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11044117 胡凡 商学精要期末作业


China Resources Enterprise, Limited

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BRAVING CHALLENGES China Resources Enterprise, Limited

11044117 Hu Fan Beijing University of Technology

China Resources Enterprise, Limited

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Abstract
This paper will give a comprehensive introduction to the China Resource Enterprise, Limited. The turnover and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) data in the 2011 and 2012 of the enterprise will be present in the paper. By analyzing the data, including the Sales of Retail, Beer, Food and Beverage parts, we can have a better understanding of the enterprise’s performance, whether they are at an increase or encounter a decrease, as well as their advantages and drawbacks and prospects. Then their Sale Strategies will be listed so we could see how they could pursue a higher goal with their “Hiking Gear”. Finally, by analyzing the Group’s Strategy we can see how they could remain and strengthening their leadership in the China market.

China Resources Enterprise, Limited

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Contents
Title .................................................................................................................................................................1 Abstract ...........................................................................................................................................................2 Contents ..........................................................................................................................................................3 Company Profile..............................................................................................................................................4 Analysis of Turnover and Ebitda......................................................................................................................5 Coporate Structure ........................................................................................................................................... Retail ...............................................................................................................................................6 Beer .................................................................................................................................................7 Food ................................................................................................................................................8 Beverage .........................................................................................................................................9 Sale Strategy .................................................................................................................................................10 Strengthening the market leadership ............................................................................................................... Final Result ...................................................................................................................................11 Strategy Implementation ..............................................................................................................12 Prospects .......................................................................................................................................14 Reference ......................................................................................................................................................15

China Resources Enterprise, Limited

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Company Profile
China Resources Enterprise, Limited CHINA RESOURCES ENTERPRISE, LIMITED is listed on the Stock Exchange of Hong Kong and is one of the constituent stocks of Hang Seng Index. The Group focuses on its four core consumer businesses in China – retail, beer, food and beverage – with the mission of becoming the largest consumer goods company in China. The business strategy of their retail division is to adopt hypermarkets as its main retail format, and to expand its multi-format store network in regions where the Group has already established a presence. Through enhancing resource allocation and operational balance and efficiency, the division targets to become a market leader in the retail industry. Their multi-format chain stores include “CR Vanguard”“Suguo”“Fun2”“Ole’ , , , , ” “Voi_la!” “Chinese Arts & Crafts” “CR Care” “VIVO” and “Pacific , , , Coffee” etc. As the largest brewer in China, the Group boasts “Snow” China’s , , best-selling single beer brand by sales volume. The Group is also the largest supplier of Chinese foodstuffs in Hong Kong and has established a vertically-integrated high quality food supply chain that encompasses research and development, production and processing, as well as wholesaling, retail, logistics and international trading.

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·

ANALYSIS OF TURNOVER AND EBITDA
2012 HK$ million 83,506 28,064 10,379 4,766 126,715 (479) 2011 HK$ million 70,088 26,689 10,706 3,112 110,595 (431) 110.164 Increaed(decreased) % 19.1% 5.2% (3.1%) 53.1% 14.6% 11.1% 14.6%

For the year ended 31 December 2012 Turnover by segment Core Businesses Retail Beer Food Beverage Elimination of intersegment transactions

Total

126,236

EBITDA1 by segment Core Businesses Retail Beer Food Beverage Corporate overhead Total from core businesses Total from other businesses Total

2012 HK$ million 5,228 3,824 722 263 (116) 9,921 (1) 9,920

2011 HK$ million 3,953 3,497 662 243 (111) 8,244 (1) 8,243

Increaed(decreased) % 32.3% 9.4% 9.1% 8.2% 4.5% 20.3% 20.3%

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CORPORATE STRUCTURE
Retail
The Group’s retail division recorded turnover of HK$83,506 million and attributable profit of HK$2,871 million in 2012, representing increases of 19.1% and 49.8% respectively as compared to that of 2011. Excluding the after-tax revaluation surplus and the disposal of the non-core assets, the division’s attributable profit in 2012 would have decreased by 35.0% when compared to 2011. During the year under review, sluggish recovery of global economy and persistent Euro debt crisis have affected China’s export trade and slowed down the economic growth in China. The home purchase restrictions imposed by the central government and the lackluster performance of China’s stock markets have resulted in contraction of wealth effect and slower overall retail sales growth. Benefiting from the rising prices of consumer goods, same store sales of the Group’s retail division grew by 4.1% year-on-year. The increases in minimum wage levels across various regions leading to higher labor costs, accompanied by the incubation period required for the newly-opened stores, have exerted pressure on the division’s profitability. Looking ahead, hypermarkets will remain the main retail format of the Group’s retail division. The division will continue to develop in regions in which the Group has dominant market share.The Group will also replicate its successful multi-format business model to other regions in China by establishing more retail stores in core cities and accelerating its expansion into third-to-fourth tier cities, as well as into counties, towns and villages.

