Implementation Support for Geberit China-II

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Implementation Support for Geberit China-II

    Implementation Support for Geberit China


    Geberit China

    thShanghai, December 6, 2000

    Roland Berger & Partner GmbH International Management Consultants

    Barcelona Beijing Berlin Brussels Bucharest Budapest Buenos Aires Delhi Detroit Düsseldorf Frankfurt Hamburg Kiev Kuala Lumpur Lisbon London Madrid Milan Moscow Munich New York Paris Prague Riga Rome São Paulo Shanghai Stuttgart Tokyo Vienna Zurich

Contents Page

    A. Project background and objectives 3

    B. Contents, scope and methodology 4

    C. Project organization 6

    D. Time schedule 6

    E. Consulting fee 7

    F. Terms of payment 7

    G. Confidentiality 7

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A. Project background and objectives

    Roland Berger ( Shanghai ) International Management Consultants Ltd (here-after refered to as Roland Berger) has conducted a 3-month-project commencing from August, 2000 for Geberit. In this project Roland Berger reviewed Geberit’s current business

    operation in China and developed a concept to restructure Geberit’s two operations

    (GSHA & GDAI ) in order to achieve the turnaround by 2002. The corner stones of the restructuring concept include:

    ; Negotiation for termination of JV to turn GSHA into WFOE ( via buyout with

    obligation to take over Lida employees by the Chinese partner )

    ; Production stop in Shanghai for 2~3 years

    ; Closure of Ningbo office, transfer of operation to Shanghai

    ; Reorganization / merger of operations

    ; Optimization of product portfolio

     Restructuring of sales organization into 3 business units (channel - orientation) ; Massive downsizing (from 285 to 126 employees)

    ; Reduction of expatriates from 8 to 3

    ; Review of Daqu in 2~3 years, consideration of Shanghai as production location for


    ; Break even by the end of 2002

    In order to speed up the restructuring process, Roland Berger is asked to support Geberit in the immediate implementation. Since the key issues of the restructuring depend to a large extent on the outcome of the negotiation with the Chinese partner, the project proposed here is focused on the restructuring of the Marketing & Sales function which needs to be reorganized rather independently of the negotiation. Thus, the key objectives are:

    ; To fine-tune the new structure of the Marketing & Sales function consisting of three

    channel based business units for OEM, piping and sanitary products ; To design the sales processes for the piping and sanitary business units ; To develop the reporting and controlling system for the three sales business units ; To formulate the job description of the key positions of Marketing & Sales ; To develop a performance based salary system for Marketing & Sales ; To evaluate the existing distributors in Shanghai, Guangzhou and Beijing and

    identify potential new distributors. Based on these, recommendation for Geberit to

    strengthen the distributor network is to be worked out

    ; To support Geberit in the negotiation with the Chinese partner on an on-demand


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    B. Contents, scope and methodology

    Roland Berger proposes to structure the project into 3 fields:

    1. Marketing & Sales restructuring

    2. Distributor assessment

    3. On-going negotiation support

1. Marketing & Sales restructuring

     Processes in Marketing & Sales

    Based on the organizational framework described in the final report, Roland

    Berger will finalize the organizational restructure for Marketing & Sales jointly with

    Geberit. Thereafter, the detailed sales processes for the piping and sanitary

    business units will be designed. Roland Berger will focus on the key processes of

    Marketing & Sales, including:

    ; Acquisition of new distributor

    ; Identification of potential projects

    ; Selling process

    ; Monitoring of distributor performance

    ; Project implementation (order fulfillment)

    ; After-sales service

    ; Review of project completed

    ; Performance assessment of sales personnel

    Reporting and controlling system

    Roland Berger will develop a tailor-made reporting and controlling system for

    Marketing & Sales. This includes budgeting, reporting and review processes.

    Each process will be described according to the initiator, standard forms,

    frequency, person in charge and actions to be taken if irregularities arise.

    Salary and incentive systems

    To develop a performance based competitive salary and incentive system,

    Roland Berger will analyze the existing system used at GSHA and GDAI to

    understand the structure of the current system. In addition, face to face interviews

    will be conducted with top and mid level managers as well as sales personnel in

    order to draw a picture of their opinions and suggestions. Since each company is

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facing a competitive environment, Geberits current system will be then

    benchmarked with direct and indirect competitors from construction related industries.

