Date
18 November 2017

The secrets behind Country Garden’s stellar growth

As many as seven property developers in China are now said to be in the ’100 billion yuan club’ after growing their revenues steadily in recent years. While no study is available as to the time the firms took to boost annual sales from below 50 billion yuan (US$8.26 billion) to over 100 billion yuan, Country Garden Holdings Co. Ltd. (02007.HK) could arguably be the fastest. The firm accomplished that feat in just one year by reaping an eye-popping 120 percent annual sales surge in 2013.

A few numbers can further illustrate the firm’s astounding growth in the past year. Total floor area under development stood at 9.9 million square meters (sqm) at the end of 2012, but within just the next six months the figure almost doubled to 18.24 million sqm.

Earning a place in the nation’s elite 100 billion yuan sales club was a lofty goal laid down by Country Garden’s chairman Yang Guoqiang {楊國強} in 2012 when his firm was just halfway to the mark. The Economic Observer revealed that Yang had set an even higher target than 100 billion yuan. To boldly scale up the size, Yang had to fire on all cylinders with some unprecedented measures.

The first thing was functional autonomy. Observers say Yang, known as a meticulous businessman who used to work around the clock and wouldn’t let go of even the smallest details, took a back seat and let his subordinates have more say.

Good results have reinforced the new management style. Media reports say the company’s regional entities nationwide have been given a free rein in almost everything from construction to marketing for specific projects. Most land purchase deals, which earlier needed prior approval from the head office, are now left to the discretion of regional managers. The move is so radical that observers now describe some of the firm’s units as “independent kingdoms” or “mini Country Gardens”.

Furthermore, Country Garden’s largest regional subsidiaries were not prevented from gaining ground elsewhere in the nation. The company’s Guangdong and Hubei teams are now stepping out of their home bases and flocking into other provinces like Shandong to snap up land.

Country Garden has built up its land bank to 65.9 million sqm as of the third quarter last year, from 43.56 million sqm in the same period in 2012, providing adequate ground for it to build on its ambitions.

Meanwhile, the group has put in place standardized operation models for the units, covering all aspects from land auction to procurement, to ensure proper procedures amid greater autonomy. After Yang named his daughter Yang Huiyan {楊惠妍} as executive vice chairwoman in 2012, four professional managers were appointed to the board over the past year to counterbalance the voting power of the Yang family members.

To further ratchet up sales, it is said that Yang waged an all-in campaign among employees with 0.8 percent sales commission as the incentive. During the second half peak season last year, homes of several Country Garden developments in a number of second- and lower-tier cities in Guangdong, Hunan and Hubei were said to have been sold out within just one month.

The achievements are very impressive, but some analysts are warning that it may be risky if the group attempts to match industrial heavyweights stride for stride simply for the sake of sales feats. They believe it will be good if Country Garden takes a pause for a health check and dispel any concerns about its super-high growth speed.

Some cite the alarming example of Sunco {順馳地產}, which claimed to surpass real-estate titan Vanke in terms of sales within three years but ended up in dismal bankruptcy in 2006 following irrational expansion.

Country Garden’s sales force has seen a dramatic increase of 10,000 in head count during the first half last year. Operational costs also ballooned 80 percent.

– Contact the writer at frankchen@hkej.com

RC

 

EJ Insight writer

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