analysis of corporate strategy prepared by jessica choi, phoenix tiu, janet poon, cathy ho &...
TRANSCRIPT
![Page 1: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/1.jpg)
ANALYSIS OF CORPORATE STRATEGY
P r e p a r e d b y J e s s i c a C h o i , P h o e n i x T i u , J a n e t Po o n , C a t h y H o & T i m o t h y S a r g e a n t
China Resources Enterprise
![Page 2: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/2.jpg)
Content
ProblemSWOT Analysis –OverviewBusiness Level Strategy
- Focused geographical- Differentiation
• Corporate Level Strategy- Related- link
- Acquisition- based StrategyRecommendation
![Page 3: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/3.jpg)
Problem
Recently restructured companies assets
Low margins CRE operating margin: 1.5% (2009 FY) Sector average: 3.1%
Desire from investors for higher profit margin
Acquisitions currently a very important part of CRE’s strategy
![Page 4: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/4.jpg)
Problem
CRE has yet to improve its margins through an acquisition based strategy
Should CRE continue acquisition based growth strategy or focus on fine-tuning their core business against the risks?
![Page 5: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/5.jpg)
C’estbon Pacific Coffee
Beverage Analysis
![Page 6: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/6.jpg)
Beverage Analysis
![Page 7: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/7.jpg)
Beverage Analysis
Strength- Largest packaged water
brand in Guangdong
Weakness- Insufficient production capacity for launching
new products
Opportunity- Fast-growing coffee
market- Emphasis on healthy
diet
Threat- High development Cost
- Keen competition
![Page 8: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/8.jpg)
Rivalry with existing
competitors
Bargaining power of customers
Bargaining power of suppliers
Potential Entrants
Product Substitutes
![Page 9: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/9.jpg)
Beverage Analysis
Five Forces Rivalry with existing competitors
“C’estbon”: Master Kong, Wahaha, Nongfu & Coca-Cola
Pacific Coffee: Starbucks and Gourmet Master (Taiwan brand)
![Page 10: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/10.jpg)
Beverage Analysis
Potential EntrantsChina beverage industry is attractive to the potential entrants
Source: Canadean
![Page 11: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/11.jpg)
Beverage Analysis
Bargaining power of customers“C’estbon”: HIGH Pacific Coffee: LOW
Bargaining power of suppliersPacific Coffee: HIGH
Product SubstitutesCarbonated drinks, energy drinks and tea
![Page 12: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/12.jpg)
Marketing Strategy
“ Snow” Advertisement http://www.snowbeer.com.cn/
How does this add value to the presentation, not sure that we can afford the time
![Page 13: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/13.jpg)
Beer Analysis
![Page 14: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/14.jpg)
Beer Analysis
Beer - " 雪花 Snow“
SWOT – Strength China’s best-selling beer for 2009 in terms of sales volume Market leader position further consolidated by acquisition of
Kingway in Feb 2011 US $40m investment in Technology
Legend of quality: unified technological and
technical standards
Appointed again as the official beer for NPC and CPPCC
![Page 15: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/15.jpg)
Beer Analysis
Customer-Focused
Royal- looking and extravagant
noble gold and jade inlaid and engraved vision
Focus shift from supply-driven to demand small bottles like imported beers
![Page 16: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/16.jpg)
Beer Analysis
-Brand Promotion Campaign : “The Great Expedition” (勇闖天涯 ) more customer interaction attracted many customers due to its story (not actual
taste)
![Page 17: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/17.jpg)
Beer Analysis
SWOT –Weakness- Thin profit margin (Chinese: price-sensitive)
[$2 per hectoliter, compared with $50 to $80 in Europe and the U.S]
HK $ right
![Page 18: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/18.jpg)
Beer Analysis
SWOT –OpportunityEnlarged customer group :
younger, higher income, more urban customers high-end : Snow Draft, Snow Super Premium urban: Beijing
Chinese robust economy
Chinese twelfth five-year plan
![Page 19: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/19.jpg)
Beer Analysis
SWOT –Threat
cost of production: raw materials, rent, utilities
increasing M&A cost
![Page 20: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/20.jpg)
• “Tsingtao”: great brand recognition, 15% of domestic market share
• “Bud Light”: “Snow” outsold [Source: Pluto Logic]
Rivalry with existing
competitors
• High market reputation and strong customer loyalty“The Great Expedition” (“勇闖天涯” )
Bargaining power of
customers
• Raw materials + Packaging materials: hard to be replaced
Bargaining power of suppliers
• Hard to gain a share in this competitive marketPotential Entrants
• Taste specialityProduct Substitutes
![Page 21: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/21.jpg)
Retail Analysis
Strength
- 2nd largest retail organization in China in
Retail Asia Pacific top 500 awards
- Multi-format business platform
