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The LINK, Mar - Apr 2010
ASIAM's Strategic Success
Carlos Moncayo (DIMP 2008) has survived the challenge of going head-to-head with other China-based start-ups, including those launched by the 'new wave' of savvy, sophisticated local entrepreneurs. Read on for his strategy for growing a business and ensuring long-tem success in China.
By Charmaine N. Clarke
Before he left Ecuador to study law in the U.S. in 2003, Carlos Moncayo (DIMP 2008) knew almost nothing about China. It was simply a place he occasionally saw "in the movies." In 2004, he arrived in Shanghai on a scholarship to East China University of Law and Politics for a six-week programme on Chinese legal institutions and an internship in a China-based law firm. Six years later, Moncayo is the CEO of ASIAM Business Group, an offshore manufacturing management company that specializes in the garment industry, which he launched and runs with his two brothers Fernando and Luis.
Although just six years old, ASIAM has made a splash not only in the clothing business but also as a media darling. The company first captured two categories in The BizzAwards 2009: the "Entrepreneurial Company Award" for small and medium size companies, and the "Inspiring Business Award" for macro and larger companies. Last year as well, Moncayo himself was also voted by BusinessWeek as Asia's Best Young Entrepreneur for 2009. At the young age of 28, he is among the foreigners who have survived the challenge of going head-to-head with other China-based start-ups, including those launched by the 'new wave' of savvy and sophisticated local entrepreneurs. What is the Moncayo brothers' strategy for growing a business and ensuring long-term success in China?
The early years
Like many foreign entrepreneurs in China, Carlos Moncayo fell in love with China by accident. While working as one of five research assistants to a law professor in the U.S., he got stuck with researching Chinese sports law, a daunting task that his classmates had sought to avoid. The project kindled a genuine interest in China and a scholarship to study Chinese law in Shanghai. "I was very excited about the opportunity but I saw it as a short stay, initially," Moncayo explains. That soon changed. Even before he arrived in China, his brother Luis began discussing potential business opportunities that could exist in the Asian country. It wasn't a hard sell. After all, the brothers had grown up learning from their father's many business ventures and their mother had often dreamt aloud of her three sons forming a company.
It was Moncayo's ability to recognize a good business opportunity that finally got the business started. While doing his internship at the Shanghai office of a U.S. law firm, he noticed a trend: many lawsuits stemmed from problems between factories inside China and their clients abroad. A lot of the problems, he realized, could have been avoided with better communication, due diligence, and an efficient check-and-balance system. "I could see the Chinese factory trying to say something that the client didn't understand. The misunderstanding grew, and it was messy," Moncayo says. "After I read a lot of cases, I realised this was the general trend. There was a very big difference between what the clients were requesting and what the factory thought the client wanted. I thought: there has to be a different way of doing this."
Just two months after he first set foot in China, Moncayo sold the idea of a new business venture to his brothers. They quit their jobs and helped him set up an office in Ecuador, using a US$10,000 cash advance from their father's credit card and another US$10,000 from Fernando's card as seed capital. Meanwhile here in China, Moncayo convinced the law firm where he interned to grant a rent-free work space in exchange for continued work on their Spanish-speaking accounts. Suddenly, ASIAM was open for business, with offices in two countries. Then came the hard part.
Who are we?
The Moncayo brothers began with a clear goal of helping international companies to do business more effectively in China, but only a murky plan for achieving this target. Today, ASIAM's business plan is lucid: the company helps Spanish-speaking SMEs to source goods from China. Its main clients are in Mexico, Spain, Guatemala, Panama, Colombia, Peru, Ecuador and Argentina.
In the early days, before the popularity of Alibaba and similar sites, the brothers began by helping clients find China-based factories. Initially, they charged a flat fee to generate lists of suppliers. Later, they expanded the service to include the actual product purchase. Demand came fast, Moncayo remembers. "People were interested!" he says. "We were busy and it was just me handling the entire thing and that was not enough." The next step was to hire their first employee and to open a modest office along Shanghai's Changshu Road.
Business flowed in, Moncayo says, largely because, as the first Ecuadorian company in China, their clients depended on them to source everything. By the start of their second year, they were in danger of spreading themselves too thin by trying to meet all their clients' needs. "We realised that, if we really wanted a sustainable business, we would need to focus on long term, relationship-based clientele," Moncayo explains.
Secrets to success
The struggle to stay one step ahead of their fast-growing business served ASIAM well during its early years. In fact, redesigning their business plan annually has helped the Moncayo brothers to continually seek new ways to serve clients better.
One turning point came when the company attained a solid reputation in the Ecuadorian market. "The biggest challenge in the first two years was that we were three young men -- I was 24, Luis was 26, and Fernando was about 30, and we still had only small offices in both countries. It was hard for us to reach the 'big league' clients. So 'credentials' was what limited us the most at the beginning," Moncayo says. Creativity and hard work eventually paid off and they landed an account with one of Ecuador's largest toy importers. Eighteen months later they had leveraged this to add another five major clients in Ecuador. Building on those successes, the trio branched out to neighbouring Colombia, then Peru, and they haven't looked back since.
Another success factor during the early growth years was the addition of several important mentors; the company added one of Ecuador's best-known businessmen as an investor, one of the country's consulting gurus as a board member, and took on Moncayo's father as Commercial Manager. Says Moncayo: "We've also been very selective about the people that we hire." Today, ASIAM operates with 25 employees in the China office and nine in Ecuador.
Fast growth often requires frequent re-focusing, however, in order to avoid spreading the company too thin. By mid-2007, even though the company was trying to focus on clients who needed to source more than US$2 million in products each year, they were still offering a potpourri of diverse services. Finally, the founders had the answer to the question, "where are we going?" They decided to strip down their operation and focus mainly on their biggest clients in the garment industry, while retaining complementary services such as their factory inspection unit. Part of this effort, Moncayo says, included 'reinforcing' the team with experts in garment production. "We tried to generate a team of specialists who would allow us to provide better service," he says.
Hunkering down and looking ahead
ASIAM founders are clearly doing something right; the company has averaged 112% growth annually in the last five years. At the height of the global economic crisis last year, ASIAM hunkered down and used the time to improve its operations. Moncayo explains, "We used the recession year as an opportunity to clean house -- to improve our systems, organise things better."
Moncayo also stresses the importance of constantly evolving, especially in China's fast paced business environment. After all, during his six years in China, he has seen radical changes. For one thing, the business environment is more transparent and open, he says, and factories are becoming more professional. "Before, it was a mystery to find a factory in China -- it was like finding a lost city. But now, anybody from anywhere in the world can find a factory and can quote product prices," he says. "There's also more interaction between China and South America, both officially and privately."
Looking ahead, ASIAM is now focused on improving its manufacturing bases and expanding its services for leading garment industry brands in Latin America.
The company has set a mid-term goal of expanding outside their comfort zone and into countries in which Spanish is not the mother tongue. Brazil may be the first target destination. Also under consideration is a move outside the garment industry, as well as downstream expansion. "In the long term, I think we'll begin to integrate our business vertically," Moncayo says.
Another passion for Moncayo is helping other entrepreneurs launch their own start-ups. His advice: always be on the look-out for an opportunity, do the numbers before you invest time and money in a project, be willing to passionately focus on nothing except that goal for at least two years, and stop at regular intervals to assess if you are heading in the right direction. In the launching phase, he warns: "Don't lose focus. Always focus, focus, focus, focus on where you're going." But once the company is up and running, he advocates striking the right work-life balance. "As an entrepreneur, you put so much passion into the company that there's no 'you' -- there's just the company, which is not healthy. You have to separate the two and really develop yourself." He adds, "It's important to find a way to clear your mind and to cultivate friendships."
The role of CEIBS
Moncayo's enrolment in the CEIBS Diploma in Management Programme in 2008 helped broaden his personal and professional network in China and gave him the theoretical business knowledge he needed to complement his natural entrepreneurial instincts. The DIMP course also matched his need to keep working while he studied. "I found the programme extremely useful for my job as CEO of ASIAM because I had the chance to use the company as my 'laboratory'," he explains. Many assignments involved implementing, at his company, the theory he had learned in the classroom a few days before. "Every time I went back to work after a module, I was a new 'consultant' in a new field," he explains.
Now, equipped with the theoretical and practical knowledge necessary to succeed in China, Moncayo says he is better prepared for his role as CEO of ASIAM. The next big challenge will be to keep the company ahead of the game as China's increasingly sophisticated entrepreneurs -- including some of his former CEIBS classmates -- battle for turf. But challenges, obviously, do not intimidate Moncayo. Having arrived in China in June 2004 with no Chinese language skills and no contacts, he has already proven his stamina and ability. As he puts it, "I had US$400 in my pocket, tons of energy and big dreams." Today, he is living his dream.