How to Maintain Nine Dragon as Market Leader
How to maintain Nine Dragon Paper as the market leader in the paper manufacturing industry in China
Introduction
Nine Dragons Paper (NDP) is the largest paperboard manufacturer in China, and one of the largest in the world. Led by Mrs. Cheung, CEO, Chairman, and founder, it has successfully grown to the top of the industry through a “grow at all costs” strategy. But in the spring of 2009, the company’s rising debt levels had combined with declining margins to send the company’s share price tumbling. The market was increasingly worried that Mrs. Cheung’s strategy was putting the company at risk. Until first quarter 2012, the company’s Net Debt to Equity Ration had risen to 115.4%. Total bank borrowing was up to RMB29,219Million.
Nine Dragon’s biggest competitor is Lee & Man Holding. Comparing to Nine Dragon with -34% net profit drop, Lee&Man recorded only -23% profit drop. In this paper, I would like to study the possible management and market strategy issues which may help Nine Dragon to maintain the market leader.
Executive Summary
Background
SWOT Analysis
S- Largest paper manufacturer in China
W- Progressively expansion. Over borrowing, lack of cost control
O- RMB value increase
T- competitors such as Lee & Man Holding. Global economic affection on the paper demand.
Industry outlook
The pulp and paper industry hit a trough in 2011 due to insufficient demand and excess supply – China’s tightening monetary policy in 2011 and the European debt crisis have led to a global economic downturn and a significant drop in demand for paper products. This, together with the excess production capacity and high inventory cumulated in the Chinese pulp and paper industry in recent years, has resulted in high cost burdens for the industry, which slipped into a trough in 2011 in terms of earnings.
Slower supply growth and recovering demand will help the industry get out of its rut – After the traditional off-season during the Chinese New Year this year,
Introduction
Nine Dragons Paper (NDP) is the largest paperboard manufacturer in China, and one of the largest in the world. Led by Mrs. Cheung, CEO, Chairman, and founder, it has successfully grown to the top of the industry through a “grow at all costs” strategy. But in the spring of 2009, the company’s rising debt levels had combined with declining margins to send the company’s share price tumbling. The market was increasingly worried that Mrs. Cheung’s strategy was putting the company at risk. Until first quarter 2012, the company’s Net Debt to Equity Ration had risen to 115.4%. Total bank borrowing was up to RMB29,219Million.
Nine Dragon’s biggest competitor is Lee & Man Holding. Comparing to Nine Dragon with -34% net profit drop, Lee&Man recorded only -23% profit drop. In this paper, I would like to study the possible management and market strategy issues which may help Nine Dragon to maintain the market leader.
Executive Summary
Background
SWOT Analysis
S- Largest paper manufacturer in China
W- Progressively expansion. Over borrowing, lack of cost control
O- RMB value increase
T- competitors such as Lee & Man Holding. Global economic affection on the paper demand.
Industry outlook
The pulp and paper industry hit a trough in 2011 due to insufficient demand and excess supply – China’s tightening monetary policy in 2011 and the European debt crisis have led to a global economic downturn and a significant drop in demand for paper products. This, together with the excess production capacity and high inventory cumulated in the Chinese pulp and paper industry in recent years, has resulted in high cost burdens for the industry, which slipped into a trough in 2011 in terms of earnings.
Slower supply growth and recovering demand will help the industry get out of its rut – After the traditional off-season during the Chinese New Year this year,