Geelie Case Analysis
Dear Mr. Li,
Given the recent objective of Geeli becoming the world’s biggest air-conditioner manufacture within the next five years for which Geeli needs to raise $400 million (RMB 3.35 billion), I have looked into these areas based on the information available:
1. Current Company Position
2. Current Industry Position
3. Financing options
4. Recommendations
Current Company Position
Geeli has gained substantial market share of this industry under your leadership over the last decade. With Geeli’s present book assets approaching $400 million Geeli has enjoyed a steady growth in it’s revenue and stable cash flows. Additionally, the Geeli brand is valued at $350 million by the State Finance Bureau of China. Given this brand recognition along with the quality of Geeli’s products and service and keeping in line with the company’s objective along with China’s growing economy it is indeed the right time to dominate the air-conditioning industry and further invest in homeland (China) operations.
Current Industry Position
The export and domestic demand of the industry has stabilized after several years of rapid growth. This has reduced profit margins and manufactures are now competing on cost driving and profit margins which are down to 5% to 10%. This has also led to several consolidations and exits by smaller players given the number of brands have decreased from 150 in 2003 to 96 in 2004 and 69 in 2005. Price cuts from stronger players have further driven out weaker players and are generally leaving this sector. This works in Geeli’s favor as we are here to stay and expand by reducing our competition, while keeping our core values.
Financing Options
Equity Choices
• Chinese Domestic Market
• Hong Kong Stock Exchange
• American Deposit Receipts
• Private Placements Debt Choices
• Domestic Banks
• Corporate Bonds
• Foreign Banks
Equity Share in Chinese Market
Types of Shares Class A Shares
Class B Shares
Class H Shares
Issues Non Tradable Shares
Given the recent objective of Geeli becoming the world’s biggest air-conditioner manufacture within the next five years for which Geeli needs to raise $400 million (RMB 3.35 billion), I have looked into these areas based on the information available:
1. Current Company Position
2. Current Industry Position
3. Financing options
4. Recommendations
Current Company Position
Geeli has gained substantial market share of this industry under your leadership over the last decade. With Geeli’s present book assets approaching $400 million Geeli has enjoyed a steady growth in it’s revenue and stable cash flows. Additionally, the Geeli brand is valued at $350 million by the State Finance Bureau of China. Given this brand recognition along with the quality of Geeli’s products and service and keeping in line with the company’s objective along with China’s growing economy it is indeed the right time to dominate the air-conditioning industry and further invest in homeland (China) operations.
Current Industry Position
The export and domestic demand of the industry has stabilized after several years of rapid growth. This has reduced profit margins and manufactures are now competing on cost driving and profit margins which are down to 5% to 10%. This has also led to several consolidations and exits by smaller players given the number of brands have decreased from 150 in 2003 to 96 in 2004 and 69 in 2005. Price cuts from stronger players have further driven out weaker players and are generally leaving this sector. This works in Geeli’s favor as we are here to stay and expand by reducing our competition, while keeping our core values.
Financing Options
Equity Choices
• Chinese Domestic Market
• Hong Kong Stock Exchange
• American Deposit Receipts
• Private Placements Debt Choices
• Domestic Banks
• Corporate Bonds
• Foreign Banks
Equity Share in Chinese Market
Types of Shares Class A Shares
Class B Shares
Class H Shares
Issues Non Tradable Shares