罗兰贝格Financial, organization and processes analysis.ppt

SHA-4309-03690-08-15c.PPT,C.Financial,organization and processes analysis,SHA-4309-03690-08-15c.PPT,C1.Financial situation analysis,SHA-4309-03690-08-15c.PPT,C1.1 Geberit Shanghai,SHA-4309-03690-08-15c.PPT,Presently,GSHA is in serious corporate crisis,Phases of corporate crisis,Weak,Strong,Pathology of crisis symptoms,Normative misfit,Strategic crisis,Results crisis,Liquidity crisis,Geberit,Low,High,Bankruptcy crisis,SHA-4309-03690-08-15c.PPT,All 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 000,13.4%,46.4%,75%,+522%,Source:P&L Geberit(Shanghai),RB&P analysis,SHA-4309-03690-08-15c.PPT,Companys 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 assets,Development of liabilities&assetsRMB 000,Current ratio,Quick ratio,Current assets,Current liabilities,Source:Balance sheet Geberit(Shanghai),RB&P analysis,+37%,+522%,SHA-4309-03690-08-15c.PPT,The companys inventory increased by 91%,while current assets increased by 37%,Development of inventories,Source:Balance sheet,Geberit(Shanghai),RB&P analysis,Current asset structure(%of the current assets),+91%,RMB 000,44%,11%,6%,11%,11%,10%,7%,26%,8%,18%,2%,13%,9%,21%,7%,4%,26%,10%,10%,8%,18%,8%,15%,0%,15,720,14,007,11,507,Raw materials,Work in progress,Finished goods,Goods purchased for resale,Other inventories,Trade accounts receivable,+37%,RMB 000,Cash&cash equivalents,Other accounts receivable,SHA-4309-03690-08-15c.PPT,Due to huge losses,the company is solely financed by inter-company loans,the liabilities increase much far faster than assets,Balance sheet Geberit(Shanghai)19982000.7 RMB 000,1998,1999,2000(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,18,3185871004,5171,8625,11830,41241,426(5,420)(9,669)0407530,412,60.2%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)1,57215,35833,090,57.4%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%,18,06002343918,6444,0972,35433,78041,426(25,266)(8,293)56325,35033,780,53.5%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.PPT,The 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(1997.122000.09)RMB 000,Source:P&L Geberit(Shanghai),RB&P analysis,86%,SHA-4309-03690-08-15c.PPT,The company has been losing money since the foundation of JV,and the loss is continuously increasing in spite of the increase of sales,+41%,*:estimation,1998,1999,2000*,Source:Roland Berger&Partners analysis,Sales developmentRMB 000,Operating lossesRMB 000,+45%,SHA-4309-03690-08-15c.PPT,More than 70%of products sold in 2000(1-9),including Geberit locally produced products,have a negative gross profit margin,Lida products,Geberit local produced,Geberit imported,Gross profit margin2)(at actual cost),Gross profit margin1)(at standard cost),+25%,+44%,-6.93%,-7.43%,+38%,+38%,Lida product,Geberit imported products,Geberit locally produced products,Source:Geberit(Shanghai),Roland Berger&Partners analysis,1):Calculate based on the full capacity utilization rate(80%90%)2):Calculate based on the actual capacity utilization rate(20%30%),SHA-4309-03690-08-15c.PPT,The disproportional increase of operating expense results in the increase of operating loss in spite of the improvement of product mix,Source:P&L Geberit(Shanghai),Roland Berger&Partners analysis,+29%,146.9%,118.1%,130.4%,Total operating expenses 19982000RMB 000,*Estimation,%of sales,SHA-4309-03690-08-15c.PPT,Among the cost of goods sold,cost of materials and labor are two major cost drivers,Source:P&L,Balance sheet,Geberit(Shanghai),Roland Berger&Partners analysis,Cost of goods sold(%of sales),GSHA 1999,GSHA 2000(1-9),Turnover,15.568 million RMB,10.514 Million RMB,Cost of goods sold,12.87Million RMB(82.66%to sales),9.7 million RMB(92%to sales),Structure of cost of goods sold,Cost of materials*Labour costDepreciationEnergy consumptionMaintenanceOthers,7521,2493,1203,648,565,439,48%,16%,8%,4%,3.6%,2.8%,2%,4%,3.3%,11%,17%,54%,RMB 000,RMB 000,*note:the materials cost are the cost of all materials purchased,instead of materials actually consumed.,SHA-4309-03690-08-15c.PPT,And among the sales cost,salaries and travelling are two major cost drivers.Meanwhile,promotion fees and staff training cost increase,Source:P&L,Balance sheet,Geberit(Shanghai),Sales cost(%of sales),GSHA 1999,GSHA 2000(1-9),Turnover,15.568 million RMB,10.514 million RMB,Sales cost,5.66 million RMB(36.35%to turnover),5.4 million RMB(52.4%to