The Eight Overarching China Automotive Trends En Part 1

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Part 1 of 2 of describing how trends in the China auto market are impacting the global automotive industry.

Part 1 of 2 of describing how trends in the China auto market are impacting the global automotive industry.

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  • 1. Perspective Bill Russo Edward Tse Tao Ke Bill Peng The Eight Overarching China Automotive Trends That Are Revolutionizing the Auto Industry Part 1
  • 2. Contact Information Beijing Bill Russo Senior Advisor +86-10-6563-8300 bill.russo@booz.com Bill Peng Senior Associate +86-10-6563-8300 bill.peng@booz.com Greater China Dr. Edward Tse Senior Partner +86-10-6563-8300 +852-3650-6100 +86-21-2327-9800 edward.tse@booz.com Shanghai/Beijing Tao Ke Principal +86-21-2327-9800 tao.ke@booz.com Booz & Company
  • 3. EXECUTIVE In our judgment, China is the catalyst behind the restructuring currently underway in global automotive industry. Many SUMMARY industry experts believe the automotive industry is undergoing change as a result of the global economic crisis, which has little to do with China. Still others believe that the restructuring is a result of mismanagement and that major OEMs can be restored to greatness with a change to new leadership possessing sufficient vision to adopt a new course. Booz & Company 1
  • 4. We believe that recent events signal trends that are shaping the China 7. China Vehicle Manufacturer’s Push the early stages of an economic automotive industry: now the to Build Brand Equity revolution: a shift of the global largest in the world and the new 8. China’s Rapidly Changing center of gravity of economic battleground for domination of the Demographics and Growing strength towards the east, which global auto industry. Demand in Tier 2 & 3 Cities will result in profound changes in numerous industries. As an economic Eight Overarching China Automotive The cumulative impact of these bellwether, the automotive industry Trends: trends is essentially revolutionizing captures a great deal of interest. the business model of the global However, it is apparent that there are 1. Policy-driven Consolidation of automotive industry. We will many who still do not comprehend Chinese Vehicle Manufacturers elaborate further on each of these that the changes underway are in fact 2. Global Redistribution of Assets trends in this two-part series fundamental and irreversible. by Non-Chinese Companies to of articles. Capture China Market Growth It is apparent that more explanation 3. Acquisition of Foreign Assets and is needed for many to grasp the idea Key Development Competencies by that China is the catalyst for this Chinese Companies automotive revolution, and that the 4. China’s Investment in New Energy opportunity exists for China and Vehicles and Related Infrastructure its fledgling automotive companies 5. Utilization of China’s Automotive to assume a leadership role in the Capacities for Global Expansion 21st century automotive industry. 6. Hyper-Competition Across This explanation will be offered the China Automotive Market by highlighting eight overarching Segments 2 Booz & Company
  • 5. TREND #1: There have recently been many announcements regarding of the vehicles sold. This highly fragmented structure cannot provide POlICY-DRIVEN potential mergers and alliances for a stable development of the CONSOlIDATION among the China domestic vehicle manufacturers, including Beijing current domestic players. Of ChINESE Automotive Industry Corp (BAIC) As a result, the Chinese government VEhIClE and Fujian Daimler, Guangzhou Automobile Group Co. (GAC) has pulled-ahead its plan to consolidate the vehicle manufacturer MANUfACTURERS and Zhejiang Gonow Auto, landscape in order to achieve Chery Automotive and Jianghuai economies of scale. Prompted by Automobile Co. (JAC), Dongfeng the economic crisis, the China Motors investment in Yulon’s government in January 2009 Luxgen (Hangzhou) Motor Co., published stimulus plans for 10 key and First Auto Works (FAW) and industries including automotive. Brilliance Auto. The most sweeping proposal in this plan is the intention to consolidate The rationale for this major the industry into a “top 10” group restructuring is clear: the current organized into 2 distinct “tiers”: the structure of the automotive industry Tier 1 group consisting of companies reflects an industry in its early stage with an annual capacity of 2 million of development. There are more than units that are encouraged to acquire 150 registered vehicle manufacturers smaller automotive companies in China. In 2008, only 10 of these throughout China, whereas Tier manufacturers accounted for 83% 2 consists of companies with an The Chinese government has pulled- ahead its plan to consolidate the vehicle manufacturer landscape in order to achieve economies of scale. Booz & Company 3
