Yunnan Baiyo Group (YB) develops traditional Chinese medicine. In 1902, Baiyo (originally Qu Huanzhang Panacea) was formulated by Qu Haunzhang (respected practitioner of Chinese Medicine) from an assortment of natural herbs in Yunnan Province. During the years, Yunnan Baiyao gained a great reputation in China for its ability to treat open wounds, muscular sprains, bruising and arthritis, and the ability to invigorate the blood circulation. This was effective in treating soldiers during warfare and it became a part of the first aid kid of the Chinese armed forces.
Growth
In 1996 Yunnan Baiyao Limited Co. and three other producers were integrated into Yunnan Baiyao Group Co. through joint shareholding. China became member of the WTO, which increased the competition landscape. In 2002 , Baiyao Da Yao Fang Ltd (a drugstore chain) was established and Wuding Planting Base was established to carry out the forward vertical integration. Industry players are adjusting to open market and multinationals were coming into play. Many of YB products had reached maturity and growth potential was limited in current state. To respond to current challenges YB established a series of strategies “one core and four growth areas”. The “one core” would focus on the YB headquarters and the three companies it had acquired, as well as the sales network.
Symptoms
In order to depict the problem for YB there were three issues. Firstly, it is evident YB has a growth issue. Many of YB's products have reached or were reaching maturity. Secondly, there is a competition and global problem where the Chinese market was open to Global competition in 2002 because of their entrance to WTO. Thus, several diversified and vertically integrated companies had the opportunity to enter the industry. YB must "grow bigger through integration and diversification or they would
