Research On The Backward Development Strategy Of Sinochem Intl. Co. Based On M&A

It has been a long time for the Chinese enterprises expanding their production scale only through the self-accumulation, which leads the company slow in development, small in scale and weak in competitiveness. With China's capital market is flourishing, more and more enterprises enter the capital market, and the modern corporate mergers and acquisitions (M&A) has been generated. M&A could allow the companies to utilize the developing capital market to enhance their market competitiveness effectively, realizing the economic transformation and structural adjustment smoothly. Therefore, the research on Chinese enterprises expanding to the upper reaches of industrial chain through M&A has very high practical significance.Vertical integration is an important development strategy for the enterprises. Through M&A integration strategy, the company can quickly control the resources, keep the stable supply relationship, reduce the transaction costs, hold the prices and information advantages enhance the ability of products differentiation, improve the access threshold and enhance the competitiveness. However, the statistics from AT Kearney shows that only 20% M&A case could achieve the original expectation, most of M&A cases end in failure. After Sinochem International Corporation'Natural Rubber Department had determined to implement the backward business development strategy, three natural rubber processing plants were acquired from 2004 to 2005, the company achieved its target of becoming the third force in China natural rubber industry. Based on the analysis of its strategy development and implementation, this paper finds the clear strategy definition and strategic integration through these acquisitions are the core factors to its success, and this strategy implement process could be a well reference to other enterprises.