Corporation, page 25, issue no. 397, December 8, 2008
Translated by Liu Peng
Original article:[Chinese]

GOME, China's largest electrical appliance retailer, has adjusted its management structure in response to an investigation on financial crimes centered around its chairman.

The adjustment was undertaken on the third day after Huang Guangyu, GOME's founder and Chairman, was taken away by police for investigation on November 19. Huang was investigated for seven kinds of financial crime,including manipulation of share prices and money laundering.

According to the management restructuring, a former seven-person decision-making team was trimmed down to three including Chen Xiao, acting chairman and president of GOME, and vice presidents Wang Junzhou and Wei Qiuli.

Chen was the former chairman of Yongle, another well-known Chinese household electrical appliance retailer, but since late July 2006 he has been GOME's president, after Huang Guangyu purchased Yongle that year.

Under the adjustment, GOME centralized its pricing management of traditional household appliances and high-tech products including computer, communication and consumer electronic devices (universally called "3-C" products in China).

GOME's pricing deals were previously determined by vice president Wang Junzhou, but under the new arrangement, would be managed by acting chairman Chen Xiao.

"The adjustment shows the importance that GOME attaches to its pricing strategy," said one GOME employee , adding suppliers and GOME were most worried that prices for GOME products varied too significantly between different sales channels.

Compared with other home appliance retailers, GOME stuck to lower prices in order to open up new markets in China.

The adjustment also dismantled a core department--operational strategy center--into three departments. The former center was mainly responsible for negotiations and placing substantial orders with suppliers under the former management structure.

"The adjustment aims to intensify the power balance among internal departments," said the above source.

To enhance development strategies, GOME Communication Company (GCC), established in November 2007 to expand the firm's cell phone retail business, was incorporated into the "3C" business department.

During its inception, GCC planned to break 10% of the cell phone market share and 19.8 billion yuan in sales revenues in 2008, ultimately aiming to be the most competitive cell phone retailer in China.

For this, Gome spent nearly 100 million yuan successively to buy two Shanxi and Dalian-based cell phone retailers, however, the cell phone chain-store model didn't raise its sale profit margins, an analyst who wishes to remain anonymous said.

On the contrary, the expansion drove up GOME's costs and affected its net profits. By incorporating GCC into Gome's 3C business unit would help the former to gain more marketing channels alongside other hi-tech products.

After restructuring, the EO learned that there would be staff cutbacks, but the details were still unknown.