Cheung Kong (Holdings) Limited

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Background Description

Ka-shing Li was born in Chaozhou, China in the year 1928. When his father passed away, the accountability of taking care of the livelihood of the family was left to him. After dropping out of school at 15 years of age, he secured employment in a plastics company where he would work for 16 hours each day (Chan 2008, p. 46). Li established Cheung Kong Industries in 1950 being one of the owners.

Li married his cousin, Chong Yuet Ming, who played a key role in his thriving career and patriotic fortitude. The couple got two children Richard Li and Victor Li. Personally with the advice of their mother, Victor and Richard went abroad for further studies.

Family assets

Today, Li is the richest individual of Asian lineage internationally, and the ninth richest individual worldwide with approximated possessions of $25 billion in the year 2012. Currently, Li is the chairperson of Cheung Kong Holdings (CKH) as well as Hutchison Whampoa Limited (HWL).

Through the family businesses, he is the leading trader of container workstations and the leading medical and beauty trader in the world. Cheung Kong Holdings grew by obtaining Hutchison Whampoa in the year 1979.

In Hong Kong alone, Li and his family have nine companies. Cheung Kong Holdings Company has considerable concerns in life sciences, in addition to other businesses, (Cheung Kong (Holdings) Limited 2012). The establishment is among the leading developers in Hong Kong and boasts of a long record of property development. CKH has developed approximately one out of every twelve private mansions in Hong Kong.

Furthermore, the company is progressively prevailing in the development of private homes, which is attributed to the strategy of the government of auctioning property in affluently large blocks, excluding small and medium-sized companies (Munro-Smith 2008, p. 42). The Board of Directors (BOD) comprises Simon Murray, Wong Yuchin, son of Li (Victor Li), Canning Fok, and the chairperson is Li senior.

The Chairman of CKH is Li Ka-shing. The Deputy Chairman and Managing Director (MD) is Victor Li (the Chairman’s son). While Victor Li carries out businesses directly with his father, Richard Li heads the leading telecom corporation in Hong Kong.

Owing its successes to Li’s Family, CKH is the biggest developer of business, housing, industrial, office, and hotel facilities in Hong Kong (Munro-Smith 2008). Cheung Kong Group carries out business functions in 52 nations and has approximately 270,000 employees.

Preservation of Assets

In order to preserve family assets, CKH will have to adopt some strategies. One of the strategies entails liability insurance whereby the family obtains coverage with some companies that have adequate skills in managing family wealth. CHK has managed to insure some of its products with the best insurance companies. Ming An (Holdings) is the insurer of CHK.

In the city, a number of companies specialize in offering quality management services to family assets. The role of the family is simply to determine the best insurance firms that can offer best management services. An additional strategy is seeking the services of retirement planners because they are the best-known strategists as far as asset accumulation is concerned.

Moreover, they offer valuable asset protection benefits. In fact, analysts observe that few strategies can be compared to the efficiencies of retirement planning as far as tax and asset protection are concerned. Assets can be protected from creditor claims while they accumulate inside the plans. For the protection of family wealth, the family can consider committing its assets to the tenancy agency.

Under this approach, the assets would be held in a tenancy by entities. This would mean that no family member would claim the assets since they are owned jointly. In the modern world, married couples often use it since it is effective in protecting wealth that is held in individual residences.

Life insurance and annuities are used to preserve family wealth because assets are protected from creditors, particularly when the beneficiaries are dependants. The assets of the family would be attractive because they are protected from taxes.

Relevance of Family values to the Business

Li Ka-shing considers that anybody can serve the public, but just somebody with a generous heart can drive social development. This conviction acts as a means of generating a constructive virtuous cycle in his family and society (Munro-Smith 2008, 58). Besides CKH, the family of Li started the Li Ka Shing Foundation (LKSF) in the year 1980 to improve the force of philanthropy via three considered goals. These goals include:

Cultivate a culture of benevolence
Support education improvement initiatives that promote long-term opinion, empowerment, inventiveness, flexibility, and positive engagement with a concentration on constructive and sustainable transformation
Assist in progressing health research and services

Up to now, the Foundation has given more than HK$ 12 billion to these ventures. Furthermore, “Li established Shantou University in the year 1981 to contrive improvements in the education system” (Chan 2008, p. 201).

