Delivering Services for China's Ageing Population, May 2010

4,051 views

Published on

There is an increasingly important need to deliver quality care services to the ageing population in China. In part due to the one-child policy and pension schemes in different parts of China, many elderly do not have the financial capabilities to acquire the services they sorely need. The partner for this programme was Hetong Association, one of China’s leading elderly homes and services provider. The participants were tasked with producing strategic recommendations for Hetong’s expansion plans and transition from a non-profit organisation into a social enterprise. Our pre-programme research it includes an overview of the issues faced by Chinese elderly and the state of elderly care in China. In addition it includes information on Hetong’s operations and history, including their involvement in the aftermath of the Sichuan Earthquake of 2008.

This business plan proposes the setup of a new commercial company, Hetong China Holdings (HCH), and to start a new showcase elderly care facility in Shenzhen.

Published in: Business, Health & Medicine
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
4,051
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
49
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Delivering Services for China's Ageing Population, May 2010

  1. 1. Global Young Leaders Programme China Project – June 2010 Business Plan Elderly Healthcare in China Hetong Senior Citizen Welfare Association 1
  2. 2. Table of Contents • • • • • • • • • • • Executive Summary Objectives Background to Elderly Chinese Market Hetong Introduction Business Model Social Impact Sales and Marketing Implementation Risks Recommendation Appendix 2 3 6 8 13 24 57 62 70 80 82 84
  3. 3. EXECUTIVE SUMMARY 3
  4. 4. Executive Summary • This document contains recommendations for Hetong Group in order that they may achieve their objectives and mission, “To provide high-quality service to all elderly people irrespective of health condition and financial position”, as well as promoting elderly welfare throughout China • The results of long term developments in China‟s age distribution driven by the 4-2-1 dilemma are being magnified by increased urbanization and by limitations of the national retirement system. This creates a urgent need for high quality elderly care facilities and caregivers • Hetong‟s 15 year history of achievements in the area of elderly care are well recognized by the public and the Chinese Government. They have set the standard in the elderly health care industry • In order to further increase the standards in the elderly health care industry in China and strengthen the long term future growth for the Hetong Group, the group will benefit from new commercial operations 4
  5. 5. Executive Summary • The new commercial company, Hetong China Holdings (HCH), will leverage on Hetong‟s brand and reputation to establish a national leader with footprints in elderly care services, elderly care retail products as well as caregiver training • We recommend HCH to start with a showcase elderly care facility in Shenzhen • Furthermore, the training and elderly products businesses should be transferred into HCH to maximize their commercial potential • Current Hetong operations will benefit from royalties from HCH and used to enhanced current facilities and further growth. This will go hand in hand with increased support from the large network of Hetong volunteers • Thus ensuring sustainability for both Hetong Group and HCH 5
  6. 6. OBJECTIVES 6
  7. 7. Objectives • To strengthen Hetong‟s leadership in the elderly care industry in China for the next decade • To propose a commercial viable business model that will generate attractive returns • To identify potential opportunities to serve the fast growing elderly population in China in relation to Hetong‟s core competence • To ensure Hetong‟s long term sustainability 7
  8. 8. BACKGROUND TO ELDERLY CHINESE MARKET 8
  9. 9. Background to Elderly Chinese Market The Chinese Elderly Population • Estimated Chinese population by 2050: 1.4bn of which: – – • Traditional Chinese views on the elderly – • above age 60 : 440 mn above age 80 : 32 mn The elderly will be looked after by their children and remain in the family home Challenges for China – – – – (Age) Lack of healthcare services for elderly, especially in small cities and villages Lack of elderly healthcare professionals Due to urbanization, young adults are moving towards the cities for work elderly left behind With the 1 child policy, 1 child looks after 2 parents and 4 grandparents, with all associated time and financial constraints (42-1 dilemma) Source: United Nations Populations Division 9
  10. 10. Background to Elderly Chinese Market Government‟s Response to Aging Population • Pension System – – Aim to provide universal coverage by 2020 Urban Pension Scheme • Mandatory: Personal and government/social unified account • Voluntary: Enterprise complementary annuity and persona – Rural Pension Scheme • Newly proposed in 2009 in 10% of China‟s counties • Addressing the 4-2-1 Problem – – – • Strengthen formal care systems: invest in elderly homes, reinforce social security systems Encourage filial piety: care for parents at home Relax the one-child policy in some places Other Laws – – Additional 3 million beds planned under China‟s 11th 5-year Plan (2006-2010) Guarantee of basic needs, medical insurance and funerals for rural elderly who has no relatives, no income and no ability to work 10 Challenges: Local governments struggle with • Low revenue • Limited resources • Little capability to execute
  11. 11. Background to Elderly Chinese Market Current Market and Competitive Landscape The elderly care market is still in its infancy: • Care homes: Ownership Target Market Av. cost per bed/month Private Rich elderly 2,000 ~ 7,000RMB Government All elderly 900 ~ 1,500RMB Others Low-income elderly 500 ~ 1,000RMB • Caregivers: – Few caregivers in China as profession seen as unprofessional and lowly paid – Non-regulated industry where caregivers are often poorly trained • Products for elderly: – No national leader in the market – One of the largest untapped markets in China, predicted to reach RMB 2 trillion by 2020 Source: From interviews with elderly home directors, Hebei News, 25 Feb 2009 11
  12. 12. Background to Elderly Chinese Market Future Market • – China‟s elderly population (23% of total) will be supported by only 51% who are of working age – Comparatively, in other less developed regions only 18% will be supported by 54% of the working age population • % of Total Population China The elderly population is growing rapidly across the world compared to the working age population. By 2050: The Chinese government has acknowledged the need for more elderly care homes, trained caregivers, products and services – But the government alone cannot meet the nations‟ needs Less Developed Regions excl. China World Great potential for growth and opportunities in the Chinese elderly care market <15 Source: United Nations Populations Division 12 16-64 >65
  13. 13. INTRODUCTION TO HETONG 13
  14. 14. Introduction to Hetong Hetong Mission “To provide high-quality service to all elderly people irrespective of health condition and financial position” 14
  15. 15. Introduction to Hetong Recognition for Hetong - Awards • Four firsts – – – – • First German model in China First training school for elderly care First to initiate community of alliance for elderly center First diversified range of products for the elderly Government recognition – Central Government bestowed on Mr. Fang and senior members with advanced party membership titles • Standards for elderly care training established and set by Hetong for whole of China • Appointed by Red Cross China to lead in reconstruction efforts for elderly for in the Sichuan earthquake Incredible recognition in China 15
