China Manufacturing CEO survey: Survivor Games

Inventories, falling sales, declining exports, rising costs, labor, and so on, behind these "most deadly" dilemmas, we are trying to scan China's CEO's woes, conflicts, breakthroughs and even evolution over the past year. The CEO survey of Tsinghua University and the world Information Department found that 93% of the CEO agree "must make the choice of transformation and upgrade", they appear in front of six "Company Evolution" path: from export to domestic sales, from OEM to independent brand, from low-end to high-end, from manufacturing to services, integration of industrial chain resources,　　From extensive to fine management. Wharton, Tsinghua School of Economics and Management, CCW information, Ufida Co., Ltd. Business Report manufacturing CEO: Brutal survivor Game text | Wharton's brutal "Survivor game" first took place among manufacturing CEOs. In just a year, many things have changed, and the outlook for Chinese manufacturing has become different. The 2008-2009 survey of China's manufacturing competitiveness, conducted by AmCham and Bos, Shanghai, shows that companies are largely no longer planning to migrate, whether at home or abroad; exports and domestic sales are falling sharply, but the latter is not as big as the former; commodity prices have fallen　　, wage growth is no longer a big problem; China's laid-off population has reached more than 20 million, and the number of white-collar workers has increased. But new problems have replaced old problems, and there are new challenges. "Previously, rising costs and the appreciation of the renminbi were the main problems, and now the problem is falling demand, tighter credit and currency fluctuations," said Ronald Haddock, vice president of management consulting. "The shock continues, and one of the biggest problems in the new crisis is the decline in exports, as the global recession does not know when it will end, and manufacturers cannot expect exports to recover in the short term." Eder Saratka to the above view, he is a partner of Atlas Industrial Company, the company based in Shanghai from China to buy kitchen decoration materials and shipped to the United States, including Shanghai's cabinets, xiamen granite countertops, stainless steel sinks in Guangzhou and Hangzhou's ethylene base plate. "Last year, I was worried about rising costs and that suppliers would cut corners, especially on materials," Saratka said, "but it's no longer a problem." Now I only worry about the sales of my clients. "Many companies want to make up for the decline in exports by increasing domestic sales, but it is still unclear whether sales in China's domestic market can make up for export shortages."　　While sales in China's domestic market have not suffered the same sharp decline as in Europe and the US, domestic consumer demand is also weak, especially among middle-class consumers. In fact, sales are equally grim. More than 40% of the respondents reported falling domestic sales by more than 10%. Given the anxiety and the absence of signs that the situation is expected to improve in the near term, 1/3 of the respondents said they would like to renegotiate the materials in China andParts purchase price to cut more than 10% of the cost. As a consequent, Chinese factories are collapsing.　　In the manufacturing sector, millions of workers, mainly migrants, are facing unemployment or inability to find new jobs. However, manufacturing companies in China still have a major goal to enter the Chinese market, and surveys show that the domestic market has become a new focus. In a recent survey, 77% of respondents said the main reason for positioning production in China was to have more access to Chinese consumers, a ratio that rose 6% per cent from the previous survey.　　At present, China plays a pivotal role in production and sales, and is the leader in the success of production enterprises, because most of the successful enterprises in the survey are in China for the production and sale of enterprises. The slowdown began with a big shift in 2004, which lasted five years, with wages rising first in Guangdong and then rapidly expanding across China. The trend hit a year ago, with 52% of respondents in the US Chamber of Commerce survey in 2007-2008 putting wage increases at the top of the list, while only 35% of respondents to the 2008-2009 survey released just now rated wage increases as the number one problem. [Page] Shanghai Yu Furniture Co., Ltd. is headquartered in Shanghai, mainly manufacturing hardwood furniture to supply the local market, this year, the company's wage pressure has been greatly reduced. "Two years ago, the call for higher wages was high, wages rose by 30%, and there was still pressure to raise wages, but during the Lunar New Year period, none of the workers raised the issue of wages," said Yu's furniture chief. "With costs no longer rising fast, few companies are going to move to cheaper places, both domestically and abroad." "The reality is that the company has no spare money to move to other countries this year." Said Haddock, a manager at Bo's management consulting firm. In a recent survey, only 10% of companies planned to leave China this year, compared to 15% last year.　　This means that the manufacturing environment in China has changed dramatically.　　