In acknowledgment of his “benevolent endeavours and his roles in society, Li has obtained Honorary Degrees from many universities such as the University of Hong Kong and University of Cambridge amongst others” (Chan 2008, p. 199).

Role of Diversification in the Family Business

Flexibility in the family businesses of Li is evident from their operations in different fields as aforementioned. In addition, Li is not just focussed in business but as well in politics. In the year 2011, at the pronouncement of interim outcomes for Hutchison Whampoa, he supported Tang for the approaching elections and commended him for making a move to vie.

Before finishing, Li spilt the beans and stated that people can be simply similar to him, one individual-one vote (Mayo, Benson, & Nohria 2008, p. 54).

The press then stared at him in scepticism, and put it forward that normal citizens do not obtain one individual one vote. Li laughed it off, but stated that perhaps in the year 2017, the people will have one vote to decide. He concluded by saying that he had just mentioned it a little early.

Family Roadblocks

Li was compelled to drop out of school at the age of 12 years and flee to Hong Kong alongside his family to evade the dangers of warfare. With his little education, perhaps this flight could pose a challenge to him in handling education related issues while carrying out affairs of the businesses.

Additionally, his father passed away after suffering from tuberculosis and thus left the responsibility of taking care of the needs of the entire family on him. With these challenges, Li had to toil in a plastics company, and in 1950, his efforts, discretion, and search of prosperity allowed him to begin his own business, Cheung Kong Industries (Cheung Kong (Holdings) Limited 2012).

The death of his wife in the year 1989 acted as a family roadblock, as her contributions to the success of the family companies were cut short. The gap left thereafter was hard to fill. The death of Li’s wife, which left him with just his two sons, created a family roadblock in the power of numbers.

Institutional roadblocks

Hong Kong is a key target for liquidity runoff of the mainland that has augmented because of the stiffening of loan conditions in China. The government of China has raised the bank hold ratio as a way of controlling inflation. Additionally, the government has as well raised the maximum level of the sum of money banks should have in reserve.

Different measures put in place by the government to manage inflation might lower the requirements of purchases in Hong Kong. Furthermore, the government of Hong Kong has undertaken numerous plans to control the increasing property costs in the nation.

In the year 2010, the government of Hong Kong enforced a stamp duty reaching 15 per cent on property deals and as well raised the first payments for mortgages (Chan, Cheung, & Andrew 2011, p. 21). Moreover, the Transport and Housing Bureau executed numerous measures to improve the intelligibility and lucidity of the property knowledge in Hong Kong.

Strict measures enforced by the government of China and Hong Kong are prone to change market reaction in the property arena and hence twirl the Hong Kong property market, making prices fall and limit the growth of CKH.

Market Roadblocks

CKH mainly functions in Southeast Asia and obtains most of its incomes from China and Hong Kong. In the year 2011, CKH generated 77 per cent of its incomes from Hong Kong and 23 per cent from China. In this regard, CKH is highly reliant on economic and political situations prevailing in these nations.

Strict directives stipulated by the government in anticipations of more interest rates hinder the market expansion (Chan, Cheung, & Andrew 2011). Decrease of rent in China and Hong Kong could unfavourably influence the key business of CKH.

Highly competitive markets

The key business operations of CKH encounter noteworthy competition in their regions of operation (Lee Cher 2010, p. 67). Competition threats encountered by CKH comprise a rising figure of developers carrying out property development and investment, which might influence the market share, as well as revenues of CKH.

Mitigation of Roadblocks

After the death of Li’s wife, the family businesses had to employ many and competent employees. In addition, the family chose to be flexible to avoid the effect of the decline in a certain field (Mayo, Benson, & Nohria 2008).

