Harvard Case - Jinjiang Group: Globalization Through State Ownership and Political Connection
"Jinjiang Group: Globalization Through State Ownership and Political Connection" Harvard business case study is written by Wiboon Kittilaksanawong, Qiannan Shi. It deals with the challenges in the field of International Business. The case study is 14 page(s) long and it was first published on : Jan 23, 2018
At Fern Fort University, we recommend that Jinjiang Group continue its globalization strategy, leveraging its strong state ownership and political connections to navigate complex international markets. This strategy should focus on: 1) optimizing its global supply chain management, 2) expanding its international market reach through strategic alliances and acquisitions, 3) developing a robust global branding strategy, and 4) prioritizing sustainable business practices to mitigate geopolitical risks and enhance long-term growth.
2. Background
Jinjiang Group, a Chinese footwear and apparel manufacturer, has achieved significant success in the domestic market through its unique blend of state ownership and political connections. The company aims to expand its global presence and become a leading player in the international market. However, this ambition faces challenges, including navigating complex international trade policies, managing exchange rate risk, and adapting to diverse cultural contexts.
The case study focuses on Jinjiang Group's efforts to expand its international business, particularly through acquisitions and partnerships in emerging markets. The company faces a critical decision regarding its future strategy, considering its unique position as a state-owned enterprise with strong political connections.
3. Analysis of the Case Study
This case study presents a unique opportunity to analyze the interplay of state ownership, political connections, and international business strategy. A framework combining Porter's Five Forces and VRIO (Value, Rarity, Imitability, Organization) analysis can be applied to understand Jinjiang Group's competitive landscape and its core strengths.
Porter's Five Forces Analysis:
- Threat of New Entrants: The footwear and apparel industry is characterized by relatively low barriers to entry, posing a threat to Jinjiang Group's market share.
- Bargaining Power of Suppliers: Jinjiang Group's strong relationships with suppliers in China give it some leverage, but rising labor costs and global supply chain disruptions pose challenges.
- Bargaining Power of Buyers: The global market is highly competitive, with consumers having access to a wide range of products and brands, increasing buyer power.
- Threat of Substitutes: The industry faces competition from other fashion and lifestyle brands, as well as emerging technologies like 3D printing, which could offer substitute products.
- Competitive Rivalry: The footwear and apparel industry is intensely competitive, with established global players like Nike, Adidas, and Puma, as well as emerging local brands, vying for market share.
VRIO Analysis:
- Value: Jinjiang Group's state ownership and political connections provide access to resources and opportunities unavailable to private companies.
- Rarity: This unique combination of state ownership and political connections is not easily replicated by competitors.
- Imitability: Imitating this model is challenging due to the specific political and economic context of China.
- Organization: Jinjiang Group's organizational structure and culture are aligned with its strategic goals, enabling it to leverage its strengths effectively.
4. Recommendations
To achieve its global ambitions, Jinjiang Group should adopt a multi-pronged strategy:
1. Optimize Global Supply Chain Management:
- Diversify sourcing: Reduce reliance on China by establishing manufacturing facilities in other emerging markets with lower labor costs and favorable trade agreements.
- Develop robust logistics network: Invest in technology and partnerships to optimize global logistics, ensuring efficient and timely delivery of products to international markets.
- Implement risk management strategies: Develop contingency plans to mitigate disruptions from geopolitical events, natural disasters, and trade wars.
2. Expand International Market Reach:
- Strategic alliances: Form partnerships with local businesses and distributors in key target markets to gain access to distribution channels and local expertise.
- Acquisitions: Identify and acquire promising companies in emerging markets to expand product offerings and gain market share.
- Global marketing: Develop a targeted marketing strategy tailored to different cultural contexts, leveraging digital platforms and local influencers to reach international consumers.
3. Develop a Robust Global Branding Strategy:
- Brand positioning: Define a clear and consistent brand identity that resonates with international consumers, highlighting its unique value proposition and heritage.
- Global brand management: Establish a centralized brand management team to ensure consistency in branding across all international markets.
- Local adaptation: Adapt branding elements to local preferences and cultural nuances, while maintaining core brand values.
4. Prioritize Sustainable Business Practices:
- Environmental sustainability: Implement eco-friendly manufacturing processes, reduce carbon footprint, and promote sustainable sourcing practices.
- Social responsibility: Ensure fair labor practices, promote employee well-being, and contribute to local communities in emerging markets.
- Transparency and accountability: Embrace transparency in its operations and governance, building trust with stakeholders and mitigating reputational risks.
5. Basis of Recommendations
These recommendations are based on:
- Core competencies and consistency with mission: Leveraging its state ownership and political connections, Jinjiang Group can capitalize on its unique strengths to navigate international markets and achieve its growth objectives.
- External customers and internal clients: Understanding the needs and preferences of international consumers is crucial for success.
- Competitors: Analyzing the competitive landscape and developing a differentiated strategy is essential for gaining market share.
- Attractiveness ' quantitative measures: Evaluating the financial viability of expansion initiatives through metrics such as ROI, NPV, and break-even analysis is crucial for decision-making.
- Explicit assumptions: These recommendations assume that Jinjiang Group can successfully navigate the complexities of international business, including political risks, cultural differences, and regulatory hurdles.
6. Conclusion
Jinjiang Group has a unique opportunity to leverage its state ownership and political connections to achieve its global ambitions. By focusing on optimizing its global supply chain, expanding its international market reach, developing a robust global branding strategy, and prioritizing sustainable business practices, the company can overcome challenges and become a leading player in the global footwear and apparel industry.
7. Discussion
Alternative strategies include focusing solely on domestic growth, pursuing organic expansion through partnerships, or adopting a more aggressive acquisition strategy. However, these options may limit growth potential or expose the company to greater risks.
Key assumptions include:
- Political stability: Continued political stability in China and target markets is crucial for successful expansion.
- Economic growth: Sustained economic growth in emerging markets is essential for driving consumer demand.
- Favorable trade policies: Navigating complex trade regulations and agreements is a critical factor in international expansion.
8. Next Steps
- Develop a detailed strategic plan: Define specific goals, timelines, and resource allocation for each recommendation.
- Conduct market research: Gather data on target markets, consumer preferences, and competitive landscape.
- Identify potential partners and acquisition targets: Evaluate opportunities for strategic alliances and acquisitions.
- Develop a global branding strategy: Define brand positioning, messaging, and visual identity for international markets.
- Implement sustainability initiatives: Develop a roadmap for integrating sustainable practices across its operations.
By taking these steps, Jinjiang Group can effectively implement its globalization strategy and achieve its long-term growth objectives.
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Case Description
Since its founding in 1951, Chinese state-owned Jinjiang International (Group) Company Limited (Jinjiang) had become a leading international company in the travel and hospitality industry with business divisions in hotels, transportation, travel, realty, investments, and finance. The Jinjiang brand was well-known in China, and the group had been pursuing a conservative investment approach. However, in response to the Chinese government's "Going Global" and "One Belt and One Road" policies, and in order to strengthen the firm's international competitiveness, Jinjiang made a series of aggressive mergers and acquisitions between 2014 and 2016. The acquisitions-especially those of two large hotel groups-had worsened Jinjiang's debt position, while integration was proving difficult due to the acquired firms' different corporate cultures and values. The hospitality market was also becoming mature and highly competitive; host-country governments were increasingly wary of foreign state-owned companies acquiring domestic assets. How could Jinjiang overcome these challenges to achieve its aspiration of building a world-class brand, while fulfilling the Chinese government's political agendas through a series of aggressive globalization efforts?
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