Delivering Services for China's Ageing Population, May 2010

Global Young Leaders Programme
China Project – June 2010
Business Plan
Elderly Healthcare in China
Hetong Senior Citizen Welfare Association

1

Table of Contents
•
•
•
•
•
•
•
•
•
•
•

Executive Summary
Objectives
Background to Elderly Chinese Market
Hetong Introduction
Business Model
Social Impact
Sales and Marketing
Implementation
Risks
Recommendation
Appendix

2

3
6
8
13
24
57
62
70
80
82
84

Executive Summary

•

This document contains recommendations for Hetong Group in order that they may
achieve their objectives and mission, “To provide high-quality service to all elderly
people irrespective of health condition and financial position”, as well as promoting
elderly welfare throughout China

•

The results of long term developments in China‟s age distribution driven by the 4-2-1
dilemma are being magnified by increased urbanization and by limitations of the
national retirement system. This creates a urgent need for high quality elderly care
facilities and caregivers

•

Hetong‟s 15 year history of achievements in the area of elderly care are well
recognized by the public and the Chinese Government. They have set the standard in
the elderly health care industry

•

In order to further increase the standards in the elderly health care industry in China
and strengthen the long term future growth for the Hetong Group, the group will
benefit from new commercial operations

4

Executive Summary

• The new commercial company, Hetong China Holdings (HCH), will leverage on
Hetong‟s brand and reputation to establish a national leader with footprints in elderly
care services, elderly care retail products as well as caregiver training
• We recommend HCH to start with a showcase elderly care facility in Shenzhen
• Furthermore, the training and elderly products businesses should be transferred into
HCH to maximize their commercial potential
• Current Hetong operations will benefit from royalties from HCH and used to enhanced
current facilities and further growth. This will go hand in hand with increased support
from the large network of Hetong volunteers
• Thus ensuring sustainability for both Hetong Group and HCH

5

Objectives
•

To strengthen Hetong‟s leadership in the elderly care
industry in China for the next decade

•

To propose a commercial viable business model that will
generate attractive returns

•

To identify potential opportunities to serve the fast growing
elderly population in China in relation to Hetong‟s core
competence

•

To ensure Hetong‟s long term sustainability

7

BACKGROUND TO ELDERLY
CHINESE MARKET
8

The Chinese Elderly Population
•

Estimated Chinese population by 2050:
1.4bn of which:
–
–

•

Traditional Chinese views on the elderly
–

•

above age 60 : 440 mn
above age 80 : 32 mn
The elderly will be looked after by their
children and remain in the family home

Challenges for China
–
–
–

–

(Age)

Lack of healthcare services for elderly,
especially in small cities and villages
Lack of elderly healthcare professionals
Due to urbanization, young adults are
moving towards the cities for work elderly left behind
With the 1 child policy, 1 child looks after 2
parents and 4 grandparents, with all
associated time and financial constraints (42-1 dilemma)
Source: United Nations Populations Division

9

Government‟s Response to Aging Population
•

Pension System
–
–

Aim to provide universal coverage by 2020
Urban Pension Scheme
• Mandatory: Personal and government/social unified account
• Voluntary: Enterprise complementary annuity and persona
– Rural Pension Scheme
• Newly proposed in 2009 in 10% of China‟s counties

•

Addressing the 4-2-1 Problem
–
–
–

•

Strengthen formal care systems: invest in elderly homes,
reinforce social security systems
Encourage filial piety: care for parents at home
Relax the one-child policy in some places

Other Laws
–
–

Additional 3 million beds planned under China‟s 11th 5-year
Plan (2006-2010)
Guarantee of basic needs, medical insurance and funerals for
rural elderly who has no relatives, no income and no ability to
work

10

Challenges:
Local governments struggle
with
• Low revenue
• Limited resources
• Little capability to execute

Current Market and Competitive Landscape
The elderly care market is still in its infancy:
• Care homes:
Ownership

Target Market

Av. cost per
bed/month

Private

Rich elderly

2,000 ~ 7,000RMB

Government

All elderly

900 ~ 1,500RMB

Others

Low-income elderly

500 ~ 1,000RMB

• Caregivers:
– Few caregivers in China as profession seen as
unprofessional and lowly paid
– Non-regulated industry where caregivers are often
poorly trained

• Products for elderly:
– No national leader in the market
– One of the largest untapped markets in China,
predicted to reach RMB 2 trillion by 2020
Source: From interviews with elderly home
directors, Hebei News, 25 Feb 2009

11

Future Market
•

– China‟s elderly population (23% of
total) will be supported by only 51%
who are of working age
– Comparatively, in other less developed
regions only 18% will be supported by
54% of the working age population

•

% of Total Population

China

The elderly population is growing rapidly
across the world compared to the
working age population. By 2050:

The Chinese government has
acknowledged the need for more elderly
care homes, trained caregivers, products
and services
– But the government alone cannot meet
the nations‟ needs

Less Developed Regions excl. China

World

Great potential for growth and
opportunities in the Chinese elderly
care market
<15
Source: United Nations Populations Division

12

16-64

>65

Introduction to Hetong
Hetong Mission

“To provide high-quality service to all elderly
people irrespective of health condition and
financial position”

14

Recognition for Hetong - Awards
• Four firsts
–
–
–
–

•

First German model in China
First training school for elderly care
First to initiate community of alliance for elderly center
First diversified range of products for the elderly

Government recognition
– Central Government bestowed on Mr. Fang and senior members with advanced
party membership titles

•

Standards for elderly care training established and set by Hetong for whole
of China

•

Appointed by Red Cross China to lead in reconstruction efforts for elderly
for in the Sichuan earthquake

Incredible recognition in China
15

Hetong Background and Experience
• 15 years of experience
– Founded in Tianjin on April 20th, 1995 by Mr. Fang Jiake

• Comprehensive experience in elderly care value chain:
–
–
–
–
–
–
–
–

8 Elderly Care Homes (4 in Tianjin, 2 in Beijing, 2 in Sichuan)
1 Hospital
1 Elderly Care Catering Service
1 Elderly Cleaning Service
1 Laundry Service
1 Training School
1 Certiifcation Centre
1 Retail Operation

• Experienced Executive Committee

Tianjin Yan‟an Hospital

– Old Party Leaders, Scholars, Experts, Entrepreneurs, Workers and Public
Leaders

Unrivalled experience in China
16

Intoduction to Hetong
Current Hetong Group Network
•

Hetong Foundation
– Established in 2007
– Donations from individuals &
companies
– Scholarships / bonuses to
caregivers
– Alliance of >1000 elderly homes
across China
– Donors include:
• Chinese Red Cross Foundation
• Jet Li One Foundation Project
• China Foundation for Poverty
Alleviation
• Narada Foundation
• Tianjin Golden Bridge Welding
Materials Group Co., Ltd

17

Current Hetong Group Network
•

Networks with universities / schools
– Hetong provides training and internships to:
• Tianjin University of Traditional Chinese Medicine
• Tianjin Medical College
• Tianjin Hongxing Vocational Secondary School
• Tianjin Tourism School Bureau of Labor
• Nankai University
• Tianjin University of Technology

•

Other Networks
– Hetong shares expertise, experience and training with other organizations:
• China Charity
• China Social Welfare Association
• National Union of Long-term Care

Hetong has a strong, established
network
18

RMB m

Revenues and Costs
35

Revenues
30
25

Total Costs

20
15
10
5
0
2005

•

•
•

2006

2007

2008

2009

Hetong‟s current revenues‟ breakdown are as follows: 55% from elderly homes, 18%
from hospital, 10% from catering, 11% from laundry, 4% from elderly products, and
3% from training
Over the past five years, Hetong‟s total revenues grew at an average CAGR of 16%
while total costs grew at an average CAGR of 18%
The growth rates for variable costs and fixed costs were 15% and 44% respectively
19