![Page 22: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/22.jpg)
Retail Analysis
Regional leadership on a multi-format business platform
![Page 23: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/23.jpg)
Weakness- Lower average sales per
store compare to competitors
Strength
- 2nd largest retail organization in China in
Retail Asia Pacific top 500 awards
- Multi-format business platform
![Page 24: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/24.jpg)
Average sales per store for hypermarkets format in 2009
Market Average CNY 163.4 million
CRE CNY 78million
Carrefour’s Shanghai store CNY364 million
![Page 25: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/25.jpg)
Weakness- Lower average sales per
store compare to competitors
Strength
- 2nd largest retail organization in China in
Retail Asia Pacific top 500 awards
- multi-format business platform
Opportunity
- Increasing urbanization of China has expanded
the consumption market
Threat- Keen competition from Carrefour, Tesco, Wal-
Mart
![Page 26: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/26.jpg)
5-forces Analysis• Multinational retailers such as Wal-mart, Tesco,
Carrefour expand their operations in 2nd and 3rd tier cities
• Will open 12-20 new stores each year according to PwC
Rivalry with existing
competitors
• switching cost is moderate and is decreasing with growing experience in the marketBargaining power
of customers
• rather low for small suppliers such as small farming businesses
• higher for international brands like P&G as they have international brand awareness
Bargaining power of suppliers
• High cost to entry due to the need to set up new distribution channels
• Competitors may retaliate with price war or bad publicityPotential Entrants
• Traditional stores offering human contact are an alternative
• Internet shopping may eliminate hypermarkets and supermarkets
Product Substitutes
![Page 27: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/27.jpg)
Food and Processing Distribution Analysis
![Page 28: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/28.jpg)
Food and Processing Distribution Analysis
Ng Fung HongStrength: premium food qualityvertically integrated meat supply system
- Remain in competitive position in the market ( 5 forces)
![Page 29: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/29.jpg)
Rivalry with existing
competitors
Bargaining power of customers
Bargaining power of suppliers
Potential Entrants
Product Substitutes
![Page 30: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/30.jpg)
Food and Processing Distribution Analysis
Five Forces Rivalry with existing competitors: medium- the monopoly live cattle importer from China- strong brand recognition & reputation- Competitors: Local farms(limited supply), frozen meat
suppliers all over the world Bargaining power of customers & product
substitutes : medium to low monopoly in live cattle market in HK Substitutes: local meats, chilled/ frozen meats Potential Entrants monopoly in live cattle market in HK
![Page 31: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/31.jpg)
Bargaining power of suppliers: Low- Many product sources
Food and Processing Distribution Analysis
![Page 32: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/32.jpg)
Weakness:
increasing cost of production ( raw materials) - pressure to raise the price of
risk of diluting perceived differentiated features:- customer’s dissatisfaction of price increase of meat price increase
is not justified by perceived increase in quality
Food and Processing Distribution Analysis
![Page 33: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/33.jpg)
Food and Processing Distribution Analysis
Opportunities- Economic growth in China: increasing pork
consumption--- demand increase- market expansion in China: joint venture and
acquisition --- penetrate into production, retailing and marine fishing
![Page 34: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/34.jpg)
Threats
Hong Kong Pork Traders Call For End In Monopoly Imports:buyers urged the government to open up the live cattle market --- break Ng Fung Hong's monopoly
Food and Processing Distribution Analysis
![Page 35: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/35.jpg)
Recommendation
1. Integrated cost leadership and differentiation strategy
Increase efficiency: Integrated value chain system:- Beverage: Manufacture the products by
themselves rather than by OEM factories- Beer: divest non-core beer brands (e.x 扎西德勒 ,
Singo) --- focus investing in core brand Flexible manufacturing system(FMS): Computer
controlled process--- flexible quantities--- product variety with low cost
- Food, Beverage and beer
![Page 36: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/36.jpg)
Retaillocating supermarkets in self-owned or
partially-owned property development projects
![Page 37: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/37.jpg)
Benefits:- lower operational costs- Allow quality tracking --- create value to
customers - Widen operating margin ---higher
investment return- Build core competence to ensure continual
growth
![Page 38: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/38.jpg)
2. Differentiation Product quality improvement and innovation- Food: emphasis on its safe and high quality
