Case Study

Han’s Laser (A): A high-tech company with Chinese characteristics (1996-2000)

9 pages
December 2010
Reference: IMD-3-2173

From humble beginnings in Shenzhen, China in 1995, Mr. Yunfeng Gao led Han’s Laser to become the dominant laser marker producer in China in 1999. His success was built on a foundation of customer service and innovation and a corporate culture that stressed fairness, simplicity and rewarding good performance. Due to the company’s early success, it was undercapitalized in the beginning and struggling for survival. By 1998, the company’s cash flow problems resulted in Gao approaching SZHTI for an equity injection. As a result, SZHTI, a government-sponsored company that provided financial support to small and medium size technology companies, would have a 51% controlling stake in Han’s Laser. Despite Gao’s initial hesitation, he signed the deal in 1999 but added a share buyback condition, gave him the right to buy back SZHTI’s stake at net asset value if certain conditions were met. The company’s growth soared after the cash infusion as did conflicts over the control of the company. By the end of 2000, Gao reached an agreement with SZHTI to buy back 46% of the shares and regain control. In the meantime, however, new regulations were introduced that required state-owned interests in unlisted companies to go through a mandatory public auction. This meant that Gao would have to enter a bidding process and pay market price. If Gao was not successful in raising enough money, he risked losing the company that he had worked so hard to build.

Learning Objective

This case provides an example of how a Chinese entrepreneur started a company without a lot of money and built it into a market leader by targeting the right clients, offering the right products and providing exceptional customer service. It provides the basis for discussion of how to survive the problems associated with phenomenal growth in a volatile and uncertain environment – getting the business model right, dealing with cash flow problems, Chinese financing, regulation changes, etc.

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© 2010
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