Baosteel Group Governance With Chinese Characteristics Case Study Analysis

Case Study Solution And Analysis

Home >> Ivey >> Baosteel Group Governance With Chinese Characteristics >>

Baosteel Group Governance With Chinese Characteristics Case Study Analysis

Business is presently one of the most significant food chains worldwide. It was founded by Henri Baosteel Group Governance With Chinese Characteristics in 1866, a German Pharmacist who first introduced "FarineLactee"; a combination of flour and milk to feed babies and reduce death rate.
Business is now a global business. Unlike other international business, it has senior executives from various nations and tries to make choices thinking about the whole world. Baosteel Group Governance With Chinese Characteristics presently has more than 500 factories around the world and a network spread across 86 nations.


The function of Business Corporation is to improve the quality of life of individuals by playing its part and offering healthy food. While making sure that the business is being successful in the long run, that's how it plays its part for a better and healthy future


Baosteel Group Governance With Chinese Characteristics's vision is to provide its clients with food that is healthy, high in quality and safe to eat. It wants to be innovative and concurrently understand the needs and requirements of its customers. Its vision is to grow quickly and provide items that would please the requirements of each age. Baosteel Group Governance With Chinese Characteristics visualizes to establish a well-trained labor force which would help the company to grow


Baosteel Group Governance With Chinese Characteristics's objective is that as presently, it is the leading business in the food market, it thinks in 'Good Food, Good Life". Its mission is to offer its customers with a variety of choices that are healthy and best in taste. It is concentrated on offering the best food to its clients throughout the day and night.


Baosteel Group Governance With Chinese Characteristics has a broad range of products that it uses to its clients. In 2011, Business was listed as the most rewarding organization.

Goals and Objectives

• Remembering the vision and mission of the corporation, the business has laid down its goals and goals. These objectives and goals are listed below.
• One goal of the business is to reach zero garbage dump status. It is pursuing no waste, where no waste of the factory is landfilled. It encourages its workers to take the most out of the spin-offs. (Business, aboutus, 2017).
• Another objective of Baosteel Group Governance With Chinese Characteristics is to squander minimum food throughout production. Frequently, the food produced is squandered even prior to it reaches the consumers.
• Another thing that Business is working on is to improve its packaging in such a method that it would help it to minimize those problems and would likewise ensure the delivery of high quality of its items to its consumers.
• Meet global requirements of the environment.
• Develop a relationship based upon trust with its customers, company partners, workers, and federal government.

Critical Issues

Just Recently, Business Business is focusing more towards the technique of NHW and investing more of its earnings on the R&D technology. The nation is investing more on acquisitions and mergers to support its NHW technique. The target of the business is not attained as the sales were expected to grow greater at the rate of 10% per year and the operating margins to increase by 20%, given in Exhibition H. There is a need to focus more on the sales then the innovation technology. Otherwise, it might lead to the decreased income rate. (Henderson, 2012).

Situational Analysis.

Analysis of Current Strategy, Vision and Goals

The present Business technique is based upon the idea of Nutritious, Health and Health (NHW). This strategy handles the idea to bringing change in the customer choices about food and making the food stuff much healthier worrying about the health problems.
The vision of this strategy is based on the key approach i.e. 60/40+ which simply indicates that the items will have a rating of 60% on the basis of taste and 40% is based upon its nutritional worth. The items will be manufactured with additional nutritional value in contrast to all other items in market acquiring it a plus on its dietary material.
This method was embraced to bring more tasty plus nutritious foods and beverages in market than ever. In competition with other companies, with an intention of retaining its trust over clients as Business Business has gained more trusted by customers.

Quantitative Analysis.

R&D Costs as a portion of sales are declining with increasing real amount of costs reveals that the sales are increasing at a higher rate than its R&D spending, and enable the company to more invest in R&D.
Net Revenue Margin is increasing while R&D as a percentage of sales is decreasing. This indicator likewise shows a green light to the R&D costs, mergers and acquisitions.
Debt ratio of the business is increasing due to its costs on mergers, acquisitions and R&D development instead of payment of financial obligations. This increasing debt ratio position a threat of default of Business to its financiers and might lead a declining share costs. Therefore, in regards to increasing debt ratio, the company ought to not spend much on R&D and ought to pay its existing financial obligations to reduce the risk for investors.
The increasing danger of financiers with increasing financial obligation ratio and decreasing share prices can be observed by huge decline of EPS of Baosteel Group Governance With Chinese Characteristics stocks.
The sales development of business is likewise low as compare to its mergers and acquisitions due to slow understanding structure of customers. This sluggish development likewise hinder company to more spend on its mergers and acquisitions.( Business, Business Financial Reports, 2006-2010).
Note: All the above analysis is done on the basis of estimations and Graphs given in the Exhibitions D and E.

