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The paper sample below is an example of an economics essay. It offers a comprehensive analysis of the Evergrande China Company. 

Executive Summary

The Evergrande China real Estate company is a business that marks a significant impact on the Chinese economy. It is a company that has been growing over time with investments over time to other sectors of the economy. Analyzing the decision-making rationale for this company alongside the operating and financial business environment is therefore critical. The other critical aspect of great importance to the company is also cross-listing and international public debt financing. The Evergrande company’s debt position has been worsening with the most recent news pointing out the difficulty of the company in meeting its interest payments and also a worsening liabilities position. As a recommendation to this issue, the company should consider specialization, this way, company processes will be consolidated, and thus the overall cost of operation reduced. This may thus reduce the total liabilities of the company.

The reasons for cross listing and thus the rationale behind this action involved greater exposure and thus the need to greater access of capital. The company, just like any business aimed at maximizing its profits as fast as possible and one way this was done was through cross listing. The other rationale related to the brand image and thus brand reputation, and improving corporate governance. The cross listing initiative went along side public debt financing where as per the recent reports, the company is in financial distress. With a main aim to analyze decision making rationale for this company, the paper took a sector approach with the discussion looking at possible decisions and how the company made them. The paper also discussed the internal and external environment of the Evergrande company as a whole.



Comprehensive Analysis of the Evergrande China Company

Evergrande real estate China is a multinational company with its headquarters in China. The company engages in a range of economic activities with the focus on growing in terms of profits and scope. The Evergrande real estate China started in 1996 and is publicly listed. The selling of shares for capital started for this company in its year of operation. In the first year, the company raised 722 million dollars in its Initial Public Offering (IPO). The company has been growing over the years with a series of strategies placed and revised over time. This paper presents a comprehensive analysis of the Evergrande real estate company. This analysis involves reference to the decision-making rationale in this company. There will be an in-depth discussion of the related financial and business environment of the Evergrande real estate China company.

Cross Listing and International Public Debt Financing

The Evergrande real estate China has its shares listed on a different stock exchange other than the original stock exchange. The Evergrande real estate company’s shares have been listed under the Shenzhen listing. The company’s shares started off with a listing in the Shenzhen stock exchange. The motive behind cross listing in the Evergrande China real estate company includes a gain to more exposure and thus greater access to capital. The Evergrande company, by cross listing sought to access more potential investors across the various jurisdictions and thus have more access to capital. The cross listing decision was also aimed at improving a company’s structure of corporate governance through establishing well defined rules by which the corporation was to be governed. This for the Evergrande company was through learning what other companies had and emulate it.

Cross listing for this company was also motivated by the brand image of the company. Specifically, this was aimed at improving the image and reputation of the company by the activities that the company undertakes. By being listed in the major stock exchanges for example, the Evergrande company gained additional exposure and this strengthened this brand. It is for this reason that the reputation of this company’s brand got better. Closely related to the cross listing concept is the international public debt financing concept that refers to getting finances through the various instruments internationally across the various countries. Cross listing is therefore a form of international public debt financing through the shares of a company. It is therefore a more specialized form of the international public debt financing. The reasons for the cross listing can be clearly seen from the notes to the financial statements of the Evergrande real estate company across the five years analyzed.

The Evergrande company however, having stated the reason behind its initiative, has in the recent past saw a downward trend in its performance and as March of 2021, the company was in a debt crisis. The China markets analysts’ forecast show that the Evergrande company, as one of its cross listing options has United States dollar denominated bond. The interest payments due to this bond as at 30th September 2021, were not paid. This indicates financial distress in the company. The dollar has various denominations and covers various time periods. For this particular one, it was a 5-year period bond. Due to cross listing the company has both domestic and international investors. Forecasts however predict that failure to meet these interest payments affected international investors more than domestic investors (Tan,2021).

The debt crisis has also been discussed under the growing total liabilities and the cash crisis that the company looks forward to. The company, in the recent briefs stated its total liabilities to amounting to 300 billion dollars and thus implying liquidity problems that were looming. The company’s performance trickled across the various sectors in the economy and this therefore had a significant impact on the overall performance of the Chinese economy. As a response to this crisis, the company has set aside a reserve for cash to salvage this situation and try to help it get to its feet again. The growing debt and cash crisis however has been worsening over time. The company’s statements of financial position over the five years of analysis have been having growing total liabilities sections that in some periods exceeded the total assets and thus indicated financial distress.

Brief History of the Evergrande Real Estate Company

The Evergrande real estate company engages in property development. Being a company that started in 1996, the company focuses on real estate as a solution to its business need. The Evergrande company has its headquarters in the Guangdong Province and specifically in the Nanshan district. The Evergrande company started as a property developing company and has been growing the range of its products and services over time. The company has been registering an upward trajectory in its sales and growth agenda. The company's total assets, for example, as of December 2020 was 2.3 trillion US dollars, which is a rise from 2.2 trillion dollars in 2019. The company operates as a group and therefore presents its financial statements in a consolidated financial statements format over the various periods under analysis.

The company has one subsidiary company that is Hengda real estate. The company operates in the China mainland area and has developed the property over the 170 cities in China.  The company owns more than 1300 projects in over 280 projects across China. The company as of December 2020 had 123276 employees. The company operates in a variety of spheres and thus involves making decisions most of the time. Some of the areas of operation of Evergrande China include real estate, tourism, and recreation, sports, automotive, health, entertainment, finance, food, and agriculture. The Evergrande real estate China company had been reporting positive and increasing performance on the different facets of its existence. In the earlier years, both income and assets were increasing and this made the company a well re-known property developer in the Mainland of China.

As part of what will characterize an ideal living situation, Evergrande real estate China has faced a financial crisis that curbed its aggressive growth. Evergrande real estate China faces expired deadlines for the debt interest payments, the company has a huge debt of over 300 billion dollars and has been struggling to meet these obligations. The company's bond ratings have declined substantially over the years. This has brought about uncertainty in the prices in these markets and therefore a significant loss to the company and its shareholders.

The Evergrande company, being a large company, has many customers and interrelationships with other firms, spread the bankruptcy and putting the customers to the loss of items ordered from the company. The suppliers are at the great risk of losing their supplies and a significant detrimental effect on China's financial system. This is because the company owns a significant share of the market. The company reports debts in both domestic markets and other global financial firms with the control being 171 domestic firms and 121 other financial firms. The Evergrande real estate company China has had an upward growth trajectory in some years and financial distraught that led to a financial crisis in the most recent years. Decision-making and the strategies taken by the company should therefore be addressed. The discussion of the Evergrande company depends on the areas of interest and operation.


Real Estate Decision-Making

Real estate is a key operation area of the Evergrande business. The company owns 565 million square meters of land and is within 22 cities. The company sells apartments to both upper and middle-income dwellers. The real estate business of the Evergrande company is the company's business core in its operation. Decision-making in real estate involves value judgments. Of great consideration is the business and investment. The models practical in decision making involves normative, descriptive, and prescriptive models. Normative models focus on how decisions are made. The normative leadership model tells leaders how they raise and act to raise the moral performance of the working group and manage their different responsibilities.

The leadership of the Evergrande business is made up of the Chairman of the board of the group and chairman of the real estate. The chairman of the group organizes development strategies for the business. The leaders give direction on the operations and goals of the business. The Evergrande model of decision involves investments, corporate development, and the management of corporations (Ting, Huigiang & Yumin, 2014). The company also runs an overall strategy of long-term development of real estate. The leadership gives the overall direction of the property to buy, the lands to invest in and the portfolio to build with time. Decision-making in this business incorporated the direction and goals of the overall practice. The decision-making in this scenario rotates around the goals of the business. Strategic decision-making in this sector has seen the organization receiving awards in business forums such as ‘Top 100 Private Entrepreneurs” in China.  The decision that is considered successful in this sector will be the one that will move towards proper growth.

Tourism and Recreation Sector Decision-Making

The Evergrande China company also involves the tourism and recreation sectors. With a diversified base, the Evergrande group has also launched operations in the tourism sector. The company operates two park brands that is the 'Hengda Children of the World' and the 'Hengda Water World'. The company, therefore, ensures customer satisfaction as it builds on its basis in the tourism sector (Liu, Skinner & Grosman, 2020). The Evergrande takes feet in both domestic and international tourism. The company customizes its products to match the needs of its customers. Decision-making in this sector, therefore, aims at achieving the overall goals of the business through deciding on the type of facilities to have, the sites for tourism, and the value-added options are made.

The Evergrande China Company, through its operations in the tourism and recreation sector, has engaged in various projects, one of which is the Ocean Flower Island in Hainan. The Ocean Flower Island has risen to be one of the largest projects in China and a major tourist attraction center. Through its operations also has seen the Chinese Island of Hainan as a major recreation and tourism point. The tourism sector contributed significantly to the company revenue through the sales that this sector realizes. Throughout the operation, the company has been making decisions on the strategies and the initiatives to make the company perform better in this measure.

The normative decision-making model, which involves telling leaders how to act and emphasis moral values has been a core consideration for the Evergrande company. The other decision-making model in application in this sector is the descriptive model that outlines empirical research done in making the goals and objectives of the tourism and recreation sector achievable.

