In this part, I will cover the problems faced by Jinzhongguo The first problem is Information delay and distortion.Some subsidiaries boosted their sales and profits to the headquarter.And the second is concentration of operating risks, like bureaucratic hierarchy, power-control and self-interest.Then their profits dropped a lot since frequent acquisition needs heavy invest.And their SGA expenses rose.Also Tsingtao brewery is still a production and financing oriented company, they lack of modern market plans from an overall point of view.Sothis led to irrational allocation of resources.And as a typical SOE, Qsingtao Brewery felt hard to turnover because of some intervenes from the government.
Fast-speed of acquisition also putstre on its financing.Qsingtao brewery’s debt rose to 56% by mid-2001, a dangerous level.Thesegraphsare about ratios of china’s five listed beer companies in 2001.The red line is Qsingtao beer.It has the highest Debt/aet ratio,the lowestP/E ratio, net profit margin and ROA.Also we found a trend ofdecline of the last two ratios.So if not improve quickly, its financial condition may get worse.
Acquisition would cause indigestibilityif not integrated timely.These subsidiaries came from around the country and poe different technology and management styles, various cultures and values.So it is difficult for them to cooperate and fight for a common goal.Besides, it is a challenge to prepare enough managers in such a short time.Even if managers are already trained, they were reluctant to follow these airborne profeional managers.Lastly, conflicts of internal sales and product structures were also hard to eliminate.Becauseeach subsidiaryhasalready been accustomed to their own sales teams.Next, we will turn to the actions brought by Jinzhongguo
