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Investment strategy in China

Strategy determines the direction in which a business will head. PathToChina's(PTC) advisory assignments always start by answering the question: what should we do? Our Strategy Practice is grouped into different practice areas so that resources can be optimally allocated and devoted to develop our domain expertise. Meanwhile,the division of practice areas also enables us to draw proper talents from the appropriate offices around the Globe to assemble the most effective teams for client service. The following is a glimpse of our Strategy Practice:

Branding

Channels & Distribution

Corporate Development

Financing

Branding

Brand personifies a company. It is an image, an experience, a lifestyle. PathToChina's Branding Practice is built on the following insights:

Economic Value. Brand is the driver of economic value. This is particularly true for certain industries, such as consumer durables and packaged goods, where pricing power is to a great extent dependent upon brand power.

Transfer Branding. Certain brands in mature markets are already clearly positioned and occupy a piece of real estate in the consumer's mind. However, when such brands are transferred to China, they have the opportunity to reposition themselves as they launch a fresh start in a completely new market.

Operational Alignment. When the brand is perceived by customers as a total experience, the company's services, organization, public relations, human resource strategy, and operations need to be aligned to deliver a coherent message. Brand is not a mere advertising game. It is about firm-wide management.

PathToChina has conducted extensive work in Branding. A sample of our clients includes premium branded European apparel, wines, and luggage. - [ Back to Top ]

Channels & Distribution

Sometimes companies capable of producing the finest products are frustrated at their inability to reach a broad customer base or perplexed over their loss of bargaining power with distribution channels. PathToChina's Channel & Distribution Practice intends the following:

Margin Management. Manufacturers and channels live in the same profit pool. A company needs to maximize its own profits; while at the same time leaving sufficient margins to motivate channels to push its products and services. Thus the definition of optimal pricing points along the channel value chain is crucial to the maximization of both the company and its channels' profit.

Operational Effectiveness. Channels exist to push the company's products. A company must be able to utilize and manage its channels effectively in order to achieve the optimal balance of market share and profitability. Issues such as channel layers, channel conflicts, geographic coverage, and specific contractual terms are only some of the operational issues a company's CEO must manage adeptly.

Integration. The success of a channel strategy is inevitably part of a broader corporate management scheme. A stand alone channel strategy without the interactive support from other business functions is rarely effective. Thus Channels & Distribution needs to be part of a CEO's integrated strategy.

PathToChina has extensive experience in Distributions and Channel Design. A sample of our clients includes fiber, fabrics, apparel, health supplements, and pharmaceuticals. - [ Back to Top ]

Corporate Development

In navigating the opportunities for growth, a company can get lost in the kaleidoscope of self-introspection. Corporate development advisory functions to help our client discover new business trends and reexamine their existing business model. PathToChina's corporate development experience has given us the following insights:

Milestones: While long term vision is important for the ever-forward moving company, it is crucial to establish and execute an immediate plan of action and the subsequent stepping stones that will lead to future goals. Companies must develop a strategy that will balance long term vision, intermediate term strategy, and immediate actions. It is disciplined execution, measured by milestones that make aspirations come true.

Competition: When developing corporate strategy it is vital for a company to understand what their competitors are doing, and what they will do in response to the development. By identifying their current and future competitors, companies can compare strengths and weaknesses within their sector and deploy their resources to differentiate themselves and come ahead in the competition.

Core Competence. The concept of Core Competence is as vital as its vagueness. A company needs to formulate their strategy based on what they are best at, meanwhile, recognize that their strengths evolve and build over time. Thus understand thee self and understand thy enemies' strengths, both today and the future, are important part of the corporate development endeavor.

PathToChina has extensive experience in advising Corporate Development. Our growing client list includes the textile, wireless, logistics, and financial industries. - [ Back to Top ]

Financing

Capital fuels the growth of companies and companies seek funding opportunities that will maximize proceeds while minimizing cost. As companies reach different stages of growth their risk profile vary, leading to the need for different financing options. At PathToChina we have advised the following stages of financing:

Seed Capital: The ambitious entrepreneur seeking to get his fledgling business off the ground will need to locate forward-thinking investors who believe in his proposal in order to start operations. In financing fledgling enterprises the investors assume high risks but have the prospects for high returns

Venture Capital: When a start-up experiences initial success in realizing their objectives and has piqued market interest, the company looks for venture investments to push forward their and expand their scope via Series-A, and subsequent financing.

Mezzanine Financing: Companies who are in between start-ups and IPOs require mid to late stage capital injection for growth. Private equity capital committed at this level usually has less risk but less potential percentage appreciation than at the start up level.

Capital Markets: When companies have exhibited continuous growth, financial success, and market leadership they have reached the exciting stage where they are ready to go public and approach investors to float their initial public offering.

PathToChina has advised many varied industries, including, automotive, consumer products, retail, industrial and high-tech on financing the next stage in their growth. - [ Back to Top ]

IT

IT should be integrated into companies operations to link the front and back of their organizations, resulting in increased productivity, communications, and efficiency. At PathToChina we have worked with many companies to formulate IT strategy that improve efficiency and reduce costs. Our work has focused on the following areas:

Cost Efficiency: A company must analyze every option for costs involved over the long term, such as initial set up, training, upgrades, tech support, repairs and maintenance.

Compatibility: Before implementing a new IT system, a company should assess the compatibility of the particular system to their business. IT systems have different features and drawbacks that are important to understand when selecting the system that will best complement your company.

Legacy: When choosing an IT system or solution a company should consider the legacy system they are currently using and opt for a solution that will best integrate with the existing system, and implement a solution or platform that is scalable, adaptable and expandable.

PathToChina has experience in advising companies on the best strategy for integrating IT systems into the retail, logistics, and automotive industries. - [ Back to Top ]

Market Entry

Contemplating entry into a new market, the CEO faces opportunities as well as anxieties. Advising, leading and managing their clients' organizations to pioneer the vast yet highly competitive Chinese market while minimizing risks is the kind of work PathToChina advisors are particularly fluent in. PathToChina's insights on market entry are comprised of the following:

Market Comprehension. As the initial step of Market Entry, companies must understand the business dynamics and the legal and regulatory environment of the new market in which they will breathe every day.

Stepwise Build-up. Companies must balance the competitive pressure to capture the new market and the risks and resources associated with such actions. Establishment of a representative office, export, parts assembly, joint venture, or acquisitions are some of the options or combined steps many companies will consider. We believe fact-based and data-driven solutions, together with solid relationships will enable companies to achieve the optimal balance of risks and rewards.

Implementation. During the initial phase of Market Entry, companies are particularly vulnerable in an unfamiliar environment. Under such circumstances, on site execution is oftentimes even more crucial than strategic insight. PathToChina always works closely with our clients throughout the execution process.

PathToChina has advised numerous multinationals on their China market entry as well as Chinese firms in entering the international market, serving companies in industries such as steel, chemicals, machinery, electronics, consumer goods, and financial institutions. - [ Back to Top ]

Market Exit

When a company finds that they are not able to meet their original goals and their revenue is falling short of expectations, it can be a prudent choice to re-examine their original strategy and reorganize the business, sometimes resulting in the decision to shut down a particular segment or moving their operations to another location.

PathToChina's experience in Market Exit has given us the following insights:

Reorganize: Sometimes, when companies find that they are not making a profit, it can be caused by over diversification or segmenting within their business. They should locate their core strengths and sell-off or eliminate the periphery segments that are weighing them down.

Relocate: When a company is not meeting their objectives and is suffering from costs are much higher than expected, an analysis of their location might reveal that their shortcomings are a result of high labor costs, pollution, insufficient local resources, or lack of corporation from regional government. In this scenario it would be advisable for the company to reassess their location strategy and move their operations elsewhere.

Divest: In some cases, companies are so dissatisfied with their shrinking margins and failing operations that exiting the market completely is the best option. By reorganizing their company and packaging the remaining operations attractively, they will be able to sell off their company to the highest bidder.

PathToChina has advised Market Exit for companies within the retail, consumer products, and agriculture industries. - [ Back to Top ]

Operations

Manufacturing and outsourcing have become the core competency of many companies operating in Asia. CEOs are concerned with the shift from competing on cheap labor to competing on quality, logistics, and superior services. Leveraging the extensive experience

we have accumulated over the years across a wide variety of industries, we are able to assist our clients in translating vision into market share and profit, by focusing on the following areas:

Product Development. Leveraging our expertise in branding and customer comprehension, PathToChina can help you understand your target customers and design the winning product that delights and surprises.

Supply Chain. We will help you turn innovative concepts into winning high margin products by helping you source the most suitable components at the lowest costs and delivery to your door in the shortest period of time.

Product Launching. Launching a new product requires the concerted efforts of marketing, sales, production, logistics and all the corporate functions associated with them. PathToChina draws on many years of experience working with major multinationals to ensure that your products will move successfully from the production line to the shelf.

Manufacturing Optimization. Show us your production plant and we will come up with innovative ways to lower your costs, improve efficiency and product quality, enhance production safety, reduce cycle time, and much more.

PathToChina's has advised companies in improving their operational effectiveness in industries such as machinery, chemicals, electronics, and textile. - [ Back to Top ]

Organization

People are the backbone of every company and effective structuring ensures that the post-merger company can realize its full potential. In our experience re-organizing merged businesses, we emphasis the importance of the following areas:

Command & Control: The authority of the new management needs to be quickly established so that the merged business can operate as one firm quickly. Managers who made the best show on the negotiation tables are not necessarily those who can lead the team most effectively. Thus a reassessment of the post-merger company's management and the reassignment of their responsibilities need to be carried out systematically. The newly designated authorities should, however, be respected and accepted by the majority of the employees, otherwise silent resistance may occur.

Management Grids: It is common for companies to use the grid organizational structure, where the reporting line is by both business unit and geography. Such system works well when people in the organization have known each other for an extended period of time, but may cause confusion among staff who are unfamiliar with each other. Getting people in the merged business to know each other and function well in the grid is the imminent task of the new management.

Workers and Staff: Experienced workers and staff are the critical mass that absorbs and trains newly hired employees. Layoff is not always the best way to improve productivity. The merged business need to build a core team of employees to maintain the continuity of operations for the transition period, while absorbing new staff from the labor market.

Work Flow: Employees are accustomed to the existing work flows and processes. The new management must take the opportunity of the merger to facilitate the implementation of the new work flow as defined in the new organizational structure. Delays in the implementation of the new work flow in the new organization will lead to organizational inertia, which will be difficult to over come in later days.

Compensation: Following the merger questions of compensation and benefits arise among current employees. This issue should be addressed early on, so that employees can work with peace of mind, assured that their future is in good hands.

PathToChina always works closely with our clients in designing and implementing organizational structure and strategies to ensure the commercial success of our clients. - [ Back to Top ]

Portfolio Construction

Once a company has reached a certain level of success within their own operations they look to diversify their holdings by investing in businesses and assets in other sectors. The prudent CEO will look for create a portfolio with diverse elements that will hedge their risks. Our experience in portfolio construction at PathToChina has highlighted the following insights:

Geographical Dispersion: Different regions, within a particular country or globally, offer different advantages in natural resources, regulations, skilled labor, and technology.

Growth Stage: A hedged and balanced portfolio should consist a variety of companies in different phases growth. Early stage companies bring high risks but also high expected returns, while late state companies have lower risks but bring in low expected returns.

Industry Allocation: Investment in a wide range of industries that have different risk profiles can minimize the overall portfolio risk and poise the portfolio for maximum returns.

PathToChina has advised CEOs in constructing and optimizing investment portfolios that encompass a wide variety of industries and asset classes throughout China and the world. - [ Back to Top ]

Contact Our Regional Partners in India (Mumbai, Delhi), Singapore, Malaysia (Kuala Lumpur), China (Beijing, Shenzhen, Guangzhou, Shanghai, Suzhou, Ningbo, Hangzhou or Hong Kong) for more details:

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