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One expert believes that the key to Chunlan is still the problem of its profit model. The high-level thinking of Chunlan has not kept pace with changes in the external environment. Of course, if you do not rule out the success of MBO, it may lead to faster change of thinking of Chunlan management, but management is only one aspect, profit model, business strategy is the first.
The former king of Chunlan is in awkward position today. He has lost faith in the channels, and is anxious to diversify. The system is missing... The scenery is no longer where does Chunlan go?
Former Air Conditioning Champion Chunlan now silently awaits the unknown fate of the future.
As the carrier of Chunlan air-conditioning, Chunlan (600854.SH) has released a performance forecast for major losses in 2007. Once its 2007 annual report is announced on April 26, Chunlan shares will temporarily withdraw due to losses for three consecutive years. If it makes profits in the first half of 2008 or if Chunlan Group, its major shareholder, has come up with an effective restructuring plan, it will be able to maintain its listing status, or it may fall from the domestic capital market.
A generation of national brand Chunlan, why is it no longer?
Once brilliant
When talking about Chunlan, I have to mention Tao Jianxing. In October 1985, Tao Jianxing, 32 years old, was appointed as the director of Taizhou Air Conditioning Equipment Factory (predecessor of Chunlan Group). The following year, the factory was responsible for the system of the director, and Tao Jianxu suddenly turned the factory into a profit. After 15 years of turmoil, Tao Jianxing made the Taizhou local small enterprise, which is insolvent and has a total asset of only 2 million yuan, rapidly grow into a famous Chinese company with a total asset of more than 10 billion yuan. In 2000, Chunlan Group's sales reached 18.5 billion yuan, and the profit and tax rate ranks in the forefront of the Chinese home appliance industry.
In 1994, Chunlan became China's largest air-conditioning production base and one of the seven largest air-conditioners in the world, becoming a flag of the Chinese national brand.
Chunlan's sudden emergence at the time was based on its keen grasp of market opportunities during the introduction of air conditioning in China. In the late 1980s and early 1990s, when the air conditioners on the Chinese market were mainly imported machines, Tao Jianxing adopted the strategy of “opening the road and taking both sidesâ€. At that time, the power of imported window machines was mostly two horses. The main users One is the hotel and the other is the computer room. The two machines are too small for the hotel room and too large for the computer room. So Chunlan introduced a window machine with three horses. Moreover, Chunlan air-conditioning products have excellent quality, good appearance, and take the lead in advertising, and thus quickly become the "boss."
Moreover, Chunlan attaches great importance to brand building. Since 1999, Chunlan has been known as the World Professional Go Tournament. Even though the company has not experienced difficulties in the company's emergence, the Chunlan Cup has become a well-known brand in the domestic and international chess world. This laid the brand foundation for the internationalization and diversification of Chunlan; In addition, Chunlan attached great importance to quality and maintained a good reputation among the old users.
So far in January 2006, Chunlan still has a place in the "China's 100 Most Valuable Brands" list.
Untrusted channels
Unfortunately, when he was on the top of victory, Chunlan was no longer sensitive to the new changes.
In 1987, Chunlan took the lead in implementing the "market sales agency system" in the Chinese home appliance industry. At that time, many businesses relied on Chunlan to "send a home," including Suning Appliance, the current appliance chain giant.
From 1996 to 1997, Chunlan's channel model still adopted a large dealer system. China's air-conditioning industry entered the growth period from the lead-in period, the competition became fierce, and the price war began. The industry's profits fell rapidly. After Chunlan suffered a loss, he made a profit to the distributor. The originally promised rebates were not given to the distributors, but Gree took the opportunity to increase the rebates for the distributors. As a result, Chunlan air-conditioning's big distributors all turned their backs and turned Gree, which made Gree’s subsequent dominance.
In 1997, Chunlan's "royal position", who had been in air-conditioning for many years, was not guaranteed. Chunlan was then even squeezed out of the top three. Chunlan air conditioning had to develop its own network and stick to one side. Tao Jianxing also devoted more energy to the diversification of Chunlan.
