The reasons for the failure of Chundu Ham Sausage:

1. Resources were dispersed, the main business was lost, and the market competitive advantage was completely lost.

In the 1990s, competition in the ham sausage and meat products markets intensified. Latecomers such as "Shuanghui" and "Zhengrong" in the industry grew rapidly and competed fiercely with Chundu to seize the market. This barrier to entry In industries where it is not high and it is difficult to maintain technological advantages.

There is an urgent need for Chundu to increase investment and improve the overall competitiveness of its products and enterprises. However, those new business projects and newly merged enterprises that have nothing to do with the main business have scattered Chundu's limited resources, leaving Chundu in the main business. Investment in all aspects of business operation is seriously insufficient, and it is even difficult to ensure its normal operation.

Shuanghui Group focuses on decision-making and management. It is also an enterprise expansion. Shuanghui Group has expanded its scale closely around the main business of meat processing, allowing the company to quickly form a business that focuses on meat processing, breeding, slaughtering, Packaging, color printing and other closely related industrial groups.

Chundu made its fortune in ham sausage, but failed due to improper diversification strategy. It lost its specialty of ham sausage. The slaughtering process, which has obvious advantages in talent, technology, and equipment and is crucial to the company, was actually transferred to raw material suppliers, and the main business shrank significantly.

The most inappropriate thing is that in the price competition, Menghu Mu actually used the method of lowering product quality to reduce production costs. The meat content was once reduced from 85% to 15%, and even Chundu employees Sen nicknamed the ham sausage he produced as "noodle sticks." Chundu soon paid a heavy price for this, with sales plummeting and market share plummeting from the peak of 70% to less than 10%.

2. Unrelated diversification makes Chundu amateurs everywhere, unable to make wise decisions, and corporate risks appear one after another.

Due to the large capital requirements for new projects, most projects are underinvested, resulting in the inability to operate normally due to lack of funds. In addition, they do not have the conditions for success in terms of technology, talents, operations, and management.

This not only loses the main business, but also prevents new projects from forming market advantages for a long time. This aggravates the company's financial crisis and makes the company fall into a "diversification trap" from which it cannot extricate itself.

Chundu's merger is inappropriate in terms of the target enterprise, the timing of the merger, and its own management capabilities. Therefore, these mergers have not only failed to promote the development of enterprise groups, but have placed a heavy burden on them.

3. Low management level.

The gap between Chundu Group and Shuanghui Group is even greater in terms of cost management, personnel management, marketing management, quality management, and basic management. In terms of fund management, Shuanghui Group carefully operates the project, minimizes bank deposits, reduces warehouse inventory, implements a cash-on-site system for product sales, and implements a payment system for raw material procurement after passing the production trial.

Shuanghui Group has achieved good operating performance by relying on strict capital management, and investors’ returns are as high as 35%-70%. In terms of marketing management, Shuanghui Group has put forward the marketing strategy of "traveling through thousands of mountains and rivers, going through countless hardships, entering thousands of households, and speaking thousands of words", while Chundu Group has "traveled across thousands of mountains and rivers, experienced countless hardships, and spoken a thousand words." Set up one soldier and one pawn."

In terms of basic management, Shuanghui Group has established and improved a financial management system with vertical management by the Finance Department and daily supervision by the Audit Department, which has put financial management on a standardized, institutionalized and legal track, while Chundu Group Financial reporting data is false.

Before realizing diversification, the Fortune 500 companies first implement the "centralization strategy" internally. The so-called core strategy requires enterprises to concentrate resources, cultivate their core capabilities, vigorously develop their core main business, and make the main business bigger, stronger, and more refined. If this goal is not achieved, they must not act rashly.

The reason why the Fortune 500 companies are able to gain a firm foothold and continue to develop in the face of unpredictable international competition is that they all have their own core businesses. But Chundu just violates this basic principle.

The second is to implement relevant diversification strategies. The core strategy is the key or preliminary work for enterprises to implement related diversification strategies. If an enterprise takes the path of diversification before forming its own core capabilities and core main business, it will ultimately fail.

The rapid rise and decline of Chundu Ham Sausage:

The predecessor of Chundu Group was Luoyang Meat Factory, which was founded in 1958. Under the planned economy system, it was almost unremarkable. ten years.

In 1986, after analyzing and inspecting the domestic and foreign meat product markets, Gao Fenglai, the head of Chundu, made a decisive decision to change his original business situation of simply engaging in pig slaughtering and storage business, deep-process pork, and develop high-temperature meat. Product production and processing business.

It was the first to introduce a Western-style ham sausage production line in China and produced China's first ham sausage, which quickly became popular in the market. Sales revenue and profits doubled year after year, and huge economic benefits were achieved. The scale of the enterprise became larger, and obtain sustainable development.

By the early 1990s, Chundu had become a well-known large-scale meat product production and processing enterprise in China. "Chundu" ham sausage has been rated as "National Famous Brand Product" and "Famous Trademark" many times, and has almost become synonymous with Chinese ham sausage.

Perhaps success comes too easily. The minds of Chundu’s managers began to expand and heat up. Local leaders also demanded that Chundu “become bigger and stronger” as soon as possible, which played a role in fueling the flames.

In a relatively short period of time, they invested heavily in a number of business projects such as medicine, tea beverages, and real estate, and acquired and merged Luoyang Xuangong Building and Pingdingshan Meat Factory across regions and industries. , Chongqing Wanzhou Food Company and other 17 companies with no hope of turning around losses.

The business scope involves pig slaughtering and processing, cooked meat products, tea beverages, medicine, hotels, real estate, wood processing, commerce and other industries, embarking on a path of diversification and simultaneous development.

The company's business projects are complex, have low correlation with each other, and have no connection with its original main business. Moreover, the investment time is very concentrated, and the "development" is rapid for a while.

In terms of assets, Chundu’s assets are rapidly expanding at an average rate of nearly 6 times per year. What is frightening is that this rapid expansion not only failed to bring benefits to Chundu, but also put a heavy burden on the company. Of the 17 companies that Chundu merged and acquired, more than half suffered losses and nearly half closed down and stopped production, which undoubtedly made matters worse.