Case
Teaching Notes
Supplementary Resources
Abstract
August 6th, 2010 evening – Founder Group Chairman, Wei Xin, sat in his office, reflecting on the afternoon's media session. Two days ago, Founder and Acer Group had jointly announced that Acer would rent 70 million USD worth of Founder PCs for 7 years, and be responsible for a majority of Founder's PC business, along with its related departments and employees. This news triggered heated discussions in the media, as many people were surprised. To dispel confusion, Wei and Vice President Fang Zhonghua held a public media session where Wei expressed Founder Group's strategic intentions. In 2009, the PC business had sold 3,000,000 units, had sales revenues of 6.5 billion RMB, and was #4 in domestic market share. However, its operating profit margin was only 4.99%.
Wei had noted, “In the past decade, the computer production business has never been a high profit margin business. If you do not develop core technology, but just assemble and sell the computer, there is no sustainable core competitive advantage. Founder must eliminate low profit businesses, and invest its energy and time into the PCB business lines, with its proprietary technologies which can enable high profit margins.”
Looking back, Wei reflected that it was not just IT, but also medical service & pharmaceuticals, securities, and real estate which were undergoing massive restructuring. How much diversification was needed? In the future, how should they balance investments between each business group?
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
Exhibit 1 Founder Group 1998–2009 Main Business Revenues and Gross Profit (in billion RMB)
Year | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 |
Main Business Revenues | 7.45 | 8.43 | 6.69 | 6.88 | 8.73 | 16.12 | 22.08 | 24.49 | 29.31 | 39.52 | 42.14 | 47.47 |
Total Profit | 0.15 | 0.16 | 0.30 | 0.29 | 0.33 | 0.83 | 0.86 | 0.85 | 1.19 | 3.69 | 2.81 | 2.32 |
Source: PKU Founder Group 2011 first Edition Mid-Term Notes Issuance Manual.
Exhibit 2 Founder Group 2007–2009 Operations Background
- Individual Business Revenues & Profit Distribution (in billion RMB)
Business
2007
2008
2009
Revenue
Total Profit
Gross Profit
Revenue
Total Profit
Gross Profit
Revenue
Total Profit
Gross Profit
Amt
%
Amt
%
Amt
%
Amt
%
Amt
%
Amt
%
Amt
%
Amt
%
Amt
%
IT
16.72
42.30%
0.47
12.83%
1.51
23.76%
17.85
42.36%
0.42
14.99%
1.52
35.56%
19.33
40.73%
.44
18.93%
1.59
30.93%
Medicine
0.99
2.50%
0.07
1.92%
0.22
3.52%
1.10
2.62%
0.07
2.39%
0.26
6.07%
1.34
2.82%
.07
3.15%
.35
6.83%
Steel
4.64
11.75%
0.16
4.20%
0.21
3.38%
5.84
13.86%
0.05
1.60%
−0.29
−6.68%
5.30
11.16%
.12
5.05%
−.09
−1.74%
Securities
4.09
10.34%
2.67
72.31%
3.01
47.96%
2.17
5.14%
2.02
72.01%
1.05
24.62%
3.31
6.97%
1.39
59.94%
1.88
36.64%
Other
13.08
33.10%
0.32
8.74%
1.35
21.38
15.18
36.02%
0.25
9.01%
1.73
40.43%
18.19
38.32%
.30
12.94%
1.40
27.34%
Total
39.52
100.00%
3.69
100.00%
6.30
100.00%
42.14
100.00%
2.81
100.00%
4.27
100.00%
47.47
100.00%
2.32
100.00%
5.13
100.00%
Source: PKU Founder Group 2011 first Edition Mid-Term Notes Issuance Manual.
- Other Business Revenue Sales Creation (in billion RMB)
Business
2007
2008
2009
Revenue
%
Revenue
%
Revenue
%
Domestic Trade
7.28
55.62%
8.45
55.65%
10.15
55.79%
International Trade
5.02
38.36%
5.83
38.37%
7.00
38.47%
Real Estate Property
0.74
5.67%
0.85
5.62%
.99
5.44%
Education Training
0.05
0.35%
0.05
0.36%
.05
0.29%
Total
13.09
100.00%
15.18
100.00%
18.19
100.00%
Source: PKU Founder Group 2011 first Edition Mid-Term Notes Issuance Manual
Exhibit 3 Founder Subsidiary and Joint Venture Enterprises' Basic Information
Company Name | Registered Capital (in thousand RMB) | Direct Investment Proportion |
PKU Founder Industrial Development Company | 10,000 | 100.00% |
Founder Holdings Co., Ltd.(HK) | 119,120 | 32.49% |
Founder Industry Holdings Co., Ltd. | 1,200,000 | 94.17% |
Founder Securities Co., Ltd. | 1,653,88 | 56.59% |
Beijing PKU Founder College of Software Technology | 5,000 | 100.00% |
Founder Technology Holding Co., Ltd. | 1,726,488 | 11.39% |
Beijing PKU International HealthCare Group | 1,200,000 | 70.00% |
PKU Founder Investment Co., Ltd. | 150,000 | 80.00% |
Shenzhen Founder Microelectronics | 435,830 | 63.77% |
HK Founder Information Co., Ltd. | 123,920 | 94.67% |
Founder Training Center | 230 | 87.00% |
Beijing Daily Wisdom Management Consulting Co., Ltd. | 5,000 | 10.00% |
Kunshan HiTech Electronic Creative Arts Industry Development Co., Ltd. | 7,600 | 19.00% |
PKU Resource Group Co., Ltd. | 200,000 | 25.00% |
Founder International Leasing Co., Ltd. | 163,000 | 10.00% |
Dongguan Sanyuan Yinghui Investment Management Co., Ltd. | 290,000 | 15.00% |
Source: PKU Founder Group 2011 first Edition Mid-Term Notes Issuance Manual.
Exhibit 4 Founder Group Ownership Structure
Exhibit 5 Founder Group 2009 Organizational Structure
Exhibit 6 Founder Group and its Businesses Brand Logos
Founder Group Brand Logo
Founder IT Brand Logo
Founder Medical Service & Pharmaceuticals Brand Logo
Peking University Resource Group Brand Logo
Founder Securities Brand Logo
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved