CHAPTER 15 ' LEADERSHIP AND EMPLOYEE BEHAVIOR IN INTERNATIONAL BUSINESS C13

generation of workers. Companies need to ensure that notonly do the United Arab Emirates’ nationals have therequired set of skills. but also that they have had the oppor-tunity to have work experience in the past. Some 45 percentof the United Arab Emirates’ nationals are under I5 years ofage; the main challenge will occur over the next decade orso, as these individuals filter into the workforce. Like DubaiAirports. all businesses operating in the United ArabEmirates need to take long-t.erm human resource views. inorder to encompass Emiratisation. Last-minute fbtcs or solu-tions simply do not work. either for the company, or for thepotential employees.

Case Questions1. Why might Dubai be prepared to invest such vast funds ininfrastructure projects such as this?

2. Why did the company decide to undertake thiscomprehensive restructuring exercise‘?

3. What are the positive and negative implications ofDubai's decision to focus on employment for their ownnationals‘?

4. Undoubtedly. the company is a successful one. but inthe case of such a cash-rich company. do profitsreally matter’? What are the motivations for thecompany?

5. The investments and the ambitious plans send out astrong message to the airline industry and the aviationindustry in general. What are the implications for otherairports should the predicted figures turn out to becorrect‘?

Sutures.‘ Baltimore Sun [www.baltimoresun.eom): Dubai City(www.dubaicity.co|nJ: Flight Global (www.tlightglobal.com): Al HilalPublishing & Marketing Group (www.tradcarahia.enm): Gulf New(www.gullnews.co1n); Dubai international twwwduhaiairport.coml:Dubai Airport Guide (www.worldairportguidc.com]: Khaleej Tittiestwww.khalcejtimes.coml: Dubai Ouliue twww.dubai-onlinc.com)1 DubaiDepartment of Tourism and Commerce Marketing (www.dubaitnurismae).

Nora-Sakari: A Proposed JointVenture In MalaysiaOn Monday, July IS. 2003. Zainal Hashim. vice-chairmanof Nora Holdings Sdn Bhd‘ (Nora). arrived at his office.He thought about the Friday evening reception which hehad hosted at his home in Kuala Lumpur (KL). Malaysia.for a team of negotiators from Sakari Oyz (Sakari)of Finland. Nora was a leading supplier of telecommunica-tions (telccom) equipment in Malaysia while Sakari, aFinnish conglomerate. was a leader in the manufacture ofcellular phone sets and switching systems. The seven-member team from Sakari was in KL to negotiate withNora the formation of ajoint-venture (JV) between the twoteleeom companies.

This was the final negotiation which would determinewhether a JV agreement would materialize. The negotiationhad ended late Friday afternoon, having lasted for fiveconsecutive days. The JV Company. ifestablished, would be

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set up in Malaysia to manufacture and commission digitalswitching exchanges to meet the needs of the teleeom indus-try in Malaysia and in neighbouring countries. particularlylndonesia and Thailand. While Nora would benefit from theJV in terms of technology transfer, the venture would pavethe way for Sakari to acquire knowledge and gain access tothe markets of South-east Asia.

The opportunity emerged two and half years earlierwhen Peter Mattsson. president of Sakari‘s Asian regionaloffice in Singapore. approached Zainal to explore the possi-bility of fomiing a cooperative venture between Nora andSakari.

The large potential for teleeom facilities was evidenced inthe low telephone penetration rates for most South-east Asiancountries. For example. in I999, telephone penetration rates(measured by the number of telephone lines per 100 people)for Indonesia. Thailand. Malaysia and the Philippines rangedfrom three to 20 lines per 100 people compared to therates in developed countries such as Canada. Finland.Germany. United States and Sweden. where the rates exceeded55 telephone lines per I00 people.

The Telecom Industry In MalaysiaTelekom Malaysia Bhd (TMB). the national teleeom company,was given the authority by the Malaysian govemment todevelop the country's teleeom infrastructure.

Although TMB had become a large national teleeomcompany. it lacked the expertise and technology to undertakemassive infrastructure projects. In most cases. local teleeomcompanies would be invited to submit their bids for a particu-lar contract. lt was also common for these local companies toform partnerships with large multinational corporations(MNCs). mainly for technological support.

Nora's Search for a JV Partnerln October 2002. TMB called for tenders to bid on a live-yearproject worth RM2 billion for installing digital switchingexchanges in various parts of the country (At that time, U.S.$1 = RM 3.80). The project also involved replacing analogcircuit switches with digital switches.

Nora was interested in securing a share of the RM2 billioncontract from TMB and more importantly. in acquiring theknowledge in switching technology from its partnership with ateleeom MNC. During the initial stages. when Nora first beganto consider potential partners in the bid for this contract.teleeom MNCs such as Siemens, Alcatel. and Fujitsu seemedappropriate candidates. Nora had previously entered into afive-year technical assistance agreement with Siemens tomanufacture telephone handsets.

‘Sdn Bhd is an abbreviation for Sendirian Berhad. which means privatelimited company in Malaysia.30y is an abbreviation for Osalteyhliot. which means private limitedcompany in Finland.