  • 6. annual capacity of 1 million units obviously room for others below the forward the necessary consolidation, that are encouraged to drive regional “top”. One can anticipate that OEM the China government is ensuring consolidation. The plan even names consolidation and rationalization will that it can more efficiently develop 4 Tier 1 companies as well a 4 Tier 2 surely be accompanied by a major the industry around the fewer, and companies: restructuring of the Chinese auto stronger auto groups that remain. supply base. It is also noteworthy This is a necessary foundation- Tier 1 that companies such as BYD, Geely building step from which fewer, yet • Shanghai Automotive Industrial and Great Wall are not included stronger China auto companies can Corporation (SAIC) on the list. In spite of this, there is emerge. While providing a base, it is • First Auto Works (FAW) Group a clear indication of the rationale the cumulative impact of this trend • Dongfeng Automobile and urgency around the issue of along with the remaining seven yet to • Chang’An Automotive consolidation, and why the time to be described that will revolutionize act is now. the business model of the global Tier 2 automotive industry. • Beijing Automotive Industrial But, how does a restructuring of Corporation (BAIC) the domestic structure in a single • Guangzhou Automotive Industrial auto market revolutionize the Group (GAIG) global auto industry? Taken as a • Chery Automobile stand-alone trend, it certainly is not • China Heavy Duty Truck sufficient enough to unleash a global Corporation (CNHTC) transformational force. However, one must consider the fact that we It is noteworthy that this is not a are talking about the largest and final list of surviving companies as still rapidly expanding China auto it represents only 8 of the “top 10”, market. By seizing on the financial and by calling it “top” 10 there is crisis as a triggering event to drive This is a necessary foundation-building step from which fewer, yet stronger China auto companies can emerge. 4 Booz & Company
  • 7. TREND #2: We are fortunate to be living in historic times. While in the grip of of which 45% was targeted at infrastructure development. The GlObAl the most severe economic contraction Auto Industry Revitalization Plan REDISTRIbUTION since the 1930s, it is in such times —and only in such times—that truly implemented in March 2009 included specific measures to spark consumer Of ASSETS bY transformational structural change demand for automobiles, including: NON-ChINESE is possible. The global car industry has long suffered from overcapacity 1. Establishment of eight development COMPANIES resulting from overly ambitious goals for the industry from 2009 to TO CAPTURE assumptions for market growth combined with optimism surrounding 2011 to ensure domestic growth of automobile production and sales ChINA MARkET whatever product or technology 2. Reduction of half of sales tax for GROwTh was being offered. Ambition and optimism are the first victims of a 1.6 liter or smaller cars 3. Implementation of policies to recession as businesses struggle to boost auto sales in the countryside realign to a new world economic including subsidy for new minibus order. This translates into a major or light truck sales for rural redirection in capital spending and residents asset reallocation as businesses attempt to reconfigure themselves in All indicators point to the likelihood order to regain a profitable footing. that China will exceed its 8% GDP Many businesses are reallocating growth target in 2009. Taken in the assets from slower to higher growth context of a longer time horizon, markets, or otherwise selling assets it is also apparent that in the past or disposing assets deployed in their three decades, the major Asian weakened home markets. growth economies of China and India are in fact returning towards It is interesting to note how the their historic share of world GDP. financial crisis—while impacting the The net result of these developments entire global economy—has been has been a significant redistribution felt to varying degrees in different of the relative strength of the global markets. While GDP declines are automotive markets. anticipated for 2009 in the Euro Zone, the US, and Japan, stimulus In fact, China has surpassed the US in measures taken in China have yielded automotive sales for each of the first remarkable growth in many sectors 6 months of 2009, selling 6.1 million of its economy. China’s stimulus plan vehicles over this period compared provided UD $588 Bn of investment, with 4.8 million new vehicles in the Booz & Company 5
  • 8. US. In fact, since 2003 China’s vehicle involuntarily rethink their global these results by bringing their most market has more than doubled in footprint. For example, General advanced vehicle and powertrain size from 4.56 million units to 9.67 Motors spent a great deal of time technology to the China market, million units (in 2008). Of this total, navigating the process of completely having recently launched their 61%, or 5.91 million units, represent unwinding its European operations 1.4 - 2.0L TSI engine family. With passenger vehicles (extract the with an effort to sell its Opel, additional plans to introduce their buses, trucks and other commercial Vauxhall and Saab brands. In their DSG gearbox, VW is poised to take vehicles). The China Association of North American operations, GM is full advantage of the growth in sales Automobile Manufacturers forecasts in the process of selling its Hummer of compact cars. VW will continue to sales for 2009 will top 12 million and Saturn brands, and terminating bolster their strength in the market vehicles. Given recent developments, the Oldsmobile and Pontiac brands. this year, with plans to introduce