Search for Cases

Case Details

Case Code: BSTR544
Case Length: 19 Pages 
Period: 2010-2017    
Pub Date: 2018
Teaching Note: Available
Price: Rs.400
Organization : LeEco
Industry : Aviation
Countries : China
Themes: Strategy
Case Studies  
Business Strategy
Marketing
Finance
Human Resource Management
IT and Systems
Operations
Economics
Leadership & Entrepreneurship

Rise and Fall of LeEco: Will it Survive?

 

ABSTRACT

 
LeEco, a leading Chinese conglomerate company, had ambitious plans to build a global ecosystem of products and take on bigwigs like Apple, Google, and Samsung. But the plans of Jia Yueting (Jia), founder of LeEco, to create a great ecosystem came crashing down as the company’s revenues slowed down even as expenses mounted, leading to liquidity issues and financial woes. The company ended up staring at a huge debt. LeEco, which had 15 subsidiaries and 68 affiliated partners, also had questionable related party transactions. With a plummeting share price, trading in its shares on the stock exchange was halted by the company. Amongst the gloom came a ray of hope with Jia being replaced by Sun Hongbin (Sun) as Chairman of Le Eco. Sun is a successful Chinese real estate baron who had invested considerably in LeEco and infused US$2.4 billion to bail it out. LeEco’s failure also resulted in the Chinese regulators scrutinizing shared ecosystem companies and asking them to make more disclosures and reduce related party transactions – steps which could have a major impact on Chinese tech companies.

The case brings out the scope of questionable accounting policies and earnings management in related party transactions in a shared ecosystem environment and the challenge that it poses to the regulators. The case also allows for a discussion on whether LeEco’s failure would have an impact on Chinese start-ups as well as on its tech companies. Finally, the case would allow for a constructive debate on what should Sun do to bring LeEco out of the muddle.
 
Business Strategy Case Studies | Case Study in Management, Operations, Strategies, Business Environment, Case Studies
or
Business Strategy Case Studies | Case Study in Management, Operations, Strategies, Business Environment, Case Studies
or
PayPal (9 USD)

 

Issues

The case is structured to achieve the following teaching objectives:
  • To appreciate the criticality of execution in a strategy.
  • To understand the challenges facing shared ecosystem firms .
  • To critically analyze the changing capital structure of a firm and the problems of over-leveraging, especially when the growth does not catch up.
  • To understand the complexities involved in rapid internationalization without a proper understanding of the market.
  • To debate ways to deleverage and build back the brand image.
  • To debate whether the Chinese regulator should worry and more closely scrutinize shared ecosystem firms.
Contents
INTRODUCTION
JIA YUETING
LETV
TRANSFORMING INTO LEECOSYSTEM
CHALLENGES OF SPREADING TOO THIN
TAKING TOUGH DECISIONS
RAISING FRESH FINANCING
CHANGE OF GUARD
DRAWING ATTENTION FROM CHINESE AUTHORITIES
WHAT NEXT?
EXHIBITS

Keywords

Spreading too thin, Expansion Strategy, Strategic Execution, Liquidity Management, Corporate Governance, Financial Sustainability

INTRODUCTION - Next Page>>