Segment Revenues and Costs
Avg Rev

Avg Total Costs

•

18%
18%
10%

11%11%

9%

8%
4%

Elderly
Homes

Hospital

Catering

Cleaning
Management
& Laundry

3% 2%

Elderly
Products

Training

20

Elderly Homes, Catering,
and Training have lower
cost as percentage of
total with respective to
their revenue percentage

•

55%
52%

Elderly Products business
has a cost two times of
the revenue. It needs to
address the revenue and
cost relationship

Breakdown of Costs
45%

42%

40%
35%
30%
25%
20%

15%
15%
10%

8%
5%

5%

3%

0%
Salary (工资)

Rental (房租)

Cleaning &
Management (清管
洗费)

21

Utilities (水电气费) Staff Accomodation (
员工)

SWOT Analysis
Strengths

Opportunities

• Has set the national standard for elderly care
training
• 16 years in the management of elderly care
facilities
• Local knowledge in several cities
• Hetong‟s brand influence in the elderly care
work
• Strong network of social associations
• Close relationship with local government

• Increasing focus of elderly care by the
government
• Exponential growth for patients
• Increasing need for well trained caregivers
• Leverage on the Hetong brand for marketing
• Leverage on network of elderly home directors
• Better ways of selling products/ services to the
elderly
• Ready pool of investors willing to invest/ try the
market

Weaknesses

Threats
• Lack of standardized laws for elderly care
• China market being very attractive to foreign
competitors
• Allowing social work to distract business focus
• Escalating costs of operations/ land

• Challenging industry to work in
• High staff turnover
• Lack of middle management/ succession plan
• Unclear business expansion plan
• Lack of business oriented expertise/ focus
• Management stretched by many non-core
businesses
22

Current Challenges
•

The company currently faces
challenges including:

Hetong Group

– Difficulties in recruiting sufficient
high-quality staff to meet the
facilities demands

Elderly Homes
Hospital

– A client base that is extremely
price sensitive, leaving little room
for price increases

Training &

Elderly Homes
Certification

– Limited capital to take advantage
of opportunities and meet needs

Catering

– A small management structure
with a large number of projects
and segments to manage

Laundry
Cleaning
Elderly Products
23

Business Model
Considered Proposals
•

The following business opportunities were considered for Hetong Group before deciding to go
forward with opportunity #1: a formation of the Hetong Group and Hetong China Holdings (HCH)
We decided not to proceed with the other two scenarios, given that they did not maximize Hetong
Group‟s potential nor promote a sustainable business model

•

Strategic
Pillar
Priority
1

2

Market

Opportunity Description

3

X

Located in
Urban Main
Cities close to
Hong Kong

A formation of Hetong Group and Hetong China Holdings with:
Hetong Group: Managing some of the existing businesses including elderly homes,
hospital and laundry
Hetong China Holdings: Managing the new Showcase elderly home named Pearl River
Retirement Village, Training Academy, elderly products, catering and publications

X

Located in
China

A formation of Hetong Group and Hetong China Holdings with:
Hetong Group: Managing the elderly homes and other existing businesses including
hospitals, laundry, catering, elderly products and publications

Hetong China Holdings: Providing Consulting services and training

X

Located in
China

Maintain Hetong Group‟s current operating model and update the facilities to maximize
the operation

25

Business Model
The Proposed Business Structure
•
•

We propose forming two companies: Hetong Group and Hetong China Holdings (HCH). HCH will
be owned by a group of investment partners and make royalty payments to Hetong Group
Hetong China Holdings will provide a social benefit while leveraging off Hetong Group‟s strong
brand and high-quality services to generate a profitable return in a sustainable business model

Hetong Group

Investment Partners

Hetong China
Holdings (HCH)
Operations Include:
1) Existing Elderly Homes
2) Existing Hospital
3) Laundry Services

1) New Investment (Phase 1):
a) Pearl River Retirement Village
b) Training Academy
c) Elderly Products
2) Current Businesses: Publications &
Catering
26

Business Model
Rationale and Benefits
•

•

Hetong Group provides the newly formed Hetong China Holdings with 15
years of experience, a strong brand name, government recognition and high
quality services
HCH will make 8% royalty payments to the Hetong Group. These payments
will be used to strengthen and expand the current social operations
Royalty Payments

Hetong China
Holdings

Hetong Group

Experience, Brand, Government Recognition and High-Quality Services

27

Business Model
Hetong Group
•

Hetong Group‟s remaining operations include:

Existing
Elderly
Care
Homes

Existing
Hospital

28

Laundry
Services

Business Model
Hetong Group – Proposed Changes
Training

Catering
& Elderly
Products

Update
Facilities

• Training and Certification: A new Training Academy will be formed under Hetong China
Holdings. This Academy will be the headquarters for all training and certification

• Catering & Elderly Products: The catering and elderly products businesses will be
transferred to Hetong China Holdings, where they will be re-established and expanded

• Update Facilities: The existing elderly homes need to be updated in order to maximize
efficiency. This includes re-decorating and re-branding of the facilities

• Property Management: Phasing out of property management because its not a core
business unit and has weak financials. Hetong Group should only focus on core
businesses
Property
• Staff: Reassign staff to other business units including elderly care and laundry. Training
Mgmt
will be provided where necessary

29

Business Model
Hetong China Holdings
•

•

Mission: To provide international standard high-quality
services to the middle and lower upper income group to ensure
a profitable and sustainable business over the long term
Hetong China Holdings structure:
Hetong
China
Holdings

New Investment (Phase 1):
1) Pearl River Retirement
Village - Showcase Elderly
Home
2) Training Academy
3) Elderly Products

Current Businesses:
1) Publications
2) Catering

30

Business Model
Phase 1: The Pearl River Retirement Village

•

Premium
Facilities

•

Premium
Excursion

•

Premium
Care

•

Premium
Meals

31

Business Model
Phase 1: The Pearl River Retirement Village
•
•

Chosen Location: Shenzhen
Detail Information about Shenzhen
Current Situation
No. of population

8,277,500

No. of elderly

520,000 (6.2%)

Total no. of elderly home (No.)

29 (25 gov run ,4 private run)

Total no. of bed

2,733

–

Elderly homes in Shenzhen are fully occupied with a waiting list

–

Hong Kong elderly would be a potential market for Shenzhen elderly due to competitive
rates (average room rate is RMB 2,500 per bed per month) when compared with HK‟s
elderly home rate of at least RMB 4,500 per bed per month

–

Hong Kong elderly population was 1,23 Million in 2009 which is 17.5% of the total population

–

Shenzhen government is providing incentives to HK elderly home service providers for them
to setup business in Shenzhen

–

In 2004, the Hong Kong and Guangdong government agreed that the medical insurance and
retirement pension fund are transferrable

32

Business Model
Phase 1: Showcase Analysis
Futian District Social
Welfare Centre Elderly
Home
Private/ Government

Option 2 – Rent
The Pearl River
Retirement Village

Option 1 - Build
The Pearl River
Retirement Village

Government

Private

No. of Bed

200

400

200

Room Size m2

20

21

21

Occupancy

100% with waiting list

Expected 90%

Expected 90%

Positioning

Mid to High End

Mid to High End

Independent

Semi-dependent, Hong Kong and Shenzhen people

Doctors and Nurses

Yes

Yes

caregiver‟s qualification

TBC

Trained by Hetong and Hetong certificated

Recovery activities, gym,
recreational rooms, library,
catering, laundry

Catering, cleaning, laundry, recreational rooms, library,
German made high tech bathtub, German design bed,
recovery room