  16. 16. Introduction to Hetong Hetong Background and Experience • 15 years of experience – Founded in Tianjin on April 20th, 1995 by Mr. Fang Jiake • Comprehensive experience in elderly care value chain: – – – – – – – – 8 Elderly Care Homes (4 in Tianjin, 2 in Beijing, 2 in Sichuan) 1 Hospital 1 Elderly Care Catering Service 1 Elderly Cleaning Service 1 Laundry Service 1 Training School 1 Certiifcation Centre 1 Retail Operation • Experienced Executive Committee Tianjin Yan‟an Hospital – Old Party Leaders, Scholars, Experts, Entrepreneurs, Workers and Public Leaders Unrivalled experience in China 16
  17. 17. Intoduction to Hetong Current Hetong Group Network • Hetong Foundation – Established in 2007 – Donations from individuals & companies – Scholarships / bonuses to caregivers – Alliance of >1000 elderly homes across China – Donors include: • Chinese Red Cross Foundation • Jet Li One Foundation Project • China Foundation for Poverty Alleviation • Narada Foundation • Tianjin Golden Bridge Welding Materials Group Co., Ltd 17
  18. 18. Introduction to Hetong Current Hetong Group Network • Networks with universities / schools – Hetong provides training and internships to: • Tianjin University of Traditional Chinese Medicine • Tianjin Medical College • Tianjin Hongxing Vocational Secondary School • Tianjin Tourism School Bureau of Labor • Nankai University • Tianjin University of Technology • Other Networks – Hetong shares expertise, experience and training with other organizations: • China Charity • China Social Welfare Association • National Union of Long-term Care Hetong has a strong, established network 18
  19. 19. Introduction to Hetong RMB m Revenues and Costs 35 Revenues 30 25 Total Costs 20 15 10 5 0 2005 • • • 2006 2007 2008 2009 Hetong‟s current revenues‟ breakdown are as follows: 55% from elderly homes, 18% from hospital, 10% from catering, 11% from laundry, 4% from elderly products, and 3% from training Over the past five years, Hetong‟s total revenues grew at an average CAGR of 16% while total costs grew at an average CAGR of 18% The growth rates for variable costs and fixed costs were 15% and 44% respectively 19
  20. 20. Introduction to Hetong Segment Revenues and Costs Avg Rev Avg Total Costs • 18% 18% 10% 11%11% 9% 8% 4% Elderly Homes Hospital Catering Cleaning Management & Laundry 3% 2% Elderly Products Training 20 Elderly Homes, Catering, and Training have lower cost as percentage of total with respective to their revenue percentage • 55% 52% Elderly Products business has a cost two times of the revenue. It needs to address the revenue and cost relationship
  21. 21. Introduction to Hetong Breakdown of Costs 45% 42% 40% 35% 30% 25% 20% 15% 15% 10% 8% 5% 5% 3% 0% Salary (工资) Rental (房租) Cleaning & Management (清管 洗费) 21 Utilities (水电气费) Staff Accomodation ( 员工)
  22. 22. Introduction to Hetong SWOT Analysis Strengths Opportunities • Has set the national standard for elderly care training • 16 years in the management of elderly care facilities • Local knowledge in several cities • Hetong‟s brand influence in the elderly care work • Strong network of social associations • Close relationship with local government • Increasing focus of elderly care by the government • Exponential growth for patients • Increasing need for well trained caregivers • Leverage on the Hetong brand for marketing • Leverage on network of elderly home directors • Better ways of selling products/ services to the elderly • Ready pool of investors willing to invest/ try the market Weaknesses Threats • Lack of standardized laws for elderly care • China market being very attractive to foreign competitors • Allowing social work to distract business focus • Escalating costs of operations/ land • Challenging industry to work in • High staff turnover • Lack of middle management/ succession plan • Unclear business expansion plan • Lack of business oriented expertise/ focus • Management stretched by many non-core businesses 22
  23. 23. Introduction to Hetong Current Challenges • The company currently faces challenges including: Hetong Group – Difficulties in recruiting sufficient high-quality staff to meet the facilities demands Elderly Homes Hospital – A client base that is extremely price sensitive, leaving little room for price increases Training & Elderly Homes Certification – Limited capital to take advantage of opportunities and meet needs Catering – A small management structure with a large number of projects and segments to manage Laundry Cleaning Elderly Products 23
  24. 24. BUSINESS MODEL 24
  25. 25. Business Model Considered Proposals • The following business opportunities were considered for Hetong Group before deciding to go forward with opportunity #1: a formation of the Hetong Group and Hetong China Holdings (HCH) We decided not to proceed with the other two scenarios, given that they did not maximize Hetong Group‟s potential nor promote a sustainable business model • Strategic Pillar Priority 1 2 Market Opportunity Description 3 X Located in Urban Main Cities close to Hong Kong A formation of Hetong Group and Hetong China Holdings with: Hetong Group: Managing some of the existing businesses including elderly homes, hospital and laundry Hetong China Holdings: Managing the new Showcase elderly home named Pearl River Retirement Village, Training Academy, elderly products, catering and publications X Located in China A formation of Hetong Group and Hetong China Holdings with: Hetong Group: Managing the elderly homes and other existing businesses including hospitals, laundry, catering, elderly products and publications Hetong China Holdings: Providing Consulting services and training X Located in China Maintain Hetong Group‟s current operating model and update the facilities to maximize the operation 25
  26. 26. Business Model The Proposed Business Structure • • We propose forming two companies: Hetong Group and Hetong China Holdings (HCH). HCH will be owned by a group of investment partners and make royalty payments to Hetong Group Hetong China Holdings will provide a social benefit while leveraging off Hetong Group‟s strong brand and high-quality services to generate a profitable return in a sustainable business model Hetong Group Investment Partners Hetong China Holdings (HCH) Operations Include: 1) Existing Elderly Homes 2) Existing Hospital 3) Laundry Services 1) New Investment (Phase 1): a) Pearl River Retirement Village b) Training Academy c) Elderly Products 2) Current Businesses: Publications & Catering 26
  27. 27. Business Model Rationale and Benefits • • Hetong Group provides the newly formed Hetong China Holdings with 15 years of experience, a strong brand name, government recognition and high quality services HCH will make 8% royalty payments to the Hetong Group. These payments will be used to strengthen and expand the current social operations Royalty Payments Hetong China Holdings Hetong Group Experience, Brand, Government Recognition and High-Quality Services 27
  28. 28. Business Model Hetong Group • Hetong Group‟s remaining operations include: Existing Elderly Care Homes Existing Hospital 28 Laundry Services
  29. 29. Business Model Hetong Group – Proposed Changes Training Catering & Elderly Products Update Facilities • Training and Certification: A new Training Academy will be formed under Hetong China Holdings. This Academy will be the headquarters for all training and certification • Catering & Elderly Products: The catering and elderly products businesses will be transferred to Hetong China Holdings, where they will be re-established and expanded • Update Facilities: The existing elderly homes need to be updated in order to maximize efficiency. This includes re-decorating and re-branding of the facilities • Property Management: Phasing out of property management because its not a core business unit and has weak financials. Hetong Group should only focus on core businesses Property • Staff: Reassign staff to other business units including elderly care and laundry. Training Mgmt will be provided where necessary 29
  30. 30. Business Model Hetong China Holdings • • Mission: To provide international standard high-quality services to the middle and lower upper income group to ensure a profitable and sustainable business over the long term Hetong China Holdings structure: Hetong China Holdings New Investment (Phase 1): 1) Pearl River Retirement Village - Showcase Elderly Home 2) Training Academy 3) Elderly Products Current Businesses: 1) Publications 2) Catering 30