So far, the scars in the hearts of dealers are still there. In 2006 and 2007, Chunlan once again implemented channel reforms, increased 5,000 self-built sales points, and changed the “distribution system†to the “agent system,†but the effect was not quickly reflected. A large air-conditioning distribution company in Zhejiang said that this is a problem Chunlan has accumulated for many years. When Chunlan was the "big boss", he ignored the interests of dealers and was not standardized. "The air conditioner selling it does not make money, and the enthusiasm of dealers is naturally not high, and there is no driving force for the main push."
Therefore, Chunlan shares suffered losses for the third consecutive year from 2005 to 2007, and the "curse" was buried 10 years ago.
Excessive diversification
Tao Chengxing's Chunlan diversification project, which has been cultivated for many years, has not been able to “backfeed†the main air-conditioning business during the most difficult time.
From 1995 to 1996, Chunlan launched its first five-year plan to determine "based on the air-conditioning industry, industrial expansion, and the formation of a diversified business framework." Chunlan's tentacles have extended to refrigerators, motorcycles, trucks, high-energy batteries and even liquid crystal displays.
Tao Jianxing once revealed his thoughts to the outside world: "In the late 1980s and early 1990s, Chunlan made a home appliance and made a profit. It made a profit of several billion yuan in one year." However, "the United States and Europe After the big household appliance enterprises become bigger, they can't escape two results: either they will die or they will suffer disastrous operations. After China's accession to the WTO, it will be difficult to see a single household electrical appliance company. Today's home appliance companies are diversifying their development. There will be more and more transnational corporations like GE, Siemens and Panasonic."
Therefore, at the peak of its home appliance industry development, Tao Jianxing was determined to transfer the large amount of money earned from the home appliance industry to other industries. In November 1997, Chunlan Group acquired Nanjing Dongfeng Motor Co., Ltd. for 720 million yuan and established Chunlan Automobile Co., Ltd., and has since entered the automotive industry.
Ten years later, Tao Jianxing's thinking at that time can be said to be "only half true."
First of all, he did not foresee that air-conditioners will continue to grow for many years after China's entry into the popularization period. If Chunlan has “struck hard†on the basis of the original industry, it will add air-conditioning production capacity, channel models, and technology research and development. If you invest to expand your advantage, then it may not be Gree and Midea that you enjoy the "oligarchic competition" of the air-conditioning industry today.
Secondly, Chunlan's diversification of "four sides attacked", several projects are a bit of water, small scale, lack of anti-risk capabilities. In 2006, Chunlan's washing machine and compressor business revenue was less than 20 million yuan. From 2002 to 2004, the automotive business brought the “second spring†to the Chunlan Group, and Chunlan’s “heavy truck†was among the top five domestic counterparts. Helplessness "heavy card" industry drastic changes in 2005, Chunlan car is no longer good.
Systemic injury
In 2000, Tao Jianxing became the chairman and CEO of the first board of directors of the Chunlan Group, inspiring the reform of the old incentive mechanism. In the country, the MBO program was first proposed - quantify 25% of the company's net assets to employees (including management), and the amount is about 1.2 billion yuan. Employees must purchase shares in cash; employees are also given the same amount when purchasing shares. The number of dry shares (dividends).
Tao Jianxing, as a strong entrepreneur, hopes to break through the system, inspire the internal potential of employees, and make the company go out of the new days, but unfortunately the program was later "stopped."
One example of Chunlan's apparent lack of incentive is that the total remuneration of the top three senior executives with the highest salary in Chunlan in 2004 was only RMB 214,000, that is, the average annual salary per person was only RMB 71,300.
Some people are not sorry to say that if the Chunlan MBO did not allocate dry shares, if it did not have such a high profile then it may succeed, then Chunlan will not have so many brain drain, it will not be to the point where it is today.
However, history cannot be assumed. One expert believes that the key to Chunlan is still the problem of its profit model. The high-level thinking of Chunlan has not kept pace with changes in the external environment. Of course, if you do not rule out the success of MBO, it may lead to faster change of thinking of Chunlan management, but management is only one aspect, profit model, business strategy is the first.