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Merchants as Business Groups: British Trading Companies in Asia before 1945

Published online by Cambridge University Press:  13 December 2011

Geoffrey Jones  and
Judith Wale
Geoffrey Jones
Affiliation:
GEOFFREY JONES is professor of business history in the economics department of the University of Reading, U.K.
Judith Wale
Affiliation:
JUDITH WALE is lecturer in accounting, University of Warwick Business School; visiting research fellow at the Centre for International Business History, University of Reading; and visiting research associate in the Business History Unit at the London School of Economics.
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Abstract

Merchants formed an important component of British foreign direct investment before 1945. Locating in parts of Asia, Latin America and other developing economies, they often diversified into non-trading activities, including the ownership of plantations. This article examines three such British firms active initially in Asia, though with operations also in North America, Europe, and Africa. Often regarded as handicapped by managerial failings, especially from the early twentieth century, the authors cast these firms as more entrepreneurial and possessing greater managerial competencies than has been suggested. The article argues that their business strategies continued to evolve in the interwar years and that, when viewed as business groups, their organizational forms were robust, though considerable diversity in the performance of the three British firms can be observed. This evidence is shown to have implications for wider debates about the competencies of British management as a whole.

Type
Articles
Information
Business History Review , Volume 72 , Issue 3: The Nixon Administration and Minority Business Enterprise , Autumn 1998 , pp. 367 - 408
Copyright
Copyright © The President and Fellows of Harvard College 1998

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References

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24 Harrisons & Crosfield appears to have exported some chemicals from Canada before 1920, though such activities were moribund from 1921. In the 1930s Harrisons & Crosfield in Canada gained experience of importing industrial raw materials and intermediate goods through large scale importing from Europe of steel products. Threat of war in Europe was one of the factors behind the move into distribution within North America. Harrisons & Crosfield seized the opportunity to acquire successively two companies which together allowed them to distribute a wide range of products for a number of important chemicals manufacturers. H. J. Williams, typescript history of Harrisons & Crosfield in Canada (1961), Harrisons & Crosfield archives, GL. These two moves belonged to a strategy common to many trading companies by the late 1930s: that of acquiring specialized manufacturers' agencies. Agencies for Canadian and U.S. manufacturers were an exception to the general rule that Harrisons & Crosfield acted as overseas sales agents for British manufacturers. The other exception was in Australia and New Zealand, where the company held agencies for local foodstuffs and other manufacturers.

25 R. J. Henderson to Borneo Company, 28 Dec. 1898; letter to Mr. Grenfell, 2 Mar. 1919, MS 27235, Borneo Company archives, GL.

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34 Staff lists, Harrisons & Crosfield archive, GL. No data exists on employment in the U.S., Canada and Australia operations.

35 Calcutta to Glasgow, 17 Sept. 1945, UGD 91/413/1. It has proved impossible to reach a similar employment figure for Harrisons & Crosfield and the Borneo Company.

36 This more dynamic view of British merchants/trading is found in some of the existing literature, including Fforde, International Track, and—in the case of Russia—Carstensen, Fred V., “Foreign Participation in Russian Economic Life: Notes on British Enterprise, 1865–1914,” in Entrepreneurship in Imperial Russia and the Soviet Union, ed. Guroff, Gregory and Carstensen, Fred V. (Princeton, N.J., 1983)Google Scholar.

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49 Champdany reports and accounts, UGD 91/162.

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52 Ibid.

53 Harrisons & Crosfield, One Hundred Years as East India Merchants: Harrisons & Crosfield, 1844–1943 (London, 1944), 35–6Google Scholar; records of Irwin-Harrisons-Whitney, Harrisons & Crosfield archives, GL.

54 Harrisons & Crosfield's “Nectar” brand was mainly exported from the U.K. Within the U.K., before tea activities were hived off into Twining Crosfield, Harrisons & Crosfield undertook blending and packet labeling for named distributors. Harrisons & Crosfield, One Hundred Years, 15–16.

55 Borneo Company board minutes, 19 Dec. 1934, MS 27178/20, GL.

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58 Return on capital employed (ROCE) is profit after tax as a percentage of capital employed. Capital employed is share capital (ordinary + preference) + reserves (including profit and loss balance) + debentures + any other long term loans. ROCE has been a standard measure of company performance since the 1950s. It is applicable to the published accounts of earlier periods, given that there has been no fundamental change in the way in which such accounts are prepared. Its retrospective application can be further justified by the fact that contemporaries could have calculated ROCE if they had wished to do so; they had the necessary information. Knowledge of the meaning and usage behind the terminology appearing besides the various numbers on the credit side of balance sheets allows the historian to identify with reasonable accuracy those numbers which comprised the company's reserves.

59 For Finlays' misfortunes in the early 1920s, see Brogan, James Finlay, 107, and “A Few Dates, Facts and Figures in the History of James Finlay & Co.,” n.d., UGD 91/413/10.

60 Arnold, A. J., “‘Publishing Your Private Affairs to the World’: Corporate Financial Disclosures in the U.K., 1900–24,” Accounting, Business & Financial History 7:2 (1997): 162CrossRefGoogle Scholar. If secret reserves did exist, ROCE figures would be slightly lower than those calculated from the published accounts. There is evidence that contemporaries regarded the accounts as a worthwhile source of information. The banks which granted trading companies (and other companies) overdrafts for their head offices in Britain and for their overseas branches were eager to receive the accounts each year for the purpose of assessment of creditworthiness.

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67 “Statements, Figures, Accounts of More than Passing Interest,” UGD 91/168. This situation was not unique. See Chapman, Merchant Enterprise, 301.

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69 The shareholders would consequently fall into two distinct groups: those who exited from the company by taking advantage of the selling price offered, and those who decided to remain with the company and who would have an interest in future dividends and future movements in return on capital employed.

70 Champdany board minutes, 1899–1914, UGD 91/178/5.

71 Board minutes of plantation companies, Harrisons & Crosfield archives, GL.

72 Ibid.; Stewart, “Scottish Company Accounting,” 261.

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81 Jones, British Multinational Banking, 49–51.

82 Correspondence in UGD 91/447/2/1.

83 Minute book of managers of Finlay Muir, Calcutta, 1895–1900, UGD 91/110.

84 Stewart, “Scottish Company Accounting,” 186–217.

85 Harrisons & Crosfield, Regulations in regard to Inter-branch Trading adopted by the Board on 6 January 1920, Harrisons & Crosfield archives, GL.

86 Stewart, “Scottish Company Accounting,” 214.

87 A. Lampard to V. Ris, 24 Feb. 1911, Harrisons & Crosfield archives, GL.

88 For a study of the Borneo Company after the Second World War, see White, Nicholas J., Business, Government, and the End of Empire: Malaya, 1942–1957 (Kuala Lumpur, 1996)Google Scholar, chapter 6.

89 This argument is explored in Jones, Geoffrey, “Great Britain: Big Business, Management and Competitiveness in Twentieth-Century Britain,” in Big Business and the Wealth of Nations, eds. Chandler, Alfred D., Amatori, Franco, and Hikino, Takashi (Cambridge, Mass., 1997)Google Scholar.