【正文】 CEMSx Apparel export is still the most important business of OIE in terms of sales and profit contribution Source： OIE, Roland Berger Strategy Consultants 1) Including Holding, Minhang, Baihe, Gaonan, apparel business of Rongheng, Pudong 2) Jiada + Jingmao 3)Including Holding, Rongheng Sales structure by business 20xx [US$ m] Operating profit structure by business 20xx [US$ m] Apparel1) export Logistics2) forwarding Pharmaceutical export Textile3) export Others Total % % % % % Apparel1) export Logistics2) forwarding Pharmaceutical export Textile3) export Others Total % Example Lines 33 presentationCEMSx Taking into account the uping market liberalization, OIE will lose rapidly its petitive advantage based on governmental protection Assessment of petitiveness Business Market share development Profitability / cost position Governmental protection Business models Match of core petence and success factors Overall assessment Apparel export Phar. Export Textile export Logistics forwarding (sea) Logistics forwarding (air) High Medium Low Source: Roland Berger Strategy Consultants Lines 34 presentationCEMSx The apparel business will need to improve its profitability considerably to offset the loss of the quota business Adjustment of reported profit of apparel business based on “Economic profit” [US$ m] 1 2114 1 64 1 1Reported profit FY20xx Elimination of nonsustainable profits Currency gains Profits protected by quota “ Sustainable” profit Cost of equity “ Sustainable” Economic profit II Value of apparel business is declining! Source： OIE, Roland Berger Strategy Consultants I Requirement to improve profitability Lines 35 presentationCEMSx There are two strategic options for OIE in the apparel business: “Service oriented manufacturer” or “Fullservice regional agent” Strategic options in apparel business “ Fullservice regional agent” “ Serviceoriented manufacturer” Customer focus ? Foreign retailers (esp. vertical chains) ? Chinese retailers (private label) ? Big retailers with own buying offices ? Lowmedium advanced agents ? Regional coverage of supplier countries for production in Asia ? National coverage (. Several production plants in different labor cost areas of China) Supplier country coverage ? All apparel product categories and qualities ? Focus on one / few product categories and / or qualities Product categories Services / petences ? Supply chain partner with core petences in fabric sourcing (worldwide), factory sourcing1) and quality control ? Additional innovative services in – Design (own collection) – Product development (flexible and quick prototyping through own production capacity) – Fabric research amp。s WTO entry will have a strong impact on the pharmaceutical sector and distribution Tariff reduction Today 1/20xx Nontariff barrier abolishment ? Trading rights (import) phasing in ? Distribution/retail restrictions phased out within three years upon acc. ? Better intellectual property (brand) protection ? Transparency (publication of regulations) ? National treatment (abolishment of tax privileges, fair participation in public tenders % 60% drugs Average 15% 20% 10% Medical equipment and crude drugs Source: Trade/agreement ChinaUS % Lines 38 presentationCEMSx In fact the consumer prices of foreign imported drugs are usually 90% to 100% higher than the manufacturing price mainly due to an inefficient distribution system Drugpriceponents Distribution margins in % of turnover 100 0 100 [price index] 200 110 120 150 165 193 +17% VAT Manufacturer price Customs Clearing charges drug inspection Distribution Hospital markup VAT 25% 10 12% 3 5% 0% 10% 20% 30% China Japan Europe Source: Interviews, EIU, RBinfocenter 16,000 distributors/wholesalers 200 distributors/wholesalers 10 20 distributors 10 20 distributors Lines 39 presentationCEMSx Though the market share of foreign drug manufacturers is relatively high many market entry hurdles still remain Total drug market 20xx: 15 18 bn US$ NonWTO related Chinese walls ? Certification and Admission Procedure (State Drug Administration) ? Provincial and municipal reimbursement lists ? State Economic and Trade Commission permissions/licenses for pharmaceutical retail/wholesales ? PriceandProfitcontrolregulations ? Institutional/Legal environment – State news Medicine Examination and Approval Committee – State Pharmaceutical Administration of China (SPAC) – State Drug Administration (SDA) Source: MOTT, State Administration of Medicine Imports 1,800 foreign invested co39。s drug market will increase unrelated to WTO and make it difficult to generate profits ? state subsidized health care system ? widespread drug overprescription ? pharmaceutical’s 60% of total health care costs ? imported drugs enjoy often higher prices than domestic ? but domestic counterfeits are much cheaper ? all drug prices are controlled by the state on a provincial/municipal level Status ? state subsidysystem will be replaced by a system which includes individual contributions ? introduction of import price caps! Benchmark: price of domestic equivalents ? or: price in others developing countries lower price ceilings ? same applies to drugs manufactured by foreign JV’ s Uping new regulations Lines 41 presentationCEMSx And the WTO accession will trigger a concentration process in manufacturing and distribution ? 6,400 drug manufacturers ? 1,800 Sinoforeign JV