food products- Beer: increase product mix to meet variety
seeking of customers
![Page 39: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/39.jpg)
- Beverage: Develop healthy drinks--- strength product portfolio --- offer health-conscious customers a wide range of products
2011 2012 2013 2014 20150
5000
10000
15000
20000
Estimation of juice sales from 2011 to 2015
$U
S m
n
![Page 40: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/40.jpg)
![Page 41: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/41.jpg)
e.g. Co-location of CRE’s existing and expanding retail network and Pacific Coffee
More sophisticated lifestyle experience for customers
Increase profit margins
![Page 42: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/42.jpg)
Benefits:- Customer loyalty: superior quality- Set a premium price- Food: justify high price
Drawback: - High cost : marketing research, new product
development
![Page 43: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/43.jpg)
Focused Geographical market: domestic Chinese market
• leverage its strength : good understanding of Chinese Market
• better serve the segment• Less risky • ally with mission: China’s largest consumer goods
company
Benefits
• local competitors : focus on more narrowly defined competitive segments (same differentiation at lower price)
• cannot tap the advantages of using global strategy: (market size, ROI, economics of scales and learning)
Drawbacks
![Page 44: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/44.jpg)
Recommendation
External
environment
•Increasing urbanization, GDP in China
•China’s twelfth 5-year Plan: boost domestic consumption ( minimum wage)
Attractive
industry
•Retail, food, beverage (increasing demand)
Strategy
formulation
•Focus on regional Chinese market
•Expand in profitable 2nd tier markets substantially
Asserts and skills
•Market leadership : better equips the company to effectively participate in the vibrant Chinese markets
•Good understanding of Chinese Market
Strategy
implementation
•Products: the famous
•Price : premium price
•Place: 2nd tier area
•Promotion: advertisements---riase brand awareness
![Page 45: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/45.jpg)
Growing urbanization
![Page 46: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/46.jpg)
Increasing GDP per capita
![Page 47: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/47.jpg)
Business-level strategy
Related linked: SBU Form of Multidivisional Structure
- share some resource: distribution channels in different business units
![Page 48: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/48.jpg)
Beverage and Retail
Holders of Pacific Club Card enjoy discount in supermarkets operated by CRE
- sharing of marketing resources
![Page 49: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/49.jpg)
Food and retail
Development of self-owned retail stores and launched more than 120 meat counters and stores
Shanghai, Hangzhou, Nanning, Shenzhen and Ningbo, etc,
Leveraging the strong “Ng Fung” brand name and efficient supply chain
![Page 50: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/50.jpg)
Recommendation
Development of centralized customer base system
retail: membership card--- get customer profile & preference---used in product development for food and beverage
Centralized IT system - sharing of updated information and
technology: R&D - monitor IT system: drive cost efficiency - economies of scope
![Page 51: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/51.jpg)
Current Corporate Level Strategy
Restructuring Activities
Quality Expansion Platform
Leverage CRE`s existing core competences to create synergistic combination
Market leadership and improved profit margins
![Page 52: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/52.jpg)
Examples of Key Acquisitions in 2010
Acquisition of the Jialinshan project marked the Group’s expansion into the mineral water sector Synergy: Diversifying product offerings
Acquired 80% interest in Pacific Coffee (Holdings) Limited from Chevalier Pacific Holdings Limited Synergy: Differentiating retail markets
Acquisitions in meat processing sector Synergy: Expanded operations in slaughtering,
storage, trading and increased CRE market power
![Page 53: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/53.jpg)
Acquisition-Based Strategy
Value Creating Drivers
Pursuit of Market Power
Learn and Develop
New Capabilities
![Page 54: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/54.jpg)
Pursuit of Market Power
Market Power
Vertical Integration
Vertical Acquisition
s
Horizontal Acquisition
s
![Page 55: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/55.jpg)
Learn and Develop New Capabilities
Exploit economies of
scope
Leverage CRE’s Core Competence
s
Operational and
corporate related
acquisition
![Page 56: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/56.jpg)
Learn and Develop New Capabilities
Acquisitions to create operational relatedness CRE can leverage its existing primary activities
- Distribution systems- Sales networks
Also facilitate their support activities- Purchasing practices- Bargaining power
Has potential to improve existing profit margin Increased revenues Decreased costs
![Page 57: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/57.jpg)
