The flourishing of Taiwan's "mini-enterprises" has always been a phenomenon that is both fascinating and very hard to research. The biggest difficulty one is confronted with is the paucity of relevant statistics and their serious lack of veracity. Chang Wen-hung, section head at the Medium and Small Business Administration of the Ministry of Economic Affairs, points out that this means "we can usually only rely on the evidence of our own eyes and use direct experience in our analysis."

Being a boss twenty years ago was near-deification. Today, with the labor shortage, you have to be more pleasant to the workers. No wonder it's less interesting to be an executive. （photo by Pu Hua-chih）

Who cares about the fate of mayfly enterprises?

Take for example the five-year survey conducted by the Directorate-General of Budget, Accounting and Statistics of the Executive Yuan into industrial and service businesses. According to this, the five-year survival rate for domestic enterprises averages around 70 percent, but a closer inspection reveals that many of those registered are small businesses which might not have changed their names but in fact could have already changed hands a number of times. What occurs most often is that the original boss cannot continue, so his employees maintain the face of the shop and keep on running it. When it comes to other things, such as analyzing the individual backgrounds of entrepreneurs, the categories of businesses, levels of profits and so on, there is always this same problem of collecting statistics. There might be a great multitude of mini-enterprises, but there remain many blind spots when it comes to their management.

With insufficient and misleading statistics, the mini-enterprises are truly like mayflies, coming to life and dying off with hardly anybody giving a fig. Yet this is not a phenomenon unique to Taiwan. Take Japan, where the whole country has around six-and-a-half million small and medium businesses. Despite this giving Japan an even higher proportion of businesses to the population than exists in Taiwan, such businesses are mostly subsidiaries or satellites of larger companies and are controlled from a large central factory.

"As for the advantages of such a system, the close cooperation between large and small companies in Japan does lead to an extraordinary degree of efficiency. But because the small factories are so dependent on the large ones, as soon as the large one wants to tighten its belt, the small will be the first to suffer," points out Telix Lee, manager of the Small Business Integrated Assistance Center. The countless number of small and medium enterprises that have failed with such rapidity in these depressed two years in Japan is a reflection of this high degree of dependence.

By comparison, Taiwan's medium and small businesses are much more independent. This is naturally related to the national preference that holds "it is better to be the chicken's head than the cow's tail." Up until today, the number of the country's businesses has continued to increase uninterruptedly in a flourishing business climate. At the end of 1991, the number of businesses had increased 20 percent on 1986--an average yearly increase of 25,000. The paradox is that the business environment of the past five years has obviously been far from what it was previously. That it has actually become harder to rise from rags to riches is something that academics and officials are at one in recognizing.

Too late already:

"Scaling up, distribution, diversification, internationalization, specialization, industrial upgrading.... these are the roads that modern industrial society must take and none of them is profitable for the management of small enterprises," points out Chang Wen-hung. Actually, the laundries, watch and spectacles shops, groceries, restaurants, gift shops, and wedding photography shops which were always where you could make it on your own have now become the domain of the large chain stores. The survival space for small enterprises is being squeezed.

Ben Wan, vice-president of the China Production Center, takes grocery stores as an example: If a small shop does not buy in much stock, then the upstream supplier cannot be relied on to definitely deliver it; but if the shop wants to compromise and order a bit more, then limitations of space mean that it will have to cut back on its range. It is thus that when customers have repeatedly failed to buy what they came in for, they turn to buying from a large supermarket instead, making it difficult for the small stores to survive. Moreover, large supermarkets employ professional staff who use computers to closely analyze all kinds and levels of stock supplies and market conditions, while all that the small stores can do is to grope around in the dark for themselves.

In addition to all of this, Peter Chang, director of the Manpower Planning Department of the Council for Economic Planning and Development of the Executive Yuan, points out that "Modern society preaches the division of labor. This intricate division of labor naturally raises efficiency." Because the mini-enterprises have limited capital, usually with the boss doubling up as accountant and general hand, getting by with whatever is available, the service and quality of goods gets cut back on.

"It is only at the low point of development that there is room for small-capital businesses," says Chu Cheng-chung, deputy director of the second institute of the Taiwan Institute of Economic Research. With the low standard of living in the early days of development it did not matter if things were a bit below par. So long as they were cheap, people would naturally want to buy them. People see things differently today, however. Nobody wants to buy low-class commodities, while the market for high-class products is small. Moreover, with the high rate of economic growth, the variety of businesses and enterprises is approaching saturation point and competition is intense. This situation is leading many young people to look to mainland China or Vietnam as the places in which to realize their dreams.

The spirit of enterprise should still be preserved:

The meteoric rise of costs is the greatest nightmare for small enterprises. Twenty years ago in Taiwan rent and labor were cheap and there was no concept of environmental protection. You could build a kingdom with your bare hands. This was far from the present, where if you happen to open a shop you will find that a budget of even NT$300,000 or NT$500,000 will not be sufficient for the decor alone. Moreover, some unreasonable social costs also tend to get passed off onto the heads of small enterprises.

Telix Lee takes a clothes and accessories shop in Tienmu as a case in point. Things were very difficult for this shop at first, until a McDonald's opened up nearby to create a bustling area for business. Yet it had never occurred to the happy proprietor that as soon as his business took off the landlord would get envious and double the rent. The money he earned was as good as given up to the landlord, leading him to wind up the business and leave the district in which he had worked so hard for three years managing his enterprise.

The difficulty of finding employees is another thing that those set on becoming bosses are unprepared for. One joke tells of how a certain proprietor, who could not find someone to help watch his shop, was so afraid that nobody would be there to greet his customers that he had to run every time he went to the toilet!

The business environment today cannot be compared to that of the past. It seems that mini-enterprises are just not right for the tide of the times. Yet the contribution they make to Taiwan's economy is still not an easy thing to neglect.

"Taiwan has so many industrious small enterprises, with such an extraordinary degree of coordination, that when big businesses have to rush a job and exchange goods then they do not need to worry about what is going on in the rear. Moreover, the vigorous competition between them, and their low-priced but high-quality goods, have raised the overall international competitiveness of Taiwan's enterprises as a whole," points out Wan I-ning. Many Taiwan businesses discover on moving to Southeast Asia that even finding paper cartons for their goods, or sticky tape, takes an awful lot of trouble. It is then that they realize just how much they had previously been surrounded by benefits without knowing it.

Despite there being some people who think it is imperative under the circumstances for there to be an appropriate weeding out of mini-enterprises, there are even more who are not willing to see any derogation of Taiwan's entrepreneurial spirit. In recent years there has been a fashion for internationalizing business and forming alliances which, although not a complete substitute for enterprise, does at least offer alternative choices to those who would be entrepreneurs. Many people are now wondering just how the faces of their entrepreneurial dreams are going to change; even more people are watching closely to find out.

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The rise of well-known chain stores has put existing small independents in a tight squeeze. (photo by Huang Li-li)

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Being a boss twenty years ago was near-deification. Today, with the labor shortage, you have to be more pleasant to the workers. No wonder it's less interesting to be an executive. (photo by Pu Hua-chih)