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China 2020: What Will China Look Like in the Future?
- 1. Global Strategy
Global Challenges
Executable Solutions
France Houdard
Managing Director
france.houdard@exolus.com
November 2010
Copyright © 2010 Exolus. All rights reserved.
China 2020: How to Structure Companies around Mega-Cities
Your Corporate Platform – Globally Competitive or Obsolete for Tomorrow’s World?
France Houdard
Managing Partner
Phone US: 1 (917) 285.6528
Phone China: (00 86) 135.8591.0838
france.houdard@exolus.com
September 2014
-- UPDATED --
- 2. 1
Copyright © 2014 Exolus. All rights reserved..
If so … How?
Preface: Can this Picture from Space help us Structure Business Platforms?
Source: NASA (United States – National Aeronautics and Space Administration)
- 3. 2
Copyright © 2014 Exolus. All rights reserved..
China Market 2020
- 4. 3
Copyright © 2014 Exolus. All rights reserved..
This Section is about Opportunities and Challenges around …
Revenues … Costs … Efficiency
2. Supply Chain
COSTS
Sales
Engineering
R&D
Sourcing
Production
Distribution
Marketing
Shared Services
IT HR
F&A Procure
1. Market
3. Innovation
DRIVING Shareholder Value
Research & Development
Shared Service Centers
Virtually Integrated Models
Production / Sourcing
Sales / Marketing
- 5. 4
Copyright © 2014 Exolus. All rights reserved..
Source: World Bank
GDP* 2013
6,4 trillions de $
3,6 trillions de $
$6.8 tr
$4.2 tr
$16.2 tr
$17.3 tr
US
China
India
$16.8 tr
India
Japan
GDP* 2020
$30.0 tr
$13.4 tr
$28.8 tr
$6.8 tr
$29.6 tr
US
India
China
Japan
EU-27
France
UK
Germany
GDP* PPP-adjusted
GDP* PPP-adjusted
EU-27
France
UK
Germany
1. Future China: Projected to be #1 Largest Economy in World by 2020
- 6. 5
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29%
10%
5%
4%
6%
46%
Future GDP Growth by Geography
(2007 – 2025)
Greater China
United States & Canada
Latin America
Western Europe
Asia
Rest of The world
Source: 2012 Annual Chinese Consumer Report by McKinsey & Company
China a MUST for Future Competitiveness
1. Future China: Accounts for 29% of Future Global Economic Growth
- 7. 6
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1. Future Market (Auto): China Growth Explosive … US Flat Saturation
China Market 2x Larger than US Market by 2020
Source: National Bureau of Statistics of China, IHS
0
5
10
15
20
25
30
35
Million
Car Sales Volume – China & US (2000 – 2020f)
China
US
China Car Sales
10 MM (2008)
20 MM (2013)
30 MM (2017)
- 8. 7
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Already World’s Largest Auto Market
26%
21%
21%
32%
China
North
America
Europe
Other
34%
14%
10%
42%
China
North
America
Europe
Other
Source: China Association of Automobile Manufacturers
Global Car Sales by Geography
2013
2020
1. Future Market (Auto): China Tracking to 35% of Global Sales by 2020
- 9. 8
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Already World’s 2nd Largest Pharma Market
Pharmaceutical Market Size Country Ranking (USD billion)
Sources: IMS Health Market Prognosis, 2013; Exolus
1. Future Market (Pharma): Tracking to US$245 bn Market by 2015
2000 Top 7
USA
150
Japan
58
Germany
17
France
17
UK
11
Italy
11
China
6.8
Brazil
6.7
Canada
6.3
Spain
6.2
2005 Top 7
USA
262
Japan
65
Germany
24
France
21
UK
16
Italy
15
China
13
Brazil
10
Canada
10
Spain
9.8
2010 Top 5
USA
441
Japan
75
Germany
48
France
39
China
34
UK
32
Italy
28
Brazil
24
Canada
22
Spain
21
2015f Top 2
USA
506
China
245
Japan
130
Germany
82
Brazil
64
France
49
UK
38
Russia
35
India
33
Italy
32
- 10. 9
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15%
39%
24%
32%
10%
2011
China
North America
Europe
Japan& South
Korea
Others
25%
33%
19%
13%
10%
2015
China
North America
Europe
Japan& South
Korea
Others
Source: SFDA (State Food and Drug Administration of China)
China a MUST for Future Competitiveness
1. Future Market (Pharma): Tracking to 25% of Global Sales by 2015
Pharmaceutical Sales by Geography
- 11. 10
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0
100
200
300
400
500
600
700
800
900
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014f
2015f
2016f
2017f
Number of Users
Sales
US
Already World’s Largest Internet Population and Still Growing
Source: CNNIC; iResearch
Internet Users – China & US (2005 – 2017f)
1. Future Market (Ecommerce): Internet Users Soon 3x Size US Population
China
- 12. 11
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0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0.0
0.5
1.0
1.5
2.0
2.5
2009
2010
2011
2012
2013
2014f
US$ trillion
Sales
Growth
Ecommerce Volume has Quadrupled in past 5 Years
Source: Ministry of Commerce, China
Ecommerce Trade (2009 – 2014f)
1. Future Market (Ecommerce): Explosive Growth in China Ecommerce
Volume
Growth
- 13. 12
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1. Market Drivers: Explosive Growth in Middle Class
China’s Middle Class: 400 million (2010) … 756 million (2020)
Middle Class Income Bands (Measured against Urban Population)
Urban Population (millions)
Urban Household Income (US$ – PPP-Adjusted)
Global > US$107,800
Affluent US$3,800 - 107,800
Upper Middle US$21,501 – 53,900
Lower Middle US$13,500 – 21,500
Poor < US$13,500
607
684
822
239
255
157
106
73
53
170
355
461
525
90
99
0
100
200
300
400
500
600
700
800
900
2005
2010
2015F
2020F
2025F
531
756
Upper Middle Class
Lower Middle Class
Sources: Urbanization Rates, Population based on UN, World Urbanization Prospects 2007; MGI Consumer Demand 2008
- 14. 13
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1. Market Drivers: Driven by an Explosion in Urbanization
China’s Urban Population: 600 million (2010) … 822 million (2025)
China’s Urban Population (Measured against Total Population)
1.4 billion
1.3 billion
1.2 billion
1 billion
245
381
531
684
822
822
833
782
705
624
0
200
400
600
800
1,000
1,200
1,400
1,600
1985
1995
2005
2015
2025
1.45 billion
Urban Population (million)
Rural Population (million)
Source: World Urbanization Prospects 2007
Urban Population (millions)
- 15. 14
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Mega-City Profile: 60 Million Population + World-Class Infrastructure
1. Future China: Driving Emergence of Mega-Cities and Mega-Corridors
Source: NASA (United States – National Aeronautics and Space Administration)
- 16. 15
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1. Future China: A Fundamental Change in Economic-Geography
Framework for Investment Decisions around Structuring Corporate Platforms
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
Mountains
China’s Emerging MEGA-CITIES
Mega-Cities
Mega-Corridors
- 17. 16
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Production / Supply Chain: Opportunities and Challenges
- 18. 17
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2. Supply Chain: World’s Major OEM’s Aggressively Expanding in China
Investment Decisions made with China JV Partners
China Automotive Production
Sources: Company Websites, Publically Available Information
- 19. 18
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2. Supply Chain: Big Pharma Aggressively Expanding in China
Investment focused in Yangtze River Delta, Bohai Rim, Pearl River Delta
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
Pharma Manufacturing Operations
Mountains
Mega-Cities
Mega-Corridors
Sources: Company Websites, Publically Available Information
- 20. 19
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2. Supply Chain: World’s Major MNC’s Aggressively Expanding in China
Production Largely in Eastern Part of China
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
Mountains
Mega-Cities
Mega-Corridors
Production Operations in China
- 21. 20
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2. Supply Chain: China Still Provides Major Labor Arbitrage Opportunity
Major Labor Cost Differential
Manufacturing Labor Costs (2003 - 2012)
Source: National Bureau of Statistic of China; U.S. Bureau of Labor Statistics, International Labor Comparisons, August 2013
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
China
United States
Singapore
Brazil
Philippines
China
USA
US$ per month
- 22. 21
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2. Supply Chain: Labor Costs Significantly Lower in West (35%)
Intersection: Low Cost Bands + Emerging Mega-Cities
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
Mountains
Wage Bands / Mega-City Overlay
(Normalized to Highest Wages)
Wage Bands
Mega-Cities
Mega-Corridors
1.0
1.0
1.0
- 23. 22
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2. Supply Chain: Where are Pareto Optimal Deployment Envelopes?