Learn and Develop New Capabilities
Limitations to acquisitions to further operational relatedness Organizational integration may fail to create synergies
Success is dependent on CRE’s ability to integrate acquisitions into a cohesive structure that will allow sharing of activities to take place efficiently
Important that HQ implements controls to foster sharing of activities between related divisions
![Page 58: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/58.jpg)
Learn and Develop New Capabilities
Enhancing corporate relatedness through acquisitions
Transferring CRE’s core competences to an acquired business- CRE has expert local market knowledge and a
sophisticated distribution system
Transferring core competences of core business to CRE- Possible targets should include companies that can
transfer cost saving related core competences to CRE
![Page 59: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/59.jpg)
Learn and Develop New Capabilities
Downside of pursuing a combination operational relatedness and corporate relatedness acquisition based strategy
Cost of organization and compensation structure could be expensive leading to further decrease in CRE’s profit margins
![Page 60: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/60.jpg)
Risks of Acquisition Based Strategy
Integration Challenges
Inability to achieve synergy
Too much diversificatio
n
CRE may be getting to big
Managers overly
focused on acquisitions
![Page 61: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/61.jpg)
Recommendation
Highly fragmented Chinese retail market Great Opportunity for M&A to enhance market
leadership
![Page 62: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/62.jpg)
Keys to a Successful Acquisition
Complementary Assets
• Target firm has complementary assets to leverage CRE`s business
• High probability of synergy and competitive advantage by maintaining strengths
• Ex. Acquisitions to enhance product new development, leverage CRE`s distribution network
• Acquire firms who have a core competence in maintaining high profit margin
![Page 63: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/63.jpg)
Keys to a Successful Acquisition
Acquisition is Friendly
• Leads to faster and more effective integration and lower premiums
• Targets should be selected and groomed by establishing a working relationship prior to acquisition
• Use cooperative strategies before acquisition to see if `fit` is right
• Use of JV`s and competitive strategic alliances
![Page 64: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/64.jpg)
Keys to a Successful Acquisition
Avoid Paying too high of a premium
• Rational M&A
• Only acquire firms with strongest complementary assets
• This will avoid expensive restructuring in the future
• Use strong bargaining power to drive down the cost of M&A
![Page 65: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/65.jpg)
Keys to a Successful Acquisition
CRE Maintains emphasis on R&D and innovation
• Maintains long-term competitive advantage
• Maintain CAPEX program in R&D and innovation
• Do not let acquisition replace innovation
• Continue to invest in supply chain management initiatives to improve profit margins
![Page 66: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/66.jpg)
Keys to a Successful Acquisition
CRE manages change well and is flexible and adaptable
• Faster and more effective integration facilitates achievement of synergy
• Facilitate merging of two corporate cultures
• Friendly acquisition is vital
• Retrain target firm`s human capital by CRE in an effort for the target firm to fully understand CRE`s operations and capabilities
![Page 67: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/67.jpg)
Conclusion
Establishing Market
Leadership
M&A is the growth engine
Quality Expansion• New Product
Development
Regional expansion
Improving Profit Margins
Leverage supply chain to generate
efficienciesR&D + Innovation
to drive cost efficiencies
Acquisitions to help improve margins
![Page 68: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/68.jpg)
Appendix I: Deal Activity (2007- 2011YTD)
Source: DataMonitor
![Page 69: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/69.jpg)
Appendix II: Deal Activity Type
![Page 70: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/70.jpg)
Source: CRE 2010 Annual Report
Appendix III: Turnover by Segment
![Page 71: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/71.jpg)
Appendix IV: Geographical distribution of the group’s retail network
![Page 72: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/72.jpg)
Appendix V: GDP by province
![Page 73: ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant China Resources Enterprise](https://reader034.vdocument.in/reader034/viewer/2022052701/56649d155503460f949e9ffa/html5/thumbnails/73.jpg)
Rank Province/ municipality Per capita consumption expenditure of urban
households
1 Shanghai 20,992
2 Beijing 17893
3 Guangdong 16,858
4 Zhejiang 16,683
5 Tianjin 14,801
6 Fujian 13,451
7 Jiangsu 13,153
8 Inner Mongolia 12,370
9 Liaoning 12,325
10 Chongqing 12,144
Source: National Bureau of Statistics, PRC
Appendix VI: Top 10 provinces/ municipalities in terms of per capita consumption expenditure of urban households, 2009