| Daewoo Group, one of the four most powerful groups in Korea, once played an important role in the economic area of the world. However,~~ the coming of crisis of Asian finance, it went down. Why such a powerful company went down in such a short time? I want to discover some reasons of Daewoo burst-up from its sub- company Daewoo Heavy Industries Yantai Co., Ltd. (as DWYC below) which was registered in 1994. It began to produce excavators in1996 and its products were mainly exported. After the crisis of Asian finance, DWYC changed its strategy to develop the local market. In 1999, DWYC ranged ~ within the local producers on the amount of sales and in 2000 ranged first. Why DWYC growths so fast in such a short duration? The environment was propitious to the construction mechanical factory then. A big thing in 1998 in china was to resist the flood. Lots of water project started to be set up. These years the government made the policy on basic construction to boost the economic. The policy really expanded the needs of construction machinery. According to the material, the wholesale of excavator is 3406 units in 1997, 4238 units in 1998, and 5988 units in 1999. The average growth rate reached 32 percent. In 1997, DWYC sold out 134 units and owned a small market share, only 4 percent. In 1998, the figure reached 443 sets. In 1999, the figure was 1084 sets. The growth rate was higher than the average. From the point of the market, DWYC flourished within a short time. Why DWYC made such progress facing so many competitors? From the inside, DWYC adjusted its policy in time and grasped the opportunity. The manager moved his eyes from export market to the local. He chose a penetration-pricing strategy as high performance and low price. The policy 5 aimed to enter the competition quickly. It is not easy to enter a new market. For DWYC, the Daewoo excavator is very new to the Chinese customers. Secondly DWYC employed a lot of salesman and established 8 agencies and 3 joint ventures to sell the products in a short period. For the channels, DWYC developed the distributors actively. In a short time DWYC made a sale net. On the business terms, DWYC sold the products on credit, which was the distinct difference with other competitors. With the development of the market economy, the competition among the enterprises is becoming more and more strong. One method to enlarge the market share used by more and more manufactories is to sell on credit. The benefit of sale on credit is obvious. It can turn the prospective buyer into user, as shown from the increasing figure of Daewoo excavator. As a coin has two sides, the disadvantage of the policy is also serious. It can be summarized as 5 aspects of the disadvantage from DWYC financial analysis. 1. There is a poor risk. Especially when the credit terms are less restrained, there must be a large AIR. Some account are likely turned to bad. From the age of DWYC AIR we can feel the risk. DWYC bad A/R rate maybe more than 4 percent. 2. The big A/R has bad influence on the cash flow. It will weak the ability of payment and refund. If DWYC have not found out a good method to solve the problem, the survive of DWYC will be threaten in the future. 3. The policy of sale on credit increase the complexit... |
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