the China will easily surpass the U.S. At the same time, GM has continued all-new Volkswagen Golf, along with market in sales for the overall to invest in expanding its capacity in plans to start manufacturing two new calendar year 2009. the rapidly growing China market. SUV models in its plants in eastern Similarly, Ford has sold its Land Nanjing and western Chengdu. Looking forward, Global Insight has Rover and Jaguar brands to Tata In May, Volkswagen formed a forecasted that the Asian markets Automotive, and is in the process partnership with China’s BYD Co. represent the largest growth potential of selling the Volvo brand while to jointly develop hybrid and electric in the global auto industry…with a simultaneously expanding their China vehicles powered by lithium-ion combined 4.7% compound annual product portfolio. batteries, becoming BYD’s first growth rate over the next 10 years industrial partner. (compared with 2.9% in NAFTA). Perhaps the most impressive example Within Asia, 54% of that growth is of this trend is seen with Volkswagen Clearly, the global center of gravity expected to come from China. As AG. Historically the market share of automotive strength has shifted a result of these developments, the leader in China, the world’s third east. Those manufacturers who global automotive industry must largest automaker recently announced have anticipated this trend and are fundamentally rethink its structure in that it sold a record 652,222 vehicles providing market-relevant products terms of regional allocation of capital in China and Hong Kong in the first will continue to reap the benefits investment and capacity. half of 2009, up 22.7% year on year. as the China market continues its For Volkswagen, this makes China inexorable expansion. Global automotive companies have its biggest auto market worldwide been forced to radically and often for the first time. VW has achieved 6 Booz & Company
  • 9. TREND #3: As previously noted, the highly fragmented nature of the domestic from their domestic markets to the growth markets like China. However, ACqUISITION Chinese auto industry presents many are in a position to dispose Of fOREIGN challenges to the longer-term development of the domestic industry. of assets that are no longer critical to the business going forward. The ASSETS AND kEY The fact that that there are over historic restructuring underway in DEVElOPMENT 150 registered manufacturers is an outgrowth of a start-up phase the global automotive industry will undoubtedly result in a redistribution COMPETENCIES for China’s auto sector. Provincial or liquidation of automotive OEM bY ChINESE governments, with the support of the central government, were encouraged assets. Whole companies, brands with installed dealer networks, product COMPANIES to develop industrial bases to create platforms and associated component investment opportunities and jobs in technologies are all available for order to accelerate China’s economic a mere fraction of the investment development. However, the highly needed to create these assets. It stands fragmented industry that results from to reason that such an “inorganic” this creates enormous inefficiencies in approach to development could the area of capital investment. This significantly shorten the time frame fragmentation also makes it very for going global. difficult to focus and allocate resources to the development of critical While Chinese firms have learned technologies related to safety and fuel very quickly how to assemble economy. This is an area of particular cars and develop supply chains, weakness for Chinese OEMs who they are very inexperienced at the have relied on their foreign partners vehicle development and synthesis to lead the development of key process. An automobile is a complex component technologies. engineered system requiring advanced technology and know-how in order While the China policy makers have to test and validate the achievement prioritized the need for strengthening of benchmark targets in the areas of its industry via consolidation of the performance, fuel economy, safety domestic players, the simple fact is and quality. It is in this area that that the global financial crisis has Chinese firms are weakest. Chinese created a need to rethink the global vehicles, while improving rapidly, allocation of automotive assets. As are still not up to the world-class previously noted, many non-Chinese standards required to compete in manufacturers are shifting their focus the mature markets of the world. Booz & Company 7
  • 10. As a result, numerous Chinese firms create a cross-border alliance. While Ford benefited from access to Mazda’s are seeking opportunities to acquire it may be relatively easy to negotiate fuel-efficient technologies and foreign assets for a fraction of the a deal to acquire such assets, there is platforms, and both sides benefited cost of their original development. enormous risk and the vast majority from a shared global production Many noteworthy examples include of cross-border acquisitions ultimately and distribution footprint. However, the potential sale of Ford’s Volvo fail. The most recent case of SAIC’s Ford recently made the decision to brand, GM’s Opel and Hummer acquisition of Ssangyong ultimately liquidate its shares in Mazda in order brands, and Chrysler’s discontinued failed because