Low Cost Bands + Emerging Mega-Cities + High-Income Geographies
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
Per Capita Income / Wage Band Overlay
1
1
1
Mountains
Per Capita Annual Income
(USD, PPP-Adjusted)
> 40,000
30,000 - 40,000
25,000 - 30,000
20,000 -25,000
17,500 - 20,000
0 - 17,500
Wage Bands
Mega-City
Mega-Corridors
- 24. 23
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2. Supply Chain: Major Opportunities, but Significant Risks
China Investment Process – Key Challenges
Strategy
Transaction Execution
Investment Strategy Development
Zone Screening
High Level Due Diligence
Zone & Site Evaluation & Ranking
Negotiate Investment Agreement
Detailed Due Diligence
Business Registration
Land Auction/ Construction Contracts
Zone Screening Challenges: Given that China has 8,000 zones, the process of filtering through to a suitable zone and site represents significant complexity, time commitment and high risks rooted in: wide-ranging and ambiguous regulations, hidden land quotas, unclear ownership/ zoning, investment hurdles, utility infrastructure, tax regimes, etc.
Due Diligence: Most information presented during DD unreliable as representations tend to be made by (promotion) officials pushing to hit their quotas, rather than by the broad array of officials with actual authority and responsibility for all aspects of planning, land ownership, utility availability/extensions/upgrades, geotech and so forth.
Negotiations: Negotiations involve significant counterparty risk, as representations tend to be made by those without actual authority to implement agreements. Further, there is a tendency for legal advisors to lack engineering expertise; agreements thus often lack relevant contractual terms – exposing projects to significant potential costs, delays and even failure.
- 25. 24
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R&D / Innovation: Opportunities and Challenges
- 26. 25
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3. Innovation: Where are Auto OEMs Migrating R&D Functions in China?
“R” of R&D Seeks Universities … “D” Seeks Markets & Production
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
Source: Company Websites; Exolus Research
1
1
1
Mountains
Wage Bands
Mega-Cities
Mega-Corridors
> 800
> 1,500
> 2,000
R&D Centers
(# Operations)
Auto R&D Operations
- 27. 26
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3. Innovation: Where is Big Pharma Migrating R&D Functions in China?
“R” of R&D Seeks Universities … “D” Seeks Markets & Production
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
1
1
1
Mountains
Wage Bands
Mega-Cities
Mega-Corridors
> 800
> 1,500
> 2,000
R&D Centers
(# Operations)
Pharma R&D Operations
Source: Company Websites; Exolus Research
- 28. 27
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3. Innovation: MNC’s Migrating R&D Functions to China
“R” of R&D Seeks Universities … “D” Seeks Markets & Production
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
Mountains
Wage Bands
Mega-Cities
Mega-Corridors
> 800
> 1,500
> 2,000
R&D Centers
(# Operations)
Source: National Bureau of Statistics, 2nd R&D Census, 2009
1
1
1
c
Consumer Business R&D Operations
- 29. 28
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3. Innovation: Driven by Rapid Increase in Educated Workforce
China Science and Engineering: 1.2 Million Graduates per Year
Thousands
University Natural Sciences & Engineering Degrees (1985 – 2010)
Sources: National Science Board, Science & Engineering Indicators 2014
0
200
400
600
800
1,000
1,200
1,400
U.S.
China
UK
Japan
South Korea
Germany
China
USA
- 30. 29
Copyright © 2014 Exolus. All rights reserved..
3. Innovation: Organization Models for Foreign R&D in China
Satellite Laboratories (Bottom-up Approach to R&D)
Mostly “adaptive” – adapting existing products to better fit local market conditions
Usually do not work on “innovation” as part of global teams
That is, they act more as listening posts for parent company/ business unit -- helping detect new ideas and product innovations based on the unique characteristics of the local market
Vulnerable to budget cuts
Contract R&D (Top-Down Approach to R&D)
More focused on “innovative” research
Usually support global team in carrying out specific module as part of global research project -- closely interacts with R&D teams at headquarters & other affiliates
Used to exploit lower cost engineers, capabilities and infrastructure
Has dense information flows, but unequal knowledge exchange -- Requires tight mechanisms to control IPR leakage
Integrated Global Partnerships (Balanced/Integrated Approach to R&D)
The China R&D Center has regional and/or global product innovation mandate
Equal participant in all corporate decisions, R&D work, & other global corporate activities
No barriers to full-fledged knowledge exchange between China R&D center and the company‟s headquarters and the company‟s other global R&D centers
Models Vary Considerably in China
Sources: National Science Board, Science & Engineering Indicators 2014
- 31. 30
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3. Innovation: Migrating Upstream to Innovative and Global Models
China-Adaptive Focus Global-Innovative Focus
Sources: National Science Board, Science & Engineering Indicators 2014
R&D centers designed to support production and adapt technologies; be near customers; cooperate with local partners; access markets; improve the local “image” of a company; launch a product simultaneously; facilitate rapid scale-up in manufacturing; and overcome protectionist barriers against imports.
