1、C. Financial, organization and processes analysisSHA-4309-03690-08-15c.PPTC1. Financial situation analysisSHA-4309-03690-08-15c.PPTC1.1 Geberit ShanghaiSHA-4309-03690-08-15c.PPTPresently, GSHA is in serious corporate crisisPhases of corporate crisisWeakStrongPathology of crisis symptomsNormative mis

2、fitStrategic crisisResults crisisLiquidity crisisGeberitLowHighBankruptcy crisisBack-upSHA-4309-03690-08-15c.PPTAll liabilities are short term and are increasing 4-fold. By the end of July 2000, liabilities are 75% of total assets Development of liabilities (% of total assets)RMB 00013.4%46.4%75%+52

3、2%Source: P&L Geberit (Shanghai), RB&P analysisSHA-4309-03690-08-15c.PPTCompanys liquidity situation is deteriorating. Current liabilities are increasing much faster than current assets, the cash injection from the parent company is used to cover the running expenses in stead of building up assetsDe

4、velopment of liabilities & assetsRMB 000Current ratioQuick ratio2.821.710.910.430.620.25Current assetsCurrent liabilitiesSource: Balance sheet Geberit (Shanghai), RB&P analysis+37%+522%SHA-4309-03690-08-15c.PPTThe companys inventory increased by 91% , while current assets increased by 37%Development

5、 of inventoriesSource: Balance sheet, Geberit (Shanghai), RB&P analysisCurrent asset structure (% of the current assets)+91%RMB 00044%11%6%11%11%10%7%26%8%18%2%13%9%21%7%4%26%10%10%8%18%8%15%0%15,72014,00711,507Raw materialsWork in progressFinished goodsGoods purchased for resaleOther inventoriesTra

6、de accounts receivable+37%RMB 000Cash & cash equivalentsOther accounts receivableSHA-4309-03690-08-15c.PPTDue to huge losses, the company is solely financed by inter-company loans, the liabilities increase much far faster than assetsBalance sheet Geberit (Shanghai) 19982000.7 RMB 000Back-up199819992

7、000(1-7)Fixed assetsIntangible assetsOther prepaid expensesAdvanced payments to suppliersInventoriesAccount receivableCash & cash equivalentTotal assetsShare capitalRetained earningsNet income current yearTotal provisions & deferred revenuesTotal (liabilities)Total Shareholder Capitals & liabilities

8、18,3185871004,5171,8625,11830,41241,426(5,420)(9,669)0407530,41260.2%1.7%0.0%0.0%14.9%6.1%16.8%100.0%136.2%(17.8%)(31.8%)0.0%13.4%100.0%18,9968725737,2673,6632,97933,09041,426(15,089)(10,177)1,57215,35833,09057.4%0.32%0.1%0.2%22.0%11.1%9.0%100.0%125.2%(45.6%)(30.8%)4.8%46.4%100.0%18,06002343918,6444

9、,0972,35433,78041,426(25,266)(8,293)56325,35033,78053.5%0.0%0.7%1.2%25.6%12.1%7.0%100.0%122.6%(74.8%)(24.6%)1.7%75%100.0%SHA-4309-03690-08-15c.PPTThe accumulated losses till September 2000 are 86% of share capital. Left alone the company will be insolvent by the end of this year Net income losses(19

10、97.122000.09)RMB 000Source: P&L Geberit (Shanghai), RB&P analysis86%SHA-4309-03690-08-15c.PPTThe company has been losing money since the foundation of JV, and the loss is continuously increasing in spite of the increase of sales+41%*: estimation199819992000*Source: Roland Berger & Partners analysisS

11、ales developmentRMB 000Operating lossesRMB 000+45%SHA-4309-03690-08-15c.PPTMore than 70% of products sold in 2000 ( 1-9 ), including Geberit locally produced products, have a negative gross profit marginMixture of product sold(2000.09)Lida productsGeberit local producedGeberit importedGross profit m

