Since Hong Kong GDP growth is expected to be moderate in 2012, Cheung Kong Group is still positive about its’ long-term investment on all core businesses, trying to maintain and maybe increase profit gains in three to four years time. As one of a diverse company in 53 countries, Cheung Kong Group will also corporate with charities to accommodate minority groups’ needs in the community. Mission In concern of making long term profits out of its’ core businesses, it is the mission of Cheung Kong Group to maintain the stability of them; innovate new ideas about how to keep core businesses active and competitive.
Keep open minded to all chances of making profits globally and diversely is also one of the main concerns of the company. CKH is lacking a company that engages in restaurant business. There are no currently no restaurant in the value chain. CKH can set up the restaurant business itself and added into the value chain. The new brand can use the resources that are available now, for example, the food from Parkn shop. The brand can also enjoy low rent in the shopping center and hotels, also the existing customer of them.
Cross selling to existing customers is one of the revenue enhancement synergies. Unfortunately, there are some disadvantages for setting up the new brand. First it will be difficult at first since CKH don’t have any experience in catering business. Second, the competitive environment of catering is very tough. The new brand might found it to develop the brand image. Third, the new brand is might take a long period of time until it start break even or gain profit. CKH should do its best: Acquisition.
Acquiring the leading brand in the catering industry will be much earlier than setting a brand itself. Acquiring brands in catering industry will getting all the resources that acquired company has, for example, the reputation of the brand, the profit made, the employee training, store decoration, suppliers etc. Acquiring other company has two methods. First is negotiating with the target company, see if it will sell its company at certain price. Second is quietly buy shares of the target company to be the largest shareholder.
The first method is the suggested strategy since CKH an adequate capital reserve and method two is a lot troublesome. After acquiring the catering business, CKH should open new branch in its shopping center, the reputation of the new brand would attract more customers to visit the shopping center, and the new brand can also enjoy lower rent. The new brand can also be the catering brand of CKH’s hotel business, so that CKH don’t need to buy catering services from outside. Economic of scope is applied therefore cost is reduced.