  31. 31. Business Model Phase 1: The Pearl River Retirement Village • Premium Facilities • Premium Excursion • Premium Care • Premium Meals 31
  32. 32. Business Model Phase 1: The Pearl River Retirement Village • • Chosen Location: Shenzhen Detail Information about Shenzhen Current Situation No. of population 8,277,500 No. of elderly 520,000 (6.2%) Total no. of elderly home (No.) 29 (25 gov run ,4 private run) Total no. of bed 2,733 – Elderly homes in Shenzhen are fully occupied with a waiting list – Hong Kong elderly would be a potential market for Shenzhen elderly due to competitive rates (average room rate is RMB 2,500 per bed per month) when compared with HK‟s elderly home rate of at least RMB 4,500 per bed per month – Hong Kong elderly population was 1,23 Million in 2009 which is 17.5% of the total population – Shenzhen government is providing incentives to HK elderly home service providers for them to setup business in Shenzhen – In 2004, the Hong Kong and Guangdong government agreed that the medical insurance and retirement pension fund are transferrable 32
  33. 33. Business Model Phase 1: Showcase Analysis Futian District Social Welfare Centre Elderly Home Private/ Government Option 2 – Rent The Pearl River Retirement Village Option 1 - Build The Pearl River Retirement Village Government Private No. of Bed 200 400 200 Room Size m2 20 21 21 Occupancy 100% with waiting list Expected 90% Expected 90% Positioning Mid to High End Mid to High End Independent Semi-dependent, Hong Kong and Shenzhen people Doctors and Nurses Yes Yes caregiver‟s qualification TBC Trained by Hetong and Hetong certificated Recovery activities, gym, recreational rooms, library, catering, laundry Catering, cleaning, laundry, recreational rooms, library, German made high tech bathtub, German design bed, recovery room No. of Elderly per room 2-3 1 caregiver: Elderly Ratio 1:6 – 1:7 1:3 Target Customer Facilities 33
  34. 34. Business Model Phase 1: Showcase Analysis Futian District Social Welfare Centre Elderly Home The Pearl River Retirement village Independent Elderly Rental (RMB per bed per mth) Care Fee (RMB per elderly per mth) Total 1,049 450 1,499 3,000 1,800 4,800 1,077 770 1,847 3,000 2,500 5,500 1,189 1,260 2,449 3,000 3,500 6,500 Semi-Independent Elderly Rental (RMB per bed per mth) Care Fee (RMB per elderly per mth) Total Fully-Dependent Elderly Rental (RMB per bed per mth) Care Fee (RMB per elderly per mth) Total 34
  35. 35. Business Model Care Centre : Model Assumptions Rent Build NPV (@10%) 21,905 81,967 ROI 24.2% (5y) 11.5% (10y) Initial Investment 16,000 77,280 Rooms 200 400 („000 RMB) 21m2 Roomsize Care Givers 60 119 1:3 Average Care Ratio Ramp up 60%-90% 6 months 50%-90% 12 months Average Caregiver Fee 2240 RMB / month Average Room Rate 3000 RMB / month Rent m2 per month 30 RMB Land 14,490 Building 62,790 Refurbishment - No Inflation or property appreciation / depreciation included, - Including Revenue Tax (5%) and Corporate Profit Tax (25%) Every 36 months Simple model with market conform assumptions 35
  36. 36. Business Model Care Centre “Rent” Sensitivity Profit (RMB m) IRR (5 years) 10 34% 8 24% 6 4 11% 2 0 Base Optimistic Pessimistic Pessimistic Base Pessimistic Base Optimistic Utilization 40%-80% 60%-90% 80%-100% Rent m2/month +50% 30 RMB -50% 36 Optimistic
  37. 37. Business Model Care Centre “Build” Sensitivity Profit (RMB m) IRR (10 years) 25 18% 20 12% 15 10 6% 5 0 Base Optimistic Pessimistic Pessimistic Base Pessimistic Base Optimistic Utilization 40%-80% 50%-90% 60%-100% Refurb m2 +10% 6,500 RMB -10% 37 Optimistic
  38. 38. Business Model Phase 1: Training Academy • Facts: Majority of China's private nursing homes are understaffed. There is a need for about 10 million nurses and specialists to look after those who cannot care for themselves, and 220,000 staff are needed in elderly homes • Relationship with Government: – Hetong has been recognized for its pioneering role in China – Hetong has been invited to speak and participate in leading government conferences and forums • Considerations: The following areas require support from the government: – The regulation or policy of required certification in caregiver industry – Authorization of certification – Authorization of the design of national curriculum and text books – Authorization to conduct training for government elderly homes 38
  39. 39. Business Model Phase 1: Training Academy • Elderly Care Training School Location: TBD Rental area: 1000 square meters, 8 class rooms, 4 skill training rooms, 1 meeting room, 2 offices, etc. 2054 training students per year, 21 total sessions per year, 16 teachers – Level-1: Basic Nursing – Level-2: Medium Nursing – Level-3: Advanced Nursing – Level-4: Super Nursing ( to serve customers with special requirements ) caregiver Training No. of Students per Class No. of Classes per Sessions No. of Sessions per year No. of Teachers Level-1 41 3 12 6 Level-2 37 2 6 4 Level-3 25 2 2 4 Level-4 25 1 1 2 Elderly care training is the main source of revenue for the training academy 39
  40. 40. Business Model Training Academy • Conference and forums Conference and forums have the potential to be very profitable and are a good resource in the future if planning is optimal and coordinated with government and other organizations in this field – International conference on global elderly services – National conference on elderly services – Local forums about China elderly services 40
  41. 41. 2.5 1.5 Business Model Training Academy Financial Analysis RMB m 2.4 2.3 20% Total Revenues Total Costs Net Profit Margin 17% 2.2 16% 15% 14% 2.1 14% 12% 2.0 18% 12% 10% 1.9 1.8 8% 7% 6% 1.7 4% 1.6 2% 1.5 0% year 1 year 2 year 3 year 4 year 5 Accumulated profitability shows potential growth 41
  42. 42. Business Model Phase 1: Elderly Products Market Potential • Year 2020 – 500 million consumers in China are aged over 50 years old • Year 2025 – projected RMB 2 trillion (US$293 Billion) for elderly products market Product Mix • High quality imported European products • Locally manufactured quality products Price Position • Improved profit margin based on better market knowledge • Locally manufactured Chinese products, influenced by the high quality European model presents future opportunity for price reduction, increased quality and/or increase of profit margin Source: Huffington Post, January 31 2010 42
  43. 43. Business Model Phase 1: Elderly Products Target Market • Consumers within the Hetong Elderly Homes – on site retail store • Via health care distributors • Direct to hospitals, elderly care homes and retail chains Distribution • Third party warehousing of stock • Third party distribution model Sales & Marketing Tools & Strategy • Display/retail store at joint venture site • Point of sales material • Magazine/newspaper advertisement – health care/retail catalogues etc. • Trade shows, seminars 43
  44. 44. Business Model Elderly Products Financial Analysis RMB 100,000 80 73 Total Revenues 70 Total Costs 60 Net Profit 30 47 47 50 38 38 40 59 59 30 30 25 20 10 0 3 5 7 9 year 1 year 2 year 3 year 4 Average profit margin 14% 44 11 year 5
  45. 45. Business Model Financial Analysis – Gross Revenue (Rental Case) RMB m 25 School facility retail Total Revenues 20 Revenue CAGR School 5 0 year 1 year 2 year 3 year 4 45 year 5 2% Retail Total Revenues 10 2% Elder Home 15 20% 6%
  46. 46. Business Model Financial Analysis – Gross Revenue (Build Case) RMB m 50 School facility retail 45 Total Revenues 40 Revenue CAGR 35 30 School 3% 25 Elder Home 3% 20 Retail Total Revenues 17% 15 10 5 0 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 46 6%
  47. 47. Business Model Financial Summary (Rental Case) RMB m 25 45% Total Revenues Total Costs Net Profit margin 41% 20 40% 37% 15 35% 10 30% 30% 30% 27% 5 25% 0 20% year 1 year 2 year 3 year 4 year 5 Rental Case shows an average 32% net profit margin and an average 43% profit before tax margin over a five year horizon 47