12、argin2)(at actual cost)Gross profit margin1)(at standard cost)+25%+44%- 6.93%- 7.43%+38%+ 38%Lida productGeberit imported productsGeberit locally produced productsSource: Geberit (Shanghai), Roland Berger & Partners analysis1): Calculate based on the full capacity utilization rate (80%90%)2): Calcul

13、ate based on the actual capacity utilization rate (20%30%)SHA-4309-03690-08-15c.PPTThe disproportional increase of operating expense results in the increase of operating loss in spite of the improvement of product mixSource: P&L Geberit (Shanghai), Roland Berger & Partners analysis+29%146.9%118.1%13

14、0.4%Total operating expenses 19982000RMB 000* Estimation% of salesSHA-4309-03690-08-15c.PPTAmong the cost of goods sold, cost of materials and labor are two major cost driversSource: P&L, Balance sheet, Geberit (Shanghai), Roland Berger & Partners analysisCost of goods sold (% of sales)GSHA 1999GSHA

15、 2000 (1-9)Turnover15.568 million RMB10.514 Million RMBCost of goods sold12.87Million RMB (82.66% to sales)9.7 million RMB (92% to sales)Structure of cost of goods soldCost of materials*Labour costDepreciationEnergy consumptionMaintenanceOthers75212493120364856543948%16%8%4%3.6%2.8%2%4%3.3%11%17%54%

16、RMB 000RMB 000*note: the materials cost are the cost of all materials purchased, instead of materials actually consumed.SHA-4309-03690-08-15c.PPTAnd among the sales cost, salaries and travelling are two major cost drivers. Meanwhile, promotion fees and staff training cost increaseSource: P&L, Balanc

17、e sheet, Geberit (Shanghai)Sales cost (% of sales)GSHA 1999GSHA 2000 (1-9)Turnover15.568 million RMB10.514 million RMBSales cost5.66 million RMB (36.35% to turnover)5.4 million RMB (52.4% to turnover)Structure of sales costSalaryTravelling costPromotion feeRoom rental & parkingCommunication feeStaff

18、 trainingOthers315897958822129102120%6.2%3.8%0.2%6.6%6.08%1.6%3.4%6%9%26%3.7%5761.4%0.6%269092558235216064626RMB 000RMB 000SHA-4309-03690-08-15c.PPTIncrease operating expenses results in increase of operating losses in spite of the improvement of salesBack-upProfit & loss statement Geberit (Shanghai

19、)19982000 RMB 000199819992000 (112)SalesCost of materials Gross profitpersonnel expenses Energy/maintenanceDepreciationMarketing expensesAdministration expensesOther operating expensesTotal operating expensesOperating profit (loss)Net income10,2194,9385,2486,8101,2361781855,76783615,012(9,764)(9,669

20、)100.0%48.3%51.4%66.65%12.1%1.7%1.8%56.4%8.2%146.9%(95.5%)(94.6%)15,5687,5217,8539,3451,6701,7811,2384,72230718,379(10,526)(10,177)100.0%48.3%50.4%60.0%10.7%11.4%8.0%30.3%2.0%180.1%(67.6%)(65.4%)14,8018,0036,6409,6081,5221,9881,3202,3172,54419,299(13,735)(14,656)100.0%54.35%44.9%64.9%10.3%13.4%8.9%1

21、3.7%17.2%130.4%(92.8%)(99.0)%Source: Geberit (Shanghai), Roland Berger & Partners analysisSHA-4309-03690-08-15c.PPTThe company can not generate enough cash from business operations and it solely relies on the continuous cash injection from the parent company for survivalSource: Cash flow, Geberit (S

22、hanghai)Cash inflow and outflow, 2000 (1-6)RMB 000OperatingWorking capitalInvestmentCash before financingInter company loanSHA-4309-03690-08-15c.PPTC1.2. Geberit DaishanSHA-4309-03690-08-15c.PPTGDAIs sales have continuously improved, and cost are reducing; the inter-company sales increased much fast

