SHANDONG RUYI

SHANDONG RUYI

PORTER'S FIVE CONTINUED

CINDY J.

Customers/Buyer:

• B2B Focus (Clients such as ZARA & NIKE.) -Qualified Offerings.

Branding & Communications: Marketing

• Think: How are we (Shandong Ruyi) going to promote ourselves? (Translating values & image & Global reputation.)

• Building more Trust for a Sustainable relationship + Communication system within our existing value chain.

Threat of Substitution:

• Nature of the product: Too easy to replicate.
• Racing against time: To compete & Grow.

SHANDONG RU YI: JV Focus

AGENDA

EXTERNAL ANALYSIS: PORTER'S FIVE FORCES

POSITIVE OUTLOOK:

PROFIT OPPORTUNITIES

SUPPLIER POWER:

ANNICE:

• Company Background.

WOOL:

CHEMICAL FIBER:

COTTON:

ERIC:

• Market Evaluation: Porter's Five Forces.

STRENGTHS:

OPPORTUNITIES:

• Technology & innovation by Research and development.

• Produce new materials to make new clothing.

• Absorb customers to purchase + CRM.

FOREIGN OWNERSHIP 2:

• International – investment and cooperation.

• China-Pakistan Economic corridor.

• Long-term cooperation relationship with Australia.

– Joint venture companies

BUYER POWER:

Perspectives on the concept of ‘Foreign Ownership Strategy’

• Faster, yet reliable growth for global access.
• More value adding co-ordination = Transitioning from a supply chain into a Value chain. :)
• Greater exposure of the latest technologies, expert knowledge to stay ahead of the game.

PROS: Experts within the field (Joint Ventures).

• Renown – Japan (41.18% JV shares acquired during 2010)
• Cubbie Station – Queensland, Australia (JV acquired 80% back in 2012.)
• Harris Tweed Mill - Isle of Lewis, Near Scotland. (JV acquired in 2012. Saved the local industry.)
• Reliance Industry Ltd. – India (49% JV acquired in 2014. Back up plan to the previous consideration of the Pakistani Manufacturing firm.)
• More Co-ordination & Less direct competition. (One market only.)

CONS:

• Still wants to grow but lacks credit funds from local Banks.

CINDY:

• Extension with Porter's Five Forces
• Foreign Ownership
• Pros & Cons of Foreign Ownership + Recommendation

ANSWER:

• Cost Saving of Raw Materials + Production (Automated process) is much more cheaper + Market Responsive.
• Immediate Access of the latest Market knowledge, Resources & Power.
• Global Exposure & Reputation.
• Exchanging Common Interests of entering into new markets. (I.e. Invest into or fulfilling current demands in their most preferred market such as China.)

KEY CHALLENGES:

• Merging Cultural differences & organisational cultures.
• Communication Barriers: Translation of common interests & values & customs may also differ.
• Managing Diversity. (Like Teamwork! If it works, it works really well. vice versa.)

RECOMMENDATION:

• Continue on our strengths: Focusing on what we do best. (JV)
• Improve: Our Communication system shared with existing JV(s) to build better trust, frequent flow of information in responsiveness for the best performance.
• Improve our financial credibility: Consider New market (AUS) or relocate to other regional banks beyond Shandong.
• Communicate branding collectively as one.

Q&A:

Why does Shandong Ruyi want take part in the form of Joint Ventures when entering into other regional markets?

NIKKI:

• Risk Analysis

PEARL L.

PEARL:

• Positive Outlook: Investment into Shandong Ruyi.

ERIC H.

ERIC:

• Future Prospects

2010

2012

1995

2015

1972

RISKS MANAGEMENT

FUTURE PROSPECTS:

FOREIGN OWNERSHIP

COMPANY BACKGROUND:

NIKKI W.

COMPANY BACKGROUND

STOCKMARKET FORECAST:

• Established in 1972, Shandong China.
• A Chinese-foreign joint-venture enterprise.
• Engaged in rabbit hair spinning, textile & clothing, cotton textile, cotton printing and dyeing, knitting, fiber, jeans and real estate business.
• Major Stateholders: Shareholders + Competitors + Employees + Customers + Government.

• Expanding Overseas: Cheaper costs of raw materials such as cotton can be a huge incentive for MNCs such as Shandong Ruyi.

• That’s why they signed their joint venture deal with India.

• Plus it will also encourage them to grow & expand more responsively.

• YES: Shandong Ruyi does have the potential & resources to transition itself from a Global supply chain into a much responsive Globalized Value Chain.

KEY SHAREHOLDERS :

• In 2011, Itochu Corp. acquired 30% Share of Shandong Ruyi shares at $US200 Million (15 Billion Yen).

(Reuters 2011)

• Itochu is a Japanese trading company (Similar to Shandong Ruyi) that is also involved in a variety of different sectors ranging from Textiles, Machinery, Metals & Minerals etc.

Formation of JV: Itochu's actions were driven by the purchase of another Japanese company: RENOWN.

• Shandong Ruyi’s previously acquired 41.18% share of Renown Inc. in 2010.
• RENOWN: Another Japanese textile company found in Tokyo, Japan during 1902.
• Keen to expand into China’s clothing sector.
• Financial difficulties (due to mismanagement).
• Likewise, Shandong Ruyi is also keen to invest into the Japanese clothing market. (Without the financial difficulties...)

• Labor + Raw material price = Cost = Purchasing power.
• Location: Jining (Third-tier) of Shandong Province.
• Production scale: Small
• Market competition: New firm entry Price competition.
• RMB appreciation:

Export = Export tax rebate rate = Profit.

• Credit Issues previously experienced within ICBC Bank (Shandong Branch).
• Trade friction is also an unexpected risk.

ANNICE F.

GROUP MEMBERS:

440418483 LINGXIU (Annice) FENG

430053092 YU HAN (Cindy) JIANG

440094276 NING (Nikki) WANG

430419092 XINZHU (Pearl) LI

430541371 SHUN (Eric) HUANG