RolandBerger Partners InternationalManagementConsultantsBarcelona Beijing Berlin Brussels Bucharest Budapest BuenosAires Detroit D sseldorf Frankfurt Hamburg Kiev LisbonLondon Madrid Milan Moscow Munich NewYork Paris Prague Riga Rome S oPaulo Shanghai Stuttgart Tokyo Vienna Zurich Strategicre engineeringofGeberitChina Interimreport GeberitInternationalAG Content 1 Page ManagementSummary5A Marketenvironment12A1 MacrobusinessenvironmentinChina13A2 Marketanalysisofsanitarysystem36A3 Marketanalysisofpipingsystem67B StrategyevaluationandSales Marketing80B1 Strategyevaluation81B1 1Corporatestrategyanalysis82B1 2Productstrategyevaluation89B2 Sales Marketing91B2 1RetailchannelGSHA95B2 2ProjectchannelGSHA103B2 3OEMchannelGDAI107B2 4Marketing110B2 5Benchmarking Kohler China 112 Content 2 Page C Financial organizationandprocessesanalysis122C1 Financialsituationanalysis123C1 1GeberitShanghai124C1 2GeberitDaishan138C2 Organizationandprocesses145C2 1Organizationstructure146C2 2Managementstructure151C2 3Keyprocessanalysis157D Restructuringoptions164D1 Generaloptionsandpre selection165D2 In depthevaluation176D2 1Equitybuyout178D2 2Termination183D2 3Bankruptcy186D2 4Comparisonofthealternatives190D3 Feasiblescenarios193 Acronymlist BoDCCSCJVEJVFDIFICGDAIGSHAJVKTSVGMWFOE BoardofDirectorsCompetenceCenterShanghaiCo operativeJointVentureEquityJointventureForeignDirectInvestmentForeignInvestmentCommissionGeberitFlushingTechnology Daishan Co Ltd GeberitPlumbingTechnology Shanghai Co Ltd JointVentureKohlerTechnicalSpecialistViceGeneralManagerWhollyForeignOwnedEnterprises SHA 4309 03690 08 15a PPT x Managementsummary ChinacouldbeamarketofstrategicimportanceforGeberit sinternationalbusiness 1 ChinaisapromisingmarketforGeberit WehaveanachievablebusinesstargetofRMB200millionrevenuebyyear2005 fromwhich 130millioncomesfromsanitaryproductsand70millionisgeneratedbypipingbusiness Amongalltheproductlines tankfittings Pluviaandconcealedcisternarethetop3productlineswiththepotentialofRMB140millionor70 ofthetotalOverallChinesemacroeconomicdevelopmentisundergoingastrongmomentum Inthenext5years itisestimatedthatGDPwillgrowat7 annually thegrowthoffixedassetinvestmentwillincreaseby8 andhousingconstructionwillalsogrowby8 p a Chinesesanitarymarketismostlyaceramicmarket withanannualdemandof43millionunitsofsanitaryceramicproductsinChinain1999whichmeansthepotentialmarketofnearly2millionsetsfortankfittingsaswellas2millionunitsofmediumtohighendcisternssoldinthemarket Withthegrowthinthehousingmarket Chinesesanitarymarketwillcontinueanannualgrowthof6 8 Furthermore duetotherapidincreaseofbathroomdecoration themediumtohighendsegmentofsanitaryproductswilldefinitelyleadtheindustrygrowth By2005 theshareofmediumtohighendsegmentwillrisefromcurrent20 to35 Marketenvironment ChinacouldbeamarketofstrategicimportanceforGeberit sinternationalbusiness 2 Asthelargestconstructionindustryintheworld ChinapresentsanimmensepotentialforGeberit spipingproducts BothHDPEandMeplapossesssignificantproductadvantagesoverthecurrentlyusedChineseproducts However thesignificantpricegapcouldbeaseriousbarrierforadeepmarketpenetration ForPluvia theopportunitiesareveryattractive Presentlymorethan15roofprojects altogether700 000sqmareindifferentphasesoftheprocessofbiddingBothGeberit sconcealedcisternandPluviaroofdrainagesystemaremismatchedwithChinesetraditionalindustryhabits thiscanonlybesolvedbyalong termcommitmentintheChinamarketandeffectivemarketing DuetotheChineseconsumerstraditionalmindsetthatplasticproductarelowerpriced Chantierdoesn thaveanoptimisticmarketperspectiveRightnow formostofGeberit sproducts thecompetitionisnotsotough whichmeansagoldenopportunityforGeberittobecomeamarketleaderinChina ItalsomeanstimepressureforGeberit Currentlycompetitors e g GroheDAL Caroma aregearingupandwillbecomeaggressiveverysoon Marketenvironment Overall thestrategyofGeberitinChinahasnotbeenfullyachievedandsalesandmarketingareparticularlyweak 1 Strategyandsales marketing AlthoughGSHAdevelopedastrategywhenfounded thestrategicobjectivestopenetrateintotheChinesemarkethaven tbeenachieved currentstrategyisunfocusedThevisionofGSHAisnotcommunicatedwithintheorganization norisitimplementedIncomparison GDAI sstrategyisgoingintherightdirectionandisintheprocessofbeingimplemented Theystillhaveproblemstosolve suchasslowmarketresponsiveness poorcustomerunderstandingetc ThecorecompetenceofGeberitEuropestandsforadvancedtechnology premiumqualityandbrand excellentpre and aftersalesservices ThishasnotallbeentransferredtoGeberitChinaCurrentproductportfolioofsellingChantier Duofixandpublicproductsisunbalanced Strategicfocusshouldbeonconcealedcistern tankfittingsandPluviaandHDPEAstosalesandmarketingoperations GSHAhasnoclearstrategyindevelopingdistributionnetwork Overall thestrategyofGeberitinChinahasnotbeenfullyachievedandsalesandmarketingareparticularlyweak 2 Strategyandsales marketing Geberit sproductsaresoldthrough3channels retailsalesandprojectsalesthroughdistributors andOEMGeberitlacksclearplanningofretailnetworkdevelopmen