23、er than to third party2) Including write-offs for obsolete materials: 1 million RMB & other unclear accountsSales development RMB 000Operating losses development RMB 0001998199920001)+136%+36%1) Estimation199819992)20001)-24%+74%328444517763Third partyInter-companySource: Geberit (Daishan)SHA-4309-0

24、3690-08-15c.PPTGDAIs operating losses are decreasing due to reduction of costsSource: P&L Geberit (Daishani)Cost structure RMB 000199819992000 (1-9)11%15%10%21%1%4%36%8%12%1%3%23%29%13%3%16%5%29%22%19%16%Other operating expensesAdministrationMarketingEnergy maintenancePersonnel expensesCost of mater

25、ialDepreciation 10,05814,44411,668359%325%206% of total salesSHA-4309-03690-08-15c.PPTAs a result of cost control, operating losses are reducing in line with the improvement of salesBack-upProfit & loss statement (Geberit Daishan) RMB 000SalesCost of materials Gross profit (loss)personnel expenses E

26、nergy/maintenanceDepreciationMarketing expensesAdministration expensesOther operating expensesManagement feeTotal operating expensesOperating profit (loss)Net income199819992000(19)3284(939)2168(4195)(427)(2267)(171)(2422)(1247)0(10729)(-8561)(-8659)100.0%28.6%66.0%127.7%13.0%69.0%5.2%73.8%38.0%0%32

27、6.7%-260.7%-263.7%4451(4211)240(3361)(464)(2280)(170)(1756)(1719)483(10233)(10706)(-11052)100.0%94.6%5%75.5%10.4%51.2%3.8%39.5%39%10.9%229.1%-240.5%-248.3%4866(2224)2574(2959)(540)(1659)(321)(1309)(978)0(7834)(5255)(5401)100.0%45.7%52.9%60.8%11.1534.1%6.6%26.9%20.1%0%160.6%107.7%110.5%Source: Geberi

28、t (Daishan), Roland Berger & Partners analysis2000(112)*7763(4000)3425(3947)(721)(2241)(427)(1742)(555)(100)(9915)(6490)(7223)100.1%51.5%44.1%50.8%9.3%28.5%5.5%22.4%7%1.3%127.7%83.6%93%* EstimationSHA-4309-03690-08-15c.PPT8.8%24.3%48.2%Short-term interest bearing debt increased nearly 4 fold, leadin

29、g the short-term liabilities increase by 123%. This amounted to 68.5% of total assets by the end of July, 2000Source: Balance sheet, Geberit (Daishan), Roland Berger & Partners analysisLiabilities DevelopmentLiabilities Development, 98-00 (1-7)199819992000(1-9)+123%RMB 000Short-term interest-bearing

30、 debt development 98-00 (1-7)+487%199819992000(1-9)RMB 000% of total assets% of total assets32.9%50.2%68.5%SHA-4309-03690-08-15c.PPT0.850.420.600.360.490.28As a result of the disproportional use of current assets and current liabilities, GDAIs liquidity situation is deterioratingSource: Balance shee

31、t Geberit (Shanghai), RB&P analysisCurrent ratioQuick ratioCurrent assetsCurrent liabilities+29%+127%Development liabilities and assets RMB 000SHA-4309-03690-08-15c.PPTDue to huge losses, the company is solely financed by inter-company loans. Liabilities increase faster than assets.Balance sheet Geb

32、erit (Daishan) 19982000.7 RMB 000Back-up199819992000Fixed assetsIntangible assetsInventoriesOther prepaid expensesAccount receivable (net)Cash & cash equivalentTotal assetsShare capitalRetained earningsNet income current yearTotal liabilities & provisions Total share capital & liabilities16,3093,942

