This case discusses the phenomenon of high-ratio stock splits in China's capital market. Unlike in the U.S. capital market, where cash dividends are common, high-ratio stock splits in China are often associated with sharp stock price fluctuations and attract close attention from investors, listed companies, and regulators alike. In April 2018, the two Chinese stock exchanges released the most stringent regulations to date to prohibit ineligible companies from carrying out such practices. Nonetheless, there were still many cases where companies found ways to circumvent the rules to continue high-ratio stock splits. In the first half of 2018, Profit Cultural & Creative Group (PCCG) and Zhejiang Wolwo Bio-Pharmaceutical Co., Ltd. (WolwoPharma) announced a 1.8-for-1 stock split together with a cash dividend of ¥0.25 per share and a 1.8-for-1 stock split together with a cash dividend of ¥0.4 per share, respectively. Although the stock prices of both companies went up initially after the announcement, the prices moved in the opposite direction after the ex-rights date. What were the motivations behind the listed companies' high-ratio stock splits? Why did the stock prices of the two companies show different patterns after the stock split? How should investors respond to high-ratio stock splits?
This case presents an overview of China's FMCG industry in the early 2010s from the perspective of WinChannel, an information service provider to major FMCG companies in China. It describes the three major distribution channels (i.e., Routes-to-Market) and focuses on the challenges facing the traditional trade channel through which FMCG companies provide their products to millions of "mom-and-pop" stores (i.e., small, independently owned and operated convenience stores), especially in rural parts of China. In early 2015, Zhen (Andrew) Cui, Founder and CEO of WinChannel, is exploring how he can help improve the reach and efficiency of the traditional trade channel and wonders if the emerging online/mobile B2B FMCG platforms offer the best solution for the increasingly digitized FMCG retail industry in China.
This case aims to help students understand how digitization is enabling and shaping the transformation of the traditional FMCG industry in China. It introduces Andrew Cui's response to the challenges posed in Case (A)-i.e., how WinChannel could improve the reach and efficiency of the traditional trade channel when online/mobile B2B FMCG platforms were emerging in the market. In May 2015, Cui launched Huixiadan, a mobile-based B2B FMCG ordering platform, connecting a select group of leading FMCG companies and their numerous distributors and wholesalers with potentially millions of mom-and-pop stores in China. Huixiadan has used mobile technologies to develop an inclusive and collaborative business model linking most players in the existing traditional trade channel. However, it faces fierce competition from many online competitors seeking to disrupt the FMCG industry, including Chinese e-commerce giants Alibaba and JD.com. Cui is wondering how competitive and sustainable Huixiadan's business model is and what he should do to withstand the competitive threats even as he tries to exploit opportunities in the traditional FMCG industry in China.
Since China's reform and opening up, in merely four decades, the GDP of the city of Shenzhen has grown more than 10,000-fold. The city's development in the past 40 years has been underpinned by industry transformation and innovation, and the Huaqiangbei area in the city epitomizes this development process. Forty years ago, Huaqiangbei was a completely inconspicuous street in Shenzhen, but riding the wave of China's reform and opening up, Huaqiangbei has emerged and gradually grown to be widely known around the world as "China's No. 1 Electronics Street." How should we assess Huaqiangbei's journey of exploration and development? How many rounds of industrial upgrading and market transformation has Huaqiangbei experienced in the course of its development? Also, as the saying goes, nothing lasts forever. After its explosive growth propelled by the knockoff cellphone business, Huaqiangbei soon found itself cornered by the rapid development of e-commerce and mobile Internet technologies. How should it stand up to new challenges and identify new growth opportunities?
