cpf fdi ppt

Charoen Pokphand Food

Kitchen of the World

(FDI)

Foreign Direct Investment

Kitchen of the World

What is FDI?

Internationalization strategy

Developed countries will benefit from natural resource, cheap labor, and avoid trade barrier.

Developing countries will benefit from capital, knowledge and technology.

Does not include stock exchange investment

Horizontal FDI

Vertical FDI

Conglomerate FDI

Types of FDI

Horizontal FDI

Firm will invest in the same business as the firm does in their own countries.• Example: Toyota factory in Kentucky, United

State

Forward and backward• In forward vertical FDI, the firm will play a role

as a supplier and send finished goods through subsidiaries or dealers to host countries.

• Example: Volkswagen sell though many car dealer instead of using only one main dealer.

Vertical FDI

Forward and Backward• In backward vertical FDI, the firm will invest in

the industry that support their business.• Example: Ford Company build engine factory in

Mexico in order to decrease their cost.

Vertical FDI

It is the integrate investment between horizontal and vertical.• Example: Hong Kong firm set factory in china

and produce nonrelated product.

Conglomerate FDI

Methods of FDI

Greenfield• Begin everything from zero

Ex: Buying land

Mergers and Acquisitions• Joining between two firms

Ex: Buying local firm asset

Pros & Cons of FDI

Pros• For developed countries

Decrease cost and increase profit

• For developing countriesCapital, knowledge and technology

Cons• The host countries may lose their natural

resources because of non strict laws.

Effects of FDI

Stimulate nation economy Stability of FDI Social development Infrastructure development and technology

transfer “Crowding in” and “Crowding out” Scale and pace of investment Skewed distribution

Kitchen of the World

Company Profile

Brief Overview

Established in 1978Agro-industrial BusinessCore Business• Animal Feed• Farming

Two Main Operations

Thailand• Manages all operation in Thailand• Distributes in domestic

Overseas• Overseas Operation in 11 countries

3 Main Product Categories

FeedFarm• Breeding, Farming, and basic meat processing

Food• Semi, fully cooked meat, and frozen products

Products of CPF

Consumer products• Ready-to-eat products• Ready to cook products• Fresh products

Agricultural products• Feed• Breed

Consumer Product

Ready-to-eat& Ready to cook products• Appetizer, and Ready meal

Fresh Products• Chicken• Eggs

Consumer Product

Agricultural Product

Livestock Feed• Powder• Pallet• Concentrate

Agricultural Product

Feed• Leader and Pioneer• Over 600 Feedmill plants• High Quality Feed

Agricultural Product

Breed (Farm)• Leader in the research• Modern Farming system• Branch all over the countries

Kitchen of the World

Requirements Considering FDI

Factors to Consider

Assessment of internal resources

Competitiveness

Market analysis& Expectation

Assessment of Internal Resources

Internal resourcesInternal supportDomestic performance

Competitiveness

Competitor• How well they do• Market share

Competitive advantage• Comparison

Market Analysis & Expectation

Market research• Local regulations• Local preferences• Customer groups

Scenario Analysis• Worse case

Kitchen of the World

CPF’s Historical Development

Charoen Pokphand Group

Found by Chia Ek Chor and Chia Seow Hai in 1921

Started a small shop “Chia Tai Chung”

Expanded Business to Hong Kong, China, Malaysia and Singapore

International Trading(1921-1954)

In 1954, Jaran started feed business known as “Charoen Pokphand”.

Thai Economic Development Plan Dhanin worked for the government’s

slaughterhouse (1958-1963)General manager CEO

Mr. Dhanin Chearavanont

Animal Feed(1954-1970)

Poultry farming Joint venture (60:40) with Abor Acres “The contract farming system”. CP became a major player in agro-industry

Integrated Agro-Industry(1970-1979)

Sausages & Meatballs“Chester Grill” Shrimp Farming Siam Makro & 7-11 Infrastructure Sector Cable TV Network

Future Integration & Diversification(1980s-Present)

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

1994

1995

1996

1996_x000d_

1997

Frozen Shrimps Exported (1994-1997) (Million US$)

Source: Bank of Thailand

Sausages & Meatballs“Chester Grilled” Shrimp Farming Siam Makro & 7-11 Infrastructure Sector Cable TV Network

Future Integration & Diversification(1980s-Present)

Kitchen of the World

CPF’s International Expansion

International Expansion

CPF invested in 11 countries around the world:

TurkeyTaiwanChinaIndiaIndonesiaPhilippine

MalaysiaVietnamRussiaEnglandLaos

Strategy • A major food producer in the world• Expand distribution channels • A country that has high rate of population• Research and development

International Expansion

Main Products • Chicken feed• Breed farming, livestock farm and meat

process manufacturer• semi-cooked food and ready-to-eat

International Expansion (Turkey)

The biggest and most successful nation of CPF’s FDI is in Taiwan, called “CPE”.

One of the leading manufacturers in Taiwan Gain major market shares “Ready-to-eat” is very popular

International Expansion (Taiwan)

Mr.Dhanin Chearavanont stated that :

International Expansion (China)

“CP’s investment in China focuses mainly upon agriculture. Whether it is producing animal feed, or raising livestock such as pigs, the latest technology and management systems are utilized.” (Dhanin, 2011)

Highest rate of population and potentials.Main products are feed, farm and food.CPF just took over CPP (Second largest

market shares in China) and become the major shareholders (74.18%).

It will boost the net profit and enables growth in the future.

International Expansion (China)

Second largest rate of population.Government supports foreign investors.Main products are feed and farm. CP brand in India is well-knownTrade with local wholesalers and retailers

International Expansion (India)

Some products in domestic consumption, supplies are less than demands.

International Expansion (India)

Kitchen of the World

Characteristics to the Overall Growth and

Internalization Process

Fully-Integrated Process

Understanding Market

Finding Good Strategic Partner

Characteristics

The ability to integrate everything from feed material production to retail distribution channels.

Fully Integrated Business

Fully Integrated Business

Fully Integrated Business

Understand markets in developing countries• Creates opportunities• Invest in developing countries• Marketing and distribution strategy• “Know-How” > “Know-What”

Understand Markets

Strategic Partners

American agricultural multinational “Abor Acres”– Modern technology– Import chicken breeding stock from USA– Large scale Production– More involved in international Market

American Company “Dekalb Co.”– Reduce trade barriers– Research and development of green bean and maize breeds

Japanese Company “Mitsubishi Corporation”– Major target market for shrimp exportation

Kitchen of the World

Oversea Investment Risks

R I S K

Foreign countries’ rules and regulationsEconomic conditionsPolitical changesMinimum wageForeign exchangeEtc.

Oversea Investment Risks

Investment Policy: Control and Follow-up system• Appointments of Representative of Managing

Director and Finance executive

Conduct feasibility studies thoroughly• Ensure that the investment is profitable and it is

worth the risk.

Meetings in Thailand with Overseas operation management teams (Every 6 months)• Reviewing performance and updating plan.

Risks Management

“High risk, High return”

Kitchen of the World

Operating Results

Thailand Operation

Oversea Operations

Operating Results of Each Business Line

Conclusion

Thank You!