A recent survey by the US Chamber of Commerce points to a new problem: The credit crunch, which has proved to be a serious handicap for some manufacturing companies. Add China Although the economy has slowed this year, rising wages in the past five years, land prices and commodity prices, plus new problems such as sales decline and credit crunch have all been factors that have accelerated the phase-out of uncompetitive manufacturing companies.　　Many manufacturing enterprises that rely on cheap labor rather than modern production practices have left China or have been closed down successively. At the same time, strong companies are becoming more robust, and most "survivors" continue to invest and work to improve efficiency.　　More than half of the 108 companies surveyed are planning to continue to inject capital into their operations in China over the next two years, according to the latest 2008-2009 survey. In addition, companies are still stationed in China, but their reasons for emplacement have changed. The recent influx of ChinaBusinesses are no longer attracted to cheap labor, as in the past, but to potential markets. "Despite the recession, China is still a strong market," said the company's horn, "and companies want to make money in China, so they continue to invest in China during the economic downturn." "The survey also shows several issues that have been of concern for several years. One of these is intellectual property protection, where 73% of respondents will strengthen their intellectual property as an important or very important issue.　　It is still a challenge to identify high-quality white-collar workers, and the issues of employee retention, logistics efficiency and cost, quality and safety of Chinese-made products and materials are always included in the list of issues. The stimulus package will benefit producers directly, because public facilities such as railways, roads and ports will make domestic shipments more convenient and help open up new sales markets in various provinces.　　But the government still has a lot of pressure on it: sales are shrinking, and manufacturers are calling on the government to reduce cost pressures and increase labour training and education. At the end of the current recession, there will be a successful Chinese-made appearance: Successful companies in China are using efficient factory production methods and using a number of modern management and marketing tools.　　Enterprises will use some products for export, more and more products are put into the domestic market. Reaching out to Chinese consumers costs a lot – it's important to expand your product offerings for the current weak domestic market. "From management, to succeed in China, you have to lead your ' best team ' into China.　　"said a manufacturing CEO. China's CEO sees "the most fatal" problem, although China is the only one by one countries without the credit crisis, but under the background of economic globalization, China's economy inevitably suffers from the impact of the international financial crisis: Export decline, production decline, employment situation is becoming grim.　　The impact of the international financial crisis on China's economy with low-cost, high pollution, high energy consumption as the characteristics of the extensive development model of the accumulation of industrial structure contradictions in advance release, while China's economy over the past 10% years of high-speed development is also entering a cyclical adjustment period.　　Since November 2008, Tsinghua University, the School of Economic management and information in the support of Ufida Co., Ltd., jointly targeted at more than 100 Chinese enterprises in various industries CEO interviews. According to the survey of hundreds of Chinese CEOs, it is the six key challenges that Chinese enterprises have to deal with in the process of transformation and upgrade, such as the stress of orders, the sharp fluctuation of raw material price, the shortage of capital, the increase of human resource cost, the aggravation of the responsibility of energy saving and environmental protection and　　[Page] Six paths to "Corporate Evolution" | Tsinghua Institute of Economics and Management in the history of biological evolution, the great changes in each climate have brought about a leap in the evolution of species-the species that cannot evolve will die out, and the adaptive species will enter a new era of mass reproduction.。 Business is the same.　　For Chinese companies, this is a drastic change in the economic climate, but there is no doubt that who can respond to the new environment quickly, who will be able to meet the economic adjustment after the new market development opportunities.　　For a creature, this is evolution; for the enterprise, this is transformation and upgrading. In the survey, 93% of corporate CEOs believe that in the face of the current situation, enterprises must make the choice of transformation and upgrading, which is the enterprise for sustainable Development must take the initiative, but also in the fast changing market environment to maintain the competitiveness of enterprises effective means (see Figure 3).　　