Chapter 40 capital strategy

The establishment of an enterprise requires money, the expansion of channels requires money, and the promotion of advertisements requires money. The development of an enterprise is bound to face the demand for a large amount of funds.And "without capital, find capital; with capital, lack of strategy", this is the common dilemma and embarrassment faced by most enterprises in China at present. The capital strategy can ensure the rapid, safe, stable, lasting and healthy development of the enterprise.At the same time, whether the capital strategy is implemented successfully or not is related to the life and death of the enterprise.This is by no means alarmist talk, but the "iron law" of business operations.

On the other hand, as one of the basic components of modern social capital, financial capital is destined to show its own value, not just an appendage or variant of technology and human capital.The historical experience of business operations shows that "this is an era when capital speaks". The purpose of China's opening up is largely to introduce foreign technology.In the competition between state-owned enterprises, local private enterprises and multinational corporations, the inferiority of technical means (from product technology to management system) is often portrayed as the key to success or failure.In fact, this kind of logic appears rather one-sided and naive in today's business competition.

Technology is important, but it is capital rather than technology that determines the ownership of an industry. You can simply imagine that as long as there is sufficient capital, engineers and managers can be hired, markets can be developed, and even advanced technologies can be introduced. In a more symbolic example, Lenovo Computer bought Thinkpad, IBM's more "advanced" laptop brand.After the deal was concluded, on a purely technical level, Lenovo has outperformed its main rival, Dell Computer, which has never been good at technology.However, almost all industry commentators are skeptical that it can beat Dell.Because Dell has a capital that Lenovo can't imagine, and it is undoubtedly a well-capitalized enterprise that can really "make the wind and rain" and "make waves" in the market.

If this statement is too "capitalist", or we can think about it from another angle. Does the competitiveness of the US economy come from liberal arts schools like Harvard (with strengths in the legal system and business administration) or science schools like MIT (with strengths in science and engineering)?Undoubtedly, the mainstream view of the business community has never been ambiguous about this issue—as long as there is a well-thought-out capital system, technology that adapts to market development can naturally be born with good funding. On the contrary, the pure technological level (such as the military science and technology of the former Soviet Union) may not be able to transform the "primary productive force" of science and technology into the competitiveness of a country or an enterprise without the support of corresponding economic strength.

Even judging from China's own reform and opening-up development practice, the enterprises that are still operating today are undoubtedly not due to the use of appropriate capital strategies to maintain an excellent capital structure and maintain continuous low costs. Therefore, from state-owned enterprises to private enterprises, one should not be disturbed by some plausible "technical factors"—whether it is the dazzling computer information system or the more mysterious "risk management", these are not from overseas multinational industries The strengths of the company or financial institution.The introduction of "technology" at the expense of "market" does not necessarily help fundamentally improve the competitiveness of enterprises.A good grasp of the capital operation process in the capital strategy is the basis for the success or failure of an enterprise.

Regarding how to operate the capital strategy, Jiang Nanchun and his focus on the main lines of capital strategy of capital raising, capital allocation and capital expansion taught a lesson to a considerable number of enterprises in China. Capital is a long-term pain in the hearts of enterprises, especially private enterprises. Facing the turbulent trend of globalization and the large-scale invasion of foreign commercial forces after China's accession to the WTO, Chinese enterprises in a severe situation are generally exploring new capital strategies.However, most companies still stay at the original level of thinking - loans, relying on the support of banks to raise capital.

For this point, Focus Media has successfully explored its own capital strategic thinking and method model - "Using Doctrine", and constructed a capital strategic structure suitable for itself, making it invincible in the new media, a battlefield where there is no gunpowder. place. Specifically, Focus's capital strategy does not use the fragile and "primitive" "broker-bank-trust" financial chain to raise turnover cash, so it is not affected by the domestic financial order. Stable cash flow ensures the rapid growth of Focus business and its dominance in China's outdoor building TV advertising market.More importantly, the booming sales performance will form a resource agglomeration effect, "forcing" more capital suppliers to make larger investments.If the self-development mode of the capital strategy of Focus Media operates properly, it seems that the capital chain will never be broken.

It can be seen that the high-speed practice of Focus's "bringing doctrine" capital strategy cannot be separated from the active promotion of venture capital.In other words, behind the legend of Focus, we have seen the support of many international capitals.Under the guidance of an active capital strategy, Focus has firmly established an unshakable leading position in the building TV market. Institutional economist Justin Yifu Lin said: “The relative prices of labor and capital are related to the factor endowment structure of the economy. In the absence of policy distortions, economies with relatively abundant labor and relatively scarce capital must have lower labor prices and On the contrary, those economies with relatively scarce labor force and relatively abundant capital will inevitably have higher labor price and lower capital price.” Simply put, the capital strategy of “bringing doctrine” is a focus growth strategy soul".Sufficient capital supplemented by precise strategic thinking can guarantee the stable personnel structure of Focus and support the smooth implementation of other strategies.

Since 2003, Focus has received extensive media attention within 5 months of its operation. Although it has developed rapidly, in the past 5 months, more than 2,000 Jiangnanchun has been "burned" by equipment investment and field investment in Beijing, Shanghai, and Guangzhou. ten thousand yuan.At that time, due to SARS, advertising sales were not satisfactory.It can be said that at that time, apart from the money for pension, Jiang Nanchun was already "poverty", and there was no follow-up funds to invest in the market operation of Focus. Jiang Nanchun is soberly aware: "If the coverage is not wide enough, it will not be able to form a strong influence on advertisers. And this in-building TV project that consumes a lot of cash flow needs a lot of continuous support."

At this time, he thought of introducing international capital, and international capital was also watching every move of Focus. In May 2003, Focus Media, a pioneer in the market, took the lead in winning the investment from Softbank, and began to use capital power to launch a campaign to enclose land and buildings across the country. In April 2004, CDH International CDH (formerly known as the direct investment department of China International Capital Corporation Limited), which successfully invested in Mengniu, Li Ning and other companies, joined hands with DFJ, an internationally renowned venture capital fund that had invested in Kongkong.com and Baidu, and other companies to inject 12.5 million US dollars into the company. Focus Media promotes the spread of its national network.

In November 2004, Goldman Sachs, the largest investment bank in the United States, and 3i, the largest venture capital fund in Europe, held a press conference in the Great Hall of the People, announcing that they would invest 30 million U.S. dollars to become investors in the third round of Focus Media. The total amount rose to 42.5 million US dollars, creating a new record of domestic advertising media private equity financing in the past 10 years. "A good wind will send me to Qingyun by virtue of its strength." Jiang Nanchun, who has realized the diversification of capital sources and has enough capital, immediately adjusts his focus, operates capital, improves capital costs, optimizes the structure of capital allocation, and builds the core of the Focus brand.The accurate capital strategy also makes Jiang Nanchun handy when dealing with the opponent's impact, and maintains the steady growth and development of Focus in the competition. Later, in the process of growth, Focus Media used the power of capital many times, and used M&A (abbreviation of Merger and Acquisiti, meaning mergers and acquisitions) to make Juzhong Media and Frame Media LCD, which ranked second, third and fourth in the field of building video, screen business, boundary LCD screen business, etc., and acquired the largest apartment elevator media operator, Frame Media, and the largest store video media operator, Xicheng Media. They also used capital as a support to successfully enter the Internet advertising through acquisitions. And mobile wireless advertising field. Innovation + execution + capital = the rapid growth of Focus.