TWOS Analysis

2 analysis can be used to derive numerous methods based upon the SWOT Analysis given above. A short summary of TWOS Analysis is given up Display H.

Strategies to exploit Opportunities using Strengths

Business must introduce more ingenious items by large quantity of R&D Costs and mergers and acquisitions. It could increase the marketplace share of Business and increase the profit margins for the company. It might likewise supply Business a long term competitive benefit over its competitors.
The worldwide expansion of Business must be concentrated on market recording of developing nations by growth, attracting more customers through client's commitment. As establishing countries are more populated than industrialized countries, it could increase the customer circle of Business.

Strategies to Overcome Weaknesses to Exploit Opportunities

Swot AnalysisBaosteel Group Governance With Chinese Characteristics ought to do careful acquisition and merger of companies, as it could affect the client's and society's perceptions about Business. It should acquire and merge with those business which have a market reputation of healthy and nutritious companies. It would enhance the understandings of customers about Business.
Business should not only invest its R&D on innovation, instead of it needs to also concentrate on the R&D spending over examination of expense of numerous healthy products. This would increase expense effectiveness of its products, which will lead to increasing its sales, due to decreasing costs, and margins.

Strategies to use strengths to overcome threats

Business needs to relocate to not just establishing however also to developed countries. It needs to widens its geographical growth. This wide geographical growth towards establishing and established nations would lower the threat of potential losses in times of instability in different countries. It should widen its circle to numerous nations like Unilever which operates in about 170 plus nations.

Strategies to overcome weaknesses to avoid threats

Baosteel Group Governance With Chinese Characteristics ought to sensibly control its acquisitions to avoid the threat of misunderstanding from the customers about Business. It ought to obtain and combine with those nations having a goodwill of being a healthy company in the market. This would not just enhance the understanding of customers about Business but would also increase the sales, revenue margins and market share of Business. It would likewise enable the company to utilize its possible resources efficiently on its other operations instead of acquisitions of those organizations slowing the NHW method development.

Segmentation Analysis

Demographic Segmentation

The demographic segmentation of Business is based on four factors; age, gender, income and profession. For instance, Business produces numerous items connected to children i.e. Cerelac, Nido, and so on and related to adults i.e. confectionary products. Baosteel Group Governance With Chinese Characteristics items are rather budget-friendly by practically all levels, however its major targeted customers, in terms of income level are middle and upper middle level clients.

Geographical Segmentation

Geographical division of Business is made up of its presence in practically 86 countries. Its geographical segmentation is based upon 2 main elements i.e. average income level of the consumer in addition to the climate of the area. Singapore Business Business's division is done on the basis of the weather condition of the area i.e. hot, warm or cold.

Psychographic Segmentation

Psychographic segmentation of Business is based upon the character and life style of the consumer. For example, Business 3 in 1 Coffee target those clients whose lifestyle is quite busy and do not have much time.

Behavioral Segmentation

Baosteel Group Governance With Chinese Characteristics behavioral segmentation is based upon the mindset understanding and awareness of the customer. Its highly healthy products target those customers who have a health conscious attitude towards their intakes.

