【正文】 o Paulo – Shanghai – Stuttgart – Tokyo – Vienna – Zurich Strategic reengineering of Geberit China – Interim report – Geberit International AG Content (1) Page Management Summary 5 A. Market environment 12 A1. Macro business environment in China 13 A2. Market analysis of sanitary system 36 A3. Market analysis of piping system 67 B. Strategy evaluation and Sales Marketing 80 B1. Strategy evaluation 81 Corporate strategy analysis 82 Product strategy evaluation 89 B2. Sales Marketing 91 Retail channel GSHA 95 Project channel GSHA 103 OEM channel GDAI 107 Marketing 110 Benchmarking: Kohler (China) 112 Content (2) Page C. Financial, anization and processes analysis 122 C1. Financial situation analysis 123 Geberit Shanghai 124 Geberit Daishan 138 C2. Organization and processes 145 Organization structure 146 Management structure 151 Key process analysis 157 D. Restructuring options 164 D1. General options and preselection 165 D2. Indepth evaluation 176 Equity buyout 178 Termination 183 Bankruptcy 186 Comparison of the alternatives 190 D3. Feasible scenarios 193 Backup Acronym list BoD CCS CJV EJV FDI FIC GDAI GSHA JV KTS VGM WFOE Board of Directors Competence Center Shanghai Cooperative Joint Venture Equity Joint venture Foreign Direct Investment Foreign Investment Commission Geberit Flushing Technology (Daishan) Co. Ltd. Geberit Plumbing Technology (Shanghai) Co. Ltd. Joint Venture Kohler Technical Specialist Vice General Manager Wholly Foreign Owned Enterprises Management summary China could be a market of strategic importance for Geberit’s international business(1) ? China is a promising market for Geberit. We have an achievable business target of RMB 200 million revenue by year 2023, from which, 130 million es from sanitary products and 70 million is generated by piping business. Among all the product lines, tank fittings, Pluvia and concealed cistern are the top 3 product lines with the potential of RMB 140 million or 70% of the total ? Overall Chinese macro economic development is undergoing a strong momentum. In the next 5 years, it is estimated that GDP will grow at 7% annually, the growth of fixed asset investment will increase by 8%, and housing construction will also grow by 8% . ? Chinese sanitary market is mostly a ceramic market, with an annual demand of 43 million units of sanitary ceramic products in China in 1999 which means the potential market of nearly 2 million sets for tank fittings as well as 2 million units of medium to high end cisterns sold in the market. With the growth in the housing market, Chinese sanitary market will continue an annual growth of 6~8%. Furthermore, due to the rapid increase of bathroom decoration, the medium to high end segment of sanitary products will definitely lead the industry growth. By 2023, the share of medium to high end segment will rise from current 20% to 35% Market environment China could be a market of strategic importance for Geberit’s international business(2) ? As the largest construction industry in the world, China presents an immense potential for Geberit’s piping products. Both HDPE and Mepla possess significant product advantages over the currently used Chinese products. However, the significant price gap could be a serious barrier for a deep market peration. For Pluvia, the opportunities are very attractive. Presently more than 15 roof projects, altogether 700,000 sqm are in different phases of the process of bidding ? Both Geberit’s concealed cistern and Pluvia roof drainage system are mismatched with Chinese traditional industry habits, this can only be solved by a longterm mitment in the China market and effective marketing. Due to the Chinese consumers traditional mindset that plastic product are lower priced, Chantier doesn’t have an optimistic market perspective ? Right now, for most of Geberit’s products, the petition is not so tough, which means a golden opportunity for Geberit to bee a market leader in China. It also means time pressure for Geberit. Currently petitors (. Grohe DAL, Caroma) are gearing up and will bee aggressive very soon Market environment Overall, the strategy of Geberit in China has not been fully achieved and sales and marketing are particularly weak(1) Strategy and sales marketing ? Although GSHA developed a strategy when founded, the strategic objectives to perate into the Chinese market haven’t been achievedcurrent strategy is unfocused ? The vision of GSHA is not municated within the anization, nor is it implemented ? In parison, GDAI’s strategy is going in the right direction and is in the process of being implemented, They still have problems to solve, such as slow market responsiveness, poor customer understanding etc. ? The core petence of Geberit Europe stands for advanced technology, premium quality and brand, excellent preandafter sales services. This has not all been transferred to Geberit China ? Current product portfolio of selling Chantier, Duofix and public products is unbalanced. Strategic focus should be on concealed cistern, tank fittings and Pluvia and HDPE ? As to sales and marketing operations, GSHA has no clear strategy in developing distribution work Overall, the strategy of Geberit in China has not been fully achieved and sales and marketing are particularly weak(2) Strategy and sales marketing ? Geberit’s products are sold through 3 channels: retail sales and project sales through distributors, and OEM – Geberit lacks clear planning of retail work development and has neither intention nor leverage to monitor distributor39。Roland Berger Partners – International Management Consultants Barcelona – Beijing – Berlin – Brussels – Bucharest – Budapest – Buenos Aires – Detroit – D252。sse