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VALUSHAR’s areas of expertise:

Our areas of special expertise are:  business model, strategy, market entry, valuationorganization design and partnerships.
The diagram shows the interrelation between these elements and how they create value.  Note the feedback loops: when there is a problem of execution, information must be fed back to allow the possibility of revising the strategy, or in extreme cases, even the business model.

Value diagram

Business Model

The business model that a company brings to China or Asia is critical to its success.  Many companies make the mistake of not adjusting their business model to the realities on the ground in Asia (see Case Study).  Companies that are successful in China or Asia generally must be adaptable and willing to change what they do at home, as well as to adjust their core thinking on an ongoing basis.  This is much easier said than done, and why an objective perspective like that of VALUSHAR comes in useful.

Strategy

Once the business model has been determined to be suitable, it must be backed up by a coherent strategy for China (Asia).  Most “strategic plans” are little more than elaborate financial models built up from unreliable data and riddled with wishful thinking, producing the classic “hockey stick”.  VALUSHAR will cut through to the essential elements, validating the fundamental assumptions, and where necessary acquiring and validating pertinent data.  Like business models, strategic plans must be adaptable; what is not working now is not likely to work in future.    Bottom

Market Entry

The strategy for market entry is not necessarily the same as what will be employed on a longer-term basis.  In Asia, building a market position generally takes time and patience.  If the company does not have time but has capital, an acquisition can be the fastest route though it carries its own set of risks.  If the company does not have a lot of capital to devote to the Asian market but has time, channel arrangements (distribution and/or agency) should be considered at the outset.  Depending on the competitive environment and the company’s own situation and objectives, either a skimming or penetration price strategy can be employed.    Top

Valuation

We are able to advise on valuation of potential investments including greenfield investments, acquisitions, joint ventures and divestitures.  A basic technique we employ at VALUSHAR is the discounted cash flow method, known for many years but popularized by McKinsey in the 1980s.  Discounted cash flow looks at the net present value (NPV) of a series of cash flows using a discount rate which should be adjusted to reflect the risk of the investment under consideration.  Though a standard "corporate" discount rate is often used, for investments in emerging markets like China, a risk premium may be appropriate.  The technique is conceptually superior to other techniques in common use (e.g. book value, price earnings) but has the disadvantage of being highly subject to manipulation.  VALUSHAR will challenge and parameterize all the assumptions going into the model to give a realistic, risk-weighted view of the contemplated investment.    Bottom

Organization Design

Even with the right business model and strategy, being successful in a new environment can be very challenging.  Local culture varies across Asia from very risk-averse to hyper-entrepreneurial (where employees often become entrepreneurs on company time) and from relatively Westernized cultures to ones that are hierarchical in several dimensions, i.e. with obedience relationships inside and outside the company.  The right organization design is one which presents a consistent, local-friendly face externally while minimizing internal conflicts and making sense to employees.  VALUSHAR recommends relatively simple organization structures coupled with the use of multifunctional teams.

Partnerships

At minimum, every business is in partnership with its customers, suppliers and employees.  Sometimes it may make sense to formalize external partnerships in an agreement or alliance.  There are also cases where a third-party partner (customer, supplier, distributor, or even competitor) is critical to achieving strategic objectives and it makes sense to create a joint venture partnership.  The usefulness of such partnerships must be reevaluated as the business develops.  Notwithstanding past value created together, often, after a certain period it will be preferable to dissolve an alliance.  In addition to negotiating joint venture contracts, VALUSHAR has experience in sensitive, tactful negotiations for withdrawal from such arrangements which are in the best interests of both parties.

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