, President and CEO of Sao Mai Group, to “cultivate business ethics”. Thanh Xuan reports.

As a newcomer of the real estate industry, IDI Company, a member of Sao Mai Group, has risen to become a leader in catfish processing and export in Vietnam in the face of sectoral difficulty. Could you please tell us what core values are behind this success?
As of 2017, IDI had 10 years of experience in seafood export market, which was traditionally an option for biggies only. Success or failure of predecessors or even latecomers is experience we can learn lessons from. In business, it seems that the concept of predecessors or followers has a very fragile boundary which is determined by the sharpness and responsiveness to opportunities, judgmental mind, thinking and even some luck.

As known, IDI continued to achieve new successes in 2017, with profits amounting to more than VND400 billion.

Actually, IDI has risen strongly to not only do effective business, but also to achieve sustainable development. Inputs are important and IDI has now controlled them. In addition to the 150-ha self-farming area, we have built a farm network with households in An Giang, Dong Thap, Can Tho and Kien Giang to ensure enough inputs for our two factories to operate around the clock. We all know that catfish fillet export price depends on global markets. The price is so sensitive that all changes in politics, economics, bank interest rates, US dollar exchange rates or tax policies of major economies or even news coverage also directly affect it.

For years, export prices have gone up sharply, partly because of global supply-demand rules and partly because of unhealthy competition (in price quotation and unstable quality) from domestic companies. This ongoing story is still hurting honest companies. This has resulted in recurring and unpredictable undersupply or oversupply crises. When inputs fall short, the price is very, very high, or vice versa.

In that vicious circle, IDI soon realised that if it could not control input supply sources, it would be at a disadvantage before unreasonable coordination of importers. If IDI does not have new customers and make light of risks in foreign markets, it will find it very hard to turn around in case of the unexpected happening. Fortunately, we know how to handle and estimate correctly, strictly control product quality, and provision export risks.

For the time being, IDI has a strong contingent of skilled workers and completely controls input sources; thus, all fluctuations do not affect it. The company even finds good opportunities in risky situations. But, the essence we must grasp is absolute constancy. Life tells us that “Goodwill towards whatever will bring us a good outcome.”

How about the performance of other members of the group?
2017 was another successful year for Sao Mai Group. In the year, we made remarkably successful M&A deals with units of Nhut Hong Joint Stock Company and Phu Hung - Phu Quoc Joint Stock Company.

One year earlier, the takeovers of State-divested tourism companies in An Giang and Dong Thap clearly showed this. They were long-established State-owned enterprises (SOEs) before becoming our member companies. We created new added values to them from their personnel and infrastructure reshuffles, new business strategies and urban service styles to integrate into the market in the new context.

What is the biggest obstacle to taking over and restructuring acquired businesses?
The biggest obstacle is human resources. Behaviours and habits must be rectified and rearranged. In the current market economy, the old-fashioned State-subsidised working mechanism is obsolete. Passive manner and thinking must be eliminated completely. We assign them working goals to eliminate their dependency. The world is stormily moving forward in the Fourth Industrial Revolution and we certainly do not stop but demand our personnel to adapt to new changes.

It is said that Sao Mai Group’s restructuring process at four acquired companies is still slow. What do you think about this?
Sao Mai Group had to prepare at least one year for the four M&As above. Thus, we must be careful enough to make plans for new changes. To make plans, we must look into both business orientations and human psychology. When we have everything at hand, we must submit them and wait for consideration and approval from relevant authorities. As you know, waiting for feedback takes time.

Corporate restructuring is always challenging, and is much more difficult in the case of formerly State-owned enterprises. What are the difficulties with this kind of business that Sao Mai Group meets in reality?
Their common symptoms are hidden losses, incomplete truth-hidden IPO profiles and mounting inventories. When we take over inventories, they become waste products to Sao Mai Group.

In essence, expenses had already formed for years but old companies did not allocate them because they wanted to make falsified profits to boast their performances to their superiors. This way of doing portrays a very nice-looking, convincing picture but the reality is much more painful. All must be handled by Sao Mai Group.

First of all, Sao Mai Group will work out reasonable personnel rearrangements; go over every case, and take into account every capacity and assignment. In particular, we must train them again to integrate and adapt to new operating mechanisms of the company.

At present, Sao Mai - An Giang Tourism Joint Stock Company and Sao Mai - Dong Thap Tourism Joint Stock Company have made remarkable progress, featured by a 15 per cent growth from a negative figure earlier, totally upgraded facilities and expanded business scopes. Specifically, Sao Mai Hotel (former Song Tra Hotel) got VND200 billion of funding to upgrade to an upmarket class.

Do you think there will be a lot of conflicts in running a business with such problems?
It is the same in life or in business. There are philosophies or stories which seem to be so ordinary that we have easily forgotten them, but they are what we must notice. Water looks like having no force at all and just flows from high to low. When it encounters an obstacle, it is extremely patient to get through. If it runs into a rock, it will imperceptibly erode that rock. This is a rule of soft things winning hard things. It is also the same in business. We must know how to behave to the market, to partners and to affiliates. “Do not use a hammer to hit the ice but use fire to burn it. Water cleanses everything, no matter how dirty it is. Water is open to embrace everything without any resentment or hatred. It then slowly cleanses on its own. This is the same as moral cultivation. We need something like water to be successful in business.”

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