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Beer
The Group’s beer division reported turnover and attributable profit of HK$28,064 million and HK$823 million, respectively in 2012, representing year-on-year increases of 5.2% and 4.8%. The Group’s beer division continued to enhance its production capacity through the construction and acquisition of breweries as well as the reconfiguration and expansion of its existing breweries. However, frequent occurrences of severe weather conditions during the year, including nationwide torrential rain and continuous low temperatures, have affected overall growth in volume in the beer market. As some of the division’s leading markets are located in regions affected by severe weather conditions, the overall sales volume growth and average selling prices of the beer division were affected during the year under review. During the year under review, the division’s overall operating costs, including primary and secondary raw material costs, generally increased. By leveraging its economies of scale and centralized procurement, the Group’s beer division further enhanced its production and energy efficiency so as to relieve cost pressures. Furthermore, the division has stepped up its marketing and promotional efforts in response to the intensifying market competition, which in turn hindered growth in operating profit. As such, the division continued to enhance its product mix in order to enhance overall profitability. Looking ahead, the Group’s beer division will continue to carry out marketing campaigns for the “Snow” brand in order to strengthen the brand’s reputation and customer loyalty.

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Food
The Group’s food division reported turnover of HK$10,379 million and attributable profit of HK$331 million in 2012, representing a decrease of 3.1% and an increase of 19.1% year-on-year, respectively. Excluding the after- tax revaluation surplus and the deemed gain on the disposal of non-core investments, the division’s attributable profit would have decreased by 1.5% year-on-year in 2012. The division’s assorted foodstuff operation in China was affected by sluggish domestic consumption and unfavorable weather conditions. However, the operation maintained its operational advantages by modifying its product mix and expanding into new markets. With respect to the division’s operation in Hong Kong, the frozen food distribution operation was affected by excess market supply and low selling prices, which resulted in lower turnover for the operation. By consolidating its sales channels and reinforcing the communications with customers, the operation proactively responded to the frozen product market, which remained sluggish, and gradually stabilizing the profitability. The profitability of the livestock raising business was affected by plummeting live pig prices as compared to last year and rising feed prices. The division has adopted measures that include strengthening management of the livestock raising business and enhancing feed production technology to alleviate the impacts of the fall in prices and the increasing costs. Looking ahead, the Group’s food division will continue to focus on the domestic market and will enhance the operational efficiency of its existing businesses to accommodate its development strategy.

China Resources Enterprise, Limited

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Beverage
The Group’s beverage division reported turnover of HK$4,766 million and attributable profit of HK$86 million in 2012, representing an increase of 53.1% and a decrease of 31.7% year-on-year, respectively. The decrease in attributable profit was mainly the result of the accelerated marketing promotions for “ Kirin” beverage products. Thanks to the remarkable growth in sales volume of“Estbon”purified water, as well as the active promotion of beverage products, total sales volume of the division in 2012 increased by 33% year-on-year to approximately 3,507,000 kiloliters. The purified water operation reported a marked increase in both sales volume and turnover in Guangdong, Hunan, Sichuan, Jiangsu, Guangxi and Fujian, and has further consolidated its market leading position in Southern China. During the year under review, the drop in the prices of primary and secondary raw materials, including packaging materials and sugar, has alleviated the pressure from rising operating costs. The division has stepped up its marketing and promotional efforts while optimizing its beverage product mix to sharpen its market competitive edge and enhance brand awareness and recognition. Looking ahead, China’s beverage market shows considerable growth potential in view of opportunities for innovative products as consumers become increasingly health conscious. The Group’s beverage division will continue to engage in research and development of new products so as to optimize its product mix, and will implement strategic marketing plans to enhance its brand image and market share.

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Sale Strategy
ENRICHING CONSUMER EXPERIENCE They adopt hypermarkets as its main retail format and to expand its multi-format store network in regions where the Group has already established a presence, enriching their customer's shopping experience.

ADDING VALUE TO THE PRODUCTS The group expands sales of mid-end and above beers to add value to their products.

WIN-WIN PARTNERSHIP FOR SYNERGIES They continue to look for opportunities to team up with other market leaders, especially for their retail and food divisions.

ENHANCING MANAGEMENT FLOW AND OPERATIONAL EFFICIENCY The Group will invest more than RMB2 billion into the IT systems in the coming 5-6 years.

MINIMIZING FINANCIAL RISK The group maintains healthy cash flow for future development.

CONTINUOUS INVESTMENT IN STAFF They value continuous education and frequently arrange trainings for their colleagues.

China Resources Enterprise, Limited

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·

Strengthening Market Leadership
In 2012, the global economy faced many headwinds with the ongoing

Final Results

European debt crisis, the imminent U.S. fiscal cliff and the looming currency war, which affected economic growth in China. Despite the market volatility, the Group continued to evaluate the market situation and to identify opportunities with its commitment to developing its core businesses – retail, beer, food and beverage. Through organic growth and acquisitions, the Group maintained steady expansion and further strengthened its leading position in the market. The track record of sustainable business growth has not only propelled them further towards their goal of becoming the largest consumer goods company in China, but also laid a solid foundation with which they will go through any uncertainties and grasp opportunities when the economy rebounds. For the year ended 31 December 2012, the Group recorded consolidated turnover of approximately HK$126,236 million, representing an increase of 14.6% year-on-year. Consolidated profit attributable to the Company’s shareholders amounted to HK$3,945 million, representing an increase of 30.9% year-on-year. Excluding the after-tax effect of asset revaluation and major disposals, the Group’s underlying consolidated profit attributable to the Company’s shareholders for the year ended 31 December 2012 would have decreased by 19.2%.

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Strategy Implementation Building on a development strategy of national expansion that emphasizes strong regional leadership and synergistic opportunities between its businesses, the Group further enhanced its competitiveness and achieved sustainable business growth during the year under review. Leveraging its extensive retail network of more than 4,400 stores in China, the retail division continued to expand its national footprint to new markets and strengthened its market dominance in existing markets. Furthermore, during the year under review, the contribution from the newly acquired Jiangxi Hongkelong Department Store Investment Company Limited demonstrates the success of the Group’s acquisition strategy in accelerating growth. Apart from network expansion, the Group fostered cooperation with national mainland property developers to bring in its multi-format stores to high quality shopping malls. To further strengthen its competitive edge, the retail division will continue to relocate experienced staff to new regions, enrich its product mix and enhance the unique and sophisticated shopping experience for its customers. With a market share of approximately 22% in China, the Group’s beer sales volume reached approximately 10,639,000 kiloliters in 2012, and its flagship “Snow” brand beer continued to be the best-selling single beer brand by volume in the China market. Se against the increasingly competitive environment in China’s beer industry, the beer division managed to boost beer sales and strengthen its market share by stepping up its efforts in marketing and

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promotions and enhancing its product mix in 2012. The Group also continued to implement its acquisition strategy to secure its leading position in the beer market. In order to fuel sustainable growth, the Group is also devoted to continuing education and talent development. For example, the retail division has established a training institute to organize systematic training sessions for its staff since 2010. During the year under review, a total of more than 2,000,000 man-hours of trainings were organized by the retail division. Apart from the headquarters and business divisions organizing various training sessions and workshops, they also actively participate in training courses organized by China Resources University, the parent company’s training institute. It was established to develop the management skills and leadership of senior and middle management as well as to enhance the competitiveness of the professional experts. With the aim of enhancing its core competitiveness, management flow and cost effectiveness, the Group has established a special IT team comprising more than 30 professionals to develop its IT system projects. The Group will invest more than RMB2 billion in the coming 5-6 years to develop IT systems such as the Enterprise Resource Planning system and the Customer Relationship Management system for the fast-moving consumer goods(FMCG) industry, as well as other systems related to the retail and FMCG industries.

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Prospects Looking forward to 2013, the global economic volatility is expected to affect consumer sentiment and the short-term operating environment in the retail industry. However, they group seems to be optimistic about the long-term development of China’s retail market as the central government’s new urbanization strategies promulgated in its “18th National Congress” will promote domestic consumption. With the strong financial position and healthy cash flow, they are more focused than ever to go through the uncertainties ahead and to expand their business to capture the opportunities that will arise. In the future, their mission remains the same – to become the largest consumer goods company in China. They will adhere to the commitment to market share development for each of their consumer goods businesses while leveraging the economies of scale to enhance operational efficiency and generate higher value over the longer term. They will continue to observe the economic environment as they pursue sustainable growth with disciplined management of costs and risks, and will keep a firm grip on liquidity and financial efficiency. They will also strive to maintain high standard of corporate governance, aiming to win numerous related awards and accreditations continuously.

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Reference
An anonymous ppt material about the introduction of China Resource Vanguard Co, Ltd At:http://wenku.baidu.com/link?url=wc7UgFA4d0XPUoEBNV537dxz_fjtlo3a1hPzUgL_Zx NtUZbzHzVVTIT74ZvinRgWoov21wNtiy-B8Jww3lDfL4o7ogPpa4KySWwZPsld0NO (Accessed: 8th December 2013). Annual Report in 2011 of China Resources Enterprise At:http://wenku.baidu.com/link?url=bPyG6tB0V1pripKB3m9T2LOvtbNFztbrjHYpj2mFAVZn 9hoIZU5cijI0UXALNy37W02HUm0swv7ZRUuq7ymMKTE59s088kXXhbLZgkls7Hy (Accessed: 9th December 2013) A report of the enterprise financial highlights in 2012. At: http://www.crv.com.cn (Accessed: 7th December 2013).

A FINANCIAL REPORT COVER of the Enterprise
At: http://www.docin.com/p-342930920.html (Accessed: 7th December 2013). Date of Turnover and EBITDA of the Enterprise At: http://www.docin.com (Accessed: 7th December 2013). Chairman Chen Lang’s Report Hong Kong, 21 March 2013 At: http://www.crv.com.cn (Accessed: 8th December 2013).

An essay about the enterprise’s management discussion and analysis At: http://www.douban.com (Accessed: 8th December 2013). PricewaterhouseCoopers Certified Public Accountants Hong Kong, 21 March 2013 From: the Enterprise’s Annual Report 2012 (Accessed: 4th December 2013)..


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