2019 Whitepaper on China Best Managed Companies
Deloitte Best Managed Companies (“BMC”) program is a global initiative to identify and recognize private companies with advanced management ideas and excellent business performance in China. Private companies are an indispensable part of China's economy, Deloitte China, with BOS, Business School of HKUST, HBRC and Federation of Shenzhen Commerce, released the Chinese and English version of the first Whitepaper on China Best Managed Companies. Through sample questionnaire survey, combined with the case analysis of 23 BMC winners, this report summarizes the observation and shares insights and opinions on the management of China's private companies.
China has made incredible advances in developing its economy over more than 40 years of reform and opening up, with total GDP having grown by 22,400 percent. Private companies in particular have contributed significantly to China's economic development. We made a brief summary of the views of the whitepaper.
Viewpoints / key findings
Features of development of Chinese private companies
- Rapid expansion in scale. They have contributed more than 60 percent of GDP, and over 50 percent of state revenue.
- Entrepreneurship is a core driver for rapid growth，Which shaped the development and management models of the companies.
- Chinese private companies in general have focused more on business than on management.
- Apparent deficiencies in sustainability.
Pain points of the development of Chinese private companies
- Shortfalls in execution of strategies: Chinese private companies have their major pain points include developing, executing, implementing and practicing management mechanisms as well as accessing resources.
- Approaches to and bottlenecks in diversified development: How to choose the right "second race track" and how to conduct efficient cross-disciplinary integration are the main bottlenecks.
- Slightly unbalanced innovation: Investment in innovations that indirectly enhance competitiveness through talent management, services, sales channel, financing methods, and customer engagement remains inadequate.
- International influence yet to be enhanced: For companies with experience in overseas M&A, the challenges are to identify and respond to risks.
- Talent development struggling to keep pace with business growth: A lack of competitive salaries remains the greatest pain point of private companies in recruiting and retaining high-end talents.
- Insufficient investment in risk management: Chinese private companies in general fail to connect risk management with business growth.
Common features of the BMC winners
- They have been established for 22 years on average and maintain leading positions in their industry segments.
- Their average revenue and profit growth rates over the past three years has reached over 30%, far beyond the average of A-share listed companies and the top 500 private companies.
- They have more than 500 patents on average, with some even having more than 2,000. Their R&D investments far exceed the average among private companies.
- 48% of the winners have conducted or are planning oversea M&A and the average overseas revenue accounts for 20% of total revenue, rising to 60% for some companies.
Solutions for the development of Chinese private companies
- Develop long-term strategic planning as early as possible, focusing on future perspectives.
- Pursue targeted technology and model innovations, and build a clear innovation management and planning system.
- Think globally and enhance international influence by integrating into local communities.
- Adhere to people-oriented principles to continuously invest in talent development, sustain and develop corporate culture and entrepreneurship, and establish a sound social responsibility management system to inspire teams.
- Be proactive and prepare for changes.