For Li, alleviating the influences of the roadblocks led to pushing local redevelopment finances to sustainable improvement plans and neighborhoods, particularly the ones residing close to the location of the family businesses.

This element prevents the working group from moving to other countries in search of employment. Retaining the working group close to the locations of the family business will play a key role in avoiding labor market constrain.

The Li family evidently comprehends that the best mode of remaining in the lead is to plan practically for the expected roadblocks. This family understands that working from recall of the way dad (Li) managed similar roadblocks in the past is not probable to be kept in mind. Therefore, the family records informal considerations and means that were employed to operate together harmoniously.

The members of the Li family come together in a systematized fashion to contribute ideas and devise suggested strategies where family issues will influence the businesses (Cheung Kong (Holdings) Limited 2012).

In a bid to make sure that they maintain competitive advantage and retain quality labor force, the Li family offers reasonable wages that attract competent workforce. Knowledgeable staff is critical to the performance of the company. A company that employs a competent staff does well in the global market.

Recommendations

In my opinion, Li’s firm has a constructive ownership structure. It ought to incorporate Richard Li, the other son of Li, somewhere in the top management hierarchy. He should be appointed the Deputy Chairperson of WHL. However, he should be appointed into the new position without handing him the role of the managing director. This is because this position requires active participation yet he is in charge of another big company.

He is in charge of the leading telecom corporation in Hong Kong. Richard will work directly under his father in the WHL as Victor is in charge of CHK. This will ensure that the two companies are under full control of the family. This will allow them to be involved in the main decision making process.

Furthermore, the experience gained by Richard in managing the leading telecom company shall serve to prepare him adequately for full managerial role. This will help him gain adequate expertise by the time he comes to run their company when his father quits.

Victor is already in the main stream of the family business. Richard, as explained above, ought to be incorporated. Mr. Li senior is doing well by instructing one of his sons to seek employment elsewhere.

This is because it will create effectiveness since Richard will have acquired external experience while Victor will have acquired internal experience. Before he retires, Li has to ensure that his sons are fully allocated duties in the firm. This will give him an ample time to supervise decisions they make. In having Richard work elsewhere, he gets relevant experience.

For example, he will have acquired relevant skills in the procurement process, human resources, and personnel management. This would be crucial as far as far as decision-making is concerned.

The supervision by Mr. Li over his children will influence to draw a line between the business and family. The sons will learn from the efforts of their parents. Knowledge acquired abroad serves to open up their minds. This should help in identifying and recruiting competent and trustworthy employees.

The distinction can also be brought by outsourcing some of the firm’s departments to management companies. They would then run the various departments professionally on their behalf.

This will leave the sons with fewer areas of operations hence increasing efficiency through specialization and division of labour. With the experience of working alongside other senior managers, it would be easy working with the board members long after their father is gone.

Reference List

Chan, A 2008, ‘Creating Wealth in Twenty-first Century China: Li Ka-shing and His Progenies’, Asian Affairs: an American Review, vol. 34 no. 4, pp. 193-210.

Chan, S, Cheung, D & Andrew, B 2011, ‘Taxpayer’s Rights under the Liberalisation of Tax Information Provisions in Hong Kong’, International Tax Journal, vol. 37 no. 4, pp. 13-60.

Cheung Kong (Holdings) Limited 2012. Web.

Lee Cher, L 2010, ‘How Is “Philanthropy” Represented in Chinese Characters, Words, and Phrases? Toward an Etymological Interpretation’, Journal of Asian Business, vol. 24 no. 2, pp. 13-27.

Mayo, A, Benson, M & Nohria, N 2008, ‘Li Ka-shing and the Growth of Cheung Kong’, Harvard Business School Cases, vol. 1, pp. 1-30.

Munro-Smith, N 2008, A Dying Breed — The Diversified Conglomerate Hutchison Whampoa Ltd, Northeast Business and Economics Association, New York.

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