Chapter 18 The Kelon Revolution: A Revolution That Doesn't Live Up to Its Name

After Pan Ning, Kelon entered a period of purges, calling itself the "Kelon Revolution." This is a radical and grand definition with unclear meaning.What kind of revolution is it?Who is the object of the revolution?What are the revolutionary goals to be achieved?No one can make it clear.The truth may be that in order to fill the huge gap in belief left by the entrepreneur Pan Ning, the successor had to use this seemingly radical method to unite people and stimulate market confidence. "Revolution" is a bloody word, unless the company is in an irreversible danger, and in desperation, it may use thunderbolt means to try.For an enterprise like Kelon, which is at the peak of its benefits, the sudden implementation of this unconventional strategy due to the earthquake of personnel can only lead to the fact that this revolution almost killed Kelon itself.

On the surface, Wang Guoduan's "Kelong Revolution" was divided into two levels of tasks. One is the purge of personnel in the name of "organizational transformation". From March to April 2000, Kelon completed the adjustment of management personnel involving 2,000 people. The department was reduced by 40%, and the number of personnel was reduced by 35%.Wang Guoduan is very wary of Kelon's "personnel and ideas are aging".He successively persuaded four veteran entrepreneurs at the vice president level to retire one by one. At the same time, he introduced Qu Yunbo, a well-known marketer, as vice president of marketing, and Song Xinyu, general manager of Roland Berger China, an international consulting company, as strategic director.With the arrival of a group of "airborne troops" and the purge of high-level internal personnel, Kelon's leadership team suddenly took on a new look.

The second is to change Panning's four-high strategy of "high investment, high profit, high income, and high development" to a conservative strategy of "digestion and weaning".Pan Ning has always spared no effort in the introduction of new technologies, new molds, and new accessories, which makes Kelon always in the forefront of the domestic industry in terms of quality and quality, and thus cultivates a modern temperament that surpasses everyone.Of course, in this process, there are also problems such as waste of introduction and high maintenance and depreciation costs.The successors believe that China's home appliance industry has entered the era of meager profits, and it is no longer realistic to obtain huge profits by holding high and high. Therefore, it is necessary to plan carefully and optimize internal mechanisms to ensure sustainable benefits.Therefore, it is reflected in the decision-making, which is to significantly reduce the introduction of new molds, abandon the construction of overseas scientific research bases, and require the parts companies within the group to conduct independent accounting and "find food" by themselves.

Whether the strategic adjustment of any large company is correct or not is difficult to judge at the beginning, and there is even no way to "replay" after the event.The pros and cons of a strategy lie only in whether it is suitable and whether it is implemented resolutely.Wang Guoduan’s reforms can hardly be described as “revolutionary”. He seems to have seen that the Panning style of management can no longer allow Kelon to continue on the road of rapid growth, so he tried to save it in his own way. The execution was less than ideal.The "Kelon Revolution" hyped up by the media and Kelon itself seems to be just to cover up the various rebound effects that may be caused by Panning's dismissal.Another even more shocking fact is that in the name of "revolution", Kelon's asset situation suddenly deteriorated.

In June 2000, Wang Guoduan unexpectedly resigned after only one and a half years in office, and Xu Tiefeng, the mayor of Ronggui Town, became the president of Kelon.In southern China, where the wind of opening up is quite strong, there is no precedent for a full-time official of the town government to be the president of the largest company in the jurisdiction.Therefore, its personnel changes caused an exclamation.Perhaps it was also from this unusual move that the media sniffed out the drama of the Kelon incident. Xu Tiefeng continued to hold high the banner of "Kelon Revolution". He seemed to spend a lot of energy trying to restore "Kelon Culture" and "Kelon Enterprise Spirit".However, in December, "Kelon Electric" announced a pre-loss, and in the April annual report of the following year, Kelon lost 678 million yuan.

For this star company, which has been the leader in China's refrigerator industry for eight years, the huge loss is undoubtedly a huge bomb dropped on the market, and the public's reaction to this can almost be described as "shocking".What is even more incomprehensible is that in the past two years, despite the turbulence caused by Panning's retirement and the anticlimactic "revolution" of Wang Guoduan, Kelon's products still performed very well in the market. These "turmoil in the yard" did not affect consumers' recognition of the brand.Therefore, Kelon's loss has become a big mystery wrapped in clouds and mist.

According to public explanations, Kelon's losses were caused by poor management.However, since 1997, Kelon's profitability has been maintained at more than 600 million yuan per year. In 1999, the net profit was 630 million yuan, the production of refrigerators reached a record 2.65 million units, and the total sales volume was 5.8 billion yuan. The company won the "Best Management Company in China" and "Best Investor Relations in China" for the third consecutive year Honor, in November, Kelon was also selected by "Forbes" magazine as the world's 20 best small and medium-sized enterprises list.How can such a company turn around and lose nearly 700 million yuan in the coming year, and how can you explain the contrast of nearly 1.4 billion yuan?Moreover, the high gross profit margin of Kelon's refrigerators is a well-known fact in the industry. Zhou Houjian, president of Hisense Group, who started with color TVs and later invested in the refrigerator industry, once calculated that the gross profit margin of Hisense refrigerators was 7.73%, while that of Kelon The gross profit margin of Dragon Refrigerator is as high as 29.17%.The reasons for this high profit phenomenon are firstly the high brand and high price strategy that Panning adheres to, and secondly the huge manufacturing scale effect formed by Kelon.

From a financial point of view, there are three possibilities for Kelon’s losses: ——Sudden major vicious events in the market, sales have shrunk sharply, and huge deficits have been caused due to excessive operating costs.In fact, this situation did not happen at the time. ——Excessive receivables and huge bad debts form a financial black hole.Qu Yunbo, who was in charge of Kelon's marketing, disclosed: "When I took office in 2000, Kelon owed more than 200 million yuan in advertising fees. Before I came, Kelon's highest accounts receivable was 1.2 billion. When I first took office, it was Seven or eight hundred million yuan. And when I left at the end of 2001, only tens of millions of yuan were left in advertising expenses, and there were still 200 million yuan in accounts receivable on the books, which should be within the normal range." If Qu Yunbo said Credible, that is, although the company's receivables were staggering around 2000, no bad debts eventually formed.

—— Major shareholders are suspected of transferring assets.After Pan Ning established the Kelon brand, there has always been a "Rongsheng Group" on it. It is the major shareholder of Kelon Electric and is entrusted by the government to manage collective assets.Although Kelon has been listed in Hong Kong and Shenzhen successively and became a public company, the "Rongsheng Group" that really holds the asset rights has always been hidden behind.Qu Yunbo, who once joined Kelon's board of directors, has been silent since he left, and kept secret the real reason for his resolute resignation.It was not until August 2005 that when he was interviewed by a reporter from the "Economic Observer", he said flickeringly: "From earning 700 million yuan (actually 630 million yuan) in the first year to losing 700 million yuan (actually 630 million yuan) in the second year It’s actually 678 million yuan), which has aroused great concern from everyone. It’s 1.4 billion yuan every time. Unless it’s a special case, or it’s just making a loss.” He also said: “I can make losses like this Turning bad things into good things, turning a bad thing like constant leadership turnover into a good thing, but I don't have the ability to turn a bad thing into a good thing like stealing money."

What is the status of the assets between Kelon and the major shareholder? Although there are various speculations from the outside world, there has never been a clear explanation.Some experts boldly speculated that by the end of 2001, Kelon Electric had been completely "hollowed out" or "consumed and empty".It has become a gigantic beast that looks huge, but in fact has no appearance.Its owners began to think about finding a new home. At this time, a dreamer broke into the stage.