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1. What is the demand and growth potential of the Home Appliance sector?
Presently, the Home Appliance sector still sees large room for growth. Demand of home appliances is primarily driven by replacement needs from upgrading home appliances as result of rising standards of living, as well as by new purchase needs emerging from rapid urbanization and increasing household purchasing power. For instance, less than only 30% of China’s rural households have Air-conditioners (air conditioning), whilst the number has reached 120-130% among urban households. Globally, the current penetration rate of the Home Appliance sector in many markets is still low hence there is relatively large growth potential for us to grow both domestically and globally.
2. What is the future development plan of Midea?
Midea will focus on the following key missions in the future:
- To build a world -leading technology research system that fosters innovation including continuously optimizing our R & D talent structure, actively exploring innovative projects, better retention of our technical staff and technologies, and establishing market-oriented innovation entities.
- To actively promote the systematic product integration abilities and solution capabilities. Sales of single products will be changed to the smart home system. All current systems, such as water treatment and air systems will in the future be interconnected through the smart home system and consolidating this connection with our users.
- To transform our business models and operation models by utilizing internet technologies and fostering internet thinking. We will also re-think the whole value chain by connecting upstream and downstream links in the chain. Major changes within planning, designing, the supply chain, manufacturing, sales, logistics channels, and other functions will be carried out.
- To create a platform-oriented enterprise the company has set up platforms such as e-commerce, logistics, financial and international business, with subsequent platforms for after-sales and supply chain to be developed.
3. What new considerations and expectations will we face during this operation’s transformational period of the company?
For sustainable growth, the company will not continue with its previous large-scale, low-cost business model but will reach its new status through the following applications:
- Smart hardware: A complete transformation of the existing business by developing the Internet of Things, smart appliances, and executing the smart home strategy;
- Smart management: Using the thinking of Internet Plus to optimize our operational management and synergizing our business resources.
- Business development: Seeking complementary business on the basis of our existing business to secure sustainable growth.
4. How is our globalization strategy progressing?
Our current overseas business accounted for approximately 40% of the company’s revenue. Since our first direct investment in overseas factories in 2006, the Company has set up production bases in six countries in Vietnam, Egypt, Belarus, Argentina, India, and Brazil. Meanwhile, the Midea brand has developed a good reputation among consumers in ASEAN, Eastern Europe, South America, South Asia and other emerging markets. Midea’s Original Brand Manufacturing (OBM) contributed to 1/3 (one third) of the Company’s exports.
5. How can we improve our efficiency?
In order to improve our assets usage efficiency, the Company has been focusing on the disposal of our inactive assets and the restructuring of unproductive business over the past few years . The achievement of higher production efficiency has been achieved through lean manufacturing and the introduction of smart and automated robotic equipment while a higher organizational efficiency has been realized through simplifying the hierarchy of the Company and establishing a consumer-oriented managerial structure.
In 2011, Midea employed more than 180,000 people. The number of employees decreased to less than 100,000 by the end of 2015, and will continue to be reduced over the next two to three years.
6. What attempt has been made to safeguard innovation?
Product innovations and technological innovations are encouraged, with bold attempts being made on project-based, company-based, and product manager-based systems and training and a financial incentive system for innovative talents being established. For instance, the product manager scheme was introduced into the existing Product Division R&D and management systems to encourage people to change their mind-sets from the conventional to one of imagination and innovation. At Company level, continuous efforts are being invested in business innovation with improvements in management, operational style, new media and branding systems being continuously optimized, improved and remodeled.
7. What are our e-commerce’s target and planning for 2016?
Our sales target for 2016 is RMB20bn. Midea’s e-commerce platform is a highly efficient customer-centric system that comprises products, channels, logistics, after-sales, and users.
- Products: Building a user-centric merchandise system through analyzing our users’ Big Data, driving product development, and improving planning channels.
- Channels: Refining our distribution channels.
- Logistics: Enabling the sharing of warehousing data and realizing its logistics data visualization throughout the whole process.
- After-sales: Supporting the mobilization of our after-sales service by optimizing after-sales processes, and improving service efficiency and quality.
- User: Planning the user’s membership classification, buyer tags, and personal centers.
In the future, Midea will be more open to e-commerce partners in the sharing of platforms and users data, through the joint development of new products and in future partnerships with major logistics platforms with the intention of building Midea into a platform company.
8. How will the Company establish its financing platform?
The Midea financing platform is primarily based on industry development, and also its service to the industry. As an internal financial service within a manufacturing company, the platform begins with assisting the internal units, then extending the services to the whole industry chain. Midea’s business transition requires a series of actions to keep up with the times, as well as its needs to lead a company of value-chained enterprises to assist in their transition . Therefore not only is there competition among enterprises, but also within the industrial chain, and even the value chain.
9. What is the source of growth after the company reaches its ceiling?
Midea’s existing business is sufficient in supporting the Company’s stable growth of RMB 200 billion . After 200 billion, the Company will seek other opportunities in the areas of industries, electronics, and system providers. These future development tracks in new industries will initially be expected to come from the system provider’s field since it is found in the proximity to Midea’s current central air-conditioning, compressor, and motors business.
The company is also looking for new grounds to grow within a Blue Ocean strategy. Our product divisions and company board level are both proactively searching for high value-added projects, products, and services.
10. What will be the shareholder’s return policy?
In any three consecutive years, the company’s accumulated cash dividends shall not be less than 30% of the average distributable profits over the latest 3 years.