the interests of both to raise much-needed cash. Lenovo’s products and powertrains. While parties were not aligned. SAIC was: acquisition of IBM’s PC division is China’s policy makers have urged unable to secure concessions from largely viewed as a success because caution in bids with the Big 3, they Ssangyong’s labor union to lower of the compatible interests of both remain supportive of deals that bring costs, unwilling to inject billons of sides, but had to overcome challenges critical technologies to the domestic RMB incremental capital to fund from the US authorities fearful of industry. Such deals include Geely’s the business, and unable to manage national security risks. It remains to planned acquisition of Volvo, as the loss of leadership at Ssangyong. be seen if the merged company will well as Geely’s $58M acquisition of Ultimately, SAIC decided to dissolve be a stronger competitor in a highly Australian transmission manufacturer the deal. Sadly, cross-border competitive electronics industry. Drivetrain Systems International. acquisitions are rarely successful. The 9-year marriage of Daimler-Benz and Clearly there is a need, on the By acquiring the assets of a distressed Chrysler dissolved in 2007 largely part of the European and North but well-known international driven by an incompatibility of American OEMs and suppliers, to manufacturer, Chinese auto products, brands, business models and find additional sources of funding in companies are hoping to significantly management structures. order to keep their operations going, accelerate their development and while the rapid growth of China auto expansion plans. Chinese companies Even the more successful partnerships market in recent years has provided with global ambitions who are have had mixed results: by all Chinese companies more capacity considering a major acquisition measures, the Ford alliance with to invest. The shifting of economic would do well to study the lessons Mazda has been a very good example and industrial power to the east will learned from those who have tried to of a successful cross-border alliance. require a corresponding redistribution 8 Booz & Company
  • 11. of the asset base of the industry. resources/technological capacities However, there are real challenges in • Difficult to jointly develop new • Difficulties to integrate the parent finding suitable partners. Partners in concept or product platform for company’s systems with the the west are not necessarily going be global sales acquired company compatible, both from a technological and from a cultural standpoint with Political/legal Risks Cultural Risks a Chinese suitor. A Chinese company • Anti-trust restrictions and strict • Conflicts caused by huge differences investing in a western company or audit by in-country government in language, culture and values its assets must understand how to align the interests of the partner • Potential resistance from public • Misunderstanding and failure due in the transaction with their own, and other stakeholders who have to ineffective communications or they will likely end up owning interest or deep-rooted connections assets without the technological with the acquired brand/company Successfully anticipating these issues development know-how that went and developing a post-acquisition into creating those assets. • Potential objection from national plan for asset integration will increase security authority if company is the success rate and ensure that It all should start with a military supplier technology transfer could then happen comprehensive risk-assessment and in the context of the new partnership. plan for post-acquisition integration. financial Risks While there is every reason to doubt The risk-assessment should • Capital investment requirements in that Chinese domestic firms are ready encompass the following high-failure transition process to take on a foreign acquisition, it rate causes: is happening. Those who dare take • Increased cost level by resulting on such acquisitions are also wise to lack of Synergy from increased capacity and staffing learn the lessons from others who • Limited complementarities among have tried—and often failed— target markets and customers Operational Risks to use an acquisition to accelerate • Shortage of qualified management the process. • Significant complexity in sharing with international experience While there is every reason to doubt that Chinese domestic firms are ready to take on a foreign acquisition, it is happening. Booz & Company 9
  • 12. TREND #4: Several macroeconomic and sociopolitical challenges are directly come from China. Since 2003 China’s vehicle market has more than doubled ChINA’S linked with the automotive industry: in size from 4.56 million units to INVESTMENT the redistribution of global economic power, energy dependence, global 9.67 million units in 2008. In this time period, The passenger vehicle IN NEw ENERGY trade balance and environmental (extract the buses, trucks and other VEhIClES AND concerns. The rapid rise of the Asian economies—especially China—are commercial vehicles) share has grown from 50% to over 60%. RElATED sending shock waves through a INfRASTRUCTURE system that was already out of balance in many of these areas. Given the recent economic downturn, the China government undertook a series of focused stimulus actions