Alex Zheng, co-chairman and CEO of 7 Days Inn, the second largest economy hotel chain in China, ponders over possible growth strategies for his company. Since its inception in 2005, 7 Days Inn had grown from a fledgling start-up to a leading budget hotel chain. In late 2009, despite the uncertain economic climate, Zheng saw the company through an initial public offering (IPO) where 7 Days Inn became the first Chinese budget hotel chain to be listed on the New York Stock Exchange. The IPO greatly enhanced the company’s credibility, and helped establish the 7 Days Inn brand across China.
Two years later, Zheng felt that the company had been enslaved by the stock market. He had grand plans to expand the business but the board and US institutional investors were more focused on shorter-term quarterly earnings. He was further aggravated by the lacklustre performance of the company stock price. 7 Days Inn had tried numerous means to prop up the share price, but nothing seemed to work.
In this case students will analyse the company’s capital position and growth strategy. It suitable for undergraduate, graduate and executive education classes.
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