Case
Teaching Notes
Supplementary Resources
Abstract
In his report to the 2010 annual meeting of CSCEC (China State Construction Engineering Corporation), Mr. Jun Yi, President, CEO & CPC Secretary of the giant SOE (state-owned enterprise) and one of the biggest construction corporation in China, expressed deep satisfaction with the company's achievements during the “11th Five-Year Program” period (2006–1010). He was especially pleased with 2010, the first full year after the world economic recovery from the global financial crisis in 2008 and the company's IPO in 2009. In 2010, CSCEC's new contract value, business revenue, and total profit increased by 74.5%, 42.3%, and 47.5%, respectively. The average annual growth rates of the three indicators in the past 5 years were 38.5%, 25.8%, and 42.6%, i.e., profit had been growing much faster than revenue. Facing the future, President Yi cautioned himself and his colleagues to think of danger in peace, because “too big to fail” is never reliable. The greatest danger of a big company is its own past success. Yi proclaimed that in the coming “12th Five-Year Program” period (2011–2015) and beyond, CSCEC would strive to become a first-rate SOE and one of the leaders in China's construction industry. Will CSCEC, however, be really able to achieve its goals? The company has witnessed remarkable changes in itself for a decade. Facing a more uncertain environment and more intense competition, how should the company renovate its management control system?
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: Professional composition of CSCEC's employees (2010)
Types of employees | Shares in total |
Generalized management staff | 11.7% |
Engineers & technicians | 46.8% |
Specialized management staff | 20.5% |
Service & operating staff | 21.0% |
Total formal employees | 100% |
Source: Annual Report of CSCEC
Exhibit 2: Financial Situations of CSCEC
Source: Annual Reports and Internal Documents of CSCEC
Exhibit 3: Growth Rates of CSCEC's Financial Indicators
Source: Annual Reports and Internal Documents of CSCEC
Exhibit 4: Revenue Shares
Source: Annual Reports and Internal Documents of CSCEC
Exhibit 5: Profit Shares
Source: Annual Reports and Internal Documents of CSCEC
Exhibit 6: Stockholding system and main subsidiaries of CSCEC, Ltd. (2010)
Notes: SASAC: State-owned Assets Supervision and Administration Commission of the State Council
CNPC: China National Petroleum Corporation
Source: Annual Reports of CSCEC
Exhibit 7: Organization structure of CSCEC, Ltd.
Exhibit 8: China's Investment, Construction and Real Estate Sector
Source: China Statistical Yearbooks
Exhibit 9: The Top Chinese Contractors (2011)
RANK | Firm Name |
1 | China Railway Construction Corp. Ltd. |
2 | China Railway Group Ltd. |
3 | China State Construction Engineering Corp. Ltd. |
4 | China Communications Construction Company Ltd. |
5 | Shanghai Construction (Group) General Co. |
6 | Sinohydro Group Ltd. |
7 | Dongfang Electric Corp. |
8 | GuangSha Construction Group Co. Ltd. |
9 | China National Machinery Industry Corp. |
10 | Zhejiang Construction Investment Group Co. Ltd. |
Source: ENR1
Notes
1. Engineering News Record magazine
Exhibit 10: Revenues of China's Leading Construction Companies
Source: Annual Reports of Relevant Companies
Exhibit 11: Profits of China's Leading Construction Companies
Source: Annual Reports of Relevant Companies
Exhibit 12: Net Assets of China's Leading Construction Companies
Source: Annual Reports of Relevant Companies
Exhibit 13: World Investment and Construction
Source: UN data
Exhibit 14: Fulfilled value of overseas contracted projects by Chinese enterprises
Source: China Statistical Yearbooks
Exhibit 15: Contracted Value Of Overseas Contracted Projects by Chinese enterprises
Source: China Statistical Yearbooks
Exhibit 16: The Top Global Contractors
(based on total firm contracting revenue)
RANK | FIRM NAME & LOCATION | |
2010 | 2009 | |
1 | 1 | HOCHTIEF AG, Essen, Germany |
2 | 2 | VINCI, Rueil-Malmaison, France |
3 | 3 | STRABAG SE, Vienna, Austria |
4 | 5 | Bechtel, San Francisco, Calif., U.S.A. |
5 | 6 | BOUYGUES, Paris, France |
13 | 17 | China Communications Construction Group (Ltd.), Beijing, China |
22 | 25 | China State Construction Engineering Corp., Beijing, China |
Source: ENR
Exhibit 17: The Top International Contractors
(based on contracting revenue from projects outside home country)
RANK | FIRM NAME & LOCATION | |
2010 | 2009 | |
1 | 4 | China Railway Construction Corp. Ltd., Beijing, China |
2 | 2 | China Railway Group Ltd., Beijing, China |
3 | 1 | VINCI, Rueil-Malmaison, France |
4 | 3 | BOUYGUES, Paris, France |
5 | 7 | China Communications Construction Grp. (Ltd.), Beijing, China |
6 | 6 | China State Construction Eng'g Corp., Beijing, China |
7 | 5 | HOCHTIEF AG, Essen, Germany |
8 | 9 | China Metallurgical Group Corp., Beijing, China |
9 | 10 | Bechtel, San Francisco, Calif., U.S.A. |
10 | 8 | Grupo ACS, Madrid, Spain |
Source: ENR
Exhibit 18: Future Investment Plan of CSCEC
(100 million yuan)
Business fields | 2010 | 2011 | 2012 | Total |
Building construction | 25.25 | 20.00 | 20.00 | 65.25 |
Infrastructure | 73.02 | 54.04 | 20.00 | 147.07 |
Real estate | 274.98 | 86.53 | 67.17 | 428.68 |
Total | 373.25 | 160.58 | 107.17 | 640.99 |
Source: CSCEC's Internal Documents
Exhibit 19: Assets and Liabilities of CSCEC, Ltd. (consolidated)
Assets | (10 thousand yuan) | |||||||
Items | 2010/12/31 | 2009/12/31 | 2008/12/31 | 2007/12/31 | ||||
Amounts | Shares | Amounts | Shares | Amounts | Shares | Amounts | Shares | |
Current assets | 32,515,726 | 81.79% | 25,212,576 | 86.17% | 17,492,022 | 85.67% | 14,201,634 | 85.58% |
Monetary fund | 8,209,860 | 206.52% | 7,897,382 | 26.99% | 3,415,577 | 16.73% | 2,598,844 | 15.66% |
Account receivable | 4,806,384 | 12.09% | 3,928,444 | 13.43% | 3,310,336 | 16.21% | 3,089,151 | 18.62% |
Imprested funds | 1,782,343 | 4.48% | 2,768,487 | 9.46% | 1,074,359 | 5.26% | 962,625 | 5.80% |
Other AR | 951,398 | 2.39% | 955,509 | 3.27% | 1,062,250 | 5.20% | 945,276 | 5.70% |
Inventories | 11,567,858 | 29.10% | 5,864,948 | 20.05% | 5,710,446 | 27.97% | 4,319,378 | 26.03% |
Unsettled funds for completed projects | 4,427,412 | 11.14% | 3,314,244 | 11.33% | 2,625,929 | 12.86% | 2,133,038 | 12.85% |
Others | 770,471 | 2.62% | ||||||
Non-current assets | 7,238,186 | 18.21% | 4,045,839 | 13.83% | 2,924,756 | 14.33% | 2,392,273 | 14.42% |
Long-term AR | 2,302,416 | 5.79% | 1,261,732 | 4.31% | 593,055 | 2.90% | 460,405 | 2.77% |
Long-term stockholder's rights | 1,565,826 | 3.94% | 438,358 | 1.50% | 344,398 | 1.69% | 335,432 | 2.02% |
Real estate investment | 822,500 | 2.07% | 442,109 | 1.51% | 253,446 | 1.24% | 138,504 | 0.83% |
Fixed assets | 1,116,878 | 2.81% | 1,052,188 | 3.60% | 829,576 | 4.06% | 710,453 | 4.28% |
Intangible assets | 602,815 | 1.52% | 423,112 | 1.45% | 315,387 | 1.54% | 309,353 | 1.86% |
Others | 827,751 | 11.44% | ||||||
Total assets | 39,753,912 | 100.00% | 29,258,416 | 100.00% | 20,416,777 | 100.00% | 16,593,908 | 100.00% |
Liabilities | (10 thousand yuan) | |||||||
Items | 2010/12/31 | 2009/12/31 | 2008/12/31 | 2007/12/31 | ||||
Amounts | Shares | Amounts | Shares | Amounts | Shares | Amounts | Shares | |
Current liabilities | 22,118,356 | 75.16% | 16,249,981 | 79.56% | 13,369,649 | 77.08% | 11,326,028 | 80.95% |
Short-term loans | 1,061,151 | 3.61% | 590,591 | 2.89% | 1,396,919 | 8.05% | 1,250,846 | 8.94% |
Account payable | 10,045,538 | 34.14% | 7,225,789 | 35.38% | 5,421,844 | 31.26% | 4,757,209 | 34.00% |
Advance receipt funds | 4,379,768 | 14.88% | 3,809,040 | 18.65% | 2,830,588 | 16.32% | 2,089,559 | 14.93% |
Settled funds for uncompleted projects | 952,833 | 3.24% | 752,444 | 3.68% | 592,011 | 3.41% | 422,949 | 3.02% |
Other AP | 1,700,490 | 5.78% | 1,335,934 | 6.54% | 1,143,675 | 6.59% | 1,318,735 | 9.43% |
Others | 3,978,576 | 13.52% | ||||||
Non-current liabilities | 7,309,509 | 24.84% | 4,175,730 | 20.44% | 3,975,763 | 22.92% | 2,665,851 | 19.05% |
Long-term loans | 3,368,430 | 11.45% | 2,343,141 | 11.47% | 2,286,007 | 13.18% | 1,568,171 | 11.21% |
Bond payable | 2,806,241 | 9.54% | 1,147,570 | 5.62% | 1,124,607 | 6.48% | 523,723 | 3.74% |
Others | 1,134,838 | 3.86% | ||||||
Total liabilities | 29,427,864 | 100.00% | 20,425,711 | 100.00% | 17,345,412 | 100.00% | 13,991,879 | 100.00% |
Net assets (owners' equity) | 10,326,048 | 8,832,705 | 3,071,365 | 2,602,029 |
Source: Annual Reports of CSCEC
Appendix: Representative architectures completed or under construction by CSCEC in recent years
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