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One, once the giant is leaving us
On the evening of January 17, 2008, ST Chunlan announced that it expects the company to make major losses in 2007. At the same time, since 2005 and 2006 have been losses for two consecutive years, Chunlan will lose money for three consecutive years on April 26 of the year when the annual report is disclosed. From this date, the Shanghai Stock Exchange will suspend the company's shares and wait until the stock exchange makes a decision. After the company's stock will be suspended listing.
Chunlan was once a banner of China's air-conditioning industry. In 1994, the total output value of Chunlan Industry reached 5.2 billion yuan, and the profit and tax was 600 million yuan. The scale of production of air-conditioning products was the largest in the country, and the products formed serialization with a market share of about 30%. The industry first, after which Chunlan began to diversify into motorcycles, trucks, high-energy power batteries and other industries, becoming the most successful "model" of home appliance industry diversification, it was known as the Chinese version of GE, Chunlan Group of Companies Board of Directors Chairman and CEO Tao Jianxing won the 2002 CCTV China Economic Year Award.
However, Chunlan has no scenery today. The stock price has dropped from a peak price of 64.3 yuan in 1998 to less than 6 yuan today. It has shrunk tenfold in ten years. In 2006, *ST Chunlan only achieved a revenue of RMB 2.2 billion from its main business, a decrease of more than RMB 10 billion from 2005, and a loss of over RMB 200 million in 2007. In the same year, in 2007, the main business of Midea Electric Co., Ltd. made great strides and its sales revenue reached nearly 33.3 billion yuan, which is more than ten times that of *ST Chunlan. The younger brother of the past has become a big brother today. In 2007, the three major air-conditioning giants of the United States, Gree, and Haier have formed the utmost potential of China's air-conditioning industry. In the country's supermarkets, Chunlan air-conditioning is also becoming less and less. The air-conditioner empire, which used to have one of China's largest air-conditioning production base and one of the world's top seven air-conditioning honor trophies, has gradually lost its protagonist's identity in a few short years and is moving away from us. We must not only ask: What caused the decline of Chunlan?
Second, the fundamental failure of Chunlan is that strategic implementation is not in place, not strategic choice.
For the decline of Chunlan, it has received a lot of attention at present. The most talked about the cause of decline is Chunlan's diversification. However, I believe that diversification is not the root of the decline of Chunlan. Chunlan should be correct in terms of the choice of strategic direction. The failure to implement the diversification strategy is the reason for the decline of Chunlan.
Diversification of Chunlan Since 1994, the earliest motorcycle industry has entered. According to the argument, Chunlan invested more than 2 billion yuan to build a production line with an annual output of 1 million motorcycles and 1 million motorcycle engines. If this is true, Chunlan’s starting point in the motorcycle industry should be considered very high. Compared with military-industrial companies such as Jinan Qingqi, Chongqing Jialing, and the South Hongdu, they are still the “Chongqing Three Strongs†with civil servants Lifan and Zongshen. Compared with Longxin, Chunlan is not at a disadvantage, and there are even many advantages. For example, Lifan Motorcycles was established in 1992, when the sales income was only 7.47 million yuan, and the sales income was only 650 million yuan in 1997. This year Lifan began to produce motorcycles. It had been producing and selling parts and components. By 2002, Lifan’s sales revenue was only 4.02 billion yuan. Chunlan it, in 1997, the industrial output value of 12 billion yuan, sales revenue has exceeded 10 billion, reaching 11 billion yuan, this time is the scale of Haier, Lenovo and Chunlan. And in 1995, Chunlan launched its own brand of motorcycles. Therefore, compared with Lifan, Chunlan motorcycles now occupy considerable advantages in all aspects. And during this period, the motorcycle industry from China is in a stage of rapid growth. According to statistics, from 1993 to 1998, China's motorcycle production increased at an average rate of 29.5% each year. In 1993, China’s motorcycle production was 3.35 million. In 1995, China’s output was 7.83 million. In 1997, China’s motorcycle production exceeded 10 million (1003 million) for the first time, accounting for approximately 2300 of the world’s total motorcycle production that year. 10,000) 43%. The rapid development of the motorcycle industry has provided a rare opportunity for the development of Chunlan motorcycles during this period. In the absence of funding, development opportunities, and technical capabilities will not be an obstacle, the final development of Chunlan Motorcycle is not satisfactory. I think this is not due to the blind diversification of Chunlan. At the most, Chunlan can only say that he did not do a good job in strategy implementation, rather than the wrong choice of strategic direction.
Another important step in Chunlan's diversification was the entry into the truck business in 1997. Chunlan also has very obvious advantages in entering the truck business, such as China's famous truck manufacturer, Foton Motor. Foton Motor was established in 1996. At that time, the registered capital was only a little over 100 million yuan. It was started from agricultural vehicles. The actual launch of trucks, especially trucks with a capacity of over 5 tons, was already after 2002, and Fukuda was the earliest. The truck Auman was only launched in May 2002. Chunlan, in 1997, took over 720 million yuan from Nanjing Dongfeng Motor Co., Ltd. and established Nanjing Chunlan Automobile Co., Ltd., and then Chunlan invested heavily in technological transformation. After three years of technical renovation, in March 2001, Chunlan Luxury Medium-sized trucks began to be put into mass production. In October of the same year, the production and sales volume of medium-sized trucks produced in Chunlan was almost equal to that of FAW and Dongfeng, ranking third in China. By 2003, the first-phase investment of Chunlan trucks had been fully recovered. Similar to entering motorcycles, it should be said that Chunlan is not too late to enter the truck. Moreover, Chunlan has entered the truck industry and the development opportunities in China in the past 10 years are also very good. However, Chunlan's truck business eventually developed into a tasteless.
It should be said that when Chunlan diversified, the choice of business was very profound. It was not difficult to find out through various researches on Tao Jianxing that for the choice of entering the industry, Chunlan explored and screened it for a long time. Chunlan even studied it. The models of GE, Panasonic, and LG's international companies have made a three-step combination of their own businesses. According to Tao Jianxing, the three steps of Chunlan are: “The first step is home appliances. We have reached but did not give up; The second level is a commercial vehicle. We haven't yet reached the (peak) level. The third level is new energy. We are now starting to prepare." From the perspective of the development of various industries entered by Chunlan later, it should be said that the industries selected by Chunlan are those industries that have grown rapidly and have developed very well. These industries have also made achievements in many famous enterprises. However, it is regrettable that Chunlan has Failing to make a choice in the correct choice of industry, the diversification of Chunlan can be said to have been "a big morning and a late set." At that time, Chunlan's capital, brand, and other resource capabilities should be said to be very adequate. Under such circumstances, Chunlan's diversification can still fail, and the air-conditioning industry is not guaranteed. The fundamental reason is that Chunlan's execution is out of force. The problem is that the implementation of the strategy is not in place.
III. Analysis of the Possible Causes of the Execution Problems of Chunlan
There are no valid arguments and reasons for the reasons behind the implementation of the Chunlan strategy. But one thing should be certain. In this process, Chunlan’s leadership team lost the “entrepreneurial spirit†when air-conditioning was used in the same year, and the cohesiveness within the high-level team also declined to some extent. According to a report in the Securities Times, Tao Jianxing revealed to the press in March 1998 information on major reforms of the leadership system. Chunlan Group will establish a board of directors in 1998. In the composition of the board of directors, 10-15% of directors will be employed by the society. After the establishment of the board of directors, it will not be a rubber stamp. If the board is socialized, it will play a role in democratic decision-making. At the same time, in March 1998, Chunlan Group's internal organizational structure was fully implemented and major adjustments were made to establish five pillar industry groups. To establish an innovative matrix management model: Take industry as the line, resources as the line, horizontal legislation, and run vertically. In the restructuring of the organization, Chunlan was also preparing for a share reform. By 2002, Tao Jianxing proposed a grand plan for Chunlan's restructuring. The company is preparing to spend 3 billion yuan in cash to carry out MBO share reforms and full ownership of stocks. The management also holds large stocks. Just as he went all out to advance the reform process, a high-level meeting in Beijing heard the following noise: “No one can quantify state-owned assets to individuals for any reason.†The Chunlan share reforms met with resistance and ended. After the failure of the "property rights reform," Chunlan's management personnel and technicians were largely lost. Therefore, Chunlan's decline stemmed from the failure of the share reform, and it was not unreasonable to dismiss the company's high-level confidence and morale. From 1997 to 2002, Chunlan was more involved in the transformation of internal systems and mechanisms. It was precisely at this time that Chunlan lost the best opportunity for a “second ventureâ€. After the failure of internal reforms, Tao Jianxing did not say that it was difficult to lead and lead the entire team in the spirit of “entrepreneurshipâ€. It was difficult to promote the normal operation of the Chunlan structure. In this case, it was good. The strategy can only become a mirage, and it will be inevitable that it will decline.