  48. 48. Business Model Financial Summary (Build Case) RMB m 50 57% 45 40 60% Total Revenues Total Costs Net Profit margin 55% 51% 50% 35 30 25 45% 45% 41% 40% 40% 38% 20 37% 35% 35% 15 31% 30% 30% 10 25% 5 0 20% year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 Build Case shows an average 40% net profit margin and an average 54% profit before tax margin over a ten year horizon due to zero rental charges 48
  49. 49. Business Model Royalty Payment to Hetong 40 Projected Royalty Payment (Build Case) 100,000 RMB 35 Projected Royalty Payment (Rental Case) 35 30 26 30 29 28 27 34 31 32 25 20 20 15 15 16 17 18 14 6% CAGR 10 5 0 year 1 year 2 year 3 year 4 year 5 49 year 6 year 7 year 8 year 9 year 10
  50. 50. Business Model Key Financial Highlights • Rent: IRR over 5 years: 24% • Build: IRR over 10 years: 11,5% • Royalty Payment of 8% Rev • Use Cash from Operations  No Additional Cash Call • Investment: Rent 16MM or Build 77MM RMB Unique Opportunity  Exceptional Reward 50
  51. 51. Business Model Why Should You Invest?  World Class Management  15 years of experience  Relevant Skills  Health Care industry related  Past Performance of Team  “Best health care in China”  Competitive edge  Brand and Experience  Expansion opportunity  Scalable in Tier 1 and 2 cities  Extracting wealth  Secondary Sale, Dividends  Synergies  Elderly Care and Retail 51
  52. 52. Business Model Corporate Governance • To provide structure to manage/ monitor/ guide/ review the business to ensure that it is running/ being managed in a sustainable professional manner • The below are highlighted to be crucial for Hetong to address 7 key areas to focus General business principles – Hetong Group Management monitoring Hetong China Holdings – Hetong Group Ombudsman Systems and Processes Audit function 52 Legal compliance
  53. 53. Business Model Corporate Governance • Objective − • To ensure transparency and objectiveness in decision making and the use of funds − With 2 separate management teams and 2 sets of accounts independent of each other Management of companies − − Management of Hetong Group will remain with Mr. Fang Management of Hetong China Holdings will be with a newly hired CEO reporting directly to the Board of Directors Hetong Group Hetong China Holdings 53
  54. 54. Business Model Hetong China Holdings Organization Chart Executive Committee CEO Director Elderly Home Director Training Academy Care givers Trainers Admin Retail Director Sales/ Marketing HR, IT, Admin Manager Quality Control Manager Executives Executives Executives Finance Manager Accountants Admin Hetong Group Services outsourced to 54 Hetong China Holdings Cleaning & Laundry Catering Media/ publications
  55. 55. Business Model Role of Volunteers • Organize activities / services – – – – • Exercise for the elderly Conversations with the elderly Haircutting and photography services Entertainment for the elderly Elderly Care – Psychological care – Massages – Simple daily care e.g. serving water • Help to create awareness on elderly care – Raise funds for care homes – Website design and publications – Health awareness talks Leveraging on student volunteers / educators 55
  56. 56. Business Model Leveraging Volunteers – Key to success Dedicated volunteer management team Build network and design programme for volunteers More focused staff at Hetong Improve the use of volunteers and their skills Volunteers raise awareness of Hetong and elderly in China Volunteers raise funds for Hetong Group Increase brand recognition Increased use of Hetong products and services Better funded Hetong 56 Volunteers further assist staff
  57. 57. SOCIAL AND ENVIRONMENTAL IMPACT 57
  58. 58. Social and Environmental Impact Community Benefits Elderly • Access to quality care and facilities • Maintain dignity in old age • Enjoy life to the full Family • Lessen family burdens of taking care of aging parents • Relieve time burden to concentrate on career and next generation • Reassurance of quality care for their parents 58
  59. 59. Social and Environmental Impact Community Benefits Volunteer • Change culture and views on the elderly caretaking industry • Raise awareness of elderly care • Cultivate a „sense of charity‟ towards others • Transfer of traditional culture from elderly to the young Caregiver • Employment opportunities in local community • Vocational training of elderly care 59
  60. 60. Social and Environmental Impact Leveraging Government Support for the Elderly • Promotion for the elderly caregiving industry • Standardize regulations/ policies for the elderly caregiving industry • Special subsidies for the elderly • License to operate • Land rights • Preference on land for social enterprises • Policies to encourage volunteers program for the elderly 60
  61. 61. Social and Environmental Impact Green Building • Elderly homes and training centres will be designed to be green buildings in order to reduce the negative impact on the natural environment by: • Efficient use of energy, water and other resources • Reducing waste, pollution and environmental degradation • Protecting occupant health and improving employee productivity Example: LEED Certified buildings • Building design and energy systems are optimized for minimum energy consumption • Expected payback of additional construction costs in 5 years due to electricity savings over and above 50% energy saving targeted 61
  62. 62. SALES AND MARKETING 62
  63. 63. Sales & Marketing Corporate Branding Profiles Pioneer Recognition Experience 15 years in health care Endorsed by Ministry of Civil Affair – National Accredited Training Program Operating in 3 different Provinces Industry leader First organization called by Red Cross for helping elderly in Sichuan earth quake Cross section of health care services Setting the benchmark in QUALITY elderly services 63
  64. 64. Sales & Marketing Corporate Profiles - HETONG CHINA HOLDINGS • • • The logos represent the progression through life, from young to old Emphasizing that whilst we move forward we have support and confidence from those close to us In Chinese culture red signifies health, happiness, harmony, peace and prosperity; reflected its heavy use in the logos 64
  65. 65. Sales & Marketing The Pearl River Retirement Village Profile Disclaimer: These are the suggestion only and should be reviewed by a PR firm & branded in Chinese 65
  66. 66. Sales & Marketing The Pearl River Retirement Village Profile 宝珠乐龄村 Disclaimer: These are the suggestion only and should be reviewed by a PR firm 66
  67. 67. Sales & Marketing Sales & Marketing Tools 1) Multimedia – corporate video incorporating social awareness • Raising social awareness while increasing commercial viability • Inclusive of live testimonial from the existing customers (many good examples) • Corporate video will be on display in the center‟s lobby, in high end retail stores, at trade shows, at exhibitions and at seminars Disclaimer: These are the suggestion only and should be reviewed by a PR firm 67
  68. 68. Sales & Marketing Sales & Marketing Tools 2) Online – website with content management system, ecommerce Comprehensive website including ecommerce, health information and donation opportunities Disclaimer: These are the suggestion only and should be reviewed by a PR firm 68
  69. 69. Sales & Marketing Sales & Marketing Tools 3) Print collateral – poster, signage, brochure, corporate ID Representing standards and values A strong brand identity adds tremendous value to a business Disclaimer: These are the suggestion only and should be reviewed by a PR firm 69
  70. 70. Sales & Marketing Sales & Marketing Strategy & Budget Per Year Marketing Strategy Pearl River Retail Training •Advertising •Events •Advertising •Direct Marketing •Advertising •Direct Marketing •Events Advertising RMB 54,000 9% Direct Marketing RMB 35,670 6% Events RMB 500,000 85% Total Budget Per Year RMB 589,670 Disclaimer: These are the suggestion only and should be reviewed by a PR firm 70
  71. 71. IMPLEMENTATION 71
