A well-known foreign-funded enterprise in China is a case of success and failure.

On June 4th, 65438/KLOC-0, relevant leaders of the State Council gave instructions on the failure of Chundu. Leaders believe that it is a tragedy and a joke to despair in Chundu, so that all sectors of society can know why a prosperous state-owned enterprise has come to this step.

There have been miracles in spring. Speaking of ham sausage, who can't think of Chundu? Since 1986, when China produced the first western-style ham sausage, Chundu once spread all over China as "dancing ham sausage", with a market share of over 70% and assets of 2.9 billion yuan. However, after only a few years of glory, this star enterprise suddenly fell into a trough. Now hundreds of production lines in Chundu have stopped production, with a loss of 670 million and a huge debt of 654.38+300 million. The scene of traffic and crowds in the past is just a beautiful memory of Chundu people.

What created the miracle of Chundu?

Chundu Group, formerly known as Luoyang Meat Joint Factory, was founded in 1958. Under the planned economy system, it has been flat for decades. 1986, Gao Fenglai, the head of Chundu, after analyzing and inspecting the domestic and international meat products market, decided to change the original pig slaughtering and storage operation, carry out deep processing of pork, develop the production and processing business of high-temperature meat products, introduce the western-style ham sausage production line for the first time in China, and produce the first ham sausage in China, which quickly became popular in the market. Sales revenue and profits have doubled year after year, and great economic benefits have been achieved. The scale of the enterprise has become larger.

By the early 1990s, Chundu had become a well-known large-scale meat production and processing enterprise with a revenue of over one billion yuan and a profit of over one hundred million yuan. "Chundu" ham sausage has been rated as "national famous brand product" and "famous trademark" for many times, almost becoming synonymous with China ham sausage.

The success of Chundu in this period is undoubtedly due to its correct strategic decision-forward-looking integrated development strategy.

What made Chundu decline?

Perhaps success came too easily, and the operators of Chundu began to have a fever. Local leaders also asked Chundu to be "bigger and stronger" as soon as possible, which played a role in fueling the situation. In a relatively short period of time, they invested heavily in many commercial projects such as medicine, tea drinks and real estate. Cross-regional and cross-industry acquisition and merger of Luoyang Gong Xuan Building, Pingdingshan Meat Joint Factory, Chongqing Wanzhou Food Company and other 17 hopeless enterprises, covering pig slaughtering and processing, cooked meat products, tea drinks, medicine, hotels, real estate, wood processing, commerce and other industries, and embarked on the road of diversified and synchronous development. The enterprise's business projects are complex, with low correlation, no connection with the original main business, and the investment time is very concentrated, which makes it develop rapidly at one time.

In terms of assets, Chundu's assets grew at an average annual rate of nearly six times, from 39.5 million yuan in 1987 to 2.969 billion yuan. What is terrible is that this rapid expansion has not only brought benefits to Chundu, but also brought a heavy burden to enterprises. More than half of the 17 companies that Chundu acquired lost money, and nearly half of them closed their doors and stopped production, which is undoubtedly worse.

1In August, 1993, Chundu established Chundu Group Co., Ltd. on the basis of the original Luoyang Meat Complex, and raised 654.38 billion legal person shares from 432 shareholders, raising nearly 200 million yuan. It is a good thing to use a lot of money correctly, but it may be a disaster if it is used wrongly. At this time, Chundu just used this money to engage in blind diversification. At the beginning, I invested more than 65.438+million yuan to participate in 8 enterprises, and later I invested 65.438+05 billion yuan to hold 65.438+06 enterprises. The result was a big burden.

1In September, 1994, Chundu established a joint venture with five foreign investors, including Baoxing Investment Company of the United States, attracting foreign investment equivalent to RMB 290 million. However, after the joint venture, the foreign party found the problem of Chundu and found a reason to withdraw capital in 1997. According to the agreement, plus principal and interest plus dividends, Chundu lost more than 654.38 billion yuan at a time.

1998 12, Chundu Group, which was already suffering from heavy losses, decided to select some assets of the group company for reorganization and listing, raising 424 million yuan. Chundu Group, a major shareholder, and Chundu Food Co., Ltd., a listed company, are actually a set of people and two brands, with no separation of personnel, assets and finance. In the third month after listing, Chundu Group took 65.438+0.9 billion yuan from listed companies to pay off other debts, and then "paid back" several funds of listed companies one after another, totaling 330 million yuan, accounting for 80% of the total funds raised by listed companies, which led to the 65.438+0 investment projects promised by listed companies to the public becoming a dead letter, making the listed companies of Chundu's core business lose great development.

Blind fund-raising and blind diversification have led Chundu to a point of no return.

What happened to the diversification of Chundu?

The mistake of Chundu's blind and chaotic business strategy lies in:

First, the resources are scattered, the main business is lost, and the market competitive advantage is completely lost. In 1990s, the market competition of ham sausage and meat products intensified, and the latecomers such as Shuanghui and Zheng Rong in the industry grew rapidly, competing fiercely with Chundu to grab the market. In this industry with low entry threshold and difficult to maintain technological advantages, Chundu urgently needs to increase investment to improve the overall competitiveness of products and enterprises. However, those new business projects and newly acquired enterprises that have nothing to do with the main business have dispersed Chundu's limited resources, which makes Chundu seriously invest in all aspects of its main business (product research and development, marketing, internal management, etc.). ), it is even difficult to ensure its normal operation needs.

Chundu made a fortune on ham sausage, but failed in the improper diversification strategy and lost the housekeeping skill of ham sausage. The advantages of talents, technology and equipment are obvious, and the slaughter link, which is vital to the enterprise, has actually been transferred to the raw material supplier, and the main business has shrunk dramatically. The worst thing is that it actually reduces the production cost by lowering the product quality in the price competition. The meat content once dropped from 85% to 15%, so that employees in Chundu nicknamed the ham sausage they produced as "noodle stick". Chundu soon paid a heavy price for this, and its sales plummeted, and its market share plummeted from 70% at the peak to less than 10%, which was self-inflicted.

Second, irrelevant diversification makes Chundu a layman everywhere, unable to make wise decisions, and the risks of enterprises appear one after another. Due to the large demand for funds, most of the new projects are under-invested, resulting in insufficient funds to operate normally, and they do not have the conditions for success in technology, talents, operation and management. This not only lost the main business, but also made the new project unable to form a market advantage for a long time, aggravated the financial crisis of the enterprise, and made the enterprise fall into the "diversification trap". As Drucker, the master of management, said: The higher the diversification of enterprises, the more decision-making delays may be caused by coordination activities. This is the failure of Chundu.

Third, blind merger brings a heavy burden to enterprises. Whether merger is necessary depends on whether the result of its implementation is conducive to the improvement of enterprise competitiveness. The merger of Chundu is inappropriate in terms of target enterprises, merger timing and self-management ability. Therefore, these mergers not only failed to promote the development of enterprise groups, but also brought them a heavy burden.

It is generally believed that the implementation of enterprises has nothing to do with diversification, which not only disperses the management resources of enterprises, but also increases the difficulty of management; If we blindly diversify regardless of conditions, enterprises will face great risks and even crises. This is what people call the "diversity trap". This is the main reason for the fall of the Spring Capital.

How to avoid the mistakes of Chundu?

The practices of the world's top 500 enterprises can inspire us. Before diversification, they first implement the "nuclear regression strategy" internally. The so-called refocusing strategy requires enterprises to concentrate resources, cultivate core competence, vigorously develop core main business, and make the main business bigger, stronger and better. If this goal is not achieved, we must not act rashly.

There are two aspects to be done in the strategy of returning to nuclear power: first, we must have strong core capabilities. The blind merger of Chundu Group made him lose the time and energy to cultivate the core competence of his own enterprise.

Only with core competence can we have core main business. For an enterprise, it is unthinkable to have no core main business. The core business is like the center of gravity of an enterprise. If the center of gravity is not "heavy", it will be unstable; Without core business, enterprises will not gain a firm foothold in the tide of market competition. The reason why Fortune 500 companies can gain a firm foothold and develop continuously in the unpredictable international competition is because they all have their own core businesses. And Chundu just violates this basic principle.

The second is to implement relevant diversification strategies. The refocusing strategy is the key or preliminary work for enterprises to implement related diversification strategies. Before forming their own core competence and core business, enterprises take the road of diversification, and the final result is failure.

In a word, Welch of GE said: If you can't be first or second in a field, don't enter this industry. That's the truth.