The global economic crisis presents designed to help achieve a GDP the world with a compelling case for target of 8%. Through the first half change, and truly transformational of 2009, these measures already had changes often occur during times a dramatic impact on the automotive of crisis. The economic crisis is a market as Chinese consumers—many triggering event that freezes debate on of whom were first time buyers—took whether change is needed and creates advantage of tax and other incentives opportunities for collaboration that were made available. For the first between government and industry. half of 2009, China surpassed the Such collaboration is essential for U.S. in total car sales, posting sales of the successful transition from the 6.1 million units against 4.8 million conventional internal combustion vehicles sold in the U.S. from January engine (ICE) to new energy vehicle through June. (NEV) technology. China’s rapid automotive growth is As we have described in detail expected to continue. The market is previously, the balance of global forecast to account for more than half economic power has been shifting of the Asia-Pacific market expansion eastward to places like India and over the next decade, with over 6% particularly China. Most of the recent annual growth through 2018. As growth in the world’s auto industry China’s auto market continues to has been in the Asia-Pacific region, grow, pollution significantly increases and more than half of that growth while China’s self-sufficiency rate over the next decade is forecasted to of crude oil continues to decrease. 10 Booz & Company
  • 13. To encourage the use of more fuel- expansion on energy consumption use of NEVs initially targeting 13 efficient and less polluting vehicles, and environment. Ten years ago, pilot cities, which include Beijing, the central government’s 2009 Bejing, Xi’an, Shenyang, Shanghai Shanghai, Chongqing, Changchun, stimulus plan included objectives and Guangzhou were already Dalian, Hangzhou, Jinan, Wuhan, for increasing the proportion of listed among the Top 10 cities Shenzhen, Hefei, Changsha, smaller vehicles in the China market. with the worst air pollution. The Kunming, and Nanchang. The plan Related initiatives include a 50% massive growth of the automotive includes support for the development reduction in the sales tax for under market only adds to the problem. of energy-saving technology for use 1.6-liter vehicles, additional taxes Additionally, China imports two- in government fleets, including buses, on larger vehicles, and a relaxation thirds of its oil, and its ever-increasing postal, and sanitation vehicles. The of restrictions on small cars. The thirst has had a dramatic impact on plan targets the deployment of government’s stated objective as part global energy prices. No doubt, China 60,000 energy saving vehicles in of the plan is to achieve a market has a clear and compelling need to China by 2012. share target of 40% for 1.5-liter reinvent the propulsion technology of engine vehicles and below, and the automobile. Both universities and vehicle a share of 15% for vehicles with manufacturers have already engines at or smaller than 1.0-liter. To address this, China’s stimulus responded to the government Overall affordability as well as measures are targeting initiatives initiatives. For example, Tsinghua the shift toward consumer versus to increase energy efficiency and University has established an institutional sales will also continue reduce greenhouse gas emissions by alternative powertrain research lab. to support the development of reducing energy intensity, increasing Chinese auto brands are participating smaller vehicles. the share of renewable energy used, in NEV development (some with implementing tough auto emissions foreign partners) and have included As the size of the auto market standards, and adding investments plans in their long-term strategies. inexorably expands, China will for clean energy. China’s Minister Developments include the following: play an increasingly key role in the of Science and Technology, Mr. development of new automotive Wan Gang—a former automotive 1. SAIC: Invested RMB 2 billion for technologies. China’s emergence development engineer for Audi—has NEV development as the leading automotive market recently unveiled a plan to support 2. Chang’An: Established NEV JV in terms of sales has several the development of what China calls and plans first hybrid car for 2009 implications. While most attention “New Energy Vehicles” (NEVs). The 3. fAw/DfM: Have hybrid buses in has been paid to relative sales Ministry of Science and Technology, pilot operation performance of the foreign and working with the Ministry of Finance 4. Chery: Introduced plans for the domestic companies, what is arguably and the National Development and hybrid car A5 and electric car S18 of more long-term significance Reform Commission, is sponsoring 5. bYD: Introduced plans for the is the impact of China’s market an ambitious plan to promote the F3DM dual-mode electric car Booz & Company 11