turnover),Structure of sales cost,SalaryTravelling costPromotion feeRoom rental&parkingCommunication feeStaff trainingOthers,3158,979,588,221,29,1021,20%,6.2%,3.8%,0.2%,6.6%,6.08%,1.6%,3.4%,6%,9%,26%,3.7%,576,1.4%,0.6%,2690,925,582,352,160,64,626,RMB 000,RMB 000,SHA-4309-03690-08-15c.PPT,Increase operating expenses results in increase of operating losses in spite of the improvement of sales,Profit&loss statement Geberit(Shanghai)19982000 RMB 000,1998,1999,2000(112),SalesCost of materials Gross profitpersonnel expenses Energy/maintenanceDepreciationMarketing expensesAdministration expensesOther operating expensesTotal operating expensesOperating profit(loss)Net income,10,2194,9385,2486,8101,2361781855,76783615,012(9,764)(9,669),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%13.7%17.2%130.4%(92.8%)(99.0)%,Source:Geberit(Shanghai),Roland Berger&Partners analysis,SHA-4309-03690-08-15c.PPT,The company can not generate enough cash from business operations and it solely relies on the continuous cash injection from the parent company for survival,Source:Cash flow,Geberit(Shanghai),Cash inflow and outflow,2000(1-6)RMB 000,Operating,Working capital,Investment,Cash before financing,Inter company loan,SHA-4309-03690-08-15c.PPT,C1.2.Geberit Daishan,SHA-4309-03690-08-15c.PPT,GDAIs sales have continuously improved,and cost are reducing;the inter-company sales increased much faster than to third party,2)Including write-offs for obsolete materials:1 million RMB&other unclear accounts,Sales development RMB 000,Operating losses development RMB 000,1998,1999,20001),+136%,+36%,1)Estimation,1998,19992),20001),-24%,+74%,3284,4451,7763,Third party,Inter-company,Source:Geberit(Daishan),SHA-4309-03690-08-15c.PPT,GDAIs operating losses are decreasing due to reduction of costs,Source:P&L Geberit(Daishani),Cost structure RMB 000,1998,1999,2000(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 expenses,Administration,Marketing,Energy maintenance,Personnel expenses,Cost of material,Depreciation,10,058,14,444,11,668,359%,325%,206%,%of total sales,SHA-4309-03690-08-15c.PPT,As a result of cost control,operating losses are reducing in line with the improvement of sales,Profit&loss statement(Geberit Daishan)RMB 000,SalesCost of materials Gross profit(loss)personnel expenses Energy/maintenanceDepreciationMarketing expensesAdministration expensesOther operating expensesManagement feeTotal operating expensesOperating profit(loss)Net income,1998,1999,2000(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%326.7%-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:Geberit(Daishan),Roland Berger&Partners analysis,2000(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%,*Estimation,SHA-4309-03690-08-15c.PPT,Short-term interest bearing debt increased nearly 4 fold,leading the short-term liabilities increase by 123%.This amounted to 68.5%of total assets by the end of July,2000,Source:Balance sheet,Geberit(Daishan),Roland Berger&Partners analysis,Liabilities Development,Liabilities Development,98-00(1-7),1998,1999,2000(1-9),+123%,RMB 000,Short-term interest-bearing debt development 98-00(1-7),+487%,1998,1999,2000(1-9),RMB 000,%of total assets,%of total assets,SHA-4309-03690-08-15c.PPT,0.85,0.42,0.60,0.36,0.49,0.28,As a result of the disproportional use of current assets and current liabilities,GDAIs liquidity situation is deteriorating,Source:Balance sheet Geberit(Shanghai),RB&P analysis,Current ratio,Quick ratio,Current assets,Current liabilities,+29%,+127%,Development liabilities and assets RMB 000,SHA-4309-03690-08-15c.PPT,Due to huge losses,the company is solely financed by inter-company loans.Liabilities increase faster than assets.,Balance sheet Geberit(Daishan)19982000.7 RMB 000,1998,1999,2000,Fixed assetsIntangible assetsInventoriesOther prepaid expensesAccount receivable(net)Cash&cash equivalentTotal assetsShare capitalRetained earningsNet income current yearTotal liabilities&provisions Total share capital&liabilities,16,3093,9423,2967302,2861,57228,13535,447(8,372)(8,659)9,71928,135,58.0%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)15,59628,396,57.8%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)(3,919)20,97030,169,56.4%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.PPT,C2.Organization&processes,SHA-4309-03690-08-15c.PPT,C2.1.Organization structure,SHA-4309-03690-08-15c.PPT,GDAIs organisation structures