Facing Challenges, Where Is China's Manufacturing Road?

Manufacturing in China has faced unprecedented challenges in recent years. Where is the way out in China? What is the future of China's manufacturing? Can China produce truly world-class enterprises? In what industry, when? Can we combine the advantages of an old multinational company, its technology, system, brand and experience, and the distribution of its existing subsidiaries with the cost innovation advantages set up by the emerging Chinese companies? Such a combination should be an invincible force in global competition. Whoever builds such an advantage will most likely lead the development of the future industry. In order to seize such a commanding height, multinational corporations have accelerated their expansion in China. Chinese enterprises have accelerated global expansion, and mergers and acquisitions and alliances will become more common. The biggest development opportunity for Chinese enterprises in the next ten years is to use integrated innovation strategy to sweep the stealth champions in Europe and Japan. These invisible champions are the main objectives of the next stage of Chinese enterprises' integration and innovation. During the years of being a business school professor, the two most asked questions are: the question from multinational companies is when price war is in China. The Chinese enterprise's question is, when can I get out of the mire of price war and enjoy the excess profits of transnational corporations? I have never been satisfied with the answer. Until one day, I blurted out in class: actually both sides are dreaming, the whole world is undergoing fundamental changes, and the good days of multinational companies will not come again. The economic structure of the world is undergoing fundamental changes. Because of the huge liquidity of huge financial capital and human capital in the world, the imitative barriers and monopoly profits that any technological innovation can bring are falling rapidly. Relatively homogeneous competition makes low cost a necessary condition for any enterprise to participate in competition. The rise of Chinese enterprises has pushed the cruelty of global competition to a new height. After all, we have to solve an unprecedented problem: raising the living standard of 1 billion 400 million people in an all-round way, and after two hundred years of hard work, they finally brought them into the industrial age. The accession of India and other countries only magnified the problem further. Both Chinese enterprises and multinational corporations must face up to the cruelty of the new competition and have no illusions. Whoever can understand the new rules of the game and take the lead in cultivating the core competencies suitable for the new competitive environment can lead the next round of competition. Another fundamental global change in the economic structure of "China dragon" appeared in the last 20 years of twentieth Century - the information revolution made the world flat. Technology, capital and talents cross the barriers of the past and start the global flow in a real sense. The division of labor in the global level is possible. It may be a historical coincidence that China, the world's most populous country, started reform and opening up in the same period, and became a world factory in less than 30 years. Although China is similar to the economic growth path of Japan and South Korea in the middle of twentieth Century, due to the large scale of land and population and a more open global economic environment, the impact of China's rise on the world is far from the latter two. In the early days, China's competitiveness was reflected in its low cost processing capacity and scale advantage. But as the world becomes more and more flat, China has begun to form a unique cost innovation capability, which is only the beginning of the impact on the existing global industrial structure. It is precisely because of this that China's rise will be a continuous historical process rather than a short-term contingency. Several unique comparative advantages different from other developing countries have made China not only benefit greatly from this wave of globalization, but also become its driving force. China's valuable R & D base, a large number of cheap R & D professionals, and now combined with the "overseas returnees" power that is at the forefront of scientific research and management capabilities, these three unique combinations are releasing enormous energy, laying the foundation for the next stage of technological breakthroughs in Chinese enterprises. In addition, the Chinese market is not only growing at a high speed, but also has many particularities, which constitutes a natural harbor for the development of Chinese enterprises in a sense. These natural bases are very important for the early development of small and weak Chinese enterprises. The huge local market with Chinese characteristics also provides the possibility of differentiated competition for Chinese enterprises. China's low end market is huge, making it possible for enterprises to form economies of scale, and at the same time, the market span is very large, almost from the lowest to the high end, which forces enterprises to exercise many new abilities, such as the supply ability of diversified products and the complicated channel management ability. Such an environment makes Chinese enterprises survive in the brutal market competition with strong attack power. With cost innovation subverting the global competition pattern, enterprises in China are fighting for cost. If the initial cost advantage of Chinese enterprises comes from natural cost advantages - cheap labor and scale effect, and low resource prices that are artificially depressed and distorted by market imperfections, many Chinese enterprises have begun to establish the cost advantage of innovation, that is, "cost innovation". Low cost technology innovation and cost reduction in the form of technological innovation will become the core of global competition in the future. Although independent innovation is China's national strategy, at present, Chinese enterprises are still far away from the original research and development of basic technology. The more realistic way of China's independent innovation is to achieve a cost-effective flight through the innovation of applied technology. In order to get a higher return on investment, the veteran players in the international market only introduce new technologies in some markets willing to pay for the high price, and then gradually transfer the technology to the lower price scale market. But globalization has brought great opportunities to the emerging Chinese enterprises. They use high-tech to cut costs, and greatly enhance the economic value of various products that the mass market wants to buy now. Their cost innovation cut off the ability of old players to gain excess profits and accelerated the introduction of high technology into the mass market. The main competition is clear in the Chinese market: Chinese enterprises continue to move from the low end to the high end, and multinational companies continue to infiltrate from the high end to the next. They will fight side by side in the middle end market and decide whether the success or failure will be a cost-effective. Cost innovation will subvert global competition. We see the dawn from the following cases, and we see more and more Chinese enterprises are moving along this track. Among them, there will be a number of world-class enterprises. Integration of innovation Haier: win in the gap from a very high starting point, Haier through the integration of past innovation ability, integration of global design and research and development, eventually form the strength of disruptive innovation. From washing machines for washing sweet potatoes to washing machines without washing powder, then to wine cupboards, desk fridge... Haier replicated the washing machine mode again and again, aiming at the unique needs of one market after another, integrating global resources, and finally forming a strong strength. The development path of washing machine highlights the successful mode of Haier. On other products, Haier is also using this method to enter the international market. It's theory is through cracks, like chopping wood, this side chop seam, over there chop seam, until the seam is more, the wood is completely cracked. This is Haier's overseas expansion, from the crack market to the mainstream market thinking. There are three key points in Haier's model: stand firmly on the side of users, design demand and even create demand. Nontechnical innovation systematization is very important. Innovation can not just stay on the idea. It must be sustainable, organized, cultural, systematic, and capable of comprehensive support. Capture local opportunities to integrate resources globally. Haier combines these three points together, which is called integrated innovation. In a market that is fully competitive and everyone thinks there is no gap, Haier has created a very amazing performance. The support of this achievement is integrated innovation - every technology is ready-made, and everything is not original by Haier, but the way to integrate them is Haier's original creation. The strategy of integrated innovation is very suitable for Chinese enterprises to rapidly enhance their competitiveness in the next ten years, and fully participate in and gradually lead the evolution of the global industrial structure. Due to the constraints of the comprehensive national strength and the basic system of education and scientific research, it is still quite difficult for Chinese enterprises to break through in the original, high-end, and cutting-edge technology fields. The main goal of the development of Chinese enterprises in the next ten years is not to develop into a large input and large output research enterprise represented by Microsoft and CISCO. The biggest development opportunity for Chinese enterprises in the next ten years is to use integrated innovation strategy to sweep the stealth champions in Europe and Japan. These invisible champions are the main objectives of the next stage of Chinese enterprises' integration and innovation. After 30 years of hard work, Chinese enterprises have reached a time of great accumulation in terms of technology, talent, capital and industry. Once we break through the technical threshold, we can make use of the cheap R & D capability of the Chinese market, and rapidly improve and improve the technology. At the same time, we will take advantage of China's manpower cost and the advantage of large-scale manufacturing to greatly reduce the price of our products. The sharp reduction of product prices will often attract new users, and turn a small niche market into a large scale mainstream market, thus giving full play to the advantages of large-scale manufacturing of Chinese enterprises, so that every stealth champion will have to withdraw from the market competition. This is only the first step. Chinese enterprises can achieve mass customization at the middle and low end. They can make mass customization on modularized platforms on the relatively standardized platform, and gradually break through these segregated market segments, and finally finish the whole