No. of Elderly per room

2-3

1

caregiver: Elderly Ratio

1:6 – 1:7

1：3

Target Customer

Facilities

33

Business Model
Phase 1: Showcase Analysis
Futian District Social Welfare
Centre Elderly Home

The Pearl River
Retirement village

Independent Elderly
Rental (RMB per bed per mth)
Care Fee (RMB per elderly per mth)
Total

1,049
450
1,499

3,000
1,800
4,800

1,077
770
1,847

3,000
2,500
5,500

1,189
1,260
2,449

3,000
3,500
6,500

Semi-Independent Elderly
Total

Fully-Dependent Elderly
Total

34

Business Model
Care Centre : Model Assumptions
Rent

Build

NPV (@10%)

21,905

81,967

ROI

24.2% (5y)

11.5% (10y)

Initial Investment

16,000

77,280

Rooms

200

400

(„000 RMB)

21m2

Roomsize
Care Givers

60

119
1:3

Average Care Ratio

Ramp up

60%-90% 6 months

50%-90% 12 months

Average Caregiver Fee

2240 RMB / month

Average Room Rate

3000 RMB / month

Rent m2 per month

30 RMB

Land

14,490

Building

62,790

Refurbishment
- No Inflation or property appreciation / depreciation included,
- Including Revenue Tax (5%) and Corporate Profit Tax (25%)

Every 36 months

Simple model with market conform assumptions
35

Business Model
Care Centre “Rent” Sensitivity
Profit (RMB m)

IRR (5 years)

10

34%

8
24%

6
4

11%

2
0
Base

Optimistic

Pessimistic

Pessimistic

Base

Pessimistic

Base

Optimistic

Utilization

40%-80%

60%-90%

80%-100%

Rent m2/month

+50%

30 RMB

-50%

36

Optimistic

Business Model
Care Centre “Build” Sensitivity
Profit (RMB m)

IRR (10 years)

25

18%

20
12%

15
10

6%

5
0
Base

Optimistic

Pessimistic

Pessimistic

Base

Pessimistic

Base

Optimistic

Utilization

40%-80%

50%-90%

60%-100%

Refurb m2

+10%

6,500 RMB

-10%

37

Optimistic

Business Model
Phase 1: Training Academy
•

Facts: Majority of China's private nursing homes are understaffed. There is a need for about 10
million nurses and specialists to look after those who cannot care for themselves, and 220,000 staff
are needed in elderly homes

•

Relationship with Government:
– Hetong has been recognized for its pioneering
role in China
– Hetong has been invited to speak and participate
in leading government conferences and forums

•

Considerations:
The following areas require support from the government:
– The regulation or policy of required certification in caregiver industry
– Authorization of certification
– Authorization of the design of national curriculum and text books
– Authorization to conduct training for government elderly homes

38

Business Model
Phase 1: Training Academy
•

Elderly Care
Training School Location: TBD
Rental area: 1000 square meters, 8 class
rooms, 4 skill training rooms, 1 meeting room,
2 offices, etc. 2054 training students per year,
21 total sessions per year, 16 teachers
– Level-1: Basic Nursing
– Level-2: Medium Nursing
– Level-3: Advanced Nursing
– Level-4: Super Nursing ( to serve customers
with special requirements )
caregiver
Training

No. of Students per
Class

No. of Classes per
Sessions

No. of Sessions per
year

No. of Teachers

Level-1

41

3

12

6

Level-2

37

2

6

4

Level-3

25

2

2

4

Level-4

25

1

1

2

Elderly care training is the main source of revenue for the training academy
39

Business Model
Training Academy
•

Conference and forums
Conference and forums have the potential to
be very profitable and are a good resource in the
future if planning is optimal and coordinated
with government and other organizations in
this field
– International conference on global elderly services
– National conference on elderly services
– Local forums about China elderly services

40

2.5
1.5

Business Model
Training Academy Financial Analysis
RMB m

2.4
2.3

20%

Total Revenues
Total Costs
Net Profit Margin

17%

2.2

16%

15%
14%

2.1

14%

12%

2.0

18%

12%
10%

1.9
1.8

8%

7%

6%

1.7

4%

1.6

2%

1.5

0%
year 1

year 2

year 3

year 4

year 5

Accumulated profitability shows potential growth
41

Business Model
Phase 1: Elderly Products
Market Potential
• Year 2020 – 500 million consumers in China are aged over 50 years
old
• Year 2025 – projected RMB 2 trillion (US$293 Billion) for elderly
products market

Product Mix
• High quality imported European products
• Locally manufactured quality products

Price Position
• Improved profit margin based on better market knowledge
• Locally manufactured Chinese products, influenced by the high
quality European model presents future opportunity for price
reduction, increased quality and/or increase of profit margin
Source: Huffington Post, January 31 2010

42

Business Model
Phase 1: Elderly Products
Target Market
• Consumers within the Hetong Elderly Homes – on site retail store
• Via health care distributors
• Direct to hospitals, elderly care homes and retail chains

Distribution
• Third party warehousing of stock
• Third party distribution model

Sales & Marketing Tools & Strategy
• Display/retail store at joint venture site
• Point of sales material
• Magazine/newspaper advertisement – health care/retail catalogues etc.
• Trade shows, seminars

43

Business Model
Elderly Products Financial Analysis
RMB
100,000

80

73

Total Revenues

70

Total Costs

60

Net Profit

30

47

47

50

38

38

40

59

59

30

30
25

20
10
0

3

5

7

9

year 1

year 2

year 3

year 4

Average profit margin 14%

44

11

year 5

Business Model
Financial Analysis – Gross Revenue (Rental Case)
RMB m

25
School

facility

retail

Total Revenues

20

Revenue
CAGR
School

5

0
year 1

year 2

year 3

year 4

45

year 5

2%

Retail
Total
Revenues

10

2%

Elder Home

15

20%
6%

Business Model
Financial Analysis – Gross Revenue (Build Case)
RMB m

50

School

facility

retail

45

Total Revenues

40
Revenue
CAGR

35
30

School

3%

25

Elder Home

3%

20

Retail
Total
Revenues

17%

15
10
5
0

year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10

46

6%

Business Model
Financial Summary (Rental Case)
RMB m

25

45%
Total Revenues

Total Costs

Net Profit margin

41%

20

40%

37%
15

35%

10

30%

30%

30%
27%

5

25%

0

20%
year 1

year 2

year 3

year 4

year 5

Rental Case shows an average 32% net profit margin and an average 43% profit
before tax margin over a five year horizon
47

Business Model
Financial Summary (Build Case)
RMB m

50
57%

45

40

60%

Total Revenues
Total Costs
Net Profit margin

55%

51%

50%

35
30
25

45%

45%
41%

40%

40%

38%

20

37%
35% 35%

15

31%

30%

30%

10
25%

5
0

20%
year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10

Build Case shows an average 40% net profit margin and an average 54% profit before tax
margin over a ten year horizon due to zero rental charges
48

Business Model
Royalty Payment to Hetong
40
Projected Royalty Payment (Build Case)

100,000
RMB

35

Projected Royalty Payment (Rental Case)

