Vanke, No Bribery

No bribery in the Chinese real estate business

Thursday 29 September 2011, by Aurelie Schwaller, Christina Cao, Jenny Li, Martijn Deurloo

2 inspired

a) The main facts about the activities of the company.

Vanke is one of the biggest residential real-estate companies in China. Vanke?s headquarter is located in Shenzhen, Guangdong province. Vanke has businesses in more than 20 cities of China. Its main business is concentrating around building residential housings, selling them and giving property services.
Vanke is one of the companies that listed as one of the firsts, on the Shenzhen Stock Exchange in 1991, and achieved the largest market capitalization of the stock exchange in 2006.
In this company they promote the fact that an industry leader should have corporate social responsibility. Vanke is not giving any bribes and tries to pay more attention to ?ordinary? people by building good quality and cheap houses for them. They keep their profit rate below 25%.
Vanke tries to develop green buildings, by using waste recycling management and by controlling the greenhouse effect.

b) The ethical challenges this company is addressing.

As everyone in the western world thinks, whenever doing business in Chinese government, officials will need to be bribed to reach the top of the Chinese economy. Not only Chinese companies will use bribery to get a favorable business environment, but also some well known western companies, as the following scandals show. Rio Tinto?s reputation got a blow when four iron ore salesman where sentenced to jail for taking bribes. Walmart, let the officials who needed to approve a site, shop for free for around 100,000 RMB. This shows that bribery is one of the most pressing ethical challenges for businesses in China. Vanke is trying to address this by not taking bribes.

Vanke has shown that one can become the industry leader by following the ethical values of the owner, to not take bribes. By doing this, they also take the environmental issue into account. Since their buildings are state of the art ?green? buildings, they are not only able to address sociopolitical ethical challenges, but also the environmental issues facing China. China has to address the environmental issue, since it has become the biggest polluter. Within these ethical challenges, Vanke is trying to do it its own way, meaning the more ethical one.

c) What makes you believe this company is really ethical and why you trust it.

Vanke claims to never give bribes, and seems to have suffered from it. It?s very hard for them to get land from the government. They have to pay high prices and most of the time the building sites are far away from the center. How can they make profit when they have such high costs? Vanke decides to focus on Market and Innovation. It provides high quality houses, flats and better services to customer. Vanke also is the first company introducing showroom sales and Property services. Because of its great reputation and Market Focus Strategy, Vanke has now become more successful.

Today, Vanke is trying to develop ?green building?, waste recycling management and help control greenhouse effect. Vanke invests money to do green building research and promotes using alternative energy in their buildings. Then they decided to increase hardbound room to 80%. Although even if increasing hardbound room?s percentage uses capital and elongated the construction duration, it decreases the gas emissions of two tons CO2 per renovated house. Vanke signed a contract with a high environment standard company in order to be able to purchase materials for cheaper prices. Until October 2010 Vanke builded waste recycling system in Beijing, Shanghai, Guangzhou, Shenzhen and Chengdu, which helped reducing of 60% the waste in these residential area.
The company founder Wang Shi is one of the most respected entrepreneurs in China. He believes that social responsibility should be put in first place while doing business. He gave up 10% percent of the company stock, and so did other top managers too. They used the money to found a fund which will enhance the employee?s welfare and also to help some charities.

d) The possible challenges facing the company in the future and how you think this company may improve.

As said in the previous part, Vanke is in our point of view an ethical company. Nevertheless as well as a lot of other companies, Vanke might have some challenges to faces in the future.

First of all we think that we should take into account the crisis we are going into. In fact this crisis might and probably will lead to some financial problems. In order to cope with that, they have decided that they will try to develop in smaller cities, where there isn?t a big concurrence. This will probably help them to maintain the cash flow stable. Targeting a new market is always risky, but without taking any risks, Vanke won?t be able to develop and to improve. Therefore, even if this will be a challenge, this can only be constructive, even if it might lead to a failure.

It also appears that there might be a speculation bubble around the Chinese real-estates. It was characterized by the quick increase of the real-estate prices.

Chinese government is now taking measures to avoid the bubble explosion first is to diminish the demand market; the other is to restrain the loan amount issued by banks. With the demand market diminishing, Vanke may have problems of getting enough revenues, because the sales will go down. And with fewer loans from bank, Vanke will be unable get enough money for the new house building. Then the money earned is less than the money spent, thus the company will not be profitable anymore. And the way to cope this problem is maintain the business in a controllable scale.

In order to cope to those financial problems, we think that Vanke should try to continue to work on their ethical being and use it as a marketing strategy. Not taking bribes, being environmentally friendly and helping poor children to get heart surgery, maintains a good image, and is a great publicity. Therefore we think that they should pursue in that way.