In the survey found that outstanding performance of the enterprise performance more positive, they are more positive thinking about the transformation, the path of upgrading, mining market opportunities, to find new growth points. Path 1: From the export to domestic sales need to reduce the situation, to export-oriented enterprises are opening up the domestic market, to domestic export markets simultaneously transformation. The general manager of a Machinery Co., Ltd. said, "It is difficult to increase the domestic market, but in order to improve the ability to deal with risks, we must increase domestic sales." "Among the companies surveyed, the number of CEOs who chose to change is nearly one times more than the CEO who is not inclined to change." And all the export enterprises 32% of the CEO has begun to lead the enterprise to the domestic market transformation, the implementation of domestic export strategy.　　Clothing, shoes, hats, toys, furniture, machinery and other industries in the export enterprises to the domestic transformation more obvious. CEOs have realised that there are some drawbacks to the business model of export enterprises, such as exporting manufacturing and trading enterprises are providing products under the required standards of foreign customers, low profit margins, but large sales, relying heavily on overseas distributors of sales channels.　　Over-reliance on a single market overseas, for the enterprise will have a huge business risk, but to the domestic market will face enormous challenges, enterprises need to new brands, channels, markets, after-sale and other fields from scratch, but most of the CEO consensus is, "do, not necessarily not; Path 2: From extensive to fine management many CEOs said in an interview that the rapid growth in the past was largely due to the rapid growth of the market itself.　　A CEO recalls a few years ago the rapid development of enterprises mentioned "that year's income has increased by 70%, in fact, not even good management, but the market is too good." However, the market growth slowed down, competition intensified, profits diluted, the original enterprise of the pursuit of scale expansion, serious resource waste, high cost of the extensive mode of business development has been unsustainable. One CEO said: "The original is confused to make money, now it is difficult to earn money." "Practice the internal strength", fine management is the inevitable choice of Chinese enterprise transformation and upgrade.　　Fine management requires enterprises to do things fine, do fine, need to standardize the process, strengthen management, pay attention to details, so that enterprises reduce costs, improve efficiency, reduce risk. Path 3: From the OEM to the independent brand China's 90% of clothing and footwear enterprises are OEM production, and in the international financial crisis, the appreciation of the renminbi, human resources costs rise three factors integrated role, a typical labor-intensive industry, such as clothing, shoes and hats enterprises have a large number of SMEs closed. From the point and face, China's export processing enterprises rely too much on low labor costs, a large number of OEM production mode, to the meager profit margin, relying on mass production and too single large customer orders to maintain the operation, this industrial structure needs to be adjusted, Taiwan's manufacturing model has proved that such a manufacturing-oriented industrial economic form has drawbacks,　　Can not continue to operate, so the current foundry enterprises to the independent brand management transition has no delay. Although the operation of independent brands requires a lot of upfront investment, but the survey found that more than 75% of OEM manufacturers have begun or ready to transition to their own brands. (See Figure 4) The time required for the transition from OEM to independent brand management is longer, enterprises lack of transformation experience, enterprises need to invest a large amount of capital, need to establish research and development capabilities, need to change business mode of operation, need to re-establish sales channels and networks, enterprises for the return of investment has great uncertainty.　　However, a considerable number of CEOs have begun to learn the experience of brand enterprises in the same industry, in thinking of the transformation of the brand should be how to maximize the use of the extension of existing OEM production, in the tentative new product region market brand management innovation, these efforts have begun to bear fruit. Case: NE Tiger's own brand path. NE Tiger is the Northeast Tiger Fur Company's famous brand, founded in 1992 by Zhifeng. Self-brand awareness is zhifeng in the process of contact with international manufacturers gradually established, he successively in France, Italy, the United States, Hong Kong, China set up a NE Tiger Global four design marketing center. And Zhifeng's independent Brand Road, which has three links the most important: the first is the precise market positioning and differentiated competition strategy. The second is the quality of the fur. The third is design. The development of the brand from the foundry to the road, is a comprehensive ability to upgrade the process, it is doomed to a long process. Zhifeng plans to stop all of its foundry business and focus on developing its own brand by 2010. [Page] path 4: The "Smile Curve" from manufacturing to service manufacturing shows that the front-end research and design, back-end sales and logistics are the most profitable link in the whole industrial chain, while the profit of manufacturing is lower.　　