- Guo Guangchang: All investments to serve the industry
- Release Time: Jul 22, 2019
According to public data, in 2018 alone, Fosun added 70 new investment projects, half of which were overseas investment projects. Even in the current economic downturn, Fosun’s investment pace is still steady.
“Fosun’s development has always been based on two aspects: investment + industry operation. We must solidify our investment capability into the organizational structure to boost industry development and solidify our industry capability into the organizational structure to support investment.” Guo Guangchang emphasized again in today’s class.
After becoming listed in the stock market, Fosun International put forward several strategic optimization directions: one is to connect China Power with global resources, and the second is to become underpinned by the twin drivers of insurance and investment.
To complete the strategic plan and achieve the closed-loop ecosystem services, we have ushered in evolutions in four aspects of Fosun, one of which is focused on the funding level.
Funds are very important to everyone. Everyone should always remember that money and the source of your money are important. Fosun’s global capital resource integration has the characteristic of “developing from two aspects” and has the capability to raise funds in both China and outside China (including equities, bonds, bank loans, etc.) In other words, it can raise funds in China for domestic use and overseas for overseas use.
At the same time, Fosun also focuses on the latest trends of cutting-edge technologies through the establishment of investment funds. For example, RZ Capital focuses on VC investment and has set up offices in Beijing, Shanghai, Silicon Valley, and other places to invest in some industry-leading enterprises. Meanwhile, Innostar Capital focuses on angel investment in drugs and healthcare.
Many people say that Fosun gives the outside world the impression that it invests in all parts of the world. Indeed, among the four evolutions made by Fosun, the first one is a globalized regional layout. We have put forward the concept of “Glocal”, that is, “Global + Local”. We have established a global investment team with deep understanding of local areas, rich industry experience and entrepreneurial spirit. Through these “foreigners”, we can help Fosun develop in local areas.
Fosun once acquired 80% of the equity of an insurance company in Portugal for Euro 1 billion, and then added a new Chinese business unit in the latter’s business section to serve Chinese enterprises that have business development in Europe and Africa and provide professional insurance services for overseas Chinese.
However, while investing globally, we attach great importance to the localization of the investment capability, so we have acquired a lot of core teams with local capability in the world. For example, we have acquired teams with local experience of 10-20 years in Brazil and Japan to help develop Fosun’s globalization capability, which is also an important part of Fosun’s globalization strategy evolution.
Therefore, Fosun has never sent a person or a team to invest in a certain country (region). We must be localized and must build a team that is capable of making global investments in industries. This is what we have to do.
Many people think that all Fosun does is invest. That is not true as although investment capability is an especially important part of business strategy in Fosun’s genes, investment is by no means our goal. It is merely an efficient way to help industries develop.
Just like Fosun’s healthcare industry, unless Fosun expands into this area through investment, it would be difficult for Fosun to build the globally influential pharmaceutical enterprise it has now.
We have always been very concerned about internal cultivation and external investment, which have a complementary relationship. In my opinion, when an enterprise lacks a certain core capability, one of the best ways is to invest and control a team and enterprise that has this core capability.
When there are such enterprises, you will have more choices and can carry out internal growth through these enterprises. Therefore, another dimension of Fosun’s strategic map for continuous evolution is to be underpinned by the twin drivers of internal cultivation and external investment. We have been working in this direction.
Internal cultivation means that key industries and core projects should have the capability of self cultivation, such as Fosun Pharma; while external expansion refers to the horizontal and vertical meager and acquisition of core enterprises by obtaining core enterprises through investment, such as Club Med.
We expect to form a group of top core enterprises in their respective industries through internal cultivation + external growth, and then form complete closed service loops around the core enterprises, which will become open ecosystems of large or small scale.
In the whole ecosystem, different enterprises will empower, drive, expand and evolve with each other.
For example, in October 2014, Fosun completed the acquisition of Luz Saúde through its controlling Portuguese insurance company, holding 98.4% of the equity. The latter is one of the large groups specialized in providing medical and health services in Portugal. It mainly provides day care services for the elderly through eight private hospitals, one public-private hospital and two long-term medical care units. It combines insurance and medical services well and achieves the effect of 1 + 1 > 2.
Of course, Fosun also uses its own advantages to empower investment enterprises. In particular, I would like to share with you the importance of improving the operation capability of the invested enterprises through empowerment.
Generally speaking, the projects that require empowerment to improve operation capabilities often have obvious problems as well as distinct advantages. Fosun makes use of its profound industrial accumulation to create unique value by actively empowering, making up for shortcomings, solving problems and fully leveraging advantages.
For example, in 2018, Fosun supported its Italian high-end men’s clothing brand Caruso in reshaping its corporate strategy, optimize its products and cost structures, adjust its retail stores, explore overseas markets, and take other measures, which greatly improved the operation capability of Caruso.
This is the “deep industry operation + industry investment” proposed by Fosun. We dare not say that this is the only way for enterprises to succeed, but this is Fosun’s unique strategy. We dare to invest and are good at investing, but all our investments must serve the industry.
It is for this purpose that there are two standards to measure the quality of Fosun’s investments: On the one hand, we have to evaluate the investment value of projects; and on the other hand, we have to evaluate the synergetic value of investments with Fosun’s existing industries. We need to evaluate the integration and arrangement of new projects with Fosun ecosystem and existing industries after investment. These are all key aspects of our investment decision-making process.
Therefore, in my eyes, the investments of Fosun in the future should be as follows:
First, they will revolve around Fosun’s existing industries and customers’ needs for health, happiness, and wealth.
Second, Fosun will mainly invest in holding companies.
Third, Fosun will focus on the projects at both ends of the industry cycle, such as projects at the forefront of the early technology and projects that can help enterprises to break through bottlenecks.
I would like to emphasize once again that Fosun is an industry company, not an investment company. The purpose of all our acquisitions and investments is to strengthen our industry capability and ability to serve customers and ultimately achieve our strategic goals.
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