Bibliography

http://www.vanke.com
http://www.ft.com/intl/cms/s/0/2555850c-3afb-11df-a1e7-00144feabdc0.html#axzz1ZG1EFHEk
http://english.peopledaily.com.cn/90001/90778/90857/90860/6720259.html
http://greensource.construction.com/green_building_projects/2011/1104_Vanke_Center.asp
http://www.chinafinancialdaily.com/financial/news/2009/07/09/8625/wang-it-does-not-bribe-bribery-rats-into-the-street-instead-of-into-a-hero.html

Start a new discussion

3 Discussions / 3 Messages

  • Vanke’s Hardship in Being Ethecial 3 October 2012 at 21:14 , by Zhang Li

    Introduction of Vanke
    Vanke, founded in 1984, is the biggest real estate company in China till now. In 2011, Vanke’s total revenue reached 48.8-billion RMB and net profit was up to 5.3 billion RMB.
    How ethical Vanke is
    In China, to run real estate is a symbol of being the devil that makes money by exploiting consumer and buttering up. Well, at least Vanke is the only one gaining both fame and money, but without currying. How does Vanke do?
    * Vanke tries best to be environmentally friendly. Vanke takes the initiative to prioritize environment in constructing residential buildings. It integrates the best use of natural ventilation, daylight into designing patterns. Every single square meter is handled with best care to avoid any waste. What is more, Vanke starts incorporating advanced techniques of saving energy with all its establishments.
    * Vanke never resorts to bribery. In 1980s, a same company emerged competing with Vanke was very ambitious in buying plots at very cheap prices by offering the local government big fat money. Vanke otherwise procured at market price. Now Vanke becomes the giant, while the nobody enterprise has long disappeared.
    * Vanke set up rational culture. Employees in Vanke are respected and given the deserved rights. They are trusted. Comfortable offices are provided for them.
    Thus, Vanke is always accepted as a positive sample in the field, which is the original reason to explain that people are in favor of Vanke. However, Vanke is still far from being relieved, because it is confronted with many ethical predicaments.
    What ethical challenge Vanke encounters
    * Vanke loses competiveness in purchasing building areas. Vanke’s no-bribery-offering ethical approach certainly wins the favor of majority. Whereas, it is not easy for Vanke constantly turn its cold shoulder to an easier way. And Vanke itself is under the surveillance of all real estate peers. Probably Vanke will struggle for rare building plots far away from the city centers at very much expensive cost.
    * Vanke has to deal with the increasing cost resulted from new techniques of protecting the environment. It could address the problem via passing the cost to customers. Or it has options to replace the strategy and to be back to the same line where all its peers stand.
    * Vanke is under severe test because furniture and floor in some of its buildings are not up to the standard. The scandal has great impact on Vanke.
    Vanke will make big progress if it handles the above with care and wisdom. The good reputation it has received for quite a time will continue to exist.
    Conclusion
    Undoubted Vanke is making money and like most of others, it lets the consumers down occasionally, and it is not impeccable. In spite of all these, it still inspires me that Vanke set up its ethical bottom-line when else is keeping silent. It will continue to inspire more regarding to its consistency in an ethical approach.

  • Vanke, No Bribery 4 October 2012 at 16:47 , by Wu Youjun

    The article is good. It shows us the situation Vanke faces. I agree with most of the article and I think it is persuasive. I also have something want to add something I know.

    As the author says, I also consider Vanke as one of the most ethical company. The author clearly showed us that Vanke’s slogan “No bribery”. That also impressed me. In China, it is really hard to do this and make good profits mean while. So I think the author has told us the most important thing about Vanke’s business ethics. In my opinion, if the author could give us more details about what did Vanke do to make profits without bribery, the article will be more convincing.

    As long as I know, Vanke has kept on discovering new methods of construction. That helps Vanke cut their costs down. Vanke also pays lots of attention on innovation. Vanke introduced many new ideas to China. For example housing industrialization that means industrialization of the housing production and supplying. That is also a good way to reduce the pollution. So there are lots of stories to show Vanke’s ethics. If the author can tell more details, the article will definite be better.

    To sum up, this article is brilliant. And I think more details will make it better.

  • Vanke, a real estate company with great future in China 5 October 2012 at 08:42 , by Xiong Liwen(Rebecca)

    Vanke, established in May,1984, is the largest enterprise of real estate in China. Currently, its business covers 53 cities of China, such as the the three economic zones and the midwest, with sales revenue of 108.61 billion RMB in 2010.

    In my opinion, Vanke is one of the most promising enterprises in real estate industry in China. The reasons why it inspires me include as following.
    1. Being a public company, it can still raise excellent cash flow and be able get desired plots of land facing the challenge of constraint of real estate industry in China. Given the rules of land auction that are increasingly improved, there is no need for Vanke to win the land by giving bribes.
    2. There is still a considerable room for development of real estate in second- and third-tier cities in China. The demand in housing market with the immigration to cities from villages is still large. Concentrating on ordinary people, its has enormous area for development. Therefore, its profit is quite striking in spite of the low margin.
    3. Vanke enjoys a good reputation in real estate industry. It emphases on environmental development, concentrates on the quality of its product and provides perfect after-sale services as well as property service. Its market share will rise continually because customers will spend more money on reliable company and its products.
    4. It advocates the idea of putting people first. People and individuality are respected; communication is encouraged and free in Vanke. There is a lot opportunities and much room of promotion for every employee. Provided with harmonious working environment, everyone can fully feel the joy of work.

    In conclusion, given enough cash flow, high profit, good reputation and the idea of putting people first, I have reason to believe that Vanke can manage to tackle with the challenges Chinese real estate industry are facing.

Location: China

Sector: real estate

Official website: http://www.vanke.com

Key figures:

In 2010, Vanke achieved sales revenue of 108.61 billion RMB, being the first company to exceed 100 billion RMB, with a net profit of 7.28 billion RMB and a 36.65% revenue growth since 2009. It ranked No1 in the World residential real-estate sale for the third time.
Vanke has a talented employee team. 80% of them were born in the 1980?s, what shows that Vanke wants to give young people a chance. A survey that was conducted in 2011, shows us that Vanke is one of the best employers and that the employee satisfaction rate is 30% higher than the industry level.

Nbr. visits: 488

Nbr. inspires: 2