If Chinese enterprises only limit the production of products, will face the fierce competition, product profit is getting lower and worse pressure. Purely engaged in production and manufacturing links of Chinese enterprises, all feel the low profit, homogeneous competition pressure gradually increased.　　Some of China's highly competitive industries, such as home appliance manufacturing, have a thin edge.　　From manufacturing to service transformation, through the integration of manufacturing and services to reduce costs, enhance product value-added, extend the industrial chain, enhance customer satisfaction and develop new profit growth point, is the Chinese manufacturing enterprises to break through the Red Sea of the important choice. Survey shows: 52% of the CEO has recognized the pure production of potential problems, is leading the enterprise from manufacturing to clothingBusiness transformation. More than 34% of CEOs say companies are starting to shift from manufacturing to service.　　18% of CEOs already have a clear plan to change over the next 1-2 years. Guangdong Oppu Iron and steel in the crisis to win 100% high growth, depends on this transformation kungfu. Oppu iron and steel in enterprises rely on a single manufacturing, processing business can not achieve faster growth, and even the face of further intensified market competition, opened up a new business model: Oppu Iron and steel electronic Trading center.　　It is the first public trading platform through the network to achieve steel spot trading, established in 2002, began to generate benefits in 2005, 2008 achieved more than 50% of the growth, is expected in the second half of 2009 will be 100% of the speed of growth.　　Path 5: From low-end to high-end in order to improve product profit margin and enhance industrial discourse power, Chinese enterprises are striving to upgrade from low value-added products and services to high value-added products and services, from low-end of industrial chain to high-end industrial chain. Surveys show that 49% of CEOs have started to upgrade their products to high-end, 26% of the CEO has a clear upgrade of high-end programs and time planning, 75% of corporate CEOs have made clear choices and real action. (see Figure 5) upgrade from low-end to high-end, either as a product or service upgrade or as an upgrade to an industrial chain. Product service upgrade is the first to enhance the product service profit margin, but also open up new market opportunities is an important way.　　and industrial chain upgrade, refers to the enterprise management from the low-end manufacturing industry chain to high-end research and development design, sales logistics upgrade (that is, the so-called industrial chain "smile Curve" at both ends). Shanghai spring machinery to rely on product upgrades sound across the crisis. 2006 and before, the spring machinery of ordinary machine equipment production accounted for 70% of the total production of enterprises, to 2007 years, technology, difficult high-end machinery and equipment production accounted for 80%. Beginning in the second half of 2007, the spring machinery will be products from low-end to high-end upgrade, product total production and sales, although significantly reduced, but the income is basically flat.　　2007-year income of 180 million yuan, 2008-year income of 160 million yuan, while the cost of a substantial decline. Path 6: Integration of industrial chain Resources survey found that 81% of the CEO has begun to consider the industrial chain upstream and downstream integration, up to 30% of enterprises have begun to integrate. In the interview, we learned that under the impact of the crisis in the industrial chain conduction effect, many CEOs have realized that it is so important to maintain the stability of cooperation between the various links in the industrial chain, and the best way to maintain stability is to carry out industrial chain integration, said one CEO, "only in their own hands is the most reliable, most cost-effective." "Upstream and downstream integration of the industrial chain for different industries, the significance of enterprises in some industries are integrated upstream and downstream is to stabilize the operation, to deal with business risks; Some industry enterprises are to improve the industry in the process of rapid developmentThe ability of the industry to participate in competition; some enterprises redefine the industry through business model innovation and establish the core position of the industrial chain.　　For whatever purpose, the upstream and downstream integration of the industrial chain is an effective way to upgrade the current Chinese enterprises. Wanda is an example of an integrated industrial chain. Wanda Group now not only in the main business of commercial real estate, including Shanghai Wanda Plaza, Beijing Wanda Plaza, including Beijing Great Lakes Mansion, Dalian, Dalian, Pearl, etc. at the same time also integrated downstream hotels, supermarkets, film city and other business models, luxury hotels, including Sophie Hotel, Wanda International Hotel and other chain brands; The film city, including the stars and the United States film city, supermarkets and Wal-Mart to form a strategic partner. When the real estate industry into the downward cycle and macro demand environment is depressed, Wanda can still be in the tourism and accommodation, department stores, leisure and entertainment industries to obtain rich income.