Improve The Management, Conduct Strategic Transformation
Late 1990s, as the state lessened the restrictions on import and export operations and policy-favor no longer existed, the basis of Sinochem’s traditional foreign trade operation was essentially crumbled. In 1998, when the Asian financial crisis was getting worse and China’s oil and fertilizer operating system underwent significant change, Sinochem faced many problems accumulated in its long-time expansions, which caused severe payment crisis.
During the crisis, while seeking support from the State Council and related ministries and committees, Sinochem took the initiative in exploring an extensive range of financing channels to find its way out, with an attitude that it should be responsible for the nation and the history. Finally, Sinochem realized the extension of USD 200 million US commercial bills, restructured the external debt of China Foreign Economic and Trade Trust Co., Ltd., and called on the staff to get over the difficulty through reduction of salary by 15%. The above efforts resulted in mitigation of pay-off pressure, maintenance of Sinochem’s image and goodwill, recovery of its credit line and the end of payment crisis.
Surviving from the payment crisis, Sinochem thought seriously of the root cause of this crisis, took a series of significant actions among which were changing the raw and out-of-date management philosophy and management mode that was used under a planned economy, abandoning the import and export agency mode that relied purely upon policy monopolization and carrying out an overall and systematic reform against its value proposition, development strategy, management system, operation mode and system and its staff troop, to reconstruct the vital “gene” of Sinochem, and create a new Sinochem.
On the one hand, starting with “stop hemorrhaging of crisis”, Sinochem launched the “Management Improvement Program” which had a profound influence on future development, to initiate bold and decisive reform. The company introduced operating philosophy and value proposition that complied to the requirements of market economy to construct a new mental outlook of Sinochem’s staff; subjected its affiliates to wide-scale cleaning up and rectification, merging and restructuring, with the focuses on downsizing overdue account receivable and bad investments, to reshape the development frame of its key businesses; formulated step by step rigorous and standardized bylaws, which strengthened the control ability of the head office and formed a well-established management system and internal control mechanism appropriate to market competition.