Chapter 27 2. Market share and profit: one cannot be missing

For any entrepreneur, there are only two possibilities brought about by investment expansion: raising a "cash cow" or becoming a "dog product" that has endless troubles and needs to be fed constantly. What Zong Qinghou harvested was precisely the former. 19 production base-type branches all over the country have successfully opened one by one, creating a miracle of "zero loss".Take 2001 as an example, out of Wahaha’s 914 million yuan profit that year, this group of “cash cows” accounted for half of the profit. There is no entrepreneur who is not eager for success. In a certain sense, investment expansion is the only way to achieve this kind of success.This must-pass road is full of rosy temptations, but if you are a little careless, you can easily fall into dense traps.

In the Chinese business world, there are many people who have fallen on the road of expansion, and Zhengzhou "Asia" is probably the most famous one among them. Relying on the extremely exquisite "etiquette service business culture", this large commercial building opened in May 1989, located on the southeast side of Erqi Square in Zhengzhou, quickly became a popular "wild sun" throughout the country.The cerebral cortex of founder Wang Suizhou became extremely excited. At the end of 1993, in the "1994-1999 Development Plan of Zhengzhou Asia Group Co., Ltd.", which Wang Suizhou personally changed six drafts, he made the following passionate visionary description:

Overall goal: before 2000, reach annual sales of 50 billion yuan (actual sales in 1993 were less than 400 million yuan), ranking first in the national business community, and becoming an international trust that has a significant impact on the Chinese economy. specific goals: (1) More than 25 large-scale retail malls with a business area of ​​more than 20,000 square meters; more than 100 medium-sized shopping malls with a business area of ​​more than 5,000 square meters; and 500 supermarkets with an area of ​​2,000-5,000 square meters. (2) Build an "Asia Skyscraper", at least 68 stories high (later changed to 120 stories).

(3) Establish 20 affiliated enterprises producing "Asia" brand products; annex and transform 15 industrial enterprises; participate in and hold shares in 8-12 companies that are expected to be listed; establish overseas supply transfer stations in Moscow, Sydney, and Hong Kong, China ... According to Wang Suizhou, giving birth to a child is to raise it, and it will be difficult to raise another child five years later.As a result, this enterprise with a total self-owned capital of only 40 million yuan hastily launched a super expansion with an investment of more than 10 billion yuan.Trouble soon followed, management lost control, and the capital chain collapsed. In October 1996, the 15th department store branch of the Asian chain empire opened.The sound of festive firecrackers still echoed in my ears, and the final gong sounded at the same time.Since then, each branch has closed down every 4 months on average like a domino, and its speed is roughly as fast as when it was first opened.

The mythological figure Wang Suizhou fell.However, a group of passionate industry elites are still working hard to realize their dream of rapid expansion. The same fellow from Henan, also in Zhengzhou Erqi Square, on April 25, 1995, when Wang Suizhou's Asia was already in crisis, Qiao Ying's "Red Sorghum" mutton stewed noodle fast food chain appeared again.Qiao Ying said that this day is the 40th anniversary of McDonald's, the world's fast food king, and "Red Sorghum" is a natural enemy who wants to compete with McDonald's. After opening, the daily turnover of this small shop with an area of ​​less than 100 square meters has gradually increased from 2,000 yuan, and soon broke through the 10,000 yuan mark.The following 7 branches rolled from the 440,000 yuan borrowed from the east to the west to more than 5 million yuan in start-up capital, which took only 8 months.

The great situation of "the mountains and rivers are all red" made Qiao Ying convinced that he had walked the road of capitalist McDonald's for 40 years in 8 months, and had already figured out a successful model, and the rest only needed to continue cloning. In March 1996, Qiao Ying entered Beijing and set up camp at the entrance of Wangfujing Street, which is 22 meters away from McDonald’s Wangfujing Store. "Where there is McDonald's, there is red sorghum". Since then, in 1997, "Red Sorghum" has blossomed in 20 cities across the country. It is inevitable that the "Asian virus" will recur.Qiao Ying insisted that the key reason is that the scale is not large enough, and the law of the chain is to expand rapidly, so as to reduce costs and increase profits. "Clone, clone, clone as soon as possible" urging voices, what happened next is conceivable: "Red Sorghum" finally reached the end of failure after opening the 40th branch.

Qiao Ying's resonant voice is no longer heard in the media.Until January 2001, a text message stating that “Qiao Ying, Chairman of Henan Red Sorghum Fast Food Chain Co., Ltd. was arrested by the Jinshui District Public Security Bureau of Zhengzhou City for illegally raising 40 million yuan for a crime” announced the complete end of the era of “Red Sorghum”. Whether it is Qiao Ying or Wang Suizhou, the most direct reason for failure is obviously expansion and impatience.And Zong Qinghou chose a steady road of expansion. Let's take a look at the timetable of Wahaha's investment expansion: In 1994, the first non-local production base, Fuling Branch, was established.The second half of 1997 was the second half of 1997, three years later.The exploration of experience and the cultivation of the management team have gradually matured, and the expansion has gradually increased after the operation mode has settled and stabilized.It took 8 years to open 25 branches, with an average of 3 branches per year.

Zong Qinghou believes that the most likely consequence of impetuous advancement is to regard accidental success as inevitable experience, ignore the basic laws of enterprise development, simply copy and promote it, and eventually lead to inevitable failure. Henry Mintzberg, chairman of the Canadian Strategic Management Association, which enjoys international reputation, elaborated in the book "Corporate Strategic Plan" that the company's actual strategy - including investment expansion strategy - usually consists of two strategic models, one is A well-recognized intention is a deliberate strategy, and the other is an unexpected and unexpected strategy.Surprise strategies are not necessarily bad, but well-thought-out strategies are good.An effective strategy is based on a well-thought-out strategy that seeks to combine these two qualities.This combination should reflect the surrounding conditions, especially the ability to foresee and the need to respond to emergencies.

The fatal flaw of Wang Suizhou is that they are impatient with well-thought-out strategies, and they bet the success or failure of corporate investment and expansion on unexpected courage and unexpected strategies. We can also observe that in many cases, the psychological expansion of decision makers is not always entirely caused by the decision makers themselves.The external environment, especially the fuel of social media, often becomes the most powerful leavening agent.Back then, Qiao Ying broke into Beijing unexpectedly, shouting "Where there is McDonald's, there is red sorghum", the whole world was startled by the boldness of this Henan man.As a result, 200 domestic media followed up and reported, and more than 70 overseas media successively reproduced it. The three major cable TV networks in the United States took turns to "stir up".In the hustle and bustle, Qiao Ying became more energetic and passionate: in 2000, he opened 20,000 chain stores around the world!

Jiang Zemin Inspects Wahaha Fuling Branch In 1994, Wahaha successfully established the Fuling branch in the Three Gorges Reservoir area, echoing the national strategy of westward expansion, and its social repercussions and economic benefits are not insignificant.The leaders came, and the media, large and small, came, amazed and applauded overwhelmingly.But Zong Qinghou is still calm and rational: those who run a business are running a business, and they can only follow their own objective laws and move forward step by step. In recent years, the main point of view of the fast-track investors in Chinese business circles is that only rapid expansion can seize a large enough market share as soon as possible, otherwise, the day lily will be cold.In the non-stop siege, the basic point of business survival - profitability - is often temporarily put aside.

Around 2000, the frenzy of investment and mergers launched by Tsingtao Brewery, the number one beer brand in China, is undoubtedly a model of this expansion thinking. Tsingtao Brewery is the earliest beer production enterprise in China established in 1903 by a joint venture between British and German businessmen. In June 1993, Tsingtao Brewery Co., Ltd. was formally established with the approval of the State Economic Reform Commission. In 1999, China's beer production exceeded 20 million tons, becoming the world's second largest producer and consumer after the United States.However, most of the national beer manufacturers are small and medium-sized enterprises with an annual output of less than 200,000 tons, and only Tsingtao Brewery, Yanjing Beer and China Resources Group exceed 1 million tons.At the same time, almost all world-renowned beer brands such as Heineken, Budweiser, and Carlsberg have entered the Chinese market one after another.Tsingtao Brewery's sense of crisis that it can't wait for others is getting stronger day by day. The climax of Tsingtao Brewery's investment expansion was after 1997.Lu Taihong and Qin Shuo made a key analysis of this case in the book "Marketing in China": In just four years, Tsingtao Brewery acquired 40 companies in more than 10 provinces and cities in one fell swoop through bankruptcy, holding, and debt. Several beer companies.To this end, the company spent a lot of money, and the bank loan reached billions of yuan.It is by no means an easy task to digest a large number of enterprises acquired by the rapid expansion one by one, which will inevitably lead to a considerable increase in the management expenses and financial expenses of the enterprises within a certain period of time. In 1999, Tsingtao Brewery's sales increased by 42% over the previous year, but its net profit dropped by more than 10 million yuan.As of June 30, 2000, the total debt of Tsingtao Brewery was 3.217 billion yuan, an increase of 574 million yuan compared with 1999, and the debt ratio was as high as 54.58%.Considering that the shareholders' equity of Tsingtao Brewery in the same period was only 2.315 billion yuan, this is obviously an excessive debt. In addition, a major advantage of Tsingtao Brewery's investment expansion is the brand.However, the regional consumption of local protection in the Chinese beer market is very serious. Tsingtao Brewery has no choice but to make compromises. up. Peng Zuoyi, the former general manager of Tsingtao Brewery Company, once bluntly stated that in this unprecedented investment and acquisition, Tsingtao Brewery tried to seize market share as soon as possible regardless of cost, and set the profit target in the far enough future. Some media also expressed concern about Tsingtao Brewery's strategic thinking, thinking that this ideal expectation may sometimes become a gamble where the joy of success coexists with hidden dangers that are difficult to grasp. The purpose of enterprise investment expansion is to seize the commanding heights of the market, expand the scale, reduce costs, and maximize the competitive advantage. The ability to generate profits during the expansion process is undoubtedly the basis for ensuring this competitive advantage.Zong Qinghou, who has always had a steady style of work, has set rules for his investment operations: market share and profit must be both. This poses a greater challenge to investors' courage and skills in terms of specific operations.Zong Qinghou established his own guarantee system from five aspects: --brand.All branches use the Wahaha brand with a high reputation and influence. In the cooperation relationship of some branches, the Wahaha brand is even converted into shares, thus forming a unified and powerful integration force and team strength. --capital.In addition to the supporting funds from local governments or cooperative enterprises, all branch companies invest in Wahaha (including part of Danone’s shares) own capital, without a penny of bank loans, to ensure that the company’s capital flow is in the healthiest state. . --product.The production and operation of all branches are mature products that have been proven to be best-selling by the market. The development and production of new products are all undertaken by the Hangzhou parent company, which minimizes the risk of branch operation. --technology.The equipment used by all branches is a world-class modern production line. There are absolutely no second-hand products eliminated by the parent company in Hangzhou, and the advanced level of some equipment even exceeds that of the parent company. --personnel.All branch companies are dispatched by the parent company in Hangzhou to form a team, train a team, and serve as a reserve force for the next company.If the quality of personnel cannot keep up, the establishment of a new company would rather be postponed. Therefore, a well-known southern media humorously commented: Zong Qinghou, the business master, looks more like an excellent farmer, and all of his branches all over the country are healthy "cash cows" and those who can lay golden eggs. hen.