October 15, 2012 12:12 am

Family fortunes

CPN chief executive Kobchai Chirathivat©Lek Kiatsirikajorn/MoST

CPN chief executive Kobchai Chirathivat

As the low-key scion of one of Thailand’s wealthiest business families, Kobchai Chirathivat might have taken it a little easier on his climb up the management hierarchy in the sprawling Central group of companies.

But Mr Kobchai, chief executive of Central Pattana Public Company (CPN), the country’s largest developer and operator of shopping centres, has been described as possessing a “rare humility”. That trait prompted him in 2002 to become possibly the first chief executive of a listed Thai company to enrol on an English-language MBA course – the executive MBA at the University of Chicago Booth School of Business.

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Earlier that year, Mr Kobchai had taken the helm of CPN from his uncle, Sudhitham Chirathivat, who eventually became executive chairman of the flagship Central Group of Companies after overseeing CPN’s listing in March 1995 and the group’s recovery from the 1997 Asian financial crisis.

Mr Kobchai, who had entered the family business some years earlier at Central Trading, another arm of the group, had big ambitions for CPN’s domestic and international expansion but knew he lacked business education and expertise.

“I had done a masters in international relations and a BA in law. I never had a business education. After being pushed into the business world by my father, I learnt by myself, on the job,” he recalls. “Going back to school to learn how all these fields – marketing, finance, operations, human resources – can be integrated was quite an eye-opening experience.”

Mr Kobchai chose Booth partly for its reputation and partly for the convenience of its Singapore campus, two hours by air from Bangkok. The course was demanding. Students spend seven days a month at the Singapore campus for classes, and face a relentless load of assignments.

Booth has another satellite campus in London and a global alumni network. For Mr Kobchai, part of the reward has been some enduring relationships “with some people who are quite brilliant in their fields”.

But there were times when he nearly gave up. As he struggled to study, run CPN and oversee its expansion, it is little wonder it took him from 2002 to 2007 to complete the course. People around him say he juggled almost impossible demands. “I was working nearly full time as chief executive, with seven days off a month to go to school, but I finished,” he says with some pride.

It was “a bit tough”, he ventures, adding quickly: “Well, you could say ‘really tough’. I was probably quite a poor student, but the school encouraged me to keep going.”

The course was “transformative”, Mr Kobchai says. It also had a profound impact on human resources management and training at CPN, which now sends many people to MBA programmes in Thailand.

“We particularly try to encourage senior people, many of whom have worked with us for more than 10 or even 20 years,” he says. “They need that training to keep up with what’s going on and to communicate with their junior colleagues, many of whom have MBA backgrounds.”

CPN is among the more enlightened Thai companies, but others are also recognising the value of business education, Mr Kobchai says.

“Before, in Thailand and elsewhere in the region, the ‘Asian way’ of doing business focused on the entrepreneurial spirit – try this, try that, learn from experience. But with a good business education, you learn to look at business strategically, analytically and operationally. You really learn how to integrate management tools and operate all kinds of businesses,” he says.

Mr Kobchai’s education has also benefited CPN’s earnings and operations, which have grown substantially over the past decade. The group has forecast 30 per cent growth in annual revenue for 2012 to nearly Bt17bn ($550m). This is double the annual average increase over the past few years but also reflects a strong recovery from the closures of flagship malls last year due to the renovation of one site and damage to the CentralWorld mall, Thailand’s biggest, in Bangkok during the 2010 riots. As a result, second-quarter revenues this year leapt 51 per cent to Bt4.4bn.

Last month, the group unveiled a Bt50bn five-year expansion plan aimed at making it one of Asia’s top high-end shopping complex developers. The ambitious plan calls for 15 new branches by 2017 in Thailand and abroad, particularly in China. The company already owns and manages 18 premium malls, as well as office buildings and condominiums.

Underpinning the expansion is Mr Kobchai’s belief in the role of large shopping centres as hubs for family entertainment and relaxation as well as providers of basic necessities, financial services and luxury goods, especially for Thailand’s rapidly swelling middle class.

“People in Asia basically work very hard. In Thailand office workers start early and finish at 7pm or 8pm, especially managers. So when they have free time they want to go somewhere to relax and entertain their family,” he says. “That means they want upmarket malls – big enough and with all kinds of merchandise and services to satisfy consumers’ needs. That is why malls in Thailand, or Asia in general, tend to be on a bigger scale to those in the west.”

In the coming years Mr Kobchai will apply the CPN model to other markets, but he believes it all comes back to business education. “Partly because of our aspirations to expand abroad, we need to develop our people. They need to broaden their minds and to understand how to adapt management tools and know-how from their own market to others.”

Now in his mid-50s, Mr Kobchai never intended to go into business. His father, Vanchai Chirathivat, a formidable force in Thai retailing who took over from his elder brother in 1992, died in September, leaving the empire to five children and numerous relatives. Mr Vanchai was one of 25 children. The brothers left a vast legacy – a sparkling retail, property development and leisure empire, encompassing hotels and resorts, malls, convenience stores and restaurants, among other businesses.

Reflecting the group’s international expansion drive, Centara, the hotel and resort arm, has opened five new overseas resorts in the past few years, while Central Retail Group, now run by Mr Kobchai’s cousin, Tos Chirathivat, is also moving into overseas markets, from China to Indonesia, and acquired Italian department store chain La Rinascente for nearly $300m in 2011.

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The companies are run almost exclusively by family members. Only a few arms are listed, CPN being a key one. Mr Kobchai acknowledges the mixed structure of the mostly private group is hardly a textbook case for business school.

“The family holding in this company is still more than 59 per cent. In a way we need to learn more how to mix the strength of the family tradition of running the business with the new environment, where competition gets much keener,” he says.

“Perhaps the family needs to adopt a new kind of strategy, to run the group in a systematic way that can nurture sustainable growth, because once we expand the business across more countries, we will face many companies that are already quite mature and very competitive.”

Mr Kobchai’s career path has not been entirely smooth. As marketing manager with Central Trading, he headed an operation with 1,000 employees, but by the time he was appointed deputy general manager, he had become frustrated and decided to leave the family business. He admitted last year that he had been “too impatient” and had resolved to go back to work after some months.

His uncle, Mr Sudhitham, then head of CPN, took him on as director of property management. “I had to restart everything from zero, as one of his secretaries,” he recalls.

These days, Mr Kobchai says, his continuing education comes largely from attending industry conferences. But, he says, it may soon be time for more formal learning. “I have been thinking of going back to school, on an advanced management programme, only focused on select topics that you can utilise right away. It would probably be a month long, it depends on the school, but I would probably go back to Booth.

“Would I go through the whole thing again? It was difficult, but of course I would do it all again, although if I could turn the clock back, I would do it much earlier.”

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