As national markets become regionally more integrated, some countries may become the preferred base for adaptation, not only for the local market but for the region as a whole.
Adaptive R&D has evolved into more advanced forms of innovation, with the local market serving as a test-bed for new products for regional or even global markets.
Facilities able to do both R&D with output aimed at global exploitation by parent company.
May evolve out of locally integrated laboratories & retain tight links with production in host economy, or
Set up independently of local production to tap local innovation clusters and skills
CHINA FOCUS
ADAPTIVE
REGIONAL / GLOBAL FOCUS
INNOVATIVE
- 32. 31
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3. Innovation: Footprint Drivers Vary for Innovative and Adaptive R&D
Functional Objectives Drive Platform Decisions for R&D
Sources: National Science Board, Science & Engineering Indicators 2014
Adaptive R&D Center
Primary Drivers
Customer Locations & Business Opportunities
Proximity to Inter-Company Production Operations
Skills Availability
Fresh graduates and mid-level engineers
Experienced management (secondary)
Local Government Support
Local Resources at Universities
Secondary Drivers
Living Environment
Facilities
Utilities
Transportation
Incentives
Innovative R&D Center
Primary Drivers
Skills Availability (experienced engineers)
Local Resources at Universities
Low Labor Costs
Secondary Drivers
Living Environment
Facilities
Utilities
Transportation
Incentives
- 33. 32
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3. Innovation: Where are Key Nodes for Structuring R&D Platforms?
“R” of R&D Seeks Universities … “D” Seeks Markets & Production
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
Mountains
Wage Bands
Mega-Cities
Mega-Corridors
> 800
> 1,500
> 2,000
R&D Centers
(# Operations)
Research & Development Centers (Number of Operations in Select Cities)
Source: National Bureau of Statistics, 2nd R&D Census, 2009
1
1
1
- 34. 33
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Platform Structuring: Where are Pareto Optimal Deployment Envelopes?
Spatial Framework for Platform Optimization Decisions
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
Spatial Framework for Platform Optimization Decisions
1
1
1
Mountains
Per Capita Annual Income
(USD, PPP-Adjusted)
> 40,000
30,000 - 40,000
25,000 - 30,000
20,000 -25,000
17,500 - 20,000
0 - 17,500
Wage Bands
Mega-Cities
Mega-Corridors
> 800
> 1,500
> 2,000
R&D Centers
(# Operations)
- 35. 34
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Contract Outsourcing Models & Shared Service Centers
- 36. 35
Copyright © 2014 Exolus. All rights reserved..
This Section is about Next Generation Operating Models …
Virtually Integrated Models + Shared Service Centers (SSC)
Supply Chain
Sales
Engineering
R&D
Sourcing
Production
Distribution
Marketing
Market
Innovation
Sales / Marketing
DRIVING Shareholder Value
Production / Sourcing
Research & Development
Shared Service Centers (SSC)
Virtual Integration
SSC
IT HR
F&A Pro’c
- 37. 36
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FIPCO MODEL VIPCO MODEL (CSO, CMO, CRO, PC-CRO, INSTITUTIONS)
4. Virtual Integration Models: Outsourcing Core Functions
FIPCO (Fully Integrated Pharma Co.)
Research
Technology
Manufacturing
Clinical &
Regulatory
Sales &
Distribution
CSOs
CMOs
CROs
Partnerships
Academia, Scientific, Institutions
R&D
Preclinical
Support
Clinical
Development
Manufacturing
Sales &
Distribution
Preclinical CROs
VIPCO (Virtually Integrated Pharma Co.)
Source: G. S. Burrill, „Biotech 2008: A 20/20 Vision to 2020‟, The Burrill Indiana Life Sciences Meeting, October 2008.
- 38. 37
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MIGRATION to ADVANCED OPERATING MODELS in CHINA: CSO, CMO, CRO
4. Virtual Integration Models: Big Pharma Adoption in China
Sources: Goldman Sachs: Healthcare Services: CROs, December 2007; Exolus Research
Boehringer Ingelheim (CSO)
First Big Pharma to have entrusted a sole distributor for all of its products in China: Sinopharm.
