3i Group’s Investment

in
Little Sheep

Team 2
1. From an industry-based view, identify some of the competitive
forces affecting the Chinese restaurant industry

The Chinese restaurant business is

fragmented, difficult to standardize

Largest cost component is the chef,

difficult to achieve consistency

Do-it-yourself style of dining

Clear trend of growth for Chinese

restaurant industry at the level of
20% per year
2. What are the key factors that explain the success of Little Sheep?
What are the main obstacles associated with its continued growth?

 Successful recipe  Trademark registration

 Standardization which made tacked 7 years (too long)
the business capable of scale  Low quality of franchises
 Aggressive growth  Lack of control
 Brand awareness  Lack of procedures
3. From a resource-based view, explain the non-financial benefits that
3i can bring to Little Sheep. So, why did 3i win the competition against
other suitors such as Goldman Sachs and Morgan Stanley?

Sector focused investments

Capable and determined
manager
– Daizong Wang
Special programs
People program
Business Development
Practice
Suitable adviser for Little Sheep
– Nish Kankiwala
4. Compare the similarities & differences between the typical mid-size
investments in the West vs. China. If you were a manager working for
a Western firm, what lessons would you draw from this case?

Similarities
Access to financing
Organizing the business
Management
Prepare for final exit

Differences West China

Competition Higher Lower
Management Easy to find skilled managers Scarce
Growth rate Lower High
Legislation Business-friendly Arbitrary
5. If you were an entrepreneur at a firm in China or in emerging
economies in general, what lessons would you draw from this case?

To be humble and accept the

professional management’s
opinions

To have faith in the business model

To be ready to reinvent the

business model – e.g. the phased
overhaul of the franchise system
THANK YOU !

THANK YOU !!!