Upgrade in industrial transfer

Today I went to Zhengzhou, tomorrow to Langfang, and the day after tomorrow to show up in Chengdu. Foxconn's traces this summer are confusing. The attention that Foxconn has attracted comes not only from the media and local governments, but also from related or unrelated companies. Previously, although the slogan of the development of the western region had been shouted for several years, it was only the behavior of a few companies to go to the west and to deploy in second-tier cities. According to a joint survey on "China's Most Potential Second-Tier Cities" by CEConline and Beijing New Generation Market Monitoring Agency in August (referred to as: Joint Survey), companies that have migrated to second-tier cities in the past three years, Only accounted for 12.6% of the total number of respondents. However, Foxconn, a manufacturing giant, has frequently built factories in various places, but it has aroused the crisis awareness of many enterprises. In their view, the industrial transfer from developed coastal cities or first-tier cities to second- and third-tier cities in the mainland is inevitable. Row. The joint survey data further shows that 13% of enterprises plan to enter second-tier cities in the next three years.

Foxconn's series of transfer arrangements have been interpreted by the outside world as a move to get rid of pressure. Several employees jumped off the building at the turn of the spring and summer, forcing Foxconn to raise wages for its employees, and the cost pressure brought about by the salary increase forced them to seek to move to low-cost places to balance their income and expenses. Forcing Foxconn to relocate is not only the pressure of cost, but also the pressure of shortage of resources such as electricity and land. For example, the Foxconn Shenzhen factory, which has never been powered off in the past, has been frequently powered off in recent years. In fact, when urban development and upgrading, many manufacturing companies can feel this kind of pressure from light to heavy. Therefore, seeing Foxconn's relocation, they also have a crisis of inaction. However, despite being warmly invited by many second-tier cities, most companies still feel challenged in many aspects such as site selection, layout, inspection and support, and related human and energy resources, so they hesitate to act.

However, sooner or later, the migration step will be taken, because the tide of industrial transfer has spread from the international to the domestic market. Instead of being slammed and wrestled by the big waves passively, it is better to take the initiative to follow the waves. In fact, 12.6% of migrating enterprises have no shortage of active players. They not only formulate a migration strategy, but also explore it step by step. Their migration patterns are worthy of reference for those who are still on the sidelines.

The international industrial transfer started in the 19th century, from Europe to the United States and then to Japan and South Korea, has now entered China. The rise of American, Japanese and Korean companies has proved that numerous opportunities for industrial upgrading are bred in the process of industrial transfer. When the industrial transfer inspired by comparative advantage occurs in the domestic market, upgrading must also accompany it. Of course, upgrade opportunities are reserved for prepared companies.

Industrial transfer is irreversible

If there is a comparative advantage, it will definitely lead to industrial transfer. This is an irreversible trend. The comparative advantages of second-tier cities are gradually formed in the development of first- and second-tier cities according to different orientations. There are both objective factors and subjective factors. Coastal and first-tier cities used to be the mainstream areas to undertake international industrial transfer. However, after 20 to 30 years of concentrated development, these cities have gradually entered the limit scale, showing an overwhelmed state: severe overload of hydropower, crowded population, soaring land and housing prices, and rising living costs... Obviously, these phenomena are neither It is beneficial to people's lives, but also to the growth of enterprises, especially those labor-intensive enterprises.

Faced with such a limit bottleneck, the city where it is located must be upgraded, whether it is active or passive. In 2003, an article "Shenzhen, Who Are You Abandoned" published on Nanfang.com recorded the passivity of Shenzhen at that time. Affected by many development bottlenecks, Ping An Insurance and China Merchants Bank at that time had already focused their business in Shanghai, while Huawei and ZTE were also said to intend to withdraw from Shenzhen. This former frontier of reform and opening up was facing the crisis of "hollowing out". Fortunately, in the next few years, Shenzhen gradually revised its positioning, adjusted its industrial structure, and put its limited resources on industries that could better position itself. For example, the Shenzhen Municipal Government once made it clear to Foxconn that it hopes they will vigorously develop R&D centers in Shenzhen, and at the same time encourage them to upgrade and expand their industries. This euphemistic "customer removal order" for low-end manufacturing business has made it inevitable for all related companies, including Foxconn, to move their low-end and mid-end manufacturing businesses out of Shenzhen.