and management team have been improved after the change of the ownership,providing the basis for further improvement,Base for further improvement is established,Wholly controlled by GeberitOrganisation structure is clear and followedAuthorities and responsibilities are clearGMs management skills are accepted by the employeesChinese 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 company,SHA-4309-03690-08-15c.PPT,In GSHA,Geberit and Lida have not integrated well from the foundation of JV.This creates a lot of internal conflicts and management chaos,Lida,Corporate cultureManagement style/skillsProduct linesMarketsWork style,SHA-4309-03690-08-15c.PPT,HR,HR,HR,HR,More importantly,in GSHA,the official organization structure is not implemented,Official organization structure,Organization structure in reality,GM,Dpt.GM,Two parties exist leading to internal conflicts and complexities Unclearly defined authorities and responsibilities,leading to overlap of some functions CCS is separated from the companys system,leading to inefficient co-operation and low efficiency,GM,Dpt.GM,CCS,Sales&marketing,Production&logistic,Admin,SHA-4309-03690-08-15c.PPT,General manager is directly in charge of sales and administration by being the department manager,leading to no middle management team.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 high,GMH.Schuette,Sales&marketing2)H.Schuette,Production&logisticKen Leung 7 months,CCSK.Koenigslehner,AdministrationH.Schuette,Process engineering 24 years,Quality control1 month,Logistic 5 months,Outside purchase 5 months,Production control 32 years,Production 3 months,Maintenance5 months,Local purchase2 years,Controlling1 year,EDP2 months,Doc.Admin17 years,Material Dev.2 months,Personnel 32 years,Accounting2 years,Production dep.Past-time,Quality management N/N,Process dep.N/N,6 months,3-6 months,3 months,1),1),1),1),1),SHA-4309-03690-08-15c.PPT,C2.2.Management structure,SHA-4309-03690-08-15c.PPT,The high hierachy management design in GSHA leads to low efficiency,and slow decision making process,Organization&Management structure,Decision-making process,GM,Dpt.GM,Dep.Manager,Regional Manager,Sectional management,21,1,1,4,21,Total:48,upto 32%of total employees,GM,Dpt.GM,Total:12 people report to GM directly,SHA-4309-03690-08-15c.PPT,Personnel expenses in GSHA have been up to 73.5%of total sales in July 2000,as a result of the change of personnel structure,Personnel development&structure 1997-2000*,Turnover per employee*RMB 000,1997,1998,1999,2000,*exclude staff in Beijing Office,1998,1999,2000,*Estimation,Production,Admin,Sales,CCS,11%,2%,6%,6%,15%,17%,19%,31%,29%,25%,23%,59%,54%,52%,52%,129,138,148,151,+13%,0%,SHA-4309-03690-08-15c.PPT,The general manager can not gain necessary and correct data from the company for decision-making,Main problems of data/reporting,No control of data input(e.g.no cross check in the warehousing),Data input,A lot of useful data arent available(e.g.scrapped product report),Data processing,No strict control system(e.g.no comparison of actual cost and standard cost)Data is only for document,not for analysis,Data controlling,Too high figures in budgeting and sales forecast,Planning,Poor quality decision basis,SHA-4309-03690-08-15c.PPT,Performance evaluation and incentive system in GSHA is very weak,leading to low motivation and commitment,Problems,Evaluation&promotion,Impacts,No defined procedure&criteria were found for evaluationNo clear criteria for promotion,Poor cooperationIrresponsible work,Incentive system&Training,No incentive schemeNo personnel development program Not enough training programs,Low motivation among staffLow commitment to the companyLow quality of employeesHigh staff turnover,SHA-4309-03690-08-15c.PPT,GSHA does not have the proper management system,therefore it is run inefficiently,Main problems in management,Main problems in management system,Controlling system is not followedLack of performance evaluation system No incentive scheme,Unclearly defined authorities&responsibilitiesNo reliable information for decision-making(e.g.actual cost)Quality of data is poorNo formal reporting system to collect data,Official structure isnt implementedGM doesnt have leadershipRedundant management level leads to prevarication&inefficiencyManagement team isnt integrated and huge turnover in the middle management,No motivating corporate cultureNo