Dianrong case study
Dianrong is known to be one of the leading lending institutions in China. The firm has been found to advance in the incorporation of blockchain technology. The latter is known to have generated considerable hype all over the world. The reason for the introduction of blockchain technology platform was so as to offer capital to smaller suppliers in the supply chain as well as provide enhanced visibility along with the transparency of the supply chains for large multinational manufactures. The aim of this paper is to analyze the various aspects at Dianrong to include its tradeoffs, whether it should engage in joint ventures and partnerships, advise on what it should do to any additional funds that it may have, and whether to improve its technology.
Dianrong is at tradeoffs whereby it is in a dilemma on whether it should leverage its advantage in technology or whether it should position itself in the market. This is in the face of very slow economic growth. The overall outlook of the economy was that the banks were owned by the state and that capital naturally flowed to large state-owned corporations that crowded the funding for SMEs. This gave Dianrong quite a hard time as there was also an increased incidence of loan defaulters despite the fact that there was the introduction of technology in the finance sector. The other tradeoff faced by Dianrong is the fact that it is having too many problems at once, so it does not know which one should be tackled first. In this case, Htite should consider prioritizing the problems in terms of their importance and the effect that they have on the firm.
Given Exhibit 1, Dianrong should consider engaging in either joint ventures or partnerships. Before making any decision to this effect, the company should, first of all, carry out an assessment of its strengths and weaknesses. For instance, before engaging in a joint venture and partnership, it should ensure that the partnering firm will be able to cover its weaknesses. Similarly, the firm should also make sure that its strengths, when capitalized on, will be able to make the relationship between it and its partners mutual.
On the other hand, assuming that the firm has an additional capital amounting to the US $100 million, it should consider investing it in the new venture. That is, most of the capital like over half of it should be channelled to the blockchain venture. This is because the latter is the next big thing and has so far shown promising results. Given this case, it would be prudent for Dianrong to use most of its resources in the blockchain business. Conversely, it should spend less on those ventures that seem not to be profitable.
Moreover, it is also advisable that the company should spend part of the additional money on research and development. In this case, efforts should be made on researching the business aspects that seem promising. Apart from that, the firm, given that it has some weaknesses that can be covered by other firms, should consider engaging in partnerships and mergers with others. This will help in maximizing benefits to it. Therefore, Dianrong should consider investing in both internal research and development and merger and acquisition arrangements as so doing will help in increasing its competitive advantage (Jiazhuo, Wang, & Hongwei, 2015).
With the new local regulations in China, Dianrong should consider laying off some of its workers. This is in the face of the new policy that allows the financial institutions to use technology in their service provision. Besides that, given the new rule that made it a requirement for the lending institutions to be barred from taking public deposits or offering any forms of guarantees for lenders, Dianrong should minimize the level of its operations. This move is also in tandem with the new regulatory requirement of limiting the loans that one could borrow. Therefore, the firm shouldn’t revive its P2 industry in China.
Last but not least, given its already expansive technology that is evident in its blockchain venture, Dianrong should consider maintaining this. Venturing in blockchain technology, as is currently the case for the firm, will help it in attaining a competitive edge. Nevertheless, there is no reported technology that seems to be redundant to the firm at the moment. This is because it is not indicated anywhere that there is a need to replace or get rid of the already existing technology. To manage its competitive edge in the technology DNA, Dianrong should consider doing research on the incoming new technology in the market (Gupta, & Tham, 2018).
In conclusion, Dianrong should invest most of its resources on research and development as doing so will help it in making a wise business decision as far as the venturing in blockchain technology. Moreover, given the new government regulations in the market, the firm should consider reducing the number of its employees or should rather lay off some employees. This is in the face of it minimizing its operations. Last but not least, it is also advisable that Dianrong should engage in mergers and acquisition as this will help it in attaining a relative competitive edge in the market.
References
Gupta, P., Tham, T. M. (2018). Fintech: The New DNA of Financial Services. Germany:
De Gruyter.
Jiazhuo, G. Wang, J, M. Hongwei, H. (2015). Financing the Underfinanced: Online Lending
in China. Germany: Springer Berlin Heidelberg.