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China Resources Enterprise

China Resources Enterprise

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China Resources Enterprise

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  1. China Resources Enterprise ANALYSIS OF CORPORATE STRATEGY Prepared by Jessica Choi, Phoenix Tiu, Janet Poon, Cathy Ho & Timothy Sargeant

  2. Content • Problem • SWOT Analysis –Overview • Business Level Strategy - Focused geographical - Differentiation • Corporate Level Strategy - Related- link - Acquisition- based Strategy • Recommendation

  3. 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

  4. 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?

  5. Beverage Analysis C’estbon Pacific Coffee

  6. Beverage Analysis

  7. Beverage Analysis

  8. Beverage Analysis • Five Forces • Rivalry with existing competitors “C’estbon”: Master Kong, Wahaha, Nongfu & Coca-Cola Pacific Coffee: Starbucks and Gourmet Master (Taiwan brand)

  9. Beverage Analysis • Potential Entrants China beverage industry is attractive to the potential entrants Source: Canadean

  10. Beverage Analysis • Bargaining power of customers “C’estbon”: HIGH Pacific Coffee: LOW • Bargaining power of suppliers Pacific Coffee: HIGH • Product Substitutes Carbonated drinks, energy drinks and tea

  11. 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

  12. Beer Analysis

  13. 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

  14. Beer Analysis • Customer-Focused • Royal- looking and extravagant • noble gold and jade inlaid and engraved vision • Focus shift from supply-driven to demandsmall bottles like imported beers

  15. 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)

  16. 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

  17. Beer Analysis • SWOT –Opportunity • Enlarged 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

  18. Beer Analysis • SWOT –Threat • cost of production: raw materials, rent, utilities • increasing M&A cost

  19. Strength • - 2ndlargest retail organization in China in Retail Asia Pacific top 500 awards • - Multi-format business platform Retail Analysis

  20. Retail Analysis • Regional leadership on a multi-format business platform

  21. Weakness • - Lower average sales per store compare to competitors • Strength • - 2ndlargest retail organization in China in Retail Asia Pacific top 500 awards • - Multi-format business platform

  22. Weakness • - Lower average sales per store compare to competitors • Strength • - 2ndlargest 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

  23. 5-forces Analysis

  24. Food and Processing Distribution Analysis

  25. Food and Processing Distribution Analysis • Ng Fung Hong Strength: premium food quality • vertically integrated meat supply system - Remain in competitive position in the market ( 5 forces)

  26. 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

  27. Food and Processing Distribution Analysis Bargaining power of suppliers: Low • Many product sources

  28. Food and Processing Distribution Analysis • 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

  29. 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

  30. Food and Processing Distribution Analysis • 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

  31. 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

  32. Retail • locating supermarkets in self-owned or partially-owned property development projects

  33. Benefits: - lower operational costs - Allow quality tracking --- create value to customers - Widen operating margin ---higher investment return - Build core competence to ensure continual growth

  34. 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

  35. -Beverage: Develop healthy drinks--- strength product portfolio --- offer health-conscious customers a wide range of products

  36. Benefits: - Customer loyalty: superior quality • Set a premium price • Food: justify high price • Drawback: - High cost : marketing research, new product development

  37. Focused Geographical market: domestic Chinese market

  38. Recommendation

  39. Growing urbanization

  40. Increasing GDP per capita

  41. Business-level strategy • Related linked: SBU Form of Multidivisional Structure - share some resource: distribution channels in different business units

  42. Beverage and Retail • Holders of Pacific Club Card enjoy discount in supermarkets operated by CRE - sharing of marketing resources

  43. Food and retail • Development of self-owned retail stores and launchedmore than 120 meat counters and stores • Shanghai, Hangzhou, Nanning, Shenzhen and Ningbo, etc, • Leveraging the strong “Ng Fung” brand name and efficient supply chain

  44. 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