BELLE's "Made In China" Roundabout Competitive Strategy

In May 2007, Belle International Holdings Ltd from mainland China listed on the stock exchange of Shenzhen and raised HK $8 billion 660 million in Hongkong. BELLE has acquired over 515 subscriptions in the process of offering shares, and the frozen capital has reached 446 billion 352 million yuan, breaking the record of the freezing of 425 billion HK dollars set by the ICBC last year in the Hongkong stock exchange. BELLE is mainly engaged in footwear production and sales in the mainland of China. Its industry is a typical representative of "made in China". The reason why BELLE is well received by global investors is based on its unique business model, which is based on manufacturing and actively develops to the downstream of the industrial chain, and establishes an independent retail channel. Based on the vertical integration strategy of the industry chain, BELLE has made a breakthrough from the Chinese shoe industry and made breakthroughs in the non mainstream manufacturing field. Its commercial practice provides a new development idea for Chinese local manufacturing enterprises to face the challenges of globalization. In the past thirty years of reform and opening up, China has pursued an export-oriented economy to catch up with the growth mode, giving priority to developing industries with labor costs or natural resources as advantages, such as clothing, shoes and hats, plastics, rubber and its products, chemical products, playthings and furniture. The rapid development of processing trade explains why China's exports have been developing rapidly in the past ten years. Chinese manufacturing enterprises have processed a large number of processing orders from the global market in the form of processing trade, and have initially established their influence in the global market. Relying on the export driven economy catch-up growth mode, China's economy, especially after its accession to the WTO, has maintained an alarming pace of development. Over the past 2002-2006 years, China's compound economic growth rate has reached 9.96%, and its dependence on foreign trade has increased from 36.1% to 65.7%. It can be said that in promoting GDP growth and creating employment opportunities, China's processing trade oriented manufacturing enterprises have played an indispensable role, and its social value is worth affirming. Generally speaking, processing trade is labor intensive and capital saving. It mainly depends on the rapid flow of foreign capital and labor force, rather than the substantial increase in labor productivity. And this kind of industry that takes labor cost or natural resources as the advantage is often a "non mainstream industry" with low capital turnover rate, low entry barriers, and developed countries and multinational corporations, whose products belong to "non mainstream products". Correspondingly, those products with high profit margins, strong technological driving force and strong brand influence, such as communications, automobiles, biotechnology, aviation, etc., can be called "mainstream industry" and "mainstream products". At present, multinational companies basically control the mainstream products in the global market. In the non mainstream industries, the industrial value chain has the characteristics of "two big and small in the middle". That is, the upstream raw materials, technology (product design) and downstream brands and channels have high added value, while the profit margin of production links is low. Usually, transnational corporations take advantage of global brand and channel advantages to control high-end value, while manufacturing enterprises in developing countries are dependent on the existence of multinational business system. In a sense, the rapid development of processing trade in China is the result of the transfer of global industrial division and low-end industrial chain to China, and "made in China" reflects the non mainstream position of Chinese enterprises in the global industrial division system. From the perspective of global industrial division, long-term subsidence in non mainstream industries will bring many negative impacts on the development of a country and an enterprise. In view of the current development of China's economy, the non mainstream position is facing the following challenges. China's economic development has attracted a large number of foreign investment since its reform and development. This is the key factor to promote the success of China's processing trade and export oriented economic development strategy, but this economic growth mode will also bring the following problems: first, the continuous expansion of the scale of export production depends on the continuous driving of foreign investment, and once the investment slows down or is regulated by industry, the economic growth will slow down. Second, the higher the degree of dependence on foreign trade, the more sensitive the "made in China" to global market demand is, and the stronger the external dependence of economic development is. The situation in China's steel industry has proved that the limited profits of manufacturing enterprises depend entirely on the fluctuation of international economy when the prices of raw materials are continuously pushed up. Third, the development of traditional manufacturing industry has caused a series of problems, such as resource shortage and environmental pollution. These problems have cast a shadow over the sustainable growth of the future economy. Fourth, because of the excessive economic resources to the export processing manufacturing industry, there are many imbalances in the fiscal expenditure structure. The relatively lagging social security system and the lack of public goods have led to the increase of savings for the residents' personal needs and the squeeze on China's domestic demand. If the growth of domestic demand lags behind economic growth seriously, if it can not be improved, it will not be conducive to the smooth transformation of the growth pattern of domestic demand competition. This has a negative impact on manufacturing transformation, service industry development, social employment and so on. Facing the "three board" extrusion technology, brand and global sales network, it is the "three magic weapon" for multinational corporations to dominate the global market. I compare this to the "three boards": the "ceiling" of the core technology level, the "floor" of the global sales network control, and the "partition" of the multinational company's anti-dumping strategy. For the traditional manufacturing enterprises in the non mainstream industries which are mainly engaged in processing trade and export, the "three boards" built by multinational corporations in the global market have become a huge obstacle to their development. Due to the lack of independent brand, technology and global market channels, Chinese manufacturing enterprises are increasingly dependent on OEM and processing trade and exports, and the development of enterprises form a "vicious circle". In the global market, MNCs rely on strong comprehensive competitiveness to exploit Chinese manufacturing enterprises in order to restrain the development of local enterprises. The profitability and competitiveness of enterprises are not strong. Due to the lack of independent competitive factors such as brand, technology and channels, local manufacturing enterprises in China can only earn meager processing fees from multinational corporations. For example, in 2005, the average price of the DVD disc player in the US and Europe market was $13, and then the cost of the $32 to the multinational company was $18. After that, Chinese DVD manufacturers could only earn 1 dollars in profits. However, even the 1 dollars can not be earned by every manufacturing enterprise. Since the issue of royalties, since 2005, Holland PHILPS group has asked us and European distributors to block all DVD players imported from China. The situation of DVD video player really reflects the embarrassing situation of many Chinese manufacturing enterprises in the non mainstream industries. Because the profitability of enterprises is weak and the added value of products is low, local manufacturing enterprises are almost competing for production costs and prices. In essence, this is one of the reasons why China's economy and local enterprises are "big but not strong". The brand influence is weak. At present, there are about 1 million 700 thousand commodity brands in China, but even the "Haier" and "Lenovo" national brands, which are more outstanding in the domestic market, are also struggling in the European and American markets. Although "made in China" greatly enriched the global commodity market, but in 2007, the US Business Week "the world's 100 largest brands" did not have a national brand. In the world brand laboratory (WorldBrandLab), according to the three key brand influence indicators such as market share, brand loyalty and global leadership, the United States monopolized 245 seats and accounted for 49% of the top 500 brands in the world, making it the most powerful force in the list. France accounted for 9.2% of the total list of 46 brands, ranking second. Japan occupies 44 of the total list of 8.8% seats, ranking third. It can be seen that the road of brand competition of Chinese local manufacturing enterprises is not easy. The successful experience of BELLE is the capital and resource driven type of non mainstream industries. With the appreciation of RMB, the increase of China's export trade friction, the increase of domestic labor costs, the pressure of government regulation and environmental protection and the goal of building a harmonious society, the transformation of the traditional mode of China's economic development over the past thirty years is imminent. It is at a turning point from a simple scale expansion to a comprehensive competitiveness. This means that many local traditional manufacturing enterprises, which are mainly engaged in processing trade, must seek positive change strategies and transform business models to a higher level of competition. However, in the face of the "three boards" squeeze, most Chinese enterprises are still unable to compete with multinational corporations at present. If a frontal attack is not proper, it needs roundabout operations. In this regard, BELLE provides a successful example for Chinese enterprises in the non mainstream industries. Deng Yaoxian was founded in 1979 in Hongkong to create the "BELLE" brand. In October 1991, Deng Yao set up "Shenzhen BELLE Shoes Co., Ltd." in Shenzhen, and ordered and manufactured footwear products in Hongkong's market demand, then extended to the wholesale footwear products in the mainland of China. In 1994, Li Gang footwear (Shenzhen) Co., Ltd. was set up to fully intervene in the production of footwear products in China's domestic market. Based on manufacturing, BELLE decided to expand the market channel of the downstream industry chain. Company management believes that dealers have a perfect sales network and have the basis of bargaining with manufacturers. They can use network resources to expand market support to manufacturers. BELLE's continuous development strategy to expand its downstream industry chain has played a crucial role in promoting its development, laying a leading position in China's footwear industry, and laying a good foundation for the future development of higher level of competition. At this point, the practice of BELLE and Spain's famous women's brand "ZARA" development model has the same way. First, attach great importance to the channel construction of the local market. According to SATRATechnologyCentre, a global professional footwear technology research institute, China has become the world's largest footwear consumer market in 2004, and the annual compound growth rate of footwear products and accessories is about 8.4%. This is mainly due to the large population and fast-growing consumer market. At present, the annual consumption of footwear products in China accounts for 21.2% of the world's total consumption. Per capita consumption of footwear products is less than 2.3 pairs per year, far less than that of western countries. Under the backdrop of domestic demand, China's footwear consumption is expected to reach 212 billion yuan in 2009, an increase of 40% over 2006. SATRATechnologyCentre's data also show that China is currently the world's largest footwear producer, accounting for about 61.1% of global output. However, apart from the domestic market, most Chinese shoemaking enterprises only provide OEM manufacturing services for foreign companies, and their own brands are less competitive in the global market. Even in China's domestic market, shoemaking enterprises do not participate in retail links, mostly through multi-stage market agent system, and sell products by professional retail enterprises. In 1997, BELLE began planning to build its own retail network. Limited by foreign investment in retail business, BELLE signed an exclusive distribution agreement with 16 individual distributors and initially established a retail network under its control. In July 2002, 16 distributors jointly invested in the establishment of "Shenzhen BELLE Investment Co., Ltd.". In April 2004, after the Chinese government relaxed the restrictions on foreign investment in retail trade, it transferred all its retail network assets to BELLE. By the end of 2006, the retail network directly controlled and managed by BELLE was distributed in more than 150 cities in more than 30 provinces, autonomous regions and municipalities directly under the central government of China, with 3828 retail chains. In addition, BELLE has set up 35 retail outlets in Hongkong, Macao and the United States. Second, the integration of end-to-end improves the profitability of enterprises. BELLE's footwear business adopts a vertically integrated business model, including product design and development, production, marketing and promotion, distribution and retailing, and is unique in the footwear industry of China. Company management considers vertical integration.