SHANGYAO New Materials Co.
Schon Bediako, Weihua Cheng, Shaobin Du, Tianyi Li, Yun Pan, Jieying Su
Title: Shangyao New Materials Co.
Subject Area: Corporate strategy for stustainability
Region: Zhejiang, China
Challenge: In June 2003, Shangyao was originally founded by Xichun Su in Zhejiang, China as a medium-sized enterprise to produce and sinter shale porous bricks. Now, in 2020, Shangyao has to make a change to improve its net income and avoid the risk of bankrupt due to its lack of competitive advantage and higher rivalry in the industry. Its leadership asked our consulting team of the capstone strategy course (Northeastern U.) two evaluate two options: a) open up a new branch for sludge treatment or b) continue expanding the existing brick-making and enhance its competitiveness in the market. The client expected us to illustrate which option provides stronger matches of market opportunities and company’s strength, and outline the course of action.
Embedding in Industry’s Realities
We effectively obtained information about Shangyao, the industry, and the local market through direct interviews with Mr. Su who was easily reachable to one of the team members. We obtained the primary data such as the company’s financial statements, the certification of Green Production Pilot and detailed information on government grants. We collected an impressive anount of industry and market data from secondary sources in order to understand the context for the challenge we worked on.
To analyze the information and situation, we used the following strategic framework to provide analysis and suggestions for Shangyao:
- PESTLE Framework
- VRIO Framework
- Porter’s Five Forces Model
- SWOT Analysis
- Value Chain
Today, there is rapid infrastructural development of China which has led to the rise in market demand for bricks. However, Shangyao still has low net income possibly caused by the high competition in the brick industry. Hence, the development of a new core competency proved beneficial to the financial health of the company. The development of sludge treatment is advantageous because:
- there is a first-mover advantage and a government grant available for funding;
- the raw materials for the treatment is at a low cost to Shangyao;
- a by-product from sludge treatment can be used to produce bricks, which effectively drives down production costs.
In line with this analysis and investigation, our team was led to decide that the first option is the best for the growth of the company.
Elucidating the Team’s Professional Core: Relevance to the Team
At present, Shangyao is facing an unprecedented dilemma in enterprise development which was fascinating to us as we are all interested in the industrialized nature Chinese economy. From our co-op experiences, we were all involved heavily in resolution and decision-making at various capacities. With all of us being business majors and passionate about entrepreneurship, helping Shangyao solve its difficulties will provide us with valuable consulting and strategy experience for our future work and also facilitate our understanding of the characteristics of China’s economy.