Sinopharm is China‟s largest pharmaceutical distributor by sales and the only China distributor to cover the entire PRC.
Boehringer Ingelheim‟s sales spiked upward by 45% from 2006 to 2007; Sinopharm saw an annual growth rate of 32%.
AstraZeneca (CSO)
In a recent move, AZ licensed Cubicin, an antibiotic for skin infections, for development and commercialization on the Chinese market.
Pfizer (CRO)
Outsources to Wuxi PharmaTech: synthetic chemistry, parallel medicinal chemistry, and bio-analytical services. It also has a 3-year CRO contract with Wuxi PharmaTech to provide services in the areas of: in-vitro Absorption, Distribution, Metabolism and Excretion (ADME) services.
GSK (CRO)
Outsources to Shanghai Institute of Materia Medica (SIMM) chemistry requirements.
AstraZeneca (CRO)
Invested USD14 million in Wuxi Pharma Tech for the synthesis of 150,000 compounds.
AZ has contracted WuXi Pharmatech, a Chinese CRO, for the synthesis of collections of drug candidates, and signed an agreement with Shanghai‟s Jiao Tong University for research on the genetics of schizophrenia.
CSO/CRO Extended Cases
China’s CRO Market
0
2
4
6
8
10
12
14
16
18
Clinical
Development
Preclinical
Development
US$ billion
- 39. 38
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4. Shared Service Centers: Opportunity Map for China
Efficiencies … Economies of Scale … Knowledge Sharing … Standardization
Source: KPMG “A new Dawn: China‟s Emerging Role in Global Outsourcing”, 2009
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
Mountains
1
1
1
Shared Service Center Hubs
Wage Bands
Mega-City
Mega-Corridors
Shared Services
- 40. 39
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Platform Structuring: Where are Pareto Optimal Deployment Envelopes?
Spatial Framework for the Range of Platform Optimization Decisions
Heilongjiang
Jilin
Liaoning
Hebei
Beijing
Inner Mongolia
Shandong
Jiangsu
Shanghai
Zhejiang
Fujian
Guangdong
Guangxi
Hunan
Jiangxi
Anhui
Hubei
Henan
Guizhou
Yunnan
Sichuan
Chongqing
Gansu
Ningxia
Shaanxi
Shanxi
Qinghai
Xinjiang
Tibet
Tianjin
Spatial Framework for Platform Optimization Decisions
1
1
1
Mountains
Per Capita Annual Income
(USD, PPP-Adjusted)
> 40,000
30,000 - 40,000
25,000 - 30,000
20,000 -25,000
17,500 - 20,000
0 - 17,500
Wage Bands
Mega-Cities
Mega-Corridors
> 800
> 1,500
> 2,000
R&D Centers
(# Operations)
Shared Services
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Spatial Framework for the Range of Platform Optimization Decisions
Platform Structuring: Where are Pareto Optimal Deployment Envelopes?
Source: NASA (United States – National Aeronautics and Space Administration)
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China Economic Health Report
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5. Health: Senior Executives Select China as Most Attractive in World
Investor Confidence in China #1 in World
Source: World Investment Prospects Survey 2013 - 2015
Top 14 Most Attractive Destinations for Future Investment (2013 – 2015)
Percent of Responses
%
0
10
20
30
40
50
60
70
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Source: China Statistical Yearbook
Record FDI of USD118 billion in 2013
0
20
40
60
80
100
120
140
USD billion
Foreign Direct Investment Inflows (1990 – 2013)
5. Health: Foreign Direct Investment Continues to Soar in China
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Source: World Investment Report 2014 by UNCTAD
China Ranks #2 for Inbound FDI … or #1 when HK Included
USD billion
Foreign Direct Investment Inflows (2013)
0
20
40
60
80
100
120
140
160
180
200
220
Hong Kong Portion of FDI
5. Health: China and US Top Global Destinations for FDI
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5. Health: Balance Sheets – Banks, Enterprises, Households
USD4 trillion in Foreign Reserves … Insulation of Financial System … Clean Balance Sheets
China’s Financial System Healthy, Benefits from Insulation, Abundant Liquidity
China banks cleaned up in 1990s: Non-performing loans in 1997 averaged 40 – 50%; only 1% in 2014.
Financial institutions extended approximately USD1.44 tr in new loans in 2013; and USD1.32 tr in 2012, USD 1.21 tr in 2011.
Forex Reserves Achieve Record High in 2013
The Central Bank has accumulated over USD 4 trillion in foreign reserves.
