To build or not to build: The real estate dilemma and the rapid rise of China’s cold chain industry
Publication Type
Case
Publication Date
5-2023
Abstract
This case has been written to illustrate the pros and cons of asset-light and asset-heavy strategies. China has seen a rise in the use of asset-heavy strategies over the last few years, particularly with heavy asset users. By using financial tools such as sale and leaseback, fund management business models, and capital recycling, users can build asset-heavy real estate and capture lucrative real estate development profits. The users can then lighten the balance sheet by employing various financial techniques, thus achieving the economic benefit of the asset-heavy strategy while eventually enjoying the lower financial burden and higher flexibility of the asset-light strategy. This real industry case focuses on cold chain logistics real estate (refrigerated warehouses), which is developing in a similar manner to that of the ambient logistics real estate sector over the last 20 years. The company’s name has been disguised for confidentiality purposes and the shipment data has been randomly re-generated, but it retains its overall statistics profile for greater realism. The case is written primarily for corporate strategy discussions, but the strong quantitative element also allows it to be used as an operations management network optimisation case as well.
There are three main learning objectives: provide an appropriate context in which asset-light and asset-heavy strategies can be discussed, illustrate how a hybrid model of asset-light and asset-heavy strategies can be deployed and how numerical analysis can help ensure the implementation of appropriate strategies, and demonstrate why real estate development has become a highly attractive adjacent growth strategy for Chinese firms after they achieve success in their core business.
Keyword(s)
Asset Allocation, Distribution and Logistics Industry, corporate strategy, Real estate development, Warehousing Industry, operations and supply chain management
Discipline
Operations and Supply Chain Management | Real Estate
Research Areas
Operations Management
Data Source
Generalised Experience
Industry
Distribution and Logistics Industry
Geographic Coverage
China
Temporal Coverage
2020
Education Level
Executive Education; Postgraduate; Undergraduate
Publisher
Singapore Management University
Case ID
SMU-23-0003
Additional URL
https://cmp.smu.edu.sg/case/5756
Comments
SMU Faculty/Staff can download the case and teaching note with your SMU login ID and Password via the following links:
For purchase of the case and supplementary materials via The Case Centre, please access the following links:
For purchase of the case and supplementary materials via Harvard Business Publishing, please access the following links: