As CK group transitions from Li Ka-shing to Victor Li, monopoly should no longer be its bread and butter

Peter Guy says the group of companies founded by the legendary Hong Kong tycoon can no longer rest on its conservative and defensive strategy of investing in monopolies

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Victor Li Tzar-kuoi (left) and his father Li Ka-shing pictured at the CK Hutchison Holdings Limited and CK Asset Holdings 2017 annual results announcement in Central. Victor Li took over from his father as chairman of the two companies in March. Photo: Sam Tsang

Published: 12:00pm, 25 Jul 2018Updated: 5:03pm, 25 Jul 2018

There are only two economic reasons to own a business. One is to grow it, the other is to sell it. Anything in between invites indecision and ossification through slothful management. One exception is the Hong Kong Chinese family business, a kind of economic monarchy. Many conglomerates grew out of local property development and trading businesses whose skill sets don’t necessarily reflect the outside world. The primary rule of succession is: no matter how cumbersome it has become, the business must inevitably be run by a family member.

The outcome is a dilemma where the conservative private banking priorities of a wealthy family conflict with the risky growth priorities that investors demand of a global, listed company.

After a 30-year apprenticeship, Victor Li Tzar-kuoi, 53, inherited his father’s leadership of CK Hutchison Holdings and CK Asset Holdings this year. The two conglomerates, which operate in over 50 countries, had combined revenue last year of HK$478 billion (US$61 billion), with a net profit of HK$65 billion.

Victor Li’s father, Li Ka-shing, built his empire on his super returns in property development and utilities, where he gained a dominant and sustainable competitive advantage through defendable markets or built-in monopolies. These returns were so immense that in the ’80s and ’90s, Li’s superior negotiating skills and relationships allowed him to efficiently assemble property developments without having to buy and hold extensive land banks.

As CK group transitions from Li Ka-shing to Victor Li, monopoly should no longer be its bread and butter

Peter Guy says the group of companies founded by the legendary Hong Kong tycoon can no longer rest on its conservative and defensive strategy of investing in monopolies

Watch: Hong Kong’s richest man Li Ka-shing announces his retirement