Charoen Pokphand Food
Kitchen of the World
(FDI)
Foreign Direct Investment
Kitchen of the World
What is FDI?
Internationalization strategy
Developed countries will benefit from natural resource, cheap labor, and avoid trade barrier.
Developing countries will benefit from capital, knowledge and technology.
Does not include stock exchange investment
Horizontal FDI
Vertical FDI
Conglomerate FDI
Types of FDI
Horizontal FDI
Firm will invest in the same business as the firm does in their own countries.• Example: Toyota factory in Kentucky, United
State
Forward and backward• In forward vertical FDI, the firm will play a role
as a supplier and send finished goods through subsidiaries or dealers to host countries.
• Example: Volkswagen sell though many car dealer instead of using only one main dealer.
Vertical FDI
Forward and Backward• In backward vertical FDI, the firm will invest in
the industry that support their business.• Example: Ford Company build engine factory in
Mexico in order to decrease their cost.
Vertical FDI
It is the integrate investment between horizontal and vertical.• Example: Hong Kong firm set factory in china
and produce nonrelated product.
Conglomerate FDI
Methods of FDI
Greenfield• Begin everything from zero
Ex: Buying land
Mergers and Acquisitions• Joining between two firms
Ex: Buying local firm asset
Pros & Cons of FDI
Pros• For developed countries
Decrease cost and increase profit
• For developing countriesCapital, knowledge and technology
Cons• The host countries may lose their natural
resources because of non strict laws.
Effects of FDI
Stimulate nation economy Stability of FDI Social development Infrastructure development and technology
transfer “Crowding in” and “Crowding out” Scale and pace of investment Skewed distribution
Kitchen of the World
Company Profile
Brief Overview
Established in 1978Agro-industrial BusinessCore Business• Animal Feed• Farming
Two Main Operations
Thailand• Manages all operation in Thailand• Distributes in domestic
Overseas• Overseas Operation in 11 countries
3 Main Product Categories
FeedFarm• Breeding, Farming, and basic meat processing
Food• Semi, fully cooked meat, and frozen products
Products of CPF
Consumer products• Ready-to-eat products• Ready to cook products• Fresh products
Agricultural products• Feed• Breed
Consumer Product
Ready-to-eat& Ready to cook products• Appetizer, and Ready meal
Fresh Products• Chicken• Eggs
Consumer Product
Agricultural Product
Livestock Feed• Powder• Pallet• Concentrate
Agricultural Product
Feed• Leader and Pioneer• Over 600 Feedmill plants• High Quality Feed
Agricultural Product
Breed (Farm)• Leader in the research• Modern Farming system• Branch all over the countries
Kitchen of the World
Requirements Considering FDI
Factors to Consider
Assessment of internal resources
Competitiveness
Market analysis& Expectation
Assessment of Internal Resources
Internal resourcesInternal supportDomestic performance
Competitiveness
Competitor• How well they do• Market share
Competitive advantage• Comparison
Market Analysis & Expectation
Market research• Local regulations• Local preferences• Customer groups
Scenario Analysis• Worse case
Kitchen of the World
CPF’s Historical Development
Charoen Pokphand Group
Found by Chia Ek Chor and Chia Seow Hai in 1921
Started a small shop “Chia Tai Chung”
Expanded Business to Hong Kong, China, Malaysia and Singapore
International Trading(1921-1954)
In 1954, Jaran started feed business known as “Charoen Pokphand”.
Thai Economic Development Plan Dhanin worked for the government’s
slaughterhouse (1958-1963)General manager CEO
Mr. Dhanin Chearavanont
Animal Feed(1954-1970)
Poultry farming Joint venture (60:40) with Abor Acres “The contract farming system”. CP became a major player in agro-industry
Integrated Agro-Industry(1970-1979)
Sausages & Meatballs“Chester Grill” Shrimp Farming Siam Makro & 7-11 Infrastructure Sector Cable TV Network
Future Integration & Diversification(1980s-Present)
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
1994
1995
1996
1996_x000d_
1997
Frozen Shrimps Exported (1994-1997) (Million US$)
Source: Bank of Thailand
Sausages & Meatballs“Chester Grilled” Shrimp Farming Siam Makro & 7-11 Infrastructure Sector Cable TV Network
Future Integration & Diversification(1980s-Present)
Kitchen of the World
CPF’s International Expansion
International Expansion
CPF invested in 11 countries around the world:
TurkeyTaiwanChinaIndiaIndonesiaPhilippine
MalaysiaVietnamRussiaEnglandLaos
Strategy • A major food producer in the world• Expand distribution channels • A country that has high rate of population• Research and development
International Expansion
Main Products • Chicken feed• Breed farming, livestock farm and meat
process manufacturer• semi-cooked food and ready-to-eat
International Expansion (Turkey)
The biggest and most successful nation of CPF’s FDI is in Taiwan, called “CPE”.
One of the leading manufacturers in Taiwan Gain major market shares “Ready-to-eat” is very popular
International Expansion (Taiwan)
Mr.Dhanin Chearavanont stated that :
International Expansion (China)
“CP’s investment in China focuses mainly upon agriculture. Whether it is producing animal feed, or raising livestock such as pigs, the latest technology and management systems are utilized.” (Dhanin, 2011)
Highest rate of population and potentials.Main products are feed, farm and food.CPF just took over CPP (Second largest
market shares in China) and become the major shareholders (74.18%).
It will boost the net profit and enables growth in the future.
International Expansion (China)
Second largest rate of population.Government supports foreign investors.Main products are feed and farm. CP brand in India is well-knownTrade with local wholesalers and retailers
International Expansion (India)
Some products in domestic consumption, supplies are less than demands.
International Expansion (India)
Kitchen of the World
Characteristics to the Overall Growth and
Internalization Process
Fully-Integrated Process
Understanding Market
Finding Good Strategic Partner
Characteristics
The ability to integrate everything from feed material production to retail distribution channels.
Fully Integrated Business
Fully Integrated Business
Fully Integrated Business
Understand markets in developing countries• Creates opportunities• Invest in developing countries• Marketing and distribution strategy• “Know-How” > “Know-What”
Understand Markets
Strategic Partners
American agricultural multinational “Abor Acres”– Modern technology– Import chicken breeding stock from USA– Large scale Production– More involved in international Market
American Company “Dekalb Co.”– Reduce trade barriers– Research and development of green bean and maize breeds
Japanese Company “Mitsubishi Corporation”– Major target market for shrimp exportation
Kitchen of the World
Oversea Investment Risks
R I S K
Foreign countries’ rules and regulationsEconomic conditionsPolitical changesMinimum wageForeign exchangeEtc.
Oversea Investment Risks
Investment Policy: Control and Follow-up system• Appointments of Representative of Managing
Director and Finance executive
Conduct feasibility studies thoroughly• Ensure that the investment is profitable and it is
worth the risk.
Meetings in Thailand with Overseas operation management teams (Every 6 months)• Reviewing performance and updating plan.
Risks Management
“High risk, High return”
Kitchen of the World
Operating Results
Thailand Operation
Oversea Operations
Operating Results of Each Business Line
Conclusion
Thank You!