  72. 72. Implementation Phases Phase 1: Hetong China Holdings Corporate Facility, HR, Establishment Products Delivery Month 1-3 Month 4-6 • Business plan presentation Key Activities • Investment decision • Company registration with new name • Training, resourcing • Agree on launch site and needed resources • Construction and hiring commences • Align with business on the targeting/channel approach for Hetong China Holdings • Agree on overall project plan including • Finalize new marketing and marketing/communication sales plans to address plan customer experience & service requirements • Design pilot marketing and community campaign plan • Staffing procurement framework • Commence on Hetong improvement plan 72 Note: MCA resource allocation front loaded Launch Year 2 • Launch showcase facility in Shenzhen or other urban city option • Implement customer service training • Launch corporate academy • Enhance IT, operations and risks to meet conversion plan requirements • Track results and analyze data
  73. 73. Implementation Phases Hetong Group Update and Renovate Month 1-3 Key Activities • Renovate and update facilities with internal and external vendors • Maintain ongoing elderly care, laundry, and hospital operations • Re-assignment / Retrain existing property management staff for other functions / roles with laundry and cleaning Expand Programs Month 4-6 Launch Volunteer Management Program Month 7-12 • Hire Head of Volunteer Management Program • Advertise programme / get volunteers • Expand laundry service with the new property management staff • Assign tasks to volunteers • Coordinate with new media sister company • Design volunteer programs / briefing / database 73 • Expand community reach and communication and media messages
  74. 74. Implementation Sales & Marketing 1) Advertising (30 seconds block) Type Frequency TV Commercial 14 Days Every Quarter Radio Ads 2) Duration 28 Days Every Quarter Direct Marketing (Based on iContact & China Unicom – 100,000) Type Frequency Email Marketing Constantly Year Round SMS Marketing 3) Duration Constantly Year Round Duration Frequency 4 Days Every Half Year Once - Events (Quotation Received) Type Road Show PR Firm (Launch) 74
  75. 75. Implementation Corporate Governance • Existing • Existing corporate governance structures in Hetong Group are a combination of trusts and systems and processes • Implement • The monitoring tools and general business principles have to be updated • Need to create an ombudsman, the audit function and the annual review plan of systems and processes To update General Business Principles/ Code of Conduct To set up Ombudsman to hear/ address complaints To set up Annual review of Systems & processes Internal audit function Business monitoring tools like balance scorecards Start (within 1st month) Complete in 2 wks (by the 2nd month) Complete in 1 wk 75 (2 months before yr end) Complete in 1 mth
  76. 76. Implementation Human Resources Hiring Plan • Hetong Group has sufficient staff covering all critical functions and their systems/ processes are sufficiently clear • The key would be the identification of the CEO Recruit CEO and senior staff Prepare division functions/ plans Hiring of staff Start Week 1 Week 2 76 Week 3 Week 4
  77. 77. Implementation Phase 2: Hetong China Holdings, Year 3 to 5 • Open up to 3 new facilities in main urban cities • Expand the Training Academy into at least 3 new regional main cities • Expand retail stores and sales channels • Optimize opportunities via co-branding and other alliances such as a loyalty credit card co-brand card 77 Expand Network to Shanghai / Guangzhou etc. Training & Certification Academy Expand Retail Shops & Website Selling New Revenue Streams: Cobranding and Alliances
  78. 78. Implementation Phases Phase 2: Hetong China Holdings, Expansion Corporate Facility, HR, Establishment Products Delivery Month 1-3 Month 4-6 • Business plan presentation Key Activities • Sites selection and procurement • Help finalize project budget including capex, A&P, collaterals, trai ning, resourcing Launch Year 2 • Construction and hiring commences • Launch new facility in Shanghai/ Guangzhou etc. • Align with business on the targeting/channel approach for Hetong China Holdings • Enhance IT, operations and risks to meet conversion plan requirements to fit expanded New Corp offerings • Agree on overall project • Agree on launch sites. plan including marketing/communication • Review resource availability plan and procure senior management staff to be • Commence vendor suited to new site selection in new site 78 Note: MCA resource allocation front loaded • Track results, analyze and analyze new products to suit new location
  79. 79. Implementation Projected 10 Year HCH Accumulated Net Profit Our 2025 vision: To be the premier elderly health provider in China with a balanced, end-to-end set of elderly care services delivering diversified revenues and offering new products and services which include elderly  Homes  Hospitals  Catering  Laundry  Social Services 223.5 RMB m Building Option 105.3 RMB m 15.6 RMB m Year 5 Accumulated Net Revenue Year 1 Launch of First Location 6 HCH Loc 8 Hetong Loc Retail Products Must include Upfront Equity Investment YEAR 10 Accumulated Net Revenue 29.5 RMB m Sales Wins, Product Gains, and Projected Organic Growth 65.5 RMB m Rental Option 6.4 RMB m 79
  80. 80. Implementation Projected Location Growth 9 8 北京 Beijing 7 6 5 上海 Shanghai 4 3 2 1 0 深圳 Shenzhen Year 1 Year 5 Year 10 Disclaimer: These are only suggestion only and not set target cities 80 Year 15
  81. 81. RISKS 81
  82. 82. Risks Risks Mitigation • High staff turnover/ low retention rate/ difficult to attract new talent as the industry is new in China/ the work is demanding • Improve staff welfare, give heavier weight to staff with passion for the elderly‟ during the interview process • Financial management as there would be larger sums of money spread over many locations and many transactions involving many new people • Stronger corporate governance model, transparency in systems/ processes/ decision making and clear roles and responsibilities for all staff • Local government support not forthcoming • Hetong Group to build and maintain new relationships with local government officials • Competitors gaining ground and Hetong losing influence/ ground • Marketing to constantly feedback competitor activities for management to plan/ reflect • Not anticipating changing regulatory framework / making poor strategic decisions • Review existing insurance coverage to check the adequacy of cover, create an ombudsman and implement check and balance systems/ processes 82
  83. 83. RECOMMENDATION 83
  84. 84. Recommendations Point • The YLP has recommended two financially viable business models to capitalise on the potential of the growing elderly market. Both options offer a sound return on investment for any potential investor To • The rental option offers a higher and faster return on investment on a smaller investment, which is clearly detailed in the document Be • The building option offers a solid, but more conservative return on investment with the security of a major asset. The financial projections for this business model do not take into account the substantial appreciation of the capital asset Considered • There is no reason why both business models cannot be undertaken concurrently to achieve the best result for any potential investor. The cash flow generation from the rental model can assist in the financing of the building model within a 5-year period. Both models present an 8% dividend payment on the initial investment 84
  85. 85. APPENDICES 85
  86. 86. Current Hetong Situation 86
  87. 87. Current Hetong Situation Elderly Care Homes • 3 Elderly Home Locations: Tianjin, Beijing and Mianzhu – Tianjin • Serves as headquarters with 30 full-time staff • 4 elderly homes with 401 beds, 343 elderly, 123 caregivers • Rent land and building, privately run under its branding • Strong reputation and relationship with local Government • Semi-dependent and fully dependent are core target clients • More developed than the other 2 locations - Beijing • 2 elderly homes with 176 beds,159 elderly and 50 caregivers • Partnership with local government , profits sharing model - Mianzhu • 2 elderly homes with 180 beds, 38 elderly, 7 caregivers • Partnership with local government to assist earthquake survivors Best network in China 87