35

30

26

30

29

28

27

34
31

32

25
20
20

15
15

16

17

18

14

6% CAGR

10

5

0
year 1

year 2

year 3

year 4

year 5
49

year 6

year 7

year 8

year 9

year 10

Business Model
Key Financial Highlights
• Rent: IRR over 5 years: 24%
• Build: IRR over 10 years: 11,5%
• Royalty Payment of 8% Rev
• Use Cash from Operations  No Additional Cash Call

• Investment: Rent 16MM or Build 77MM RMB

Unique Opportunity  Exceptional Reward
50

Business Model
Why Should You Invest?
 World Class Management

 15 years of experience

 Relevant Skills

 Health Care industry related

 Past Performance of Team

 “Best health care in China”

 Competitive edge

 Brand and Experience

 Expansion opportunity

 Scalable in Tier 1 and 2 cities

 Extracting wealth

 Secondary Sale, Dividends

 Synergies

 Elderly Care and Retail

51

Business Model
Corporate Governance
• To provide structure to manage/ monitor/ guide/ review the business to ensure that it is
running/ being managed in a sustainable professional manner
• The below are highlighted to be crucial for Hetong to address

7 key areas to focus
General business
principles – Hetong Group

Management monitoring

Hetong China Holdings –
Hetong Group

Ombudsman

Systems and Processes

Audit function

52

Legal compliance

Business Model
•

Objective
−

•

To ensure transparency and objectiveness in decision making and the use of
funds
− With 2 separate management teams and 2 sets of accounts independent of
each other

Management of companies
−
−

Management of Hetong Group will remain with Mr. Fang
Management of Hetong China Holdings will be with a newly hired CEO reporting
directly to the Board of Directors

Hetong Group

Hetong China Holdings

53

Business Model
Hetong China Holdings Organization Chart
Executive Committee
CEO
Director Elderly Home

Director Training Academy

Care givers

Trainers

Admin

Retail Director
Sales/ Marketing

HR, IT, Admin
Manager

Quality Control
Manager

Executives

Executives

Executives

Finance
Manager
Accountants

Admin

Hetong Group
Services
outsourced to

54

Hetong
China Holdings

Cleaning & Laundry

Catering
Media/ publications

Business Model
Role of Volunteers
•

Organize activities / services
–
–
–
–

•

Exercise for the elderly
Conversations with the elderly
Haircutting and photography services
Entertainment for the elderly

Elderly Care
– Psychological care
– Massages
– Simple daily care e.g. serving water

•

Help to create awareness on elderly care
– Raise funds for care homes
– Website design and publications
– Health awareness talks

Leveraging on
student
volunteers /
educators

55

Business Model
Leveraging Volunteers – Key to success
Dedicated
volunteer
management
team

Build network and
design
programme for
volunteers

More focused
staff at Hetong

Improve the use
of volunteers and
their skills

Volunteers raise
awareness of
Hetong and
elderly in China

Volunteers raise
funds for Hetong
Group

Increase brand recognition

Increased use of
Hetong products
and services

Better funded
Hetong

56

Volunteers further
assist staff

SOCIAL AND
ENVIRONMENTAL IMPACT
57

Social and Environmental Impact
Community Benefits
Elderly
• Access to quality care and facilities
• Maintain dignity in old age
• Enjoy life to the full

Family
• Lessen family burdens of taking care of aging
parents
• Relieve time burden to concentrate on career and
next generation
• Reassurance of quality care for their parents

58

Community Benefits
Volunteer
• Change culture and views on the elderly caretaking
industry
• Raise awareness of elderly care
• Cultivate a „sense of charity‟ towards others
• Transfer of traditional culture from elderly to the young

Caregiver
• Employment opportunities in local community
• Vocational training of elderly care

59

Leveraging Government Support for the Elderly
• Promotion for the elderly caregiving
industry
• Standardize regulations/ policies for
the elderly caregiving industry
• Special subsidies for the elderly
• License to operate
• Land rights
• Preference on land for social
enterprises
• Policies to encourage volunteers
program for the elderly

60

Green Building
•

Elderly homes and training centres will be designed
to be green buildings in order to reduce the negative
impact on the natural environment by:
•

Efficient use of energy, water and other resources

•

Reducing waste, pollution and environmental
degradation

•

Protecting occupant health and improving employee
productivity

Example: LEED Certified buildings
•

Building design and energy systems are optimized
for minimum energy consumption
•

Expected payback of additional construction costs in 5
years due to electricity savings over and above 50%
energy saving targeted

61

Sales & Marketing
Corporate Branding Profiles
Pioneer

Recognition

Experience

15 years in health
care

Endorsed by
Ministry of Civil
Affair – National
Accredited
Training Program

Operating in 3
different Provinces

Industry leader

First organization
called by Red
Cross for helping
elderly in Sichuan
earth quake

Cross section of
health care
services

Setting the benchmark in QUALITY elderly services
63

Sales & Marketing
Corporate Profiles - HETONG CHINA HOLDINGS

•
•
•

The logos represent the progression through life, from young to old
Emphasizing that whilst we move forward we have support and confidence from those
close to us
In Chinese culture red signifies health, happiness, harmony, peace and prosperity;
reflected its heavy use in the logos
64

Sales & Marketing
The Pearl River Retirement Village Profile

Disclaimer: These are the suggestion only and should be reviewed by a PR firm & branded in Chinese

65

Sales & Marketing
The Pearl River Retirement Village Profile

宝珠乐龄村
Disclaimer: These are the suggestion only and should be reviewed by a PR firm

66

Sales & Marketing
Sales & Marketing Tools
1) Multimedia – corporate video incorporating social awareness
•

Raising social awareness while increasing commercial viability

•

Inclusive of live testimonial from the existing customers (many good examples)

•

Corporate video will be on display in the center‟s lobby, in high end retail stores,
at trade shows, at exhibitions and at seminars


67

Sales & Marketing
2) Online – website with content management system, ecommerce

Comprehensive website
including ecommerce, health
information and
donation opportunities


68

Sales & Marketing
3) Print collateral – poster, signage, brochure, corporate ID

Representing
standards and
values

A strong brand
identity adds
tremendous value to
a business


69

Sales & Marketing
Sales & Marketing Strategy & Budget Per Year
Marketing Strategy
Pearl River

Retail

Training

•Advertising
•Events

•Advertising
•Direct
Marketing

•Advertising
•Direct
Marketing
•Events

Advertising
RMB 54,000
9%
Direct Marketing
RMB 35,670
6%

Events
RMB 500,000
85%

Total Budget Per Year
RMB 589,670

70

Implementation
Phases

Phase 1: Hetong China Holdings
Corporate

Facility, HR,

Establishment

Products Delivery

Month 1-3

Month 4-6

• Business plan presentation

Key Activities

• Investment decision
• Company registration with
new name

• Training, resourcing
• Agree on launch site and
needed resources

• Construction and hiring
commences
• Align with business on the
targeting/channel
approach for Hetong China
Holdings

• Agree on overall project
plan including
• Finalize new marketing and
marketing/communication
sales plans to address
plan
customer experience &
service requirements
• Design pilot marketing and
community campaign plan
• Staffing procurement
framework
• Commence on Hetong
improvement plan
72
Note: MCA resource allocation front loaded

Launch
Year 2
• Launch showcase facility in
Shenzhen or other urban city
option
• Implement customer service
training
• Launch corporate academy
• Enhance IT, operations and
risks to meet conversion plan
requirements
• Track results and analyze data

Implementation
Phases

Hetong Group
Update and
Renovate

Month 1-3

Key Activities

• Renovate and update
facilities with internal
and external vendors
• Maintain ongoing
elderly
care, laundry, and
hospital operations
• Re-assignment / Retrain existing property
management staff for
other functions / roles
with laundry and
cleaning