Baosteel Group Governance With Chinese Characteristics Alternatives

In order to sustain the brand in the market and keep the consumer undamaged with the brand, there are 2 alternatives:
Alternative: 1
The Company must spend more on acquisitions than on the R&D.
1. Acquisitions would increase total assets of the business, increasing the wealth of the business. Spending on R&D would be sunk cost.
2. The company can resell the gotten units in the market, if it fails to implement its technique. Quantity spend on the R&D might not be restored, and it will be considered completely sunk cost, if it do not provide potential results.
3. Spending on R&D supply slow development in sales, as it takes long period of time to introduce an item. However, acquisitions supply quick outcomes, as it supply the company currently established product, which can be marketed not long after the acquisition.
1. Acquisition of business's which do not fit with the business's worths like Kraftz foods can lead the company to face misconception of consumers about Business core values of healthy and healthy products.
2 Big costs on acquisitions than R&D would send a signal of business's inefficiency of establishing innovative products, and would results in customer's discontentment as well.
3. Large acquisitions than R&D would extend the line of product of the company by the products which are already present in the market, making company not able to present brand-new ingenious products.
Option: 2.
The Company should invest more on its R&D rather than acquisitions.
1. It would enable the business to produce more innovative items.
2. It would provide the company a strong competitive position in the market.
3. It would enable the business to increase its targeted consumers by presenting those products which can be offered to a totally brand-new market sector.
4. Innovative items will offer long term advantages and high market share in long run.
1. It would reduce the profit margins of the business.
2. In case of failure, the entire spending on R&D would be considered as sunk expense, and would impact the business at large. The risk is not in the case of acquisitions.
3. It would not increase the wealth of company, which might offer a negative signal to the investors, and might result I declining stock rates.
Alternative 3:
Continue its acquisitions and mergers with significant costs on in R&D Program.
Vrio AnalysisPros:
1. It would allow the business to introduce new innovative items with less risk of converting the spending on R&D into sunk cost.
2. It would provide a positive signal to the investors, as the general properties of the company would increase with its significant R&D costs.
3. It would not impact the profit margins of the company at a big rate as compare to alternative 2.
4. It would offer the business a strong long term market position in regards to the company's general wealth in addition to in terms of innovative items.
1. Danger of conversion of R&D spending into sunk expense, greater than alternative 1 lesser than alternative 2.
2. Risk of misunderstanding about the acquisitions, greater than alternative 2 and lesser than option 1.
3. Intro of less variety of innovative items than alternative 2 and high variety of ingenious items than alternative 1.

Baosteel Group Governance With Chinese Characteristics Conclusion

RecommendationsIt has actually institutionalised its techniques and culture to align itself with the market changes and customer habits, which has actually ultimately allowed it to sustain its market share. Business has actually established significant market share and brand name identity in the urban markets, it is advised that the company must focus on the rural areas in terms of establishing brand commitment, awareness, and equity, such can be done by creating a specific brand allowance method through trade marketing tactics, that draw clear distinction between Baosteel Group Governance With Chinese Characteristics items and other competitor items.

Baosteel Group Governance With Chinese Characteristics Exhibits

PESTEL Analysis
Governmental assistance

Changing criteria of worldwide food.
Boosted market share. Transforming understanding in the direction of much healthier products Improvements in R&D and also QA divisions.

Introduction of E-marketing.
No such impact as it is favourable. Problems over recycling.

Use of resources.

Competitor Analysis
Business Unilever PLC Kraft Foods Incorporation DANONE
Sales Growth Highest given that 5000 Highest possible after Organisation with less growth than Business 7th Cheapest
R&D Spending Highest considering that 2001 Highest after Service 6th Lowest
Net Profit Margin Greatest since 2003 with quick growth from 2005 to 2016 Because of sale of Alcon in 2014. Nearly equal to Kraft Foods Unification Nearly equal to Unilever N/A
Competitive Advantage Food with Nutrition as well as health variable Highest possible variety of brand names with lasting techniques Biggest confectionary and refined foods brand name on the planet Largest dairy products and also mineral water brand on the planet
Segmentation Middle and also upper middle degree customers worldwide Specific customers together with household group All age as well as Earnings Consumer Teams Middle and upper middle level customers worldwide
Number of Brands 7th 1st 3rd 2nd

Quantitative Analysis​
Analysis of Financial Statements (In Millions of CHF)
2006 2007 2008 2009 2010
Sales Revenue 22285 181684 137275 312691 165859
Net Profit Margin 9.31% 1.52% 53.61% 3.89% 69.22%
EPS (Earning Per Share) 35.24 3.33 9.82 6.77 39.54
Total Asset 225487 297984 757961 393314 95995
Total Debt 51912 59342 72698 39942 29224
Debt Ratio 83% 64% 22% 31% 85%
R&D Spending 7153 6344 2728 2452 1757
R&D Spending as % of Sales 5.41% 9.17% 6.55% 3.96% 7.56%

Executive Summary Swot Analysis Vrio Analysis Pestel Analysis
Porters Analysis Recommendations