Discussion On The Motivation And Performance Of WK’s Application Of Light Assets Operation Mode

With the rapid development of China’s economy,the real estate industry has received more and more attention.At the beginning,we have a heavy asset operation model used by many real estate companies in China.This type of operation has a large demand for funds and a long investable return period.China has been in rapid development in recent years,and the fastest growing industry is the commercial real estate industry.At the same time of rapid development in the past few years,people believe that this industry is very profitable.But in recent years,the hidden problems erupted.Under the influence of China’s current real estate market,many enterprises in commercial real estate began to transform to the light assets operation mode.If commercial real estate wants to further develop in the current environment,it must carry out innovation and breakthrough,adapt its original operating mode,and transform the original "heavy asset operation mode" into "light asset operation mode."The light asset operation model has many advantages.For real estate enterprises,the biggest characteristic of light asset operation should be that the source of funds for its construction belongs to the public.As a result,companies can have a stable source of funding and no longer need high-cost bank loans.The profit margin of its own real estate company has been declining in recent years.Therefore,the financing method of high-value loans will lead to limited development of enterprises.WK as the leading enterprise in China’s commercial real estate industry,is also the first batch of enterprises to transform to the light assets operation under the background of declining prosperity of China’s real estate industry.The main business of WK in this mode can be divided into three parts: Shopping centers,residential properties,hotels,etc.Commercial Real Estate Company has now changed its name to Commercial Management Company.It officially began to transform into a light asset operation mode in early 2015,and signed a cooperation agreement with a number of institutions in the same year.As of the end of 2017,WK has built 180 squares and 101 luxury hotels across the country.To this end,this paper takes WK as the case object to study and evaluate the motives and effects of its light asset operation.First of all,the first part of the article,through the collation and induction of the literature,briefly expounds the background and significance of the research,and make a literature review of the three aspects of research,including the connotation of the light asset operation model,the motivation of using the light assets model and the impact of the corporate light asset operatingmodel on financial performance.Secondly,through analyzing and summarizing some relevant theories about the operation mode of the light assets,for example,it introduces the connotation and characteristics of the light asset operation mode,the general motive of the light asset operation mode,the function of the light asset operation mode,and the theoretical basis of the light asset operation mode,provides a good theoretical basis for the better analysis of the motivation and performance analysis of WK ’s application of the light asset operation mode.Thirdly,the third part of the article selects the light assets transformation of WK as the research object,and deeply analyzes the basic situation of Commercial Real Estate Company.The financial characteristics of Commercial Real Estate using the Light Assets Operation Mode are: profitability increase and operating cost drastically reducing,reducing long-term financial costs,increasing cash flow,and five major motives for adopting a light asset operation model are: reducing operating costs,digesting inefficient funds,apportioning financial burdens,decentralizing operational risks,and achieving sustainable development.Finally,the article uses event research method and quantitative analysis method to collect and collate relevant data of real estate industry to form a chart and analyze the performance and formation mechanism of WK using light asset operation mode.It is divided into financial performance and Non-financial performance analysis in performance level.In the formation mechanism,combined with case study method and literature reading method,summed up the formation mechanism on the five companies operating sector about WK.Those are: construction financing pipeline to raise project funds,divide light asset module to control project cost,“self-build to turnkey the project” value-added service income,export brand and operation management capabilities to the realization of "small share trading",sharing rental income to obtain stable cash flow.At the end of the article,the author puts forward the enlightenment of WK using light asset operation mode,and then puts forward some constructive solutions according to the development status of China’s commercial real estate industry.In the current economic environment changes,commercial real estate enterprises should transform from pure real estate enterprises to service industry enterprises,breaking through the bottleneck stage in the process of corporate profit growth.At the same time,commercial real estate companies must also have the feeling that the light asset profit model is not limited to high-tech,fashion design and the Internet industry.The model is also applicable to the real estate industry.It can also improve the traditionalprofit model and solve historical issues of the traditional real estate industry.These suggestions have played a good role in the future transformation of light assets in real estate and other industries.