Automotive Sector Decision-Making

The Evergrande company operates a conglomerate of businesses and the automotive sector being one of them. The automotive sector of this company handles vehicle manufacturing and assembly. The automotive sector has registered growth and an upward trajectory of income and assets. The sector involved growth through mergers and acquisitions and the need to acquire a market presence in different places across the globe. Decisions made by the management and other stakeholders in this company with particular reference to this sector, therefore, involved market expansion, pricing, mode of operation, and the design and sale of automotive. The goal of the decision-making process for this sector was to align the automotive sector goals and objectives to the overall goals and objectives of the business.

The Evergrande company, with the motivation to serve its mission, aligns the operations of this sector to its company's mission, which is 'Building the brand with quality and establishing the enterprise with integrity.’ The company's automotive sector therefore through its stakeholders decides to build quality brands. Quality brands will help the business achieve value and attract customers to this company and thus build demand. A multi-dimensional focus is critical in this function in the sense that, the company also strives towards integrity in its brand and business as a whole.

The decision-making rationale, therefore, entails both qualitative and quantitative perceptions of the business and through this provides a balanced approach. In terms of statistics, the automotive sector holds 45 percent of the company’s revenue. The company’s decision has also included growth through mergers and acquisitions, the most recent one being in 2018 where the company acquired a stake in Faraday Future company.

Sports Sector Decision-Making

The sports sector for the Evergrande Company involves participation in football. The Evergrande Company owns the Evergrande Guangzhou football club. The company has both a physical and financial presence in this sector. The sports sector exists for both financial and corporate social responsibility purposes (Kim, 2015). The company’s sports sector contributes to the financial performance in terms of financial statements. The sports sector boosts the company's national pride and has flow-on effects on the government. The sports sector leadership makes decisions regarding the performance of the sector and the company at large. The company's decision-making model in this sector is participative leadership and thus includes all the necessary stakeholders. Sports sector decision-making aligns with the overall country's mission. China as a country instills a sense of cohesion, encourages patriotism and national identity. The company in this sector also has a multi-dimensional approach for both qualitative and quantitative aspects.

The Evergrande Company retrospectively looks for a diversified sector. Diversification in this sense includes activities both indoor and outdoor. Sports as a business marks a significant percentage of the total turnover reported by the various companies. Globally, sporting activities account for three percent of the total economic activity. The sporting activity as a business, therefore, needs strategic insights. Decisions made around these strategic insights go a long way to include fitness and normal sporting and athletics. Decision-making should also consider sponsorship, broadcasting, and management of the various sporting activities. Getting revenue out of sport should therefore be intentional and consider many other factors within the company. A period-by-period analysis of the performance of the various activities under this sector should be done. This will set forth good monitoring and evaluation criteria.

Health Sector Decision-Making

As part of the sectors that the Evergrande Company has ventured into is the health sector. The Evergrande Company’s participation in the health sector is such that the company operates various business lines aimed at achieving the mission and vision of the company as a business. The company, for example, has the Evergrande Healthy Land, which is mostly concerned with the all-around health of the aged population. This section of the business ensures the creation of the wellness and new way of wellness living applicable to all aged-group.

The Evergrande Company seeks to realize a new and healthy way of wellness living. This involves 852 facilities and 867 all-rounded facilities. The Healthy Land involves four parks that is Elderly Care Park, Fun Park, Sports Park, and Kid Park. With all these in place, the mantra “Three generations of one family in two households’’ holds. Under the Healthy Land umbrella, the company creates a highly precise and multi-dimensional health management model, a new approach of high quality and multi-level health care, a new system of the full cycle and well-covered health insurance, and also a new membership mechanism covering diversified facilities.

 The decision-making model and environment include variables such as synchronization with the international standards and technologies, combining frontier healthcare and elderly care models, integrated quality assurance resources, and integrated world care resources. The other sub-sector is the Boao Evergrande International Hospital. The Boao Evergrande International Hospital deals with international medical and health awareness. The hospital is designed and constructed for medical and rehabilitation services. The hospital owns high-end bed hospitals and fine decorated apartments.

 Decision-making in the Boao Evergrande Hospital involves integrating global medical resources. Stakeholders in the Hospital are committed to ensuring bringing together all medical resources and introduction of diagnostics and treatment. Decisions made to this effect, involve mobilization of resources necessary to facilitate this function. The other goal that makes the decision-makers align their decisions involves enjoying regional advantage and policy reference. This is by supporting the nine preferential policies set by the State Council and applying cutting-edge technologies and innovative medical facilities after approval. The decision-making model in this section is wholly participative and includes innovation towards realizing the goals of the organization.

Medicine as a field incorporates a wholly inclusive approach that draws experiences from various parts of the world. Decisions made in this field therefore may be experimental and thus practical. With the rise in diseases and other health challenges, innovation is key and highly incorporated into the model and therefore a key consideration in decision-making. The decision-making in this case highly incorporates research and collaboration among the various stakeholders.

For the health management services, the Evergrande China Company has developed a system that includes the medical, catering, living, traveling, studying, and nursing aspects. The health network is concerned with both international and extension to the communities. Decision-making, therefore, extends the model internally to the China communities and extends to other countries. Health practitioners as well as key health personnel take part in ensuring basic body checks and chronic disease management to ensure that the business’s objectives are met and the patients are upheld.

The Evergrande China Company in its investment in the health sector also included maintenance services. For this, the company works across the demands of all age groups. The company has apartments for the aged where there is the integration of sports and leisure, life care, and rehabilitation centers. The apartments set up by the company in this sector are aimed at meeting the living requirements of the aged. The daycare center in this area is concerned with board games and rehabilitation areas that meet the needs of the various people in these age groups. The products and services meet the needs of the disabled and the aged.

 The sector also involves the Evergrande Nursing home for the old people. The Evergrande nursing home ensures self-support and self-assistance and ensures competent professionals and proper nursing systems. In the future, the company looks forward to more beds to cater to their patients. This ensures resource mobilization strategies in decision making and the focus for giving back to the society that the company thrives in. The decision-making rationale in this sector has been very relevant towards the performance of the Evergrande Nursing home as it has been strategic and highly elaborative. The company has performed better in this sector in the past and looks forward to better performance in the future.

Finance Sector Decision-Making

The Evergrande China Company has also brought forth its efforts towards the finance sector. The company has made advances in financial management principles and operates a portfolio of products in its wealth management practices. The company has made investments over time with a large bulk being in shares in various places. The company has had increasing share capital in the various places and therefore an increasing stake. As of December 2015, the Evergrande Company acquired a 50 percent stake in the Sino-Singapore company Insurance Company and the Evergrande Life. The company also has a stake in the Shengjing bank which has been increasing over time (Sun & Cao, 2021).

The company’s decisions in this sector involves both internal and external stakeholders with the internal ones strictly adhering to the choice of investments that the company chooses to engage in. Externally, the company ensures the selling of shares intending to raise internal capital for the company. Still, under the finance sector, wealth management products are considered. The company has discounted offices, apartments, and parking units that ensure investments in the company (Gao, 2021). With this being in place, various investors tap into the opportunities presented by the company. Diversification of assets in this sector is a critical consideration in decision making and this will be aimed at minimizing the risk posed by various assets.

Food and Agricultural Sector Decision-Making

            The decision-making environment is characterized by the ones making decisions, processes, and the problem hierarchy. The Evergrande real estate China has in the previous sectors highlighted how it handles decision-making while factoring in the above components. In the food and agricultural sector, the company holds a brand that serves this segment to its best. The company is always looking for opportunities to strengthen this brand. Specifically, the Evergrande real estate company holds the Hengda Bingquan brand, a mineral water brand that the company has channeled resources towards promoting and bringing up. The company has had to make decisions in marketing and strengthening the market position of this brand. As part of the marketing, for example, the company once hired Jackie Chan to promote the brand. This is a form of celebrity advertising and thus a critical marketing component.

            The company has had agribusiness units that have supplied the China and South Korea markets with produce. This channel has correctly ensured the attainment of the business objectives of maximizing profits as well as ensuring food security. The company, still in the food and agricultural sector, had a dairy business that met China's dairy market needs. This is also aligned with the overall goals and objectives of the business. The company also ran the grains and oil business and therefore ensured complete diversification in this sector. The agricultural sector of the Evergrande China company also included pig farms that supplied pork and other pork-related products. The sector, therefore, met the market needs appropriately. The emphasis on decisions was about the acquisition and supply to the markets, therefore, ensuring constant meeting of the customers’ needs.

Evergrande Real Estate China Business Environment

Analyzing the business under the various components highly draws from the aspect of the business environment. Business environment by definition relates to all factors within and outside the business that affect the business's functioning and operations. The business environment is both internal and external. The internal business environment relates to factors that affect the success and approach of the business. The external business environment on the other hand relates to factors outside the control of the business but which affects the business. Internally, the Evergrande real estate company business is characterized by the various departments across the various sectors that the business operates. The Evergrande real estate operates in the food and agricultural sector, health sector, finance sector, health and insurance sectors. The company also operates in the real estate and entertainment sectors with heads and employees working under them. The company has a centralized decision-making structure in some sectors whereby the head makes final decisions in the sectors. Some sectors such as health highly relate to innovations and thus incorporate a more comprehensive approach. For such, decentralized decision-making is key and highly considered. The focus in this environment is to ensure that the goals of the business are met (Yap,2017).

Internal environmental analysis may also include the company’s policies and how they affect the way things are done. With company policies, the performance of the various sectors can be understood and measured. The Evergrande company has policies relating to human resources, finances, purchasing, and marketing. The Evergrande company has employees and bosses in the various sectors it operates in. The employees' conduct is guided by the company's policies on staff behavior. The Evergrande real estate China, in the recent past, has had ethical dilemma issues with various offenses being raised.

The other internal environment factor is corporate culture. The corporate culture involves beliefs and behaviors that affect the interactions between employees and management. The Evergrande China real estate has an accountability culture with reporting across all cadres. The monitoring and evaluation performance of the systems and corporate conduct is in place. The corporate culture in this sense is aligned to the overall goals of the business of making profits and ensuring social responsibility to its stakeholders.  The internal environment of Evergrande China Limited as a company also consists of management and leadership styles. The leaders in the various sectors in the Evergrande company exhibit a transactional kind of leadership such that the followers, in this case, those who work under the leaders, receive either rewards or punishments depending on their conduct. In cases where there is decentralized decision making, followers have an important stake while in centralized decision making, the leader is final.

Still on the internal environment is the mission and the strategy of the company. While the strategy expresses the courses of action that the company undertakes to achieve certain objectives, the mission statement declares the actions that an organization intends to take to serve the purpose of the organization and the customers. The Evergrande real estate China’s mission is to build its brand with quality and ensure integrity. The company achieves this through both long-term and short-term strategies, whose overall aim is to increase revenue and build a brand that will stand the test of time.

The external environment of the Evergrande real estate company is defined by the economic environment, technological environment, competitive environment, legal environment, and social environment. The economic environment entails economic events that affect businesses regardless of size. The economic environment entails all factors that influence buying habits of consumers and businesses and thus the performance of the company. For the Evergrande company, the company in question, the tax rates set in the different areas of operations are some of the factors in the economic environment (Qiu & Wan, 2017). The other economic environment factor is the prices set for the particular company’s products and services. This may be internally or externally driven. Internally, the firm sets the prices considering the mark-up and margin dimensions and factors in the cost of production. Externally, price floors and ceilings affect the prices charged by a company.

The other aspect of the external environment is technology and thus the technological environment. In a rapidly growing world with consumer needs changing daily, rapid technological innovations are key. For the Evergrande company, throughout its decision-making model, the incorporation of technology has come out strongly. The health sector, for example, highly relies on innovations and thus meets the needs of the patients. The sports and finance sectors tap into technological innovations in the instruments and the mode of delivery. The uptake of technology in finance sectors helps in the choice of assets as well as the computation of the profits. The finance sector's investments and returns are highly analyzed through technological innovations (Wang, Hong, Li & Gao, 2020).

The external environment also involves a legal environment that entails regulations and laws. The legal environment of the Evergrande company includes laws within the jurisdiction of the country's operations relating to opening and running a company, the company's transactions, and performance. The quality assurance standards aimed at upholding the services that the company offers should match the international standards under the ISO requirements. The Evergrande company needs to ensure that this is observed and practiced. Still under the external environment is the social environment that is the beliefs, attitudes, wants, and desires of the consuming public. The social values explain the demographics consideration and the corporate social responsibility function (Xia, 2021). The Evergrande company’s sectors offer products and services while incorporating attributes such as age and demographic composition. The health and insurance sectors, for example, have products for the elderly and the young while making a clear distinction between the disabled and those not with disabilities.

In conclusion, the Evergrande company has eight sectors where decisions are made. The overall decision-making model is normative and includes instructing leaders on how to raise and act to raise the moral performance of the working group and manage their different responsibilities. Decisions made in this company, including the food and agriculture sector, involve the goals of the business, regarding the property to buy, lands to invest in, and the portfolio to build with time. For the tourism and recreation sector, decisions Evergrande company makes involve the type of facilities to have, the sites for tourism, and value-added options. In the automotive sector, decision-making includes market expansion and the mode of operation in the model. For the sports sector, the company has a multi-dimensional approach that is to make profits and corporate social responsibility. The internal business environment in the Evergrande company includes policies, corporate culture, mission, and strategy. The external business environment for the Evergrande company is characterized by the legal and technological environment. The company should consider specialization in one sector so as to consolidate some of its processes. This way, the company will get out of financial distress.