The accumulation of large external surpluses means financial system enjoys abundant liquidity.
Clean Balance Sheets for Enterprises and Households
State Owned Enterprise net profits as share of GDP has grown from (-1%) in 1997 to (+3.34%) in 2013.
Record corporate profit growth over past 5 years (industrial profits rose 100%); liability ratios declined.
Urban incomes have quadrupled in past 10 years.
Source: Deutsche Bank; Standard Chartered; UBS; IMF; Other
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About Us: Leading Investment Advisory Firm
Global Scale: Established in 1931 • 3,000 Employees • 250 Offices Worldwide
Leading Expertise: Acquisitions • Dispositions • RE Funds • Agency • Structuring
Real Estate Advisory: Industrial, Office, Residential, Retail
Business Advisory: Strategy, Targeting, Due Diligence, Structuring, Negotiations
Investment Formats: Greenfield, JV's, Acquisitions, Dispositions, Outsourcing Multi-Disciplinary Expertise: Legal-Tax, Supply Chain, Engineering, HR, Real Estate
Investment Advisory: Financial Advisory, Capital Raising, Fund Structuring Investment Sectors: Automotive, Life Sciences, Manufacturing, Technology, Real Estate Geographic Focus: Greater China and US
Leading Global Investment Advisory Firm
- 49. 48
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Services: Align Directly with China (M&A) Investment Process
Strategy
Client
Approval
LOI
Term
Sheet
Purchase
Agreement
Ownership
Transfer
Transaction Execution
Acquisition Strategy Development
Target Screening
High Level Due Diligence
Evaluation & Ranking
Negotiate LOI
Detailed Due Diligence
Structure & Negotiate Transaction
Transaction Closing
Exolus Group
China
Expertise
Cross-Industry
Expertise
Facility & Engineering
Expertise
Structuring & Negotiating Expertise
Due Diligence
Expertise
Client Involvement
Targets & Counterparties
Mergers & Acquisitions
M&A and JV’s
- 50. 49
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Exolus Group
China
Expertise
Cross-Industry
Expertise
Facility & Engineering
Expertise
Structuring & Negotiating Expertise
Due Diligence
Expertise
Services: Align Directly with China (Greenfield) Investment Process
Strategy
Client
Approval
Investment
Agreement
DD
Findings
Legal
Entity
Land/Facility
Ownership
Transaction Execution
Investment Strategy Development
Zone Screening
High Level Due Diligence
Zone & Site Evaluation & Ranking
Negotiate Investment Agreement
Detailed Due Diligence
Business Registration
Land Auction/ Construction Contracts
Client Involvement
Targets & Counterparties
Direct Investment
Greenfield Investment
- 51. 50
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New Entity
Philosophy: Provide Holistic Solutions that Benefit Entire Organization
Establish Manufacturing Operations
Research & Development (R&D) - Marketing, Sales & Distribution
Sales & Marketing
Shared Services
Solutions Rooted in Multi-Disciplinary Expertise:
Real Estate, Facilities, Engineering
-Facilities, construction, geotechnical, environmental, utilities, critical paths, permitting
Supply Chain, Sourcing, Distribution, Transportation - Logistics, distribution, taxes, modes, physical transportation, rates, providers
Labor-Force Dynamics - Structure, laws, trends, skills, costs, quality, scalability, sustainability
Financial Analysis & Structuring (Tax, Legal)
-Legal structures, tax structures, financial analysis, feasibility, business case, incentives
Corporate Stakeholders
Corporate Real Estate, Engineering, Manufacturing
Supply Chain, Logistics
Human Resources
Finance, Tax, Legal
Exolus
Client
China Solutions Require a Multi-Disciplinary Approach
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Exceeding our Clients’ Expectations
Representative Clients: Serving World’s Leading Companies
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For a Comparative Perspective with the other BRIC Countries Please Refer to the Following Research Reports
Found on Slideshare @
http://www.slideshare.net/Exolus/india-2020-what-india-will-look-like-in-the-future
http://www.slideshare.net/Exolus/brazil-2020-what-will-brazil-look-like-in-the-future
http://www.slideshare.net/Exolus/russia-2020-what-will-russia-look-like-in-the-future
http://www.slideshare.net/Exolus/bric-2020-what-will-the-brics-look-like-in-the-future
Download Reports @
www.exolus.com/en/knowledge/research.html
Brazil 2020
Russia 2020
India 2020
BRIC 2020