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.
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