In the 2000s, disadvantages in the traditional proactive sales model used by China's fast-moving consumer goods (FMCG) market began to appear. These disadvantages stemmed from the rise of both labor and logistics costs. Brand owners are suffering from over-extended distribution hierarchies and the high cost and inefficiency of distribution personnel. In addition, distributors' capital chains face significant pressure stemming from the high costs of warehousing and logistics. For retailers, insufficient supply and a limited variety of products are major issues. Launched in 2015, Jinhuobao is a business-to-business (B2B) e-commerce sales platform that specializes in serving small and midsize convenience store owners. Jinhuobao has launched a series of products to address each of the issues that the FMCG market is currently facing: (a) Jinhuotuan, a product that solves the human resource problem by using crowdsourcing and the Witkey model to help brand owners recruit part-time sales teams, thereby reducing channel costs; (b) Jinhuobao, a product that solves the goods problem by using the B2B e-commerce platform model to reduce intermediate distribution links and help terminal retailers purchase goods from more brands at more affordable prices; and (c) Jindou Cloud Warehouse, a product that solves the warehousing problem by using time-share leases, shared warehousing, and three-dimensional management to help distributors cut supply chain costs through an integrated storage and distribution system. Having accumulated a significant amount of big data and warehouse management capacity after two years of development, Jinhuobao began to target a new pain point in the FMCG market — financing difficulties faced by distributors due to their lack of credit — and ventured into the field of supply chain financial services. Jinhuobao works with new retail, a market that many big players have begun pouring into over the past two years (2015, 2016): new entrants include Internet giants such as JD.com and Alibaba. Moving forward, how can Jinhuobao work to develop better supply chain financial products? What capabilities does it still lack? How should Jinhuobao set itself apart from its competitors?
Fast moving consumer goods
Supply Chain Finance
Journal of International Business Studies
Firms and governments operate in broad networks in which the home government and its diplomatic service are a critical node – or a “referral point” – between firms and potential partners in foreign locations. Thus diplomatic relations between countries matter for the choice of foreign investment location. Using a network perspective, we argue that the extent to which good diplomatic relations induce firms to invest in friendly host countries depends on their political connections to home governments. Those with stronger ties to home governments can better access and leverage intergovernmental diplomatic connections, thus benefiting potentially from enhanced access to information, reduced political risks, and increased legitimacy. Such ability of politically connected firms is more useful where weak institutional impartiality in the host country inhibits neutral treatment of foreign investors. Empirically, using overseas investment location decisions by Chinese firms, we find that the types of home government ties (i.e., whether they are organizational or personal and whether those relationships are with central or local goverments) and the impartiality of host institutions are both important contingencies affecting firms’ utilization of diplomatic relations. We discuss the implications of our study to research on network theory, political ties, and internationalization of emerging market firms.
foreign location choice
This case allows students to see typical thinking and behaviors that a student entrepreneur might have. The case briefly describes the product and team of the entrepreneurial company and invites students to look for the values of the company from a venture capitalist’s angle. The case is most suitable for MBAs as it enables a professor to introduce the “chemistry” between early-stage venture capital institutions and their portfolio companies in one case/class.
Journal of Business Ethics
Social capital can serve as informal governance in weak investor-protection regimes. Using hand-collected data on entrepreneurs’ political connections and firm ownership, we construct several original measures of social capital and examine their effect on the performance of entrepreneurial firms in China after their initial public offerings. Political connections or a high percentage of external investors tend to enhance firm performance, but intragroup related-party transactions commonly lead to performance decline. These forms of social capital have a strong influence on the performance of Chinese firms, whereas formal governance variables such as board size or board independence have little effect. Although social capital may serve as an informal governance mechanism and effectively substitute for formal governance mechanisms in an emerging market, this role of social capital raises several ethical concerns, notably the development of rent-seeking and crony capitalism.
This paper explores rent-seeking behavior in a heavily regulated equity-financing market. Using manually-collected information about ownership changes from China’s IPO application filings for the Growth Enterprise Market (GEM), we find that over a third of firms receive late-stage private equity investment and subsequently halve rejection rates for IPO applications, compared to firms without PE investment. The PE investors help firms pass the regulatory barriers, especially for those with weaker quality, and are rewarded with 9.5 times return over a 14-month period for an average deal. We also examine alternative explanations for extraordinary PE returns, such as financing, selection/certification, and managerial involvement, and find rent-seeking is the most coherent explanation to our findings.