474 PART 3 I MANAGING INTERNATIONAL BUSINESS

Nora also had the experience of a long-term workingrelationship with Japanese partners which would prove valu-able should a JV be formed with Fujitsu. Alcatel wasanother potential partner, but the main concern at Nora wasthat the technical standards used in the French technologywere not compatible with the British standards alreadyadopted in Malaysia. NEC and Ericsson were not consid-ered, as they were already involved with other local com-petitors and were the current suppliers of digital switchingexchanges to TMB. Their five-year contracts were due toexpire soon.

Subsequent to Zainal's meeting with Mattsson. hedecided to consider Sakari as a serious potential partner. Hewas briefed about Sal-:ari's SK33. a digital switching systemthat was based on an open architecture, which enabled theuse of standard components, standard software develop-ment tools. and standard software languages. Unlike theswitching exchanges developed by NEC and Ericssonwhich required the purchase of components developed bythe parent companies, the SK33 used components that werefreely available in the open market. The system was alsomodular. and its software could be upgraded to provide newservices and could interface easily with new equipment inthe network. This was the most attractive feature of theSK33 as it would lead to the development of new switchingsystems.

Mattsson had also convinced Zainal and other Nora man-agers that although Sakari was a relatively small player infixed networks, these networks were easily adaptable. andcould cater to large exchanges in the urban areas as well assmall ones for rural needs. Apparently Snkari’s smaller size,compared to that of some of the other MNCs, was an addedstrength because Sakari was prepared to work out customizedproducts according to Nora's needs. Large telecom companieswere alleged to be less willing to provide custom-madeproducts. instead. they tended to ofier standard products that,in some aspects. were not consistent with the needs ol‘ thecustomer.

Prior to the July meeting, at least 20 meetings had beenheld either in KL or in Helsinki to establish relationshipsbetween the two companies. It was estimated that each sidehad invested not less than RM3 million in promoting the rela-tionship. Mattsson and llkka Junttila. Sakari‘s representative inKL, were the key people in bringing the two companiestogether.

Nora Holdings Sdn BhdThe CompanyNora was one of the leading companies in the telecom industryin Malaysia. It was established in 1975 with a paid-up capitalof RM2 tnillion. Last year, the company recorded a turnover ofRM32O million. Nora I-loldings consisted of 30 subsidiaries,including two public-listed companies: Multiphone Bhd. andNora Telecommunications Bhd. Nora had 3.08] employees, ofwhich 513 were categorized as managerial (including244 engineers) and 2.568 as non-managerial (including269 engineers and technicians).

Nora had become a household name in Malaysia as atelephone manufacturer. It started in 1980 when the companyobtained a contract to supply telephone sets to the government-owned Telecom authority. TMB. which would distribute thesets to telephone subscribers on a rental basis. The contract.estimated at RMl3U million. lasted for l5 years. ln I985 Norasecured licenses from Siemens and Nortel to manufacturetelephone handsets and had subsequently developed Nora'sown telephone sets.

The ManagementWhen Nora was established. Osman Janfar. founder and chair-man of Nora Holdings. managed the company with his wife.Nora Asyikin Yusof, and seven employees. Osman was knownas a conservative businessman who did not like to dabble inacquisitions and mergers to make quick capital gains. He wasformerly an electrical engineer who was trained in the UnitedKingdom and had held several senior positions at the nationalTelecom Department in Malaysia.

Osman subsequently recruited Zainal Hashim to fill in theposition of deputy managing director at Nora. Zainal held amaster's degree in microwave communications from a Britishuniversity and had several years of working experience as atproduction engineer at Pernas-NEC Sdn Bhd. a manufacturerof transmission equipment. Zainal was later promoted to theposition of managing director and six years later. the vice-chaimian.

Industry analysts observed that Nora's success wasattributed to the complementary roles. trust. and mutualunderstanding between Osman and Zainal. While Osman“likes to fight for new business opportunities." Zainal pre-ferred a low profile and concentrated on managing Nora'soperations.

Industry observers also speculated that Osman. a formercivil servant and an entrepreneur. was close to Malaysianpoliticians. notably the Prime Minister, while Zainal hadbeen a close friend of the Finance Minister. Zainal disagreedwith allegations that Nora had succeeded due to its closerelationships with Malaysian politicians. However. heacknowledged that such perceptions in the industry had beenbeneficial to the company.

Osman and Zainal had an obsession for high-techand made the development of research and development(R&D) skills and resources a priority in the company.About one per cent of Nora's earnings was ploughedback into R&D activities. Although this amount was con-sidered small by international standards. Nora planned toincrease it gradually to five to six per cent over the next twoto three years.

Zainal was also active in instilling and promoting lslamicvalues among the Malay employees at Nora. He explained:

Islam is a way of life and there is no such thing asIslamic management. The Islamic values. which must bereflected in the daily Life of Muslims. would influencetheir behaviours as employers and employees. OurMalay managers. however. were often influenced bytheir western counterparts. who tend to stress knowl-edge and mental capability and often forget the

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