  88. 88. Current Hetong Situation Elderly Care Home Marketing - Nearly all business obtained by word of mouth - Occasional newspaper advertisement for recruitment of staff - Virtually no marketing strategy due to high occupancy rates - Publications distributed to members/elderly - Web site promoting elderly home 88
  89. 89. Current Hetong Situation Elderly Care Home 2009 Beds Number of Elderly # of caretakers Total Revenues TR PPPM 106 109 103 82 52 452 86% 22 41 37 10 23 133 2/7 1,428,000 1,048,716 1,040,751 772,264 461,602 4,751,333 1,123 802 842 785 740 876 Nanlu (南路) 142 Fengtai (丰台) 126 Huayuan (华苑) 106 Chuanfu(川府) 91 Xuefu (学府) 62 Elderly Homes 527 Including Rental Expenses Salary (工资) 20% Cleaning & Management (清管洗 费) 15% Utilities (水电气费) 7% Elderly Products 7% Staff Accomodation (员工) 1,358,804 676,496 846,876 666,000 359,434 3,907,609 4,867,609 1,068 517 685 677 576 720 897 Elderly Homes total revenues per person per month (PPPM) is slightly below total cost PPPM (including rental expenses) 45% Rental (房租) Total Costs TC PPPM 5% 89
  90. 90. Current Hetong Situation Laundry and Catering Services • Laundry and Catering services - In house services to service Hetong centers in Beijing and Tianjin - Employs laid off older workers - Potential to expand business to public - Catering services address unique nutritional needs of elderly 90
  91. 91. Current Hetong Situation Laundry Services Laundry 2005 2006 2007 2008 2009 Average Revenues 445,052 427,766 632,310 1,192,855 1,526,702 844,937 Total Costs 445,440 464,838 683,149 1,185,296 1,529,384 861,621 Variable Costs 391,440 398,538 555,949 1,011,306 1,273,776 726,202 Fixed Costs 54,000 57,300 106,200 131,990 243,608 118,620 0% -9% -8% 1% 0% -2% Profit Margin Revenue Composition External Cleaning and Management Internal Facilities Cleaning and Management Washing Others (其它) Internal Cleaning and Management Salary (工资) Insurance 19% Others (其它) 17% Stationary (文具/物料) 3% Staff (员工) 3% Utilities (水电气费) 41% 56% 2% 31% 30% 27% 12% Laundry should be outsourced given its consistent negative profit margin 91
  92. 92. Current Hetong Situation Catering Services Catering 2005 2006 2007 2008 2009 Average 1,456,068 1,212,744 1,677,389 1,619,371 2,344,960 1,662,106 COGS 873,641 666,262 952,214 875,304 1,149,897 903,464 Net Revenues 582,427 546,482 725,176 744,067 1,195,063 758,643 Total Costs 582,124 506,262 719,868 646,735 820,810 655,160 Variable Costs 267,692 381,462 542,868 520,735 612,850 465,121 Fixed Costs 99,232 64,800 129,000 102,000 183,960 115,798 0% 7% 1% 13% 31% 14% Gross Revenues Profit Margin Salary (工资) 50% Fuel (油/煤) 17% Utilities (水电气费) 10% Stationary (文具/物料) 9% Cleaning & Management (清管洗费) 5% Rental (房租) 4% 92 Catering has the highest profit margin in all segments
  93. 93. Current Hetong Situation Hospital • Hospital: Tianjin – This is a rented facility, serving as the first private hospital for Hetong in China – Serves as a home to semi or fully dependent elderly – Facilities are designed to accommodate unique needs of the elderly – Specially designed Hetong beds, Germanimported bathtubs, special handrails for bathrooms and amenities are included – Medium standard of cleanliness – Received approval from the government to allow its patients to use their medical insurance • Marketing – Local community networking 93
  94. 94. Current Hetong Situation Hospital Revenue Composition In-Patient with Insurance (医保住院) 58% Gross Revenues 2,834 In-Patient without Insurance (非医保住院) 11% Cost of Goods Sold 1,572 Out-Patient (门诊) 18% Net Revenues 1,262 Seasonal Charge (床/暖/暑) 10% Total Costs Others (其它) 3% Hospital 2005 2006 2007 Per Person Per Month 2008 2009 Average Gross Revenues 2,305,360 1,383,355 1,539,455 1,459,140 1,980,811 1,733,624 Net Revenues 1,369,144 1,719,772 881,351 1,350,166 1,572,791 1,378,645 Total Costs Salary (工资) 3,674,504 3,103,128 2,420,806 2,809,306 3,553,602 3,112,269 COGS 983 1,325,896 1,757,799 1,325,914 1,122,353 1,505,295 1,407,451 Variable Costs 784,040 841,799 809,914 567,354 774,831 755,587 Fixed Costs 121,856 436,000 246,000 192,500 355,464 270,364 Inventory Profit Margin 0 3% 92,020 120,322 550,355 -2% -50% 17% 0 152,539 4% Rental (房租) Others (其它) Heating Costs (取暖费) Cleaning & Management (清管洗费) 34% 30% 15% 7% 7% -2% Inventory Management, especially medicine (93% of total inventory) is key to Hospital‟s profitability 94
  95. 95. Current Hetong Situation Training • Locations – 9 training centers across China (3 centers in Hebei, 1 in Gansu, 1 in Shaanxi, 1 in Qingdao, 1 in Anhui, 1 in Fujian and most recently-opened center in Chengdu – 15 professional trainers and there are 5 levels of training for caregivers (Beginner nursery, Medium nursery, Advance nursery, Beginner and Medium) – National standard certification • Marketing – Training marketing by word of mouth – Web site promotion of training – Training publication – Collaborate with local universities and hospitals 95
  96. 96. Current Hetong Situation Training School 2005 2006 2007 2008 2009 Average Revenues 187,920 207,405 223,898 89,140 275,997 196,872 Total Costs 183,408 155,860 188,262 172,861 199,442 179,967 Variable Costs 114,568 80,960 110,262 71,861 113,802 98,291 Fixed Costs 40,840 46,400 60,000 83,000 67,640 59,576 2% 25% 16% -94% 28% 9% Profit Margin Salary (工资) 52% Government Exp (劳动局费用) 13% Rental (房租) 12% Marketing (宣传费) 8% Operating Exp (教材教学支出) 6% School is a steady operation with an attractive profit margin 96
  97. 97. Current Hetong Situation Elderly Products • Elderly Products − A rented small pilot retail shop in Tianjin − Products include wheelchairs, beds and portable toilets, canes, strollers and paper diapers with different price ranges to cater the needs and affordability of different consumers − Limited profit margin due to lack of retail locations and marketing • Marketing − One retail site open in Tianjin − Products sold in retail stores in Beijing homes − Web site product list with pricing and descriptions – no ecommerce − Discounted pricing on occasions 97
  98. 98. Current Hetong Situation Elderly Products Revenue Composition Internal 59% External 40% Retail Gross Revenues COGS Net Revenues Total Costs Variable Costs Fixed Costs Inventory Profit Margin Salary (工资) 29% Rental (房租) 24% Interest Expenses (还占压资金利息) 8% Marketing (宣传费) 8% Cleaning & Management (清管洗费) 2005 2006 1,565,400 461,943 1,020,000 307,327 545,400 154,616 545,070 1,076,251 110,050 34,800 40,840 46,400 240,000 992,736 0% -596% 3% 2007 651,975 431,473 220,502 737,986 60,000 60,000 571,502 -235% 2008 768,974 480,701 288,274 985,768 93,000 83,000 808,810 -242% 2009 752,020 428,180 323,839 208,599 63,648 67,640 0 36% Average 840,062 533,536 306,526 710,735 72,300 59,576 522,610 -132% Inventory management is key to elderly products‟ profitability 2009 was a very good year for retail 98
  99. 99. Location Analysis 99
  100. 100. Location Analysis Phase 1: Showcase Shanghai Beijing Shenzhen Guangzhou Total Population 14,007,000 (Household population) 16,447,000 (Resident population) 8,277,500 (Household + Resident population) 7,800,000 Elderly population 3,157,000 2,500,000 520,000 1,075,000 (% of total population) 22.5% 15.2% 6.3% 13.8% No. of Elderly Home 615 339 29 163 No. of Bed 89,859 >40,000 2,733 22,817 No. of Hospital for Elderly 71 - - - No. of Home Base Elderly - - 17,754 - Monthly subsidy from gov for home base elderly - - 253 - Total no. of elderly on the waiting list for elderly home - 30% of the beds are empty 1,500 - GDP per capita 80,198 72,663 93,000 >68,000 Annual Disposable Income (RMB) 21,871 26,738 21,196 14,512 Shenzhen exhibits growing demand and limited supply 100
