Business Model of Fosun International Ltd V60.docx

Business Model of Fosun International Ltd V60.docx

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BusinessModelofFosunInternationalLtdV60

BusinessModelofFosunInternationalLtd.

BusinessEnglish11-2ChenPeng

SupervisorWuTiantian

Abstract

FosunInternationalLimited,whichranked37thand229thinthelistoftop500privateenterprisesandtop500enterprisesrespectivelyinChinain2014,hasbeenregardedasalegendbymanypeopleinthecircleintheChinesebusinessatmosphere.Itstartedoutactingasamarketingconsultingoutfitwhichaimedtoprovideverdictsorsuggestionsforotherbusinessestocarryouttheiroperatingactivitiesinanappropriateway.Butlateron,itsteppedintorealestate,pharmaceuticals,retailing,mining,finance,steeling,mediaindustriesandothersectors.Nowitmainlyfocuseson4areas,whoseupsurgingpathandbusinessmodels,quitesimilartoWarrenBuffet’company,BerkshireHathawayInc.isworthlearning,especiallyforthoseChina’sprivateenterpriseswhichareflounderingbutpossessgreatambition.

Keywords:

Fosun,BusinessModel,Investment

Acknowledgements

ManythankstomysupervisorMrs.Wuwhogotoutofherwaytogivemevaluablesuggestions.Withouthergeneroushelp,thisessaywon’tbefinished.ThanksalsotomyteacherMr.Liu,whosebookguidedmetodrawchartsandhealsoshowedmelotsofmarvelouscharts.

Contents

Abstracti

Acknowledgementsii

ChapterOneFosun:

ALegendinChineseBusinessAtmosphere1

1.1TheHistoryofFosun1

1.1.1AnUnfledgedBird（1992~1993）1

1.1.2TheTransformationofGuangxin（1994~1998）2

1.1.3DiversifiedDevelopmentofFosun（1999~2006）2

1.1.4AWould-beWorld-classInvestmentGroup（2007~now）3

1.2TheCurrentSiuationofFosun4

ChapterTwoTheAnalysisofFosun'sBusinessModel5

2.1TwinDriversDevelopmentModel5

2.2InvestmentModelofFosun5

2.2.1PE+IndustrialOperations5

2.2.2CashIstheKey:

CapitalInvestmentMothod8

2.2.3Counter-cyclicalInvestmentModel9

2.2.4ProcessofProjectAssessmentforInvestinginFosunGroup10

2.3KeyFactorsbehindFosun’sBusinessModel11

2.4AdvantagesandThreatsofFosun’sBusinessModel13

2.4.1FourCategoriesofAdvantages13

2.4.2TwoDisadvantages14

ChapterThreeWhatCanOtherPrivateEnterprisesLearnfromFosun15

3.1AdaptationtotheGovernment’sPolicy15

3.2UsingthePettyCapitaltoControlLargeAsset15

3.3BenefitingotherPeopleaswellasOneself16

References17

ChapterOneFosun:

ALegendinChineseBusinessAtmosphere

1.1TheHistoryofFosun

ThehistoryofFosuncanbeseparatedinto4phases.EachofthemhasbeenmarkedbysomecharacteristiceventsorconventionsthatFosunhasencounteredonitswaytobecomeacosmopolitaninvestmentconglomerate.

1.1.1AnUnfledgedBird（1992~1993）

In1992,ayoungmanfromFudanUniversitynamedGuoGuangchangwhotookwithhimselfwith4000dollarswasinanextremelylongqueuetowaitforthevisatobesignedbytheAmericanambassadorsinShanghai.Aswasprobablytruetomanypeople,hewaseagerlyplanningtostudyintheU.Sinordertogetabettereducationtherewhichwasconsideredtobeatrendatthattime.Suddenly,anewideapoppedupinhismind,therefore,hemadeuphismindtogiveupstudyingabroad.Then,the4000dollarswasconvertedintoRMB380,000.TogetherwithsomefinancialhelpfromMr.Guo’sfriends,heandhisacademicbrotherLiangXinjun,erectedaconsultingfirmnamedGuangxinTechnologicConsultingFirminNovember1992,whosemajorbusinessliedinmarketresearchbecausebothofthemhadnomoney,noexperienceandnobusinessbackground.Startingabusinesswasnotsoeasyforthem.Atthebeginningofthebusiness,bothofthefoundershadnochoicebuttomakepainstakingefforttorideabiketocarryoutinvestigationsinthemarketandpersuadesomepotentialclientstochoosetheirservice.Althoughtheyworkedquitehard,theycouldonlygot200yuanofsalarypermonth.

Atthattime,therewerelessthan10consultingfirmsalloverChinaandtherewereonly4oftheminShanghai.Therefore,somecompanieslikeApolloGroupCO.,Ltd,LuckyFilmCO.,Ltd,andTCBYbecametheirclientsbecauseoftheirintelligenceandhardworking.Oneoftheirclients,Ganso,wasquitesatisfiedwithitsserviceanditgaveGuangxinTechnologicConsultingFirmagoodreputationinthisindustrywhichinturnhelpedtogainthemarketshare.OnJune1993,thefounderswereverypleasedtofindthattherewere1millionyuaninthefirm’saccount.

1.1.2TheTransformationofGuangxin（1994~1998）

Withthe1millionfund,theleaderofGuangxin,Mr.Guo,determinedtochangethebusinessscopeoftheirfirm,althoughithadbecomeoneofthemostprominentfirmsintheconsultingindustry.JustaswhatGuohadsaidlaterinoneofhisspeeches:

”Thedepressionofbusinessshallbepredictedbythetimeithasbeenbooming.”HerealizedthattheboomingofconsultingindustrywasboundtoreduceGuangxin’smarketshareinthefiercecompetition.Thus,withtheparticipationofanother3gradatesfromFudanUniversity,FanWei,WangQunbingandTanJian,Mr.GuoledhisteamtotransformGuangxinintoapropertydeveloperin1994.Besides,thenameofthiscompanywaschangedintoShanghaiFosunIndustrialCo.Ltd.

NearlyallthepropertydevelopersinShanghaiwerewaitingfortheircustomerstoaskforthedetailsoftheirproductsin1994.AssoonasGuoobservedthisphenomenon,hedecidedtochangethismodel.Therefore,hedividedthestaffinto5teamsandeachteamsentdistinctivebrochuresthatwereintendedtointroducetheircommercialhousestotheirpotentialclients.Fosun’sproductsweresoldverywellinthiswayandFosunhadearnedabout10millionyuanbytheendofthatyear.

Fosuninvestedintheareaofbioengineeringin1995.Aprojectthathadbeendealingwithfor3yearswasdevelopedintoproductsPCRdiognoticreagentundertheleadershipofFanWeiandWangQunbing..Bytheendof1995,therevenueofthisproducthadbeen100millionyuanandavaluablesalessystemaroundChinawasestablishedaswell.Atthesametime,thefocusofbusinesswasconvertedfromsalesmarketingtothedevelopmentofrealestateandthusthefirstprojectwasFosunGarden.In1998,Forte（Group）Co.,Ltdwhichspecializedindevelopingpropertywassetup.InAugust1998,FosunIndustrialCo.LtdwaslistedatShanghaiStockExchangeanditsnamewaschangedintoShanghaiFosunPharmaceutical（group）Co.,LtdinDecember,2002.Sofar,propertyandpharmaceuticalhavebecometwoofthemajorbusinessesinFosun.

1.1.3DiversifiedDevelopmentofFosun（1999~2006）

TheIPOofFosunPharmaceuticalhadhelpedFosunfinance350millionyuanwhichrenderedtheleadersofFosunconsidercapitaloperation.AtypicalinstancewastheacquisitionofsharesofYuyuanTouristMartonNovember11,2001madebyanewsubsidiarycalledFosunIndustrialInvestmentCo.,Ltd.Thenewsubsidiarytookup13.25%ofthegeneralcapitalandhadbecomeoneofthelargestshareholders.Afterthat,similareventsoccurredoverandoveragain.30%ofshareofBeijingJianlongGroupwasboughtbyFosunin2002.SteelingindustryhasbeenplayingtheroleofcashcowforFosunsincethenandithadbuiltasolidfoundationforFosun’Mergerandacquisition.TebonSecuritiesCo.,LtdwasestablishedbyFosunin2003andFosuninvestedinZhaojinMiningCo.,Ltdin2004.Fosun’sbusinessscopehadrangedfromproperty,pharmaceutical,retailing,steeling,miningtofinancethroughmergerandacquisitionbytheendof2006.

1.1.4AWould-beWorld-classInvestmentGroup（2007~now）

FosunGroupwaslistedasawholeintheMainBoardofHongKongStockExchangein2007whichbecamethethirdlargestIPOthatyearwiththetotalmarketvalueof64.6billionHKdollars.FosunsteppedintoinsuranceindustryinthesameyearbyinvestinginYong’anP&CInsurance.Aswasprobablyknowntomanypeople,thefinancialcrisisburstoutin2008whenthestockpricesofmanyfirmsplummetedinevitably.SodidFocusMediaNetworkLimitedwhichwasresultedintheinvestmentfromFosunGroupbytheoccupation26.14%ofthetotalshares.PeoplewerestunnedbytheFosun’spromptbuyingasthepriceofthestocktripledaftertwoyears.

CooperatedwithCarlyleGroupinanallroundwayin2010,Mr.GuoreachedanagreementwithDavidRobenstein,co-founderofCarlyleGroup,tocarryoutprivateequityinChinawith100milliondollars.Theyear2010alsomarkedtheinternationalizationofFosunGroupbecause7.1%sharesofClubMedwereboughtbyFosun.Then,therewasacquisitionofFolliFolliein2011,PeakReinsurancein2012,St.Johnin2013andCaixaSegurosin2014.Sofar,FosunGrouphasbecomeaworld-classinvestmentgroupafternearly23years’hardworkwhosebusinessscopehasrangedfromproperty,pharmaceuticals,insurance,steeling,mining,finance,assetmanagementandmedia.

1.2TheCurrentSiuationofFosun

FosunGroupisnowalarge-scalecomprehensiveinvestmentcorporationwhichmainlyfocusesonthegrowthmomentumofChinawiththeoperatingactivitiessuchasindustrialoperations,investment,insuranceandassetmanagement.Ithasmorethan100subsidiariesorjointlyrunningbusinessesresultingfromhundredsofmergersandacquisitions.AndthestructureofFosunattheendof2014canbeseenasfollows:

Figure1TheStructureofFosunGroupby2015

accordingtotherevenuesofthelatestnineyearsthatFosunhasearned,wecouldjudgeitsunparalledspeedofdevelopment:

Figure2TheLatestNineYears’RevenueandNetProfitofFosunGroup

MillionYuan

TheaimofFosunistobecomeaworld-leadinginvestmentgroupthatwillconcentrateonChina’sgrowthmomentum,manageassetworthtrillionsofdollars,combinethegrowthmomentumofChinawithresourcesaroundtheglobe,investintheindustr