Rewriting the Definition of Made in China

In 1850, China was once the world's largest manufacturing country. 160 years later, China regained this crown from the United States. According to a recent report by IHS Global Insight, an American consulting firm, China's manufacturing output in 2010 accounted for 19.8% of the world's total, slightly higher than the US's 19.4%. However, another set of data in the same report made our comfort disappear in an instant. China's manufacturing capacity is the result of employing 100 million workers, while the US manufacturing industry has only 11.5 million workers.

The disparity between Chinese manufacturing and the strong is not only in production efficiency. As Zhao Min, director of the International Market Research Department of the Institute of International Trade and Economic Cooperation of the Ministry of Commerce, said, "In the field of equipment manufacturing, an important indicator to measure the prosperity of a country's manufacturing industry, there is a huge gap between China and developed manufacturing countries. The processing industry is still the main one."

Processing is only one of the seven links covered by manufacturing, which also includes product design, raw material procurement, warehousing and logistics, order processing, wholesale operations and terminal retailing. Obviously, if other links cannot be controlled, Chinese manufacturing can only be in a passive state. In the resource crisis, energy crisis and labor shortage that have erupted one after another in recent years, most Chinese manufacturing enterprises are stretched thin, which is the true manifestation of this passiveness.

In fact, in order to cope with this passiveness, as early as a few years ago, Chinese manufacturing was faced with the call for upgrading, that is, from processing to other links that are more conducive to mastering the initiative. However, the inclusiveness of the Chinese market makes most companies still slow to move. However, stubborn diseases will not disappear because of the tolerance of the market. On the contrary, when the development of the market is no longer so fast, when the resources are no longer inexhaustible, these problems will reappear in a more serious way. In this regard, Yao Ming, founder of Yao Ming Ribbon Company, was deeply touched, "The issue of upgrading and transformation has been discussed for several years. Now it seems that this is a matter of survival or destruction. The continuous rise in labor and raw material prices, The repeated record highs of the RMB exchange rate have pushed the company to a last-ditch position. Only by finding high value-added products and services based on high costs can Chinese manufacturing continue to survive and continue.”

It is not only the people who feel the existential crisis Yao Ming, according to a survey conducted by "CEConline" in March, 87.1% of Chinese manufacturing companies have an urgent desire to get rid of the crisis and upgrade to become stronger, and they are eager to try. Fortunately, the once comfort zone of the market has not yet paralyzed all companies. Some companies with a long-term vision have already taken action. They will become the benchmark for latecomers, and will also inject new connotations into Made in China.

4 upgrade paths bring changes

In the Toledo Art Museum in Ohio, USA, no one dares to despise Made in China, because the most technically difficult glass museum there is the masterpiece of China Aviation Sanxin; similarly, the global Germany, the former monopoly of construction machinery, has also begun to fear rivals from China. China's Sany Heavy Industry has repeatedly brought down German rivals in high-end projects. In addition, China's Huawei and China's high-speed rail have also overwhelmed their former strong rivals in their respective fields. In these fields, Made in China is no longer the image of the old one who is willing to make promises and work for others.

Although these upgrading companies are not enough to completely change the image of Made in China, this is the beginning of change after all. They are heading for high value-added and high-profit territory along four directions: technology, brand, cross-border and supply chain integration.

Accumulate technology to gain voice

Technology has always been a shortcoming of Chinese manufacturing. According to this "CEConline" survey, 57.9% of people believe that Chinese manufacturing is "generally low in technical content, high in product homogeneity, and weak in innovation". This short board directly leads to Chinese manufacturing having to rely on low-price competition to survive. However, China's labor costs are rising, as are the prices of raw materials and energy, and when the cost advantage gradually fades, this model is obviously unsustainable. Therefore, more and more companies are aware of this crisis. According to the survey, 50.5% of enterprises are planning to upgrade their enterprises through technology and product innovation.

Technological accumulation and innovation are not unfamiliar to me, but so far, it is rare to find people who have successfully turned around through this path. Because most companies do not have the patience for long-term investment and tolerance for R&D mistakes. Few companies dare to spend 3 times the industry average level of R&D investment every year in the first 8 years like Sany Heavy Industry did; and few companies are willing to allow millions of yuan in technology like Huawei. Development is at risk of failure.

Of course, if you can accurately grasp the direction of technological upgrading like AVIC Sanxin, then the rest is a matter of persistence. However, it can also be seen from this special case that AVIC Sanxin's perseverance also requires extraordinary courage and endurance.

Continuous progress on the brand

The accumulation of technology can change the product image and enhance the brand. However, the improvement of the brand does not only rely on technology, but also on the improvement of services, marketing, design and even capital investment. The Shanghai Jahwa in this special case is to achieve a step-by-step brand improvement through a multi-link "system war". Similarly, Yao Ming Ribbon, the world's largest webbing enterprise, has also formed its brand power through its efforts in quality, cost, design, channel and service.

In this survey, 89.7% of enterprises are aware of the significance of brand upgrading. Such high brand awareness is unprecedented in the Chinese manufacturing industry. Many Chinese manufacturing companies are OEM manufacturers or equipment providers hidden behind big brands, and they were almost insensitive to brands before. However, when the game rules of market operation changed, they realized the importance of brand building, especially for consumer end brands. As Yao Ming said: "Direct-to-consumer development of end products can push our company to the back end of the entire value chain, from the bottom of the 'smile curve' to the top."

From behind the scenes to the front There are more and more companies raising their brands. Even the low-key and mysterious Huawei, which used to deal with operators, has also made its brand logo appear in subways, airports, outdoor street signs and Internet advertising spaces. At the same time, It has also opened stores in Beijing, Shanghai and Shenzhen where consumers can experience its terminal equipment.

Companies that can successfully go from behind the scenes to the front desk do not simply repeat the work specified by the customer, but accumulate in technology, service, design and other aspects. For example, HTC in Taiwan, relying on its continuous and precise grasp of the needs of end customers, it is logical to get rid of the foundry and launch its own brand HTC. Similarly, another huge enterprise group in Taiwan also fills the needs of market segments with its own capabilities, so that its own brand Giant surpasses the brands of OEM customers and becomes the global leader of bicycle brands.

Seeking new growth points across borders

15 years ago, Ren Zhengfei set a rule in the "Huawei Basic Law", "In order to make Huawei a world-class equipment supplier, we will never enter the information service industry. "However, 15 years later, Ren Zhengfei is still the head of Huawei, but Huawei is extending from the network business to the cloud computing and terminal business. It's not that Ren Zhengfei is taking his word for it, but the industry is changing too fast. The telecommunications industry is being eroded by the IT industry and the Internet industry. If Huawei moves forward according to its inertia, then in a few years, they may touch the ceiling of survival. Therefore, it is a wise move to follow the evolution of the industry and cross the border. Fortunately, when Huawei is supporting operators, it has also planted some cross-border seeds intentionally or unintentionally. For example, the terminal products they support for operators have become the seed products they enter the terminal market today.

Most of the crossovers are related to the original industry. Tong Ren Tang in this special case also developed the cosmetics market by virtue of its original external medicines. In 2004, the state stipulated that "Jianzihao" drugs should not be circulated in the market, which was equivalent to blocking the way out of Tongrentang's products with beauty and health care functions. In desperation, they crossed into the "cosmeceutical" market.

Cross-industry integration of resources and innovative applications is an important guarantee for cross-industry success. Yunnan Baiyao has successfully entered the daily chemical industry by adding "Baiyao formula" to mature products such as toothpaste and Band-Aid. Yunnan Baiyao's cross-border idea is very simple, that is, to focus their confidential formula on the product market that has been highly recognized by consumers, and use the formula as an additive for mature products, in order to innovate new products that meet consumers' "hemostasis and anti-inflammatory" needs. product. With such cross-border thinking, Yunnan Baiyao has changed from a pharmaceutical company with annual sales of 200 million more than 10 years ago to a group company with annual sales of nearly 6 billion.

Infiltrate the whole industry chain

Technology, brand and cross-border upgrade are all individual behaviors of enterprises. The resulting high added value may be effective from the perspective of the enterprise, but from the perspective of the industrial chain, such value may be offset. For example, in order to control their own costs, some OEMs dump their inventory to suppliers, and the inventory does not disappear from the supplier. Over time, the resulting losses will be reflected in the supplied parts, which will eventually lead to the appearance of products. Quality issues. This will not only increase the cost of after-sales service for the OEM, but also seriously affect the brand image. Therefore, Huang Xinliang, a professor at the School of Management of the National University of Singapore, believes that the most ideal direction for transformation and upgrading should be to create the highest value based on the entire industrial chain system.

The reason why Japanese manufacturing companies can successfully upgrade is because they are always doing everything possible to increase the value of the entire supply chain. For example, those leading companies will help suppliers, or even suppliers' suppliers, to improve and incorporate them into their overall upgrade strategy.

Some Chinese companies also realize the value of the supply chain. For example, textile companies such as Youngor and Esquel have penetrated into the upstream supply chain of raw materials such as cotton and linen through acquisitions or their own investment. And some auto companies control the supply of some key components through capital ties. Gree Air Conditioning in this special case regards the channel as a part of the overall capability, and has been committed to the development and maintenance of the channel.

However, unlike Japanese manufacturing companies that focus on the entire industry chain, most Chinese manufacturing companies only penetrate into certain parts of the industry chain.

Change is not just a matter of companies

The reason why Chinese companies can only penetrate into a few parts of the industrial chain is that they use capital control or do it themselves. The power is limited, and the links that can be reached are also limited. Why can't Chinese companies work with other links in the supply chain to achieve long-term improvement? "Because there is no way to gain mutual trust between companies, everyone makes their own calculations and takes care of their own livelihood." Huang Xinliang, who has dealt with Chinese companies a lot, pointed out the root cause of the problem. In his view, in a market that lacks integrity, it is difficult for all links in the supply chain to work together. "This is an environmental issue that cannot be improved through the efforts of a single company."

For the upgrade of Chinese manufacturing, Huang Xinliang emphasized environmental factors. "Singapore has created an environment with a transparent legal system and gathered a group of high-quality manufacturing talents, thereby transforming the manufacturing industry into a high-value, high-tech, capital-intensive industry locally." Such manufacturing contributes 1 to Singapore every year. /4 of GDP.

Changing the status quo of Made in China requires long-term efforts. However, many Chinese entrepreneurs are short-sighted. Huang Xinliang believes that this is also forced by the environment. If the entire society operates according to the market rules of fairness, transparency and sufficient competition, then everyone will not be eager to compete for immediate resources.

Therefore, Huang Xinliang believes that the most important thing for the relevant departments of the Chinese government and those influential enterprises is to create a business environment that is conducive to the growth of talents, perfect capital operation, sound legal system, fair and stable business environment. "Only in such an environment can an enterprise have the power for long-term development."

In fact, most of the enterprises that are at the forefront of upgrading in China's manufacturing industry are participants in the global market or fully competitive markets. Their horizons expand to the world, and their motivation also comes from the global market.

This is a positive sign that as the globalization of the Chinese market progresses, more and more Chinese manufacturing companies are joining the global competition. The momentum generated there will drive their upgrade. And more and more upgrades will rewrite the current definition of Made in China in the world.

Interactive Questions:

1. An ideal business environment allows entrepreneurs to look to the future and implement long-term upgrading strategies. However, when the environment is not so ideal, what should enterprises do?

2, in the Chinese market, is it possible to achieve an overall upgrade of the supply chain?

The above two questions are still lingering after writing this article, dear reader, what are your thoughts on these two questions? Hope to see your insights at www.ceconline.com/mag/208.