Low-end manufacturing is not welcome in cities like Shenzhen, which are relatively urbanized and want to build a headquarters economy. However, for those who are rich in labor, need to improve employment, need to get rid of poverty and become rich, and have undeveloped land , For third-tier cities, it is the hope of development. And those cities have gradually created soil suitable for the survival of low-end manufacturing industries.

In fact, many second- and third-tier cities, in addition to possessing original ecological resources, have also invested in road construction and bridge construction for several years in order to get rid of poverty and become rich. When the Chinese government invested four trillion yuan to stimulate the economy during the economic crisis, when it was distributed to local governments, most of it was also invested in local infrastructure construction. Local governments are not only committed to improving transportation, they are also actively creating a favorable policy environment for attracting investment. In addition to improving the service capabilities of government departments, they are also conscious of improving the supporting capabilities of their cities. For example, when the two home appliance brands "Meiling" and "Rongshida" fell into a low point of development, the Hefei Municipal Government used them to attract Changhong and Midea. Changhong acquired Meiling and Midea became the owner of Rongshida. When the two big home appliance companies that were recruited became prosperous in Hefei, and the logistics and supporting environment gradually matured, other phoenixes also flew in one after another. Hefei has been regarded as a battleground for enterprise layout by domestic home appliance bigwigs. In July this year, with the experience of building a home appliance manufacturing base, the Hefei Municipal Government and related enterprises invested 10 billion yuan to develop the rainbow blue LED project in the Hefei Xinzhan Development Zone. Relying on this project, Hefei will build China's largest flat panel display industry base.

When Unilever set up a site in Hefei in 2001, it had to worry about how to send managers. Unilever is headquartered in Shanghai. At that time, there was no direct train from Hefei to Shanghai, and it took 7 hours to transfer trains in the middle. There are only two flights a day between Hefei and Shanghai, and it is difficult to achieve a day trip. Inconvenient transportation makes it difficult for expatriates to work with peace of mind. This problem was alleviated in the subsequent increase of flights, and the Hefei-Shanghai bullet train opened in 2008 has fundamentally improved this problem. It only takes 3 hours from Hefei to Shanghai, and 40 minutes from Hefei to Nanjing. In big cities like Beijing and Shanghai, many people spend the same amount of time going to work every day.

The "same city effect" brought about by the opening of the high-speed railway facilitates the flow of people and enables the comparative advantages of second-tier cities to be more fully reflected and brought into play. In March 2010, Unilever closed its six factories in Shanghai and Guangdong, and moved to Hefei as a whole, making Hefei a global manufacturing base, which can save 30% of costs. And when the train between Beijing and Tianjin takes only 30 minutes, according to data from Samsung Research Institute, more than 2,000 companies have kept their headquarters in Beijing and moved other parts, such as factories, to Tianjin.

Three factors drive the three types of transfer

The comparative advantages of second-tier cities make some companies eager to try, however, a successful migration does not depend entirely on these advantages, but on companies knowing what they are missing and looking for To the regional advantage resources that can make up for the shortcomings. Therefore, those comparative advantages that make up for the shortcomings constitute the driving factors for enterprises to transfer.

According to the observation of Xu Huchu, a partner of Booz (Shanghai) Management Consulting Co., Ltd., who has studied industrial transfer for a long time, there are three main driving factors for domestic industrial transfer: cost, raw materials or energy, and market demand. Our joint survey also found that, in addition to external survival conditions such as policies (65.7%) and geographical transportation (60.9%), the factors that attract and drive enterprises to relocate are also related to production costs (51.7%), Production factor resources such as supporting conditions (55.7%, including raw materials and energy supporting) and market conditions (42.7%). Therefore, judging from the attractiveness of production factor resources, we believe that three types of industrial transfers are actually taking place in the domestic market: cost-driven, raw material or energy-driven, and market-driven.