  101. 101. Location Analysis Phase 1: Showcase Shanghai Beijing Shenzhen Guangzhou Opportunities - The elderly population is substantial in Shanghai -The elderly population is substantial in Beijing -Hong Kong elderly population will be a substantial source for elderly homes in Shenzhen provided the high rental of elderly home -Various government policies are in place to encourage HK elderly to choose elderly homes in China - Government provides RMB 1,000 per bed per year for the elderly living in the elderly homes for a max of 5 yrs. Gov gives RMB 60 – 100 per mth to those who are semi- or fully – dependent. Risk -Competition is high in Shanghai - Chain elderly homes have established their business and network in Shanghai -The high-end elderly homes are not well received by the market with a low occupancy rate -The government is promoting home based elderly care - The elderly population in Shenzhen is relatively lower than Shanghai and Beijing - The consumption power is weak in Guangzhou Shenzhen has been chosen as the showcase location 101
  102. 102. Hetong China Holdings: Catering Business 102
  103. 103. Hetong China Holdings: Catering Business • Proposed catering business operation and pricing Catering In elderly homes High-end Set meals: ¥8-12 Single-point: ¥10-15 nutrition meal : ¥12-18 Low-end Set meals: ¥4-8 Single-point: ¥6-10 nutrition meal : ¥8-12 Meals on wheels High-end Set meals: ¥10-15 Single-point: ¥12-18 nutrition meal : ¥14-20 103 Low-end Set meals: ¥5-10 Single-point: ¥8-12 nutrition meal : ¥10-15
  104. 104. Additional Financial Information 104
  105. 105. Additional Financial Information Hetong Profit Margins 10% 6% 5% 4% 0% 1% 2005 2006 2007 2008 2009 -5% -9% -10% -15% -18% -20% Hetong current operation showed an average profit margin of -2% 105
  106. 106. Additional Financial Information Hetong Profit Margins Avg Profit Margin Avg Adj Profit Major Inventory Margin Influence Total -2% 9% Care Homes 5% 5% Hospitals -2% 12% Catering 14% 16% Cleaning & Laundry Services -2% -2% -132% 81% 9% 9% Elderly Products School YES YES Cleaning and Laundry Service is a money losing proposition Inventory management is key to Hospitals and Elderly Products 106
  107. 107. Sales and Marketing 107
  108. 108. Sales & Marketing Corporate Branding Profiles 1) Hetong has 16 years as a pioneer of the health care business • Specialises in incapacitated elderly care • Quality trained experienced staff • Extensive volunteer network 2) Founder Mr. Fang Jiake • Chinese Doctor with extensive experience • Pioneer of the industry • Passion for health care based on personal experience • Set up an NPO to help the elderly of the community 108
  109. 109. Sales & Marketing Corporate Branding Profiles Continued 3) Established Government recognition • • • • Mr. Fang & senior staff are bestowed with Advanced Party Memberships Endorsed by Ministry of Civil Affairs Nationally Accredited Standard of Health Care Registered NPO 4) The benefit of experience in a changing and expanding industry 5) Operating in multiple locations • • • Tianjin Beijing Sichuan 6) Operating in a cross section of services • • • Elderly health care Training Products based on successful European model 109
  110. 110. Sales & Marketing Corporate Branding Profiles Continued 7) Nationally Accredited Training • • • • Nationally Accredited Training program (internal and external) Quality trained staff Specialists in incapacitated care Specialists in meeting all health care needs 8) First company the Red Cross contacted to assist after the Sichuan earthquake 9) Passion, quality of consistent care recognised by the community 10) Extremely high occupancy (e.g: 90%+) purely through word of mouth only! 110
  111. 111. Sales & Marketing Hetong China Holdings Logo Samples 111
  112. 112. Sales & Marketing Sales & Marketing Strategy & Budget Per Year 1) Advertising (Health Care / National Newspaper) Type Magazine Ads Newspaper Ads Duration Cost 4 times per year RMB24,000 5 days x 12 months RMB30,000 2) Direct Marketing (Based on iContact & China Unicom – 100,000) Type Duration Cost Email Marketing Bi-Annual RMB25,670 SMS Marketing Quarterly RMB10,000 3) Events (Based on Quotation) Type Road Show PR Firm (Launch) Duration Cost Once A Year RMB150,000 Once RMB350,000 Disclaimer: These are the suggestion only and should be reviewed by a PR firm 112
  113. 113. Sales & Marketing Sales & Marketing Strategy – Advertising 1) Show Case Type Duration Cost Magazine Ads Quarterly RMB8,000 5 days x 12 months RMB10,000 Type Duration Cost Magazine Ads Quarterly RMB8,000 5 days x 12 months RMB10,000 Newspaper Ads 2) Retail Newspaper Ads 3) Training Academy Type Magazine Ads Newspaper Ads Duration Cost Quarterly RMB8,000 5 days x 12 months RMB10,000 Disclaimer: These are the suggestion only and should be reviewed by a PR firm 113
  114. 114. Sales & Marketing Sales & Marketing Strategy – Direct Marketing 1) Show Case Type Duration Cost Email Marketing - - SMS Marketing - - Duration Cost Email Marketing Bi-Annual RMB25,670 SMS Marketing 2 Quarters RMB5,000 2) Retail Type 3) Training Academy Type Duration Cost Email Marketing - - SMS Marketing 2 Quarters RMB5,000 Disclaimer: These are the suggestion only and should be reviewed by a PR firm 114
  115. 115. Sales & Marketing Sales & Marketing Strategy – Event 1) Show Case Type Duration Cost Road Show (Gov & Uni) Once Per Year RMB75,000 Once RMB175,000 Type Duration Cost Road Show (Gov & Uni) - - PR Firm (Launch) - - Type Duration Cost Road Show (Gov & Uni) Once Per Year RMB75,000 Once RMB175,000 PR Firm (Launch) 2) Retail 3) Training Academy PR Firm (Launch) Disclaimer: These are the suggestion only and should be reviewed by a PR firm 115
  116. 116. Corporate Governance 116
  117. 117. Corporate Governance Introduction • Objective is not to introduce red tape or bureaucracy, but to ensure the security of your investment and the successful operation of the company • Ensures actions/ decisions are transparent where/ when it needs to be • Enables the organization to work at a high level of professionalism both internally and when viewed from externally • Provides an opportunity to all staff/ patients/ shareholders/ stakeholders to voice their concerns Governance is like a constitution – it provides check & balance to everyone‟s actions Stakeholders/ Shareholders gain confidence from a strong governance model Provides a strong organization infrastructure 117
  118. 118. Corporate Governance General Business Principles 1) Hetong Group -General principles – to behave ethically & responsibly -No child/ force labor -Product safety -Privacy of information/ records -Environmental protection -Commitment towards shareholders -Commitment towards customers -Commitment towards suppliers and business partners -Commitment towards employees -health & safety -equal and fair treatment -right to fair wages -Business integrity -no bribery/ blackmail -full records of transactions -no 3rd party interests -no political payments 2) Hetong - Hetong China Holdings General Business Principles + Full transparency of accounts -All profits to be returned to Hetong social co -All donations will be for the benefit of Hetong social co -Land donated to Hetong can only be used for the elderly homes and can never be used for any other purpose State the reasons on how the organization chooses to be a responsible corporate citizen Sets out the guiding principles on integrity and ethics in business conduct They govern all decisions and actions and applies to all employees 118 Not all encompassing but formulate a minimum requirement of behavior
  119. 119. Corporate Governance Systems & Processes + Management & Monitoring 3) Systems & Processes -Stable systems/ processes that are transparent and clear to all staff -To have systems/ processes in place in the reporting/ management of the below 9 elements which covers the entire breadth of the organization 4) Management & Monitoring •Management tools to create transparency in information and actions •Tools for the organization to better monitor/ manage their business during the weekly management meetings E.g.: Balance Scorecard E.g.: 119 •Weekly alignment meetings •Monthly management meetings •Quarterly review •Annual Operating Plan •Annual report •Employee Satisfaction Survey
  120. 120. Corporate Governance Ombudsman & Audit Function 5) Ombudsman • Independent/ neutral person to receive complaints from internal/ external sources that cannot be resolved satisfactorily through existing channels • To demonstrate that Hetong is objective and impartial • To foster a more open, effective and productive relationships with our stakeholders/ shareholders • Create helpline and clear reporting line to Chairman/ Founder • Unlimited powers to investigate • Concerns will be handled promptly with care, respect and sensitivity 6) Audit function • To create internal and external (3rd party) audit function • Role created to review actions/ results of the company and to propose improvement opportunities • Ensure all staff with key responsibilities and roles are transparent/ objective in their decision making • Ensure decisions are objective • Provide additional confidence to shareholders/ stakeholders 120
  121. 121. Corporate Governance Legal Compliance 7) Legal Compliance •Compliance with all: • Labour laws • National laws • Local government laws 121
  122. 122. Human Resource (HR) 122
  123. 123. Human Resource (HR) Introduction • HR is one of the most important elements of Hetong • Hetong is predominantly in the people business • Requires large numbers of passionate staff • Services rendered are to the old that require a lot of attention • We find that the existing HR processes are insufficient to bring Hetong to the next level. It requires more focus on Strategic HR issues • In the following pages we have submitted our suggestions for how Hetong can move into Strategic HR and, some other areas that Hetong needs to address HR function should be treated as a service provider and cannot be bloated/ operating in a void. As such, there needs to be a Service Level Agreement (SLA) that has be established and communicated to all the HR „customers‟ 123
  124. 124. HR Corporate Culture This is a collection of values and behaviour that are shared by all staff in the organization which control the way they interact with each other and with stakeholders Findings •We find the existing Hetong culture solid and propose that Hetong puts it in writing with a few additions Next Steps Corporate culture of both Social and Hetong China Holdings will be based upon the beliefs of Mr. Fang‟ beliefs on the service to the elderly -Provide safe environment for all elderly in China -We treat the elderly as our parents -Enable the elderly who are lying down to sit up -and those that are sitting to stand -and those that are standing to walk -We always improve ourselves -We always improve our services -We always set the standard for elderly services -Teamwork is key to everything we do 124
  125. 125. HR Employee Satisfaction Survey (ESS) This provides an opportunity to all staff to voice out their concerns/ likes/ dislikes/ inner feelings in a confidential manner with the objective of being heard by the management Hetong‟s success is strongly dependent upon its people. As such, there needs to be strong avenue for them to be heard Findings • There is no ESS currently Next Steps • Appoint a 3rd party HR company to propose the survey • Conducted annually • 100% confidential (management does not know the input of the staff) 125
  126. 126. HR Staff Welfare Staff Welfare has the following objectives: • To provide better life and health to the workers • To make the workers happy and satisfied • To relieve workers from industrial fatigue and to improve intellectual, cultural and material conditions of living of the workers. Happy Employee Findings •Existing staff welfare provisions are sufficient and we propose additions to it Next steps • Staff to celebrate birthdays with elderly • Preferential rates to the parents of staff buying Hetong‟s services • Staff counseling service • Health checks Immunization  Dietary advise  Intranet/ notice board that lists all the services/ benefits for staff  Sustainability committee  Community committee  126
  127. 127. HR Training Plan • Target To increase the job satisfaction and morale To built the professional career development To provide a competent, motivated and diverse workforce • Scope All staff in Hetong & Hetong Group • Content Level 1 - Entrance Staff Training Level 2 - Professional Skills Development Level 3 – Management Capability Building • Review To collect the group-wide feedback quarterly (HR dept.) 127
  128. 128. HR Training Plan Development Name Level 1 Content Employee Orientation Employee Orientation Level 2 Computer Skills Customer Service Customer Service Career Exploration Health Service Social Responsibility Level 3 Leadership Development Intented Audience Description Corporate mission, vission and Culture Overview of corporate organization Basic skills of Microsoft Office Oral Communication Etiquetee Basic Knowledge of Health building Ethics Diversity - Cultural Competency All Staff Potential Resources for Training Delivery Founder of Hetong All Staff Leaders of different Depts Supervisor IT Dept. Supervisor Supervisor Supervisor Customer Serivice Dept. Customer Serivice Dept. HR Dept. Supervisor Traing Academy Supervisor HR Dept. Manager HR Dept. Leadership Development Time Management Manager HR Dept. People Skills Confiict Resolution Hostile Situations Manager HR Dept. Team Building Field Activity Manager Outsourcing Training Agency 128
  129. 129. HR Training – Leadership development •Hetong wants to be in the forefront of elderly care •Leadership skills will be crucial to ensure the growth and sustainability of Hetong •There needs to be activities that enhance the leadership abilities of key staff Findings •No clear leadership development program •Hetong is not ready for a full scale leadership development program as the organization systems/ processes are not stable Next steps •Identify individual weaknesses of each leader •Identify formal programs •Identify mentors (within/ outside the organization) Medium to long term initiative Cannot be a „one-off‟ affair. More like learning how to play a musical instrument than reading a book 129
  130. 130. HR Succession Planning • Crucial for sustainability of the organization • All key areas of the organization/ key staff of the organization must have a successor Findings • Current Hetong does not have a clear succession plan for key staff. • It is growing tremendously and therefore room for advancement for all staff • There should not be a fear of being replaced Next steps • Identifying key roles for succession; • Developing a clear understanding of the capabilities required to undertake those roles; • Identifying employees who could potentially fill and perform highly in such roles; and • Preparing employees to be ready for advancement into each identified role • Each Management staff must have a minimum of 1 to 2 successors • Each leader/ key staff to have a KPI to develop a successor • Job rotation among functions/ Social co/ Hetong China Holdings 130
  131. 131. HR Structure Capacity Building – A learning organisation • Clear Career Path for Specialists – – – – • 4 certifications (Skill-based) Team Leader, Shift Leader, HOD, Asst Dir, Dir (Function-based) Functional roles to be assumed only with at least Intermediate certificate Exposure to HQ functions: Parallel transfer to admin staff functions for 2 year periods Exposure for Administrators: – Managers: Functional Skills (Skills-based) – Short 2 – 4 weeks attachment to elderly home, training academy and retail businesses • Skills and Personal Development: – 100 training hours allowed for all staff, given 1000 RMB as training funds – See training Plan 131
  132. 132. HR Structure Resignation and Termination • Resignation – – – – • 1 month notice (Non-managerial level) 3 month notice (Managerial level) Hand over of duties to team Exit interview by Supervisors 2 level up Termination – 1 month payment in lieu upon confirmation – 3 days during probation http://www.mayerbrown.com/publications/article.asp?id=8798&nid=6 132
  133. 133. Thank you If you are interested in this investment opportunity, please contact Chandran Nair at GIFT at (852) 3571 8103 or cnair@global-inst.com.

×