关于雀巢收购徐福记的商业分析案例

关于雀巢收购徐福记的商业分析案例 Analysis of the Acquisition Between Nestle and Hsu Fu Chi Introduction Chinese candy market Hsu Fu Chi International Ltd. had published a report via the Singapore Exchange stating that the Ministry of Commerce of China had approved Nestlé’s $1.7 billion acquisition of 60 percent stake in Hsu Fu Chi. Background information of Nestle and Hsu Fu Chi Nestle is the world's largest food and nutrition manufacturer, founded in Veyey, Switzerland in 1866 .For a century, Chinese are already familiar with and trust the Nestle, because in 1903 Nestle had already set up its first sales office in China and then in 1990, Nestle began its first operating in the mainland of China .At present, the total market value is about $200 billion and in 2010, the turnover reached $840.7billion and the sales of products was 99% in local manufacturing. Nestle has a clear goal. In 2020, the company hopes that the emerging market can make a contribution rate of 45% for the company’s overall operating income and at the moment, the figure is 33%. In our country’s candy market, Nestle’s share is about 2% in all manufactures, placed fifth, well behind America’s top ranked Masterfoods who has nearly 15% market share. Meanwhile, Nestle had already purchased TaiTaiLe (an enterprise made chicken powder and beauty oral liquid), Yinlu (a company made mixed congee) and Five Goat Ice –cream etc. in China. Hsu Fu Chi International limited was founded in 1978, one of the largest candy brand and sugar enterprise in China. In 2006, it had 56 local sales branches, more than 13,000 direct control of the terminal sales place. Trough their subsidiaries, the company operate in three business segments: Candy Products, Cake and Cookie Products and Sachima Products. In 2010, its profit rose 31% to 602.2million yuan ($93million), and sales grew 14% to 4.31billion yuan. 1 From the background information above, not only can we see that both Nestle and Hsu Fu Chi have a bright promising and have already occupied a large number of market shares, but also we can know that they have deeply-rooted in Chinese people’s mind. Then, what is the reason that Hsu Fu Chi give up its promising future and what is the purpose for Nestle to occupy Hsu Fu Chi? The answer will be solved in the following paragraphs. The reasons of the expansion for Nestle First of all, Trough acquisition can improve its competiveness and market share. For more than 21years’ development in China, Nestle has already occupied a large quantity of the market share and also it is accepted by most of the Chinese people for its long history and quality. We have to say that nestle has a good strategy in company’s development, product research and development, and the management of the company, etc. But, in order to look for a better development through the fiercer competition, the company has to move its footsteps. Although, Nestle has already reached a great achievement, comparing Masterfoods in America who has about 15%market share in China, it has to work hard to gain more profit and market share. Meanwhile, the successful company,Hsu Fu Chi who have some internal problems and running problems has attracted him . Through acquisition can improve the ability of an enterprise to control the market. On one hand, by means of horizontal merger, Nestle can improve its industry structure and concentration for it has already been involved in sugar manufacturing. As a result, it can invest more money in the candy industry and gain more profit from the investment. On the other hand, through vertical acquisition, Nestle can control the raw material and marketing channel .In this way, it can control its competitors’ operating activities and the competitive force strengthens. In most of the cases, the impact of the merger and acquisition to the market power is accomplished by indirect way because it does not mean that you will be sure to gain profit immediately through acquisition but you have to do numerous jobs after 2 acquisition. Also, although the benefit of acquisition is not productive right away, it can still help the company a lot .After the merger, the organization will form a larger threat to the relevant industry for its absolute scale and sufficient financial .So this is the first reason for why Nestle try to combine Hsu Fu Chi. Secondly, Nestle can learn some experience from Hsu Fu Chi after the acquisition as well as it can reduce its cost in product’s research and development. The experience may include technology, market, patent, product, administration, and corporate culture, etc. Hsu Fu Chi has a long history in candy industry, and it is more mature in all respects such as production’s research and development, and marketing. So, it may help Nestle a lot if he can gain the experience .As we know, Nestle has invested a large sum of money in the research and development. For example, the science and technology park of industry in Yunnan. Although Nestle can not copy experience from Hsu Fu Chi, it can share the target enterprise’s experience which can help it reduce its costs in accumulating experience and save costs for the enterprise’s development. Thirdly，through the merger, it can help the enterprise to accomplish financial synergistic effect. The benefit of merger and acquisition to the enterprise in financial aspect is tax effect. In other words, it can pay fewer taxes in a reasonable way. Nestle is a foreign, owned company, it means that it has to pay more taxes in China than the domestic enterprises. But after the merger of the national enterprises, it may have a reasonable right to pay fewer taxes for it is both foreign-owned and national owned. Besides that, Nestle may achieve expected share price effect, which means that acquisition can change the evaluation of the stock market. In this way, it may affect the share price. As a result, the share price of Nestle may change into higher level. At last, it can help Nestle to acquire the large ,scale economic effect. After the consideration of competitive cost after acquisition, enterprise merger can get property and assets which they need. In the same time, Nestle can achieve the integrated management and get scale effect. 3 The difficulties after the acquisition of Hsu Fu Chi Both companies will be affected after the acquisition. It may be successful or failed. The main problems lay on: The first one is the administrative problem. Different enterprises have different management methods and managements，especially the difference between foreign capital enterprises and national companies. After the acquisition, Nestle may also meet this problem. On one hand, it has to rearrange the management staffs and team. On the other hand, it has to find a new proper administrative method in order to achieve consistency and coordination. It may run a risk in administrative if the skills can not meet the company’s requirement. The second one is the corporate culture. Corporate culture is relatively independent and it is formed in a long period under a specific group involving all the production activities, thinking activities which are essential characteristics to the corporate culture. The previous staffs may not accept the acquisition between the two companies, especially those who make a great contribution to Hsu Fu Chi. Nestle has to combine the culture of Hsu Fu Chi in order to form a common management idea, team spirit and working style. If it fails to deal with the enterprise culture, it will doom to be unsuccessful. The third one is the running risk. Hsu Fu Chi had a great success before merger, but it does not mean that it will still succeed after acquisition. Nestle may still have risks in running Hsu Fu Chi. It has to improve its operation model and even production structure. In addition to this, it has to increase its investment in product’s research and development. Meanwhile, it has to be strictly control the quality of products and adjust the allocation of resources. The last one is the public approval. Both Nestle and Hsu Fu Chi have relatively stable customers. Some of the customers of Hsu Fu Chi may not accept the truth that it had been purchased by Nestle for all kinds of reason. Even some of them will refuse to buy the product for the rejection of the acquisition and nationalism. 4 The impact for candy industry after the acquisition The acquisition between Nestle and Hsu Fu Chi had attracted many people’s discussion. Some of them think it’s a win-win decision. “Mergers and acquisitions are a normal and inevitable trend, so it's not necessary to reject them,” said He Manqing, director and researcher at the Center of Transnational Corporation under the Research Institute of the Ministry of Commerce. The others may think its bad for this acquisition, especially for our national candy industry. No matter it is good or not, it will bring a large effect to the food industry. On one hand, the competitive power will be reduced for some of the candy companies. For instance, Yake food Cor. Ltd was founded in 1993.Ater 18years development; it has become one of the largest candy enterprises. After the acquisition, it may lose its competitive advantage for both potential and remained customers. On the other hand, the crisis will be more severe for the national food industry. Many small companies as well as some lager companies are afraid of the acquisition will fall on them in the future. Also, the development space will be smaller and the competition will be fiercer and even may result in malignant competition. The measures to improve competitive power There are many ways can improve competitive power for example, to encourage creation and innovation. Acquire more developmental space via the two measures. Then, try to promote the reform of the company such as the technology, administration and corporate culture. Last but not least, the government should give more policy supporting and financial supporting for some national enterprise such as reducing tax rate. Conclusion We should have a rational view towards the acquisition between Nestle and Hsu Fu Chi, because the enterprise merger between the two companies is arranged according to the respective operational state and object. Whether Hsu Fu Chi’s merger 5 means the disappearing of national brand or not is still hard to say. But Hsu Fu Chi and Nestle will use this chance to integrate the resources in order to enlarge the enterprise’s market share .The rising market competition may possibly maximize the interests of the customers. When we try to protect our national brand, we should also follow the market law. Do not put too much national mood towards the merger between the two companies. We should view and exam our national brand and old enterprise under the international market through the international capital acquisition process. Perhaps, it can encourage our enterprises to go out into the international market and have a better, smooth way to develop. 6