Cost-driven means moving from high-cost places to low-cost places. This type of migration first occurred in labor-intensive manufacturing, some forced and some actively. After the economic crisis in 2009, many enterprises in the Pearl River Delta encountered the stringent cost requirements of the international market. Some enterprises only woke up and hurriedly retreated to the second- and third-tier cities in the mainland to seek low-cost resources to survive. Enterprises are much more relaxed because of their prior layout in the mainland. Hangsheng, headquartered in Shenzhen, is such a calm person. In this special case section, we explore in detail the story behind Hangsheng's calm transfer.

With the rise of cities with talent and high-tech supporting resources such as Chengdu and Dalian, cost-driven migration has also begun to occur in talent and technology-intensive industries. For example, software companies such as Microsoft and Neusoft are located in Chengdu, Dalian set up a software development base, while Intel moved its packaging and testing factory from Shanghai to Chengdu.

Driven by raw materials and energy, when raw materials and energy gradually become scarce resources, directly going to the place of origin to occupy resources has become another motivation for many companies to migrate. This type of migration mainly occurs in industries that are highly dependent on raw materials and energy, such as textiles and garments and coal chemical industry. For example, Xinjiang, China's largest cotton planting base, has welcomed branches of textile and garment enterprises since 1997. The first spinning mill in Turpan was built in 1997 by Esquel Hong Kong. Subsequently, Esquel also invested in cotton planting in Xinjiang. After 2003, the price of cotton in the domestic market was so high that more textile and garment enterprises moved to Xinjiang, such as Youngor in Kashgar, Zhejiang Golden Eagle in Ili, Shandong Lutai in Aksu and so on. They do this, on the one hand, to ensure a stable supply of raw materials, and on the other hand, to cultivate and obtain high-quality raw materials. When some scholars questioned that this kind of flocking to Xinjiang might lead to resource depletion, Youngor in this case has already been exploring new raw material resources. It has discovered hemp, a substitute for cotton spinning resources, and is one step ahead Place chess pieces in the hemp resource field.

Market-driven, market demand is always attractive to enterprises, and those enterprises that need to be close to the market to serve the individual needs of customers are the mainstream army of market-driven transfer. Not only do they have to set up camps where the market demand is strong, but they also need to plant seeds in those markets that can expand and radiate to the surrounding areas. The most obvious market-driven industry in China is automobiles, and almost all OEMs are located in different places outside the headquarters. Automobile is a product with very high requirements for logistics and local customer demand response, and the logistics cost can account for 1/3 of the total product cost. As a result, in-situ production not only saves costs, but also delivers customers quickly and improves customer satisfaction. At the same time, nearby production can be arranged in time to meet the relatively individual product needs of local customers, such as northerners prefer large cars and southerners prefer economical compact cars. However, the off-site layout of OEMs is more difficult. This is a move that has high requirements for local logistics, supporting facilities and large-scale factories. It requires courage, and also requires a keen sense of opportunity and a forward-looking vision of the market. Changan Automobile, which has the largest layout in China, relies on such capabilities. In this regard, we have a detailed description in the Changan case.

How to land locally is a difficult problem faced by almost all enterprises when migrating. Acquisition and restructuring, joint ventures with local companies or the government, or direct establishment of factories in the local area, most companies cannot escape these migration routines. However, which way to go depends on opportunities and resource preparation. According to a joint survey by "CEConline", 53.6% of enterprises relocated through joint ventures and cooperation with local companies, such as the relocation of most auto factories; while 45.5% of enterprises directly built factories locally, such as Foxconn, Intel migration. However, so far, only 13.1% of enterprises have implemented migration, and most of them have only migrated part of their business.

Seize upgrading opportunities in the transfer process

Industrial transfer, there must be opportunities for upgrading. From the international industrial transfer, Chinese companies have seized this opportunity. For example, benefiting from the establishment of factories in China by international auto companies, the import of the latest products and technologies into China, and the establishment of research institutes in China for localized R&D, most Chinese auto companies have mastered auto manufacturing technology, while Chery, Geely, BYD We have also cultivated the ability of independent development in this technology and talent supporting environment. Similarly, in the domestic industrial transfer, wise enterprises are also carrying out the following four types of upgrades.