Expand
Programs

Month 4-6

Launch Volunteer
Management
Program

Month 7-12

• Hire Head of Volunteer
Management Program

• Advertise programme / get
volunteers

• Expand laundry service
with the new property
management staff

• Assign tasks to volunteers

• Coordinate with new media
sister company
• Design volunteer programs
/ briefing / database

73

• Expand community reach
and communication and
media messages

Implementation
Sales & Marketing
1)

Advertising (30 seconds block)
Type

Frequency

TV Commercial

14 Days

Every Quarter

Radio Ads
2)

Duration

28 Days

Every Quarter

Direct Marketing (Based on iContact & China Unicom – 100,000)
Type

Frequency

Email Marketing

Constantly

Year Round

SMS Marketing
3)

Duration

Constantly

Year Round

Duration

Frequency

4 Days

Every Half Year

Once

-

Events (Quotation Received)
Type

Road Show
PR Firm (Launch)

74

Implementation
• Existing
• Existing corporate governance structures in Hetong Group are a combination of trusts and
systems and processes

• Implement
• The monitoring tools and general business principles have to be updated
• Need to create an ombudsman, the audit function and the annual review plan of systems and
processes

To update
General Business
Principles/ Code of Conduct

To set up
Ombudsman to hear/
address complaints

To set up
Annual review of
Systems & processes
Internal audit function

Business monitoring tools
like balance scorecards
Start
(within 1st month)
Complete in 2 wks

(by the 2nd month)
Complete in 1 wk
75

(2 months before yr end)
Complete in 1 mth

Implementation
Human Resources Hiring Plan
• Hetong Group has sufficient staff covering all critical functions and their
systems/ processes are sufficiently clear

• The key would be the identification of the CEO

Recruit CEO and
senior staff

Prepare division
functions/ plans

Hiring
of staff

Start
Week 1

Week 2

76

Week 3

Week 4

Implementation
Phase 2: Hetong China Holdings, Year 3 to 5
• Open up to 3 new facilities in main urban
cities

• Expand the Training Academy into at least
3 new regional main cities

• Expand retail stores and sales channels
• Optimize opportunities via co-branding
and other alliances such as a loyalty
credit card co-brand card

77

Expand
Network to
Shanghai /
Guangzhou
etc.

Training
&
Certification
Academy

Expand
Retail Shops
& Website
Selling
New
Revenue
Streams: Cobranding and
Alliances

Implementation
Phases

Phase 2: Hetong China Holdings, Expansion
Corporate

Facility, HR,

Establishment

Products Delivery

Month 1-3

Month 4-6

• Business plan presentation

Key Activities

• Sites selection and
procurement
• Help finalize project budget
including
capex, A&P, collaterals, trai
ning, resourcing

Launch
Year 2

• Construction and hiring
commences

• Launch new facility in
Shanghai/ Guangzhou etc.

• Align with business on the
targeting/channel
approach for Hetong China
Holdings

• Enhance IT, operations and
risks to meet conversion plan
requirements to fit expanded
New Corp offerings

• Agree on overall project
• Agree on launch sites.
plan including
marketing/communication
• Review resource availability
plan
and procure senior
management staff to be
• Commence vendor
suited to new site
selection in new site

78
Note: MCA resource allocation front loaded

• Track results, analyze and
analyze new products to suit
new location

Implementation
Projected 10 Year HCH Accumulated Net Profit
Our 2025 vision:
To be the premier elderly health
provider in China with a
balanced, end-to-end set of
elderly care services delivering
diversified
revenues
and
offering new products and
services which include elderly
 Homes
 Hospitals

 Catering
 Laundry
 Social Services

223.5
RMB m

Building
Option

105.3
RMB m

15.6
RMB m

Year 5
Accumulated
Net Revenue

Year 1
Launch of
First
Location

6 HCH Loc
8 Hetong Loc
Retail Products

Must include
Upfront
Equity
Investment

YEAR 10
Accumulated
Net Revenue

29.5
RMB m

Sales
Wins, Product
Gains, and
Projected Organic
Growth

65.5
RMB m

Rental
Option

6.4
RMB m
79

Implementation
Projected Location Growth
9
8

北京
Beijing

7
6
5

上海
Shanghai

4
3
2
1
0

深圳
Shenzhen
Year 1

Year 5

Year 10

Disclaimer: These are only suggestion only and not set target cities

80

Year 15

Risks
Risks

Mitigation

• High staff turnover/ low retention rate/ difficult
to attract new talent as the industry is new in
China/ the work is demanding

• Improve staff welfare, give heavier weight to
staff with passion for the elderly‟ during the
interview process

• Financial management as there would be
larger sums of money spread over many
locations and many transactions involving
many new people

• Stronger corporate governance model,
transparency in systems/ processes/ decision
making and clear roles and responsibilities for
all staff

• Local government support not forthcoming

• Hetong Group to build and maintain new
relationships with local government officials

• Competitors gaining ground and Hetong
losing influence/ ground

• Marketing to constantly feedback competitor
activities for management to plan/ reflect

• Not anticipating changing regulatory
framework / making poor strategic decisions

• Review existing insurance coverage to check
the adequacy of cover, create an ombudsman
and implement check and balance systems/
processes

82

Recommendations

Point

• The YLP has recommended two financially viable business models to capitalise on the
potential of the growing elderly market. Both options offer a sound return on investment for
any potential investor

To

• The rental option offers a higher and faster return on investment on a smaller
investment, which is clearly detailed in the document

Be

• The building option offers a solid, but more conservative return on investment with the
security of a major asset. The financial projections for this business model do not take into
account the substantial appreciation of the capital asset

Considered

• There is no reason why both business models cannot be undertaken concurrently to
achieve the best result for any potential investor. The cash flow generation from the rental
model can assist in the financing of the building model within a 5-year period. Both models
present an 8% dividend payment on the initial investment

84

Current Hetong Situation
Elderly Care Homes
•

3 Elderly Home Locations: Tianjin, Beijing and Mianzhu
– Tianjin
• Serves as headquarters with 30 full-time staff
• 4 elderly homes with 401 beds, 343 elderly, 123 caregivers
• Rent land and building, privately run under its branding
• Strong reputation and relationship with local Government
• Semi-dependent and fully dependent are core target clients
• More developed than the other 2 locations
- Beijing
• 2 elderly homes with 176 beds,159 elderly and 50
caregivers
• Partnership with local government , profits sharing model
- Mianzhu
• 2 elderly homes with 180 beds, 38 elderly, 7 caregivers
• Partnership with local government to assist earthquake
survivors

Best network in China
87

Elderly Care Home Marketing
- Nearly all business obtained by word of mouth
- Occasional newspaper advertisement for recruitment of staff
- Virtually no marketing strategy due to high occupancy rates
- Publications distributed to members/elderly
- Web site promoting elderly home

88

Elderly Care Home
2009

Beds

Number of
Elderly

# of
caretakers

Total
Revenues

TR PPPM

106
109
103
82
52
452
86%

22
41
37
10
23
133
2/7

1,428,000
1,048,716
1,040,751
772,264
461,602
4,751,333

1,123
802
842
785
740
876

Nanlu （南路）
142
Fengtai (丰台）
126
Huayuan (华苑）
106
Chuanfu（川府）
91
Xuefu （学府）
62
Elderly Homes
527
Including Rental Expenses
Salary (工资)

20%

Cleaning & Management (清管洗
费)

15%

Utilities (水电气费)

7%

Elderly Products

7%

Staff Accomodation (员工)

