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Monday, March 12, 2001

Asian Family Business


Entrepreneurship of fourth generation saves empire

EU YAN SANG has survived the "three-generation trap'' common in the history of most Chinese family businesses because of the entrepreneurship of the fourth generation, said an economist.

National University of Singapore's Associate Professor Dr Henry Yeung Wai-chung said the 1990 acquisition of Eu Yan Sang Holdings Ltd in Singapore by local property developer Lum Chang Group almost led to the demise of the company as a family business.

"This acquisition ended the long history of family ownership and management of Eu Yan Sang Holdings Bhd in Malaysia and Singapore,'' he said.

In his paper, Managing Traditional Chinese Family Firms Across Borders: Four Generations of Entrepreneurship in Eu Yan Sang, Dr Yeung said one of the challenges the third-generation of Eu faced was "the lack of interest among the brothers to manage Eu Yan Sang directly.''

Even though members of the third generation had substantial ownership and control of the family business, they did not participate actively in its day-to-day management which was instead left to trusted employees.

"The lack of a clear succession plan by Eu Tong Sen also contributed to the inheritance dilemma in which equal inheritance essentially forbade any branch of the family from controlling the business,'' Yeung said.

He said it was the dynamism and entrepreneurial skills of the fourth generation that saved the family business empire.

He lauded the current controlling family members for rejuvenating the business through a combination of direct family control, a consolidated corporate structure and a professional management team.

"Eu Yan Sang's example shows that to manage successfully across borders, a Chinese family firm needs both professional managers and corporatised organisational structure,'' he concluded.

When Eu Tong Sen renamed his father's shops from "Yan Sang Medical Shop'' to "Eu Yan Sang Medical Shop'', it was meant to "reinforce the fact that Eu Yan Sang was a family business to be handed from one generation to another,'' Yeung noted.

It is a testament to the fourth generation's tenacity that Tong Sen's legacy has been preserved.

It is also interesting to note that Eu Yan Sang International Holdings Pte Ltd is the only company which still bears the family name today.

"All other companies founded by Eu Tong Sen have been renamed or consolidated under different holding companies,'' Yeung said.

Related stories:

Eu Yan Sang -- a 4th generation success
CEO recalls history of company's transition
Eu Yan Sang big on R&D
Herbal soup invigorates the mind, says herbalist
The Chinese family business in S-E Asia

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March 12, 2001
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 ·  Malaysia Today: Key events to watch, and why, on March 12   8:03:07 AM

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