One of the upgrade methods is to eliminate outdated equipment and carry out technical transformation during the migration. Enterprises using this method may invest in the latest production lines in relocated places. For example, a domestic electric company has invested in the construction of the latest plasma production lines in Hefei, and Unilever has also deployed advanced manufacturing plants in Hefei. Or, some companies relocate outdated production lines to use their waste heat, while manufacturing and technology upgrades are carried out on the vacated sites. For example, some textile enterprises are engaged in the manufacture of low-end products in the relocated place, while the manufacture of high-end products in the original location.

Using the regional aggregation effect to upgrade is the second way. In this round of industrial transfer, some emerging bases with obvious characteristics are being formed, such as the automobile manufacturing base in Zhuzhou, Hunan, the home appliance manufacturing and flat panel display manufacturing base in Hefei, and the notebook manufacturing base in Chongqing. With the snowballing attraction of these bases to similar enterprises, various related resources, such as talents, technology, supporting facilities and logistics, have gradually become enriched, and a relatively complete value chain has been formed. Obviously, companies that get together can use these resources to improve their related capabilities. Midea used to be almost blank in white goods such as refrigerators. With the help of the Hefei base, it is now the top three brand of refrigerator products in the domestic market. The agglomeration effect of the place of relocation also helps enterprises to upgrade. Shenzhen, where Hangsheng is located, has been committed to building a gathering place for high-tech enterprises in recent years. Therefore, Hangsheng has left its R&D and other high-tech departments in Shenzhen, and created Shenzhen and national-level enterprise technology. Center and Automotive Electronics Research and Development Center, relying on the technical support of these centers, Hangsheng has repeatedly defeated rivals in Europe, America and Japan, and won large international orders.

Increasing the competitiveness of the supply chain during the transfer is the third way of industrial upgrading. In the expert commentary of this issue, Li Kailuo described in detail how Li Ning Company uses transfer to enhance the competitiveness of the entire supply chain. Changan built factories in places with strong demand and integrated the supply chain on the spot, also to shorten the supply chain and improve the responsiveness of the supply chain.

The reason why Younger wants to invest and build factories in raw material producing areas is to improve his position in the supply chain. "Whoever controls the raw materials will control the right to speak in the supply chain." And this kind of utilization transfer improves The way of one's own status is the fourth kind of upgrade that we see. Foxconn is actually doing this upgrade. People are often attracted by Foxconn's series of relocation moves, but at the same time, it is quietly advancing its "ten thousand horses galloping" plan formulated in 2009, which is to open 10,000 retail stores within three years. in the second and third tier markets. Foxconn is leaning towards the market terminal while reducing cost pressure. The closer to the end market, the more valuable parts of the industry chain can be obtained. This is a feasible upgrade model that Foxconn has been looking forward to. As a company that relies on OEMs, it is difficult for Foxconn to make any moves to develop its own brands. Otherwise, it may lose the large-scale business of brand owners. However, it is not taboo to be a channel, and once he firmly controls the channel resources, he can also control the discourse power of the entire industrial chain like Suning and Gome. Of course, it will take time to see whether such an upgrade can be achieved in the end.

No matter what happens in the future, enterprises that can implement upgrades in a planned way in the process of industrial transfer are the initiative of industrial upgrading. Xu Huchu believes that in order to become an active player, “you must pay attention to how the industrial environment is evolving, where is your competitiveness, and where is your market. Only by integrating these system data can you formulate an active layout, Upgrading strategy."

A journey of a thousand miles begins with a single step. Since the tide of industrial transfer is irreversible, companies that hope to take advantage of it should act quickly and seize the upgrade opportunity in the process of industrial transfer!

The tide of industrial transfer has spread from the international to the domestic market. Instead of being slammed and wrestled by the big waves passively, it is better to take the initiative to follow the waves.

The 'same city effect' brought about by the opening of the high-speed railway facilitates the flow of people and allows the comparative advantages of second-tier cities to be more fully reflected and brought into play.

'You should pay attention to how the general environment of the industry is evolving, where is your competitiveness, and where is your market. Based on the integration of these system data, you can formulate an active layout and upgrade strategy. '——Xu Huchu