Hongxuan Agriculture: The Innovations in Value Chain

In June 2018, the president of Hongxuan Agriculture Group (Hongxuan), which operated in the Chinese egg industry, was aware that an ongoing trade dispute between China and the United States might affect both his industry and future financing for his company. The company he had founded in 2008 had grown dramatically over the past decade; it received high prices for the three billion eggs it produced each year, largely due to its branded marketing, its innovative product development, and its incorporation of new technologies into both farming and sales. The company’s goal was to integrate its entire value chain and to meet an annual production target of five billion eggs. However, the industry was asset heavy and had not traditionally been attractive to investors. In order to raise funds for future development, Hongxuan’s president needed to determine how to lower the industry price to reduce the company’s revenue uncertainty and how to persuade investors and financial institutions to provide the financing he needed for stable future development. Were there innovative supply chain financial solutions the company could use?

This case was developed for both undergraduate and graduate students of operations management, supply chain management, supply chain finance, and corporate financial management to discuss operational management and supply chain management innovations of agribusiness as well as business models and trends for future changes. It analyzes the industry supply chain and financial practices of a Chinese agricultural group, discusses the challenges of value chain integration in agriculture, and explores new business models for smart agriculture. After working through the case and assignment questions, students will be able to do the following:<ul><li>Describe the effect of vertical integration in the agricultural industry on a company’s product innovation using the smiling curve or “make versus buy,” and supply chain management frameworks.</li><li>Explain operational innovations that agricultural enterprises can make in a new retail era of consumption upgrades.</li><li>Identify the key points and methods of supply-side structural reform in agricultural enterprises based on the push/pull theory of supply chain management.</li><li>Explain how the Internet Plus operational strategy can be applied to traditional agricultural enterprises, and explain how this affects the operating environment of the agricultural industry.</li><li>Identify the prevailing investment dilemma of agriculture.</li><li>Explain how to apply industrial supply chain financial instruments, tools, and practices to effectively allocate financial resources for an agricultural supply chain and promote the development of ecological agriculture.</li></ul>

• value chain, egg industry, supply chain, finance innovation