This case describes how EVCard, a car-sharing business in China, was created from scratch using a lean startup approach through observing overseas peers, analyzing market opportunities, building a startup team and conducting feasibility studies. The company formed at a time when the commercialization of new energy vehicles (NEVs) in the country was in its infancy, public awareness was low, and viable domestic models did not exist. The case describes how EVCard first developed a minimum viable product and improved on it incrementally through closed testing and a pilot. The firm eventually expanded its Shanghai model to 64 cities across the country, offering more than 42,000 vehicles from more than 13,000 stations to four-million-plus members. They generated nearly 100,000 daily reservations as of November 2018. EVCard's entrepreneurial journey will show students that in a changing market environment, startup companies can develop competitive advantage through rapid learning and product iteration.
Hope Noah Health Management (Beijing) Co., Ltd. (hereafter Hope Noah) was one of China's earliest providers of medical tourism services. The company built a sterling reputation among customers, and demand for its services grew quickly. However, CEO Wang Gang wanted to achieve more than just handsome sales figures and hoped to provide customers with more effective, efficient, and affordable medical tourism services. He believed that the industry's prevailing pricing model, whereby customers were charged according to the amount, duration, and frequency of services ran counter to patients' interests, as less effective and longer treatments resulted in higher bills. To address this issue, Wang considered switching to an "all-inclusive" pricing model covering medical costs, service charges, and all other non-medical expenses arising from treatment. In addition to addressing patients' concerns about unpredictable expenses, this model would also force the company to increase efficiency, aligning the interest of patients with those of the company. However, Wang's proposal was unanimously opposed by other executives due to the financial risks associated with the inherent uncertainties of medical treatment. This case looks into a thought-provoking topic as it concerns China's inadequate medical resources, deficient healthcare system, rapidly aging society, and consumption upgrading trends. The case study will cover topics like basic pricing theories and innovative pricing methods while showing students how to formulate marketing strategies for companies by applying theoretical frameworks such as the marketing mix.
Yiliu Tech was established in 2006 to reform road freight in China and address its lack of transparency with information technology. Its philosophy was built on the concept of "logistical transparency", i.e., providing digitalized services to road freight suppliers and customers. These services use real-time positioning and other physical vehicle data collected via various devices and sensors. Of the three stages of logistical transparency, Yiliu Tech has undergone stages 1.0 and 2.0 in the past ten years and is now transitioning from business digitization to data-driven services. How important is logistical transparency, and what do Logistical Transparency 1.0, 2.0, and 3.0 actually mean? How should Yiliu Tech use logistical transparency and logistics big data to optimize logistical decision-making, design more innovative services and make them widely accessible? Against the backdrop of industry-wide transformation and upgrading and the opportunity presented by strategic investment from Cainiao Network Technology (hereinafter "Cainiao"), what path should Yiliu Tech take to pursue its goal of Logistical Transparency 3.0?
The case presents an investment opportunity in a Chinese technology company by using a variable interest entity (VIE). Since foreign ownership is restricted in certain sectors of the Chinese economy, like technology, a VIE can be used to structure around such regulations. VIEs are complex arrangements that rely on an intricate network of contractual relationships that have been designed to mitigate, but cannot eliminate the risk of investing without becoming a shareholder of the investment target. As almost all Chinese technology companies that are listed on exchanges outside of China use a VIE structure, it is important to understand the possible risks associated with investing via a VIE. Examples such as Alibaba are used to illustrate the risks related to using a VIE to access Chinese investment opportunities.
Garmin 2019 is the second in a two-part case. Case A reviews the history of Garmin from 1991 to 2008, when the personal navigation device (PND) industry is disrupted by the entry of smartphones with mapping applications. Garmin 2019 covers the decade until 2019, describing how Garmin and other major players responded to shifting consumer preferences, new developments in digital mapping and satellite networks, and the race to develop self-driving cars. In the face of a massive decline in the PND market in this period, Garmin staged a remarkable recovery, shifting focus to spread over diverse products segments, each with its own threats and opportunities. The core of the case is management's reassessment of corporate strategy across the portfolio of businesses.