  • 14. Replacing internal combustion propulsion technology particularly priority, we can expect the China engines with other technologies— challenging is not simply the vehicle government to help by offering such as hybrid electric, full electric, itself - but the need for invention incentives for the retail consumer to hydrogen powered vehicles or clean of the infrastructure for delivering purchase new energy vehicles. Chinese diesel—requires collaboration renewable sources of electricity and consumers have less experience between business and government installation of battery charging/ with gasoline-powered cars, and are to develop the infrastructure in replacement stations. already accustomed to short distance, tandem with development of the low-speed commuting—conditions technology. The economics of the As the largest car market, and the very favorable for electric cars. product itself and ultimate market place with the largest need for acceptance is very much dependent on alternative energy solutions, we The China government’s willingness the availability of the infrastructure can expect to see China place a to invest in the infrastructure to to recharge or replenish the fuel. It’s heavy emphasis on development support alternative propulsion not realistic to expect a company of the electric vehicle (EV) technology will ultimately help to reinvent the technological infrastructure. The country that drive market acceptance. This is underpinnings of the automobile leads the development of this where China has the opportunity unless there is a concurrent infrastructure will undoubtedly to take the lead, and that will drive development and investment in lead in attracting the investment in investment in new technology. It the infrastructure to support that development of the technologies that takes a combination of business and new technology vehicle. This is plug in to that infrastructure. government working together to especially true in today’s weakened make such a transformational change global economy. Consumer acceptance of new energy possible – and nowhere in the world vehicles is yet another challenge. is there a closer link between business As the largest automotive market, and While the infrastructure investments and government than in China. because the China government has already described will help tip the In the next article in this series, the capacity and willingness to invest scales in favor of new energy vehicles, we will complete our look at the in the infrastructure for alternative consumers must also be convinced remaining “Eight Overarching propulsion, the technology will that the price and performance of China Automotive Trends That Are eventually come to the market. What the new energy vehicle can in fact Revolutionizing the Auto Industry”. makes the development of alternative meet their expectations. As a national 12 Booz & Company
  • 15. About the Authors Dr. Edward Tse is Booz & Company’s managing partner for Greater China, specializing in definition and implementation of business strategies, organizational effectiveness, and corporate transformation. He has assisted several hundred companies— headquartered both within and outside China—on all aspects of business related to China and its integration with the rest of the world. Bill Russo is a Senior Advisor with Booz & Company as well as the Founder and President of Synergistics Limited. He lives in Beijing and has more than 20 years of experience in the automotive industry, most recently serving as Vice President of Chrysler’s business in North East Asia. Tao Ke is a project principal with Booz & Company and is a member of the core financial services leadership team in Greater China. He has more than 10 years’ consulting experience in a broad range of strategy, operations, organization, and risk manage- ment assignments, covering the financial services, automo- tive, consumer, and telecom industries. Bill Peng is a senior associ- ate with Booz & Company. He is expert in overall strategy, branding, marketing, chan- nel and entry strategy in the automotive and automotive supplier industry, with focus on sales/marketing/branding and channel functions. Booz & Company 13
  • 16. The most recent list of Worldwide Australia, Dublin Middle East Mexico City our office addresses and Offices New Zealand & Düsseldorf Abu Dhabi New York City telephone numbers can Southeast Asia Frankfurt Beirut Parsippany be found on our website, Adelaide Helsinki Cairo San Francisco www.booz.com Auckland London Dubai Bangkok Madrid Riyadh South America Brisbane Milan Buenos Aires Canberra Moscow North America Rio de Janeiro Asia Jakarta Munich Atlanta Santiago Beijing Kuala Lumpur Oslo Chicago São Paulo Delhi Melbourne Paris Cleveland Hong Kong Sydney Rome Dallas Mumbai Stockholm Detroit Seoul Europe Stuttgart Florham Park Shanghai Amsterdam Vienna Houston Taipei Berlin Warsaw Los Angeles Tokyo Copenhagen Zurich McLean booz & Company is a leading global management consulting firm, helping the world’s top businesses, governments, and organizations. Our founder, Edwin Booz, defined the profession when he established the first management consulting firm in 1914. Today, with more than 3,300 people in 59 offices around the world, we bring foresight and knowledge, deep functional expertise, and a practical approach to building capabilities and delivering real impact. We work closely with our clients to create and deliver essential advantage. for our management magazine strategy+business, visit www.strategy-business.com. Visit www.booz.com to learn more about Booz & Company. Printed in Greater China ©2009 Booz & Company Inc.