    Based on the internal and external assessment Roland Berger will develop a new salary and incentive system which has a clear performance orientation and more powerful retention component. As a result Roland Berger will deliver a ready-to-implement system with detailed suggestions concerning salary groups and levels, performance indicators and performance evaluation system, calculation scheme of bonus, key components of the retention system and suggestions for the implementation.

Job description

    For the key positions of Marketing & Sales a detailed job description will be developed. The positions to be described include Business Unit Manager, Sales Engineer, Application Engineer, Project Manager, Account Manager and marketing staff.

    The job description itself will cover the overall roles, responsibilities, authorities, performance measurement and requirements on the position holder.

    2. Distributor assessment

    The distributor assessment will be carried out in Shanghai, Guangzhou and Beijing to evaluate the existing distributors and to identify potential new distributors.

The existing distributors will be assessed according to:

; Historical performance record

    ; Company background and financial status

    ; Credit worthiness

    ; Image in the market

    ; Number of showrooms and geographic coverage

    ; Management quality and corporate culture

    ; Business infrastructure (office, warehouse, delivery vehicles etc.) ; Cooperation with Geberit up to now

    In addition Roland Berger will identify potential new distributors in these three cities. We will start with the screening of all major distributors for piping and

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    sanitary products by using Roland Bergers in-house database, online research,

    interviews with industry experts and industry associations. They will then

    assessed by the same criteria as used for the existing distributor. The most

    promising ones will be contacted to ensure that they are interested in cooperation

    with Geberit.

    The assessment described above will be conducted by our consultants,

    supported by Geberits local sales personnel. The relevant information on the

    existing distributors should be provided as complete and accurate as possible by

    Geberit. To ensure the accuracy of our assessment, Roland Berger will cross-

    check the result of our second research with on-side investigation and individual

    interviews as much as possible. In case of identifying potential new distributors

    Roland Berger will only disclose the name of Geberit upon its approval in advance.

    3. On-going negotiation support

    Roland Berger will support Geberit in the negotiation with the Chinese partner

    focusing on negotiation strategy and tactics, negotiation scheduling and

    preparation, support during the negotiation and recommendation concerning audit

    and law firms.

    Due to the importance of these activities, Mr. Jian Xu will personally participate in

    the negotiations if required by and agreed with Geberit.

C. Project Organization

    According to the significance of the project, Mr. Jian Xu, the Managing Partner of Roland Berger in China will take the overall responsibility of this project. He will be supported by Mr. Hanson Chen and Mr. Lin Bo. Both of them have made essential contributions to the development of the restructuring strategy for Geberit in the first project and possess extensive knowledge on Geberit’s operations and the competitive environment in China.

D. Time Schedule

    Considering the coming Christmas, New Year and Chinese Spring Festival on one side and the immediate implementation of the restructuring on the other side, Roland Berger is willing to adapt the time schedule according to Geberits requirement. As agreed Roland

    Berger will finish the part of sales processes, reporting and controlling system, and job description by the end of December, 2000. The salary and incentive system and the distributor assessment will be completed by the end of January, 2001. The on-going

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    negotiation support offered in this proposal covers the period up to the end of January, 2001.

E. Consulting fee

    Our consulting fee is calculated on the basis of the scope of the project and the man-days needed. For the project proposed here the consulting fee will be USD 71,000 (seventy one thousand US dollar).

    In addition we will charge 20% out-of-pocket expenses for travel within China, accommodation, telecommunication, database research and graphic service. The mandatory business tax amounts to 5% and will be charged together with the total fee.

F. Terms of payment

    Invoice will be made out at the beginning of the project (30%), after the delivery of the first report by the end of December, 2000 (40%), and at the end of this project (30%). Invoice will be made out in USD and are due immediately, without discounts, to one of our accounts to be announced to you at a later stage.

G. Confidentiality

    All information related to this project will be treated as strictly confidential. All company-specific data and results collected by Roland Berger & Partners during this project will be treated in strict confidentiality with respect to third parties.

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