Crisis and recovery of enterprises in China: the case of Luckin Coffee

This thesis investigates the dynamics of corporate crises and recoveries, with a focus on China. It combines theoretical frameworks from existing literature with a practical case study of Luckin Coffee, a famous coffee chain founded in China in 2017 and known for its innovative and technology-driven business model. Once early warning indicators of crisis and the strategic approaches needed to manage corporate distress are identified, these theoretical insights are directly applied to the Luckin Coffee case. An overview of the company is provided, while placing it in the context of China’s fast-growing coffee market. A turning point of this thesis is the analysis of the financial fraud that triggered the company’s crisis, the operational and financial consequences, as well as the strategies implemented to achieve recovery. Therefore, a comprehensive examination of the relationship between mismanagement, market dynamics and turnaround strategies is provided. Lastly, the thesis broadens the discussion to the Chinese economic situation and its slowdown, and it explores the implications of state aid in corporate recoveries. The Chinese situation is then compared with the European Union’s restrictive stance on state support and with the American perspective, which is largely guided by a free market approach. A critical analysis is carried out to understand whether state intervention has a different impact across countries, and what are its broader implications.