33、3,2967302,2861,57228,13535,447(8,372)(8,659)9,71928,13558.0%14.0%11.7%2.6%8.1%5.6%100.0%126.0%-29.8%-30.8%34.5%100.0%16,4173,4323,1242222,3252,87628,39640,901(17,031)(11,052)15,59628,39657.8%12.1%11.0%0.8%8.2%10.1%100.0%143.9%-59.9%-38.1%54.9%100.0%17,0103,1353,9993082,3823,33530,16941,201(28,083)(3

34、,919)20,97030,16956.4%10.4%13.2%1.0%7.9%11.1%100.0%136.6%-93.1%-13.0%69.5%100.0%Source: Geberit (Daishan)SHA-4309-03690-08-15c.PPTC2. Organization & processesSHA-4309-03690-08-15c.PPTC2.1. Organization structureSHA-4309-03690-08-15c.PPTGDAIs organisation structures and management team have been impr

35、oved after the change of the ownership, providing the basis for further improvementGDAIBase for further improvement is establishedWholly controlled by GeberitOrganisation structure is clear and followedAuthorities and responsibilities are clearGMs management skills are accepted by the employeesChine

36、se middle management team is set-upReporting system has set-upPositive corporate culture is formingInternal communication and co-operation have been improvedEmployees are generally motivated and have the positive attitude to the future of the companySHA-4309-03690-08-15c.PPTIn GSHA, Geberit and Lida

37、 have not integrated well from the foundation of JV. This creates a lot of internal conflicts and management chaosGSHALidaGeberitCorporate cultureManagement style/skillsProduct linesMarketsWork styleSHA-4309-03690-08-15c.PPTHRHRHRHRMore importantly, in GSHA, the official organization structure is no

38、t implemented Official organization structureOrganization structure in realityGMDpt. GMSales & marketingProduction & logisticCCSAdminTwo parties exist leading to internal conflicts and complexities Unclearly defined authorities and responsibilities, leading to overlap of some functions CCS is separa

39、ted from the companys system, leading to inefficient co-operation and low efficiency GMDpt. GMCCSSales & marketingProduction & logisticAdminSHA-4309-03690-08-15c.PPTGeneral manager is directly in charge of sales and administration by being the department manager, leading to no middle management team

40、. Most 3rd tier managers are newly appointed, which results in lacking continuity in management 1): Employees from Lida2): The management team of sales department is relatively stable, but the turnover of sales staff is relatively highGMH. SchuetteSales & marketing2)H. SchuetteProduction & logisticK

41、en Leung 7 monthsCCSK.KoenigslehnerAdministrationH. SchuetteProcess engineering 24 yearsQuality control1 monthLogistic 5 monthsOutside purchase 5 monthsProduction control 32 yearsProduction 3 monthsMaintenance5 monthsLocal purchase2 yearsControlling1 yearEDP2 monthsDoc. Admin17 yearsMaterial Dev.2 m

42、onthsPersonnel 32 yearsAccounting2 yearsProduction dep.Past-timeQuality management N/NProcess dep. N/N 6 months 3- 6 months 3 months1)1)1)1)1)SHA-4309-03690-08-15c.PPTC2.2. Management structureSHA-4309-03690-08-15c.PPTThe high hierachy management design in GSHA leads to low efficiency, and slow deci

43、sion making processOrganization & Management structureDecision-making processGMDpt. GMDep. ManagerRegional ManagerSectional management2111421Total: 48, upto 32% of total employeesGMDpt. GMTotal: 12 people report to GM directlySHA-4309-03690-08-15c.PPTPersonnel expenses in GSHA have been up to 73.5%

44、of total sales in July 2000, as a result of the change of personnel structure Personnel development & structure 1997-2000*Turnover per employee *RMB 0001997199819992000* exclude staff in Beijing Office199819992000* EstimationProductionAdminSalesCCS11%2%6%6%15%17%19%31%29%25%23%59%54%52%52%1291381481

45、51+13%0%SHA-4309-03690-08-15c.PPTThe general manager can not gain necessary and correct data from the company for decision-makingMain problems of data/reportingNo control of data input (e.g. no cross check in the warehousing)Data inputA lot of useful data arent available (e.g. scrapped product repor

46、t)Data processingNo strict control system (e.g. no comparison of actual cost and standard cost)Data is only for document, not for analysisData controllingToo high figures in budgeting and sales forecastPlanningPoor quality decision basisSHA-4309-03690-08-15c.PPTPerformance evaluation and incentive s

47、ystem in GSHA is very weak, leading to low motivation and commitmentProblemsEvaluation & promotionImpactsNo defined procedure & criteria were found for evaluationNo clear criteria for promotionPoor cooperationIrresponsible workIncentive system & TrainingNo incentive schemeNo personnel development pr

48、ogram Not enough training programs Low motivation among staffLow commitment to the companyLow quality of employeesHigh staff turnoverSHA-4309-03690-08-15c.PPTGSHA does not have the proper management system, therefore it is run inefficientlyMain problems in managementMain problems in management syste

49、mControlling system is not followedLack of performance evaluation system No incentive schemeUnclearly defined authorities & responsibilitiesNo reliable information for decision - making (e.g. actual cost)Quality of data is poorNo formal reporting system to collect dataOfficial structure isnt impleme

50、ntedGM doesnt have leadershipRedundant management level leads to prevarication & inefficiencyManagement team isnt integrated and huge turnover in the middle managementNo motivating corporate cultureNo trustworthiness between GM & local staffDecision - MakingControlling, promotion & evaluationManagem

51、ent structureCulture, morale, communicationLow morale/motivationLow commitment to the companyInefficient internal communicationUnclear criteria for promotionSHA-4309-03690-08-15c.PPTC2.3. Key process analysisSHA-4309-03690-08-15c.PPTCurrently, in GSHA the production-oriented process leads to unaware

52、ness of the market, as a result, there are no right products in the right marketProductionSalesMarketingHRR&DFinanceLogisticsAfter-sales serviceCorporate strategyBusiness unit strategyProduct strategyProfitsCorporate cultureMoraleManagement capabilitiesCooperation with Chinese partnersSHA-4309-03690

53、-08-15c.PPTCCS does not have enough market information which leads to long development time and limited number of new productsProduct InitiationProduct DevelopmentProduct LaunchNo clear product development strategy, no comprehensive market research, no detailed quantitative forecast and non market o

54、riented method lead to low number of successful products and waste of resourcesNot enough manpower and technology resources and lack of cooperation and communication with other departments (e.g. production and sales) leads to poor design and limited number of new productsLong time -to-market leads t

55、o missed market opportunity ( especially for Daishan )SHA-4309-03690-08-15c.PPTIn GSHA, process control in production system is inadequate, leading to high production costProduction planningPurchasingImprecise sales forecast figure from sales department and too many “Daily Sales Order”lead to diffic

56、ulties in arranging the production schedule and purchasing. This least to high inventory level and delivery delayNo MIS for purchase plan leads to high amount of storage or shortage of some materialsNo evaluation of suppliers leads to high price and poor quality Selection and review of suppliers are

57、 all done by purchasing department which leads to difficulties for further improvementFrequent change of suppliers leads to unsustainable quality and high waste ( e.g. PVC) SHA-4309-03690-08-15c.PPTIn GSHA , process control in production system is inadequate,leading to high production cost (continue

58、d )Control of input/outputProductionStorage controlCCS can not provide all the necessary technology standards for quality inspection, leading to poor quality inputs.The recycling materials are sold directly to outsiders without approval from QC, leading to waste of materialsLow utilization of machin

59、ery leads to high production costOld-age machinery and molds and low quality workers lead to high production waste and low productivity (esp. Lida products)Safety stock level is unreasonable for current situation, leading to high inventory levelNo MIS for inventory management, warehousing only check

60、s the documents instead of the exact amount of goods with no cross check in the whole process. Finance dept is not actively involved in inventory management. This leads to high amount of storage or shortage of some materials and discrepancies between bookkeeping and real amountSHA-4309-03690-08-15c.