INSEAD alumnus Martin Murray is the inventor of waterdropâ„¢, a cube made up of natural aromas, superfood extracts and vitamins that encourages people to drink more water by adding flavour. Although he initially builds a business on a lean budget, he knows that creating a unique brand is key for the success of his innovation. Not only is waterdrop in a category of its own - 'a microdrink' - but, unlike most drinks, the cubes can be sold online. With a product positioning 'drink more water', he tests the brand on his native Austrian market. The case follows Martin from the initial idea (prompted by the limited drinks range on-board a flight to Singapore) to recruiting a small team to launch what he believes will be a game-changer in the non-alcoholic beverage industry.
On April 2, 2017, the chairman of Kamat Hotels (India) Limited (KHIL) and his son, the company's chief executive officer, were having breakfast and recalling tough times endured in 2014 after a failed corporate debt restructuring. It had been one of the most important decisions ever made by the public sector undertaking bank-leaving their previous joint lenders and deciding to assign the loan to an asset reconstruction company. The incident had proven to be a turning point for the company. The failure of the corporate debt restructuring mechanism had become an unexpected advantage, and the company never looked back. The two leaders were now focused on their commitment to grow the company in a sustained manner, staying true to the local environmental challenges. With the goal of aggressive growth in several Indian states, the chief executive officer was looking for more hotels to own, manage, or lease in the mid to high segments of the market as an expansion plan. His vision was to someday retire as the owner of one of India's largest hotel assets and to take his family name forward to the next benchmark of Indian hospitality. Was this the best path forward for KHIL?
Sandu Pharmaceuticals Ltd. (Sandu Pharmaceuticals) was a publicly listed company operating in the pharmaceuticals and health care sector. It manufactured Ayurvedic medicines. Incorporated in 1985, the company traced its history back over more than a century. The third generation was at the helm of the firm in September 2016. The company’s director, was thinking about how previous successive generations in the family had handled the challenge of absorbing family members into the business, and in particular about whether he was doing enough to prepare the next generation to take over a business that was bound to grow more rapidly in the future, given the growing concern worldwide about the cost of allopathic health care and demand for less invasive and more holistic treatments.
On April 2, 2017, the chairman of Kamat Hotels (India) Limited (KHIL) and his son, the company’s chief executive officer, were having breakfast and recalling tough times endured in 2014 after a failed corporate debt restructuring. It had been one of the most important decisions ever made by the public sector undertaking bank—leaving their previous joint lenders and deciding to assign the loan to an asset reconstruction company. The incident had proven to be a turning point for the company. The failure of the corporate debt restructuring mechanism had become an unexpected advantage, and the company never looked back. The two leaders were now focused on their commitment to grow the company in a sustained manner, staying true to the local environmental challenges. With the goal of aggressive growth in several Indian states, the chief executive officer was looking for more hotels to own, manage, or lease in the mid to high segments of the market as an expansion plan. His vision was to someday retire as the owner of one of India’s largest hotel assets and to take his family name forward to the next benchmark of Indian hospitality. Was this the best path forward for KHIL?
Ofo (stylized “ofo”), a Beijing-based bicycle-sharing company, had grown bicycle sharing from nothing into a dockless mobile application (app) service industry with over 120 million monthly active users sharing 30 million bicycles in cities across China and around the world. Founded by five bicycle enthusiasts in 2014, its dockless system used a smartphone application to unlock and locate nearby bicycles, charging an hourly rate for use. Although only two years old in 2017—and yet to turn a profit—the company was valued at over USD 1 billion in a recent E round of private-equity financing. ofo’s new funds would be used to buy bicycles for international expansion and hire more talent, but in a rapidly changing, highly competitive environment, the company needed to assess its current and future position.
Trov is a disruptive startup in the insurance space ("insurtech"). It allows consumers to simply turn on and turn off insurance for each of their possessions on a mobile app with the swipe of a finger. Consumer love the simple, on-demand, single-item coverage product. However, the cost to acquire customers (CAC) for Trov is significantly higher than the total expected contribution margins (CLV) for the single item coverage insurance product that the company is known for. In light of this, what should the CEO of Trov to with the product? How can Trov monetize on-demand insurance?