1,358,804
676,496
846,876
666,000
359,434
3,907,609
4,867,609

1,068
517
685
677
576
720
897

Elderly Homes total revenues per
person per month (PPPM) is slightly
below total cost PPPM (including
rental expenses)

45%

Rental (房租)

Total Costs TC PPPM

5%

89

Laundry and Catering Services
•

Laundry and Catering services
- In house services to service Hetong centers in Beijing and Tianjin
- Employs laid off older workers
- Potential to expand business to public
- Catering services address unique nutritional needs of elderly

90

Laundry Services
Laundry

2005

2006

2007

2008

2009

Average

Revenues

445,052

427,766

632,310

1,192,855

1,526,702

844,937

Total Costs

445,440

464,838

683,149

1,185,296

1,529,384

861,621

Variable Costs

391,440

398,538

555,949

1,011,306

1,273,776

726,202

Fixed Costs

54,000

57,300

106,200

131,990

243,608

118,620

0%

-9%

-8%

1%

0%

-2%

Profit Margin

Revenue Composition
External Cleaning and
Management
Internal Facilities Cleaning and
Management
Washing
Others (其它)
Internal Cleaning and
Management

Salary (工资)
Insurance

19%

Others (其它)

17%

Stationary (文具/物料)

3%

Staff (员工)

3%


41%

56%

2%

31%
30%
27%

12%

Laundry should be outsourced given its consistent negative profit margin
91

Catering Services
Catering

2005

2006

2007

2008

2009

Average

1,456,068

1,212,744

1,677,389

1,619,371

2,344,960

1,662,106

COGS

873,641

666,262

952,214

875,304

1,149,897

903,464

Net Revenues

582,427

546,482

725,176

744,067

1,195,063

758,643

Total Costs

582,124

506,262

719,868

646,735

820,810

655,160

Variable Costs

267,692

381,462

542,868

520,735

612,850

465,121

Fixed Costs

99,232

64,800

129,000

102,000

183,960

115,798

0%

7%

1%

13%

31%

14%

Gross Revenues

Profit Margin

Salary (工资)

50%

Fuel (油/煤)

17%


10%

Stationary (文具/物料)

9%

Cleaning & Management (清管洗费)

5%

Rental (房租)

4%

92

Catering has the highest
profit margin in all segments

Hospital
•

Hospital: Tianjin
– This is a rented facility, serving as the first
private hospital for Hetong in China
– Serves as a home to semi or fully
dependent elderly
– Facilities are designed to accommodate
unique needs of the elderly
– Specially designed Hetong beds, Germanimported bathtubs, special handrails for
bathrooms and amenities are included
– Medium standard of cleanliness
– Received approval from the government to
allow its patients to use their medical
insurance

•

Marketing
– Local community networking

93

Hospital
Revenue Composition
In-Patient with Insurance (医保住院)

58%

Gross Revenues

2,834

In-Patient without Insurance (非医保住院)

11%

Cost of Goods Sold

1,572

Out-Patient (门诊)

18%

Net Revenues

1,262

Seasonal Charge (床/暖/暑)

10%

Total Costs

Others (其它)

3%

Hospital

2005

2006

2007

Per Person Per Month

2008

2009

Average

Gross Revenues

2,305,360 1,383,355 1,539,455 1,459,140 1,980,811 1,733,624

Net Revenues

1,369,144 1,719,772 881,351 1,350,166 1,572,791 1,378,645

Total Costs

Salary (工资)

3,674,504 3,103,128 2,420,806 2,809,306 3,553,602 3,112,269

COGS

983

1,325,896 1,757,799 1,325,914 1,122,353 1,505,295 1,407,451

Variable Costs

784,040 841,799 809,914 567,354

774,831 755,587

Fixed Costs

121,856 436,000 246,000 192,500

355,464 270,364

Inventory
Profit Margin

0
3%

92,020 120,322 550,355
-2%

-50%

17%

0 152,539
4%

Rental (房租)
Others (其它)
Heating Costs (取暖费)

Cleaning & Management
(清管洗费)

34%
30%
15%

7%
7%

-2%

Inventory Management, especially medicine (93% of total inventory) is key to
Hospital‟s profitability
94

Training
•

Locations
– 9 training centers across China (3 centers
in Hebei, 1 in Gansu, 1 in Shaanxi, 1 in
Qingdao, 1 in Anhui, 1 in Fujian and most
recently-opened center in Chengdu
– 15 professional trainers and there are 5
levels of training for caregivers (Beginner
nursery, Medium nursery, Advance
nursery, Beginner and Medium)
– National standard certification

•

Marketing
– Training marketing by word of mouth
– Web site promotion of training

– Training publication
– Collaborate with local universities and
hospitals

95

Training
School

2005

2006

2007

2008

2009

Average

Revenues

187,920

207,405

223,898

89,140

275,997

196,872

Total Costs

183,408

155,860

188,262

172,861

199,442

179,967

Variable Costs

114,568

80,960

110,262

71,861

113,802

98,291

Fixed Costs

40,840

46,400

60,000

83,000

67,640

59,576

2%

25%

16%

-94%

28%

9%

Profit Margin

Salary (工资)

52%

Government Exp (劳动局费用)

13%

Rental (房租)

12%

Marketing (宣传费)

8%

Operating Exp (教材教学支出)

6%

School is a steady operation with an attractive profit margin

96

Elderly Products
•

Elderly Products
− A rented small pilot retail shop in Tianjin
− Products include wheelchairs, beds and
portable toilets, canes, strollers and
paper diapers with different price ranges
to cater the needs and affordability of
different consumers
− Limited profit margin due to lack of retail
locations and marketing

•

Marketing
− One retail site open in Tianjin
− Products sold in retail stores in Beijing
homes
− Web site product list with pricing and
descriptions – no ecommerce
− Discounted pricing on occasions

97

Elderly Products

Revenue Composition
Internal

59%

External

40%

Retail
Gross Revenues
COGS
Net Revenues
Total Costs
Variable Costs
Fixed Costs
Inventory
Profit Margin

Salary (工资)

29%

Rental (房租)

24%

Interest Expenses (还占压资金利息)

8%

Marketing (宣传费)

8%

Cleaning & Management (清管洗费)

2005
2006
1,565,400 461,943
1,020,000 307,327
545,400
154,616
545,070 1,076,251
110,050
34,800
40,840
46,400
240,000
992,736
0%
-596%

3%

2007
651,975
431,473
220,502
737,986
60,000
60,000
571,502
-235%

2008
768,974
480,701
288,274
985,768
93,000
83,000
808,810
-242%

2009
752,020
428,180
323,839
208,599
63,648
67,640
0
36%

Average
840,062
533,536
306,526
710,735
72,300
59,576
522,610
-132%

Inventory management is key to elderly
products‟ profitability
2009 was a very good year for retail

98

Location Analysis
Phase 1: Showcase
Shanghai

Beijing

Shenzhen

Guangzhou

Total Population

14,007,000
(Household
population)

16,447,000
(Resident
population)

8,277,500
(Household +
Resident population)

7,800,000

Elderly population

3,157,000

2,500,000

520,000

1,075,000

(% of total population)

22.5%

15.2%

6.3%

13.8%

No. of Elderly Home

615

339

29

163

No. of Bed

89,859

>40,000

2,733

22,817

No. of Hospital for Elderly

71

-

-

-

No. of Home Base Elderly

-

-

17,754

-

Monthly subsidy from gov for
home base elderly

-

-

253

-

Total no. of elderly on the
waiting list for elderly home

-

30% of the beds
are empty

1,500

-

GDP per capita

80,198

72,663

93,000

>68,000

Annual Disposable Income
(RMB)

21,871

26,738

21,196

14,512

Shenzhen exhibits growing demand and limited supply
100

Location Analysis
Phase 1: Showcase
Shanghai

Beijing

Shenzhen

Guangzhou

Opportunities

- The elderly
population is
substantial in Shanghai

-The elderly population is
substantial in Beijing

-Hong Kong elderly
population will be a
substantial source for
elderly homes in
Shenzhen provided
the high rental of
elderly home
-Various government
policies are in place
to encourage HK
elderly to choose
elderly homes in
China

- Government
provides RMB 1,000
per bed per year for
the elderly living in the
elderly homes for a
max of 5 yrs. Gov
gives RMB 60 – 100
per mth to those who
are semi- or fully –
dependent.

Risk

-Competition is high in
Shanghai
- Chain elderly homes
have established their
business and network
in Shanghai

-The high-end elderly
homes are not well
received by the market
with a low occupancy
rate
-The government is
promoting home based
elderly care

- The elderly
population in
Shenzhen is relatively
lower than Shanghai
and Beijing

- The consumption
power is weak in
Guangzhou

Shenzhen has been chosen as the showcase location
101

Hetong China Holdings:
Catering Business
102

Hetong China Holdings: Catering
Business
•

Proposed catering business operation and pricing
Catering

In elderly homes

High-end

Set meals: ￥8-12
Single-point: ￥10-15
nutrition meal : ￥12-18

Low-end

Set meals: ￥4-8

Meals on wheels

High-end

Set meals: ￥10-15

103

Low-end

Set meals: ￥5-10

Additional Financial
Information
104

Additional Financial Information
Hetong Profit Margins
10%

6%
5%
4%
0%

1%
2005

2006

2007

2008

2009

-5%
-9%

-10%

-15%
-18%
-20%

Hetong current operation showed an average profit margin of -2%

105

Additional Financial Information
Hetong Profit Margins
Avg Profit
Margin

Avg Adj Profit Major Inventory
Margin
Influence

Total

-2%

9%

Care Homes

5%

5%

Hospitals

-2%

12%

Catering

14%

16%

Cleaning & Laundry Services

-2%

-2%

-132%

81%

9%

9%

Elderly Products
School

YES

YES

Cleaning and Laundry Service is a money losing proposition
Inventory management is key to Hospitals and Elderly Products
106

Sales & Marketing
Corporate Branding Profiles
1)

Hetong has 16 years as a pioneer of the
health care business
•

Specialises in incapacitated elderly care

•

Quality trained experienced staff

•

Extensive volunteer network

2)

Founder Mr. Fang Jiake
•

Chinese Doctor with extensive experience

•

Pioneer of the industry

•

Passion for health care based on personal

experience
•

Set up an NPO to help the elderly of the

community

108

Sales & Marketing
Corporate Branding Profiles Continued
3) Established Government recognition
•
•
•
•

Mr. Fang & senior staff are bestowed with
Advanced Party Memberships
Endorsed by Ministry of Civil Affairs
Nationally Accredited Standard of Health Care
Registered NPO

4) The benefit of experience in a changing and
expanding industry
5) Operating in multiple locations
•
•
•

Tianjin
Beijing
Sichuan

6) Operating in a cross section of services
•
•
•

Elderly health care
Training
Products based on successful European model

109

Sales & Marketing
Corporate Branding Profiles Continued
7) Nationally Accredited Training
•
•
•
•

Nationally Accredited Training program (internal and external)
Quality trained staff
Specialists in incapacitated care
Specialists in meeting all health care needs

8) First company the Red Cross contacted to assist after the Sichuan earthquake
9) Passion, quality of consistent care recognised by the community

10) Extremely high occupancy (e.g: 90%+) purely through word of mouth only!

110

Sales & Marketing
Hetong China Holdings Logo Samples

111

Sales & Marketing
Sales & Marketing Strategy & Budget Per Year
1) Advertising (Health Care / National Newspaper)
Type
Magazine Ads

Newspaper Ads

Duration

Cost

4 times per year

RMB24,000

5 days x 12 months

RMB30,000

2) Direct Marketing (Based on iContact & China Unicom – 100,000)
Type

Duration

Cost

Email Marketing

Bi-Annual

RMB25,670

SMS Marketing

Quarterly

RMB10,000

3) Events (Based on Quotation)
Type
Road Show
PR Firm (Launch)

Duration

Cost

Once A Year

RMB150,000

Once

RMB350,000


112

Sales & Marketing
Sales & Marketing Strategy – Advertising
1) Show Case
Type

Duration

Cost

Magazine Ads

Quarterly

RMB8,000

5 days x 12 months

RMB10,000

Type

Duration

Cost

Magazine Ads

Quarterly

RMB8,000

5 days x 12 months

RMB10,000

Newspaper Ads

2) Retail

Newspaper Ads

3) Training Academy
Type
Magazine Ads
Newspaper Ads

Duration

Cost

Quarterly

RMB8,000

5 days x 12 months

RMB10,000


113

Sales & Marketing
Sales & Marketing Strategy – Direct Marketing
1) Show Case
Type

Duration

Cost

Email Marketing

-

-

SMS Marketing

-

-

Duration

Cost

Email Marketing

Bi-Annual

RMB25,670

SMS Marketing

2 Quarters

RMB5,000

2) Retail
Type

3) Training Academy
Type

Duration

Cost

Email Marketing

-

-

SMS Marketing

2 Quarters

RMB5,000


114

Sales & Marketing
Sales & Marketing Strategy – Event
1) Show Case
Type

Duration

Cost

Road Show (Gov & Uni)

Once Per Year

RMB75,000

Once

RMB175,000

Type

Duration

Cost


-

-

PR Firm (Launch)

-

-

Type

Duration

Cost


Once Per Year

RMB75,000

Once

RMB175,000

PR Firm (Launch)

2) Retail

3) Training Academy

PR Firm (Launch)


115

Introduction
• Objective is not to introduce red tape or bureaucracy, but to ensure the security
of your investment and the successful operation of the company
• Ensures actions/ decisions are transparent where/ when it needs to be
• Enables the organization to work at a high level of professionalism both
internally and when viewed from externally
• Provides an opportunity to all staff/ patients/ shareholders/ stakeholders to
voice their concerns

Governance is like a constitution – it provides check & balance to everyone‟s
actions
Stakeholders/ Shareholders gain confidence from a strong governance model
Provides a strong organization infrastructure

117

General Business Principles
1) Hetong Group
-General principles – to behave ethically & responsibly
-No child/ force labor
-Product safety
-Privacy of information/ records
-Environmental protection
-Commitment towards shareholders
-Commitment towards customers
-Commitment towards suppliers and business partners
-Commitment towards employees
-health & safety
-equal and fair treatment
-right to fair wages
-Business integrity
-no bribery/ blackmail
-full records of transactions
-no 3rd party interests
-no political payments

2) Hetong
- Hetong China Holdings General Business
Principles

+
Full transparency of accounts
-All profits to be returned to Hetong social co
-All donations will be for the benefit of Hetong
social co
-Land donated to Hetong can only be used for
the elderly homes and can never be used for
any other purpose

State the reasons on how the organization chooses to be a responsible corporate citizen
Sets out the guiding principles on integrity and ethics in business conduct
They govern all decisions and actions and applies to all employees
118
Not all encompassing but formulate a minimum requirement of behavior

Systems & Processes + Management & Monitoring
3) Systems & Processes
-Stable systems/ processes that are
transparent and clear to all staff
-To have systems/ processes in place in
the reporting/ management of the below
9 elements which covers the entire
breadth of the organization

4) Management & Monitoring

•Management tools to create transparency in information and actions
•Tools for the organization to better monitor/ manage their business during the weekly
management meetings
E.g.: Balance
Scorecard

E.g.:

119

•Weekly alignment meetings
•Monthly management meetings
•Quarterly review
•Annual Operating Plan
•Annual report
•Employee Satisfaction Survey

Ombudsman & Audit Function
5) Ombudsman

• Independent/ neutral person to receive complaints from internal/ external sources that
cannot be resolved satisfactorily through existing channels
• To demonstrate that Hetong is objective and impartial
• To foster a more open, effective and productive relationships with our stakeholders/
shareholders
• Create helpline and clear reporting line to Chairman/ Founder
• Unlimited powers to investigate
• Concerns will be handled promptly with care, respect and sensitivity

6) Audit function

• To create internal and external (3rd party) audit function
• Role created to review actions/ results of the company and to propose improvement
opportunities
• Ensure all staff with key responsibilities and roles are transparent/ objective in their
decision making
• Ensure decisions are objective
• Provide additional confidence to shareholders/ stakeholders

120

Legal Compliance
7) Legal Compliance
•Compliance with all:

• Labour laws
• National laws
• Local government laws

121

Human Resource (HR)
Introduction
• HR is one of the most important elements of Hetong

• Hetong is predominantly in the people business

• Requires large numbers of passionate staff
• Services rendered are to the old that require a lot of attention

• We find that the existing HR processes are insufficient to bring Hetong to the
next level. It requires more focus on Strategic HR issues
• In the following pages we have submitted our suggestions for how Hetong can
move into Strategic HR and, some other areas that Hetong needs to address

HR function should be treated as a service provider and cannot be bloated/
operating in a void. As such, there needs to be a Service Level Agreement (SLA) that
has be established and communicated to all the HR „customers‟

123

HR
Corporate Culture
This is a collection of values and behaviour that are shared by all staff in the
organization which control the way they interact with each other and with
stakeholders
Findings
•We find the existing Hetong culture solid and propose that Hetong puts it in
writing with a few additions
Next Steps
Corporate culture of both Social and Hetong China Holdings will be based upon the
beliefs of Mr. Fang‟ beliefs on the service to the elderly
-Provide safe environment for all elderly in China
-We treat the elderly as our parents
-Enable the elderly who are lying down to sit up
-and those that are sitting to stand
-and those that are standing to walk
-We always improve ourselves
-We always improve our services
-We always set the standard for elderly services
-Teamwork is key to everything we do
124

HR
Employee Satisfaction Survey (ESS)
This provides an opportunity to all staff to voice out their concerns/ likes/ dislikes/ inner
feelings in a confidential manner with the objective of being heard by the management
Hetong‟s success is strongly dependent upon its people. As such, there needs to be
strong avenue for them to be heard

Findings
• There is no ESS currently
Next Steps
• Appoint a 3rd party HR company to propose the survey
• Conducted annually
• 100% confidential (management does not know the input of the staff)

125

HR
Staff Welfare
Staff Welfare has the following objectives:
•

To provide better life and health to the workers

•

To make the workers happy and satisfied

•

To relieve workers from industrial fatigue and to improve
intellectual, cultural and material conditions of living of the workers. Happy Employee

Findings
•Existing staff welfare provisions are sufficient and we propose additions to it
Next steps
• Staff to celebrate birthdays with elderly
• Preferential rates to the parents of staff buying
Hetong‟s services
• Staff counseling service
• Health checks

Immunization
 Dietary advise
 Intranet/ notice board that lists all the services/
benefits for staff
 Sustainability committee
 Community committee


126

HR
Training Plan
• Target
To increase the job satisfaction and morale
To built the professional career development
To provide a competent, motivated and diverse workforce
• Scope
All staff in Hetong & Hetong Group
• Content
Level 1 - Entrance Staff Training
Level 2 - Professional Skills Development
Level 3 – Management Capability Building
• Review
To collect the group-wide feedback quarterly (HR dept.)

127

HR
Training Plan Development
Name

Level 1

Content

Employee Orientation

Employee Orientation

Level 2

Computer Skills

Customer Service
Customer Service
Career Exploration
Health Service
Social Responsibility

Level 3

Leadership Development

Intented
Audience

Description
Corporate mission,
vission and Culture

Overview of corporate
organization
Basic skills of Microsoft
Office
Oral Communication
Etiquetee
Basic Knowledge of
Health building
Ethics
Diversity - Cultural
Competency

All Staff

Potential Resources
for Training Delivery
Founder of Hetong

All Staff

Leaders of different Depts

Supervisor

IT Dept.

Supervisor
Supervisor
Supervisor

Customer Serivice Dept.
Customer Serivice Dept.
HR Dept.

Supervisor

Traing Academy

Supervisor

HR Dept.

Manager

HR Dept.

Leadership Development

Time Management

Manager

HR Dept.

People Skills

Confiict Resolution
Hostile Situations

Manager

HR Dept.

Team Building

Field Activity

Manager

Outsourcing Training Agency

128

HR
Training – Leadership development
•Hetong wants to be in the forefront of elderly care
•Leadership skills will be crucial to ensure the growth and sustainability of Hetong
•There needs to be activities that enhance the leadership abilities of key staff
Findings
•No clear leadership development program
•Hetong is not ready for a full scale leadership development program as the
organization systems/ processes are not stable
Next steps
•Identify individual weaknesses of each leader
•Identify formal programs
•Identify mentors (within/ outside the organization)

Medium to long term initiative Cannot be a „one-off‟ affair. More like learning how
to play a musical instrument than reading a book

129

HR
Succession Planning
• Crucial for sustainability of the organization
• All key areas of the organization/ key staff of the organization must have a
successor
Findings
• Current Hetong does not have a clear succession plan for key staff.
• It is growing tremendously and therefore room for advancement for all staff
• There should not be a fear of being replaced
Next steps
• Identifying key roles for succession;
• Developing a clear understanding of the capabilities required to undertake those roles;
• Identifying employees who could potentially fill and perform highly in such roles; and
• Preparing employees to be ready for advancement into each identified role
• Each Management staff must have a minimum of 1 to 2 successors
• Each leader/ key staff to have a KPI to develop a successor
• Job rotation among functions/ Social co/ Hetong China Holdings

130

HR Structure
Capacity Building – A learning organisation
•

Clear Career Path for Specialists
–
–
–
–

•

4 certifications (Skill-based)
Team Leader, Shift Leader, HOD, Asst Dir, Dir (Function-based)
Functional roles to be assumed only with at least Intermediate certificate
Exposure to HQ functions: Parallel transfer to admin staff functions for 2 year
periods

Exposure for Administrators:
– Managers: Functional Skills (Skills-based)
– Short 2 – 4 weeks attachment to elderly home, training academy and retail
businesses

•

Skills and Personal Development:
– 100 training hours allowed for all staff, given 1000 RMB as training funds
– See training Plan

131

HR Structure
Resignation and Termination
•

Resignation
–
–
–
–

•

1 month notice (Non-managerial level)
3 month notice (Managerial level)
Hand over of duties to team
Exit interview by Supervisors 2 level up

Termination
– 1 month payment in lieu upon confirmation
– 3 days during probation

http://www.mayerbrown.com/publications/article.asp?id=8798&nid=6

132

Thank you

If you are interested in this investment opportunity, please contact Chandran Nair at GIFT at
(852) 3571 8103 or cnair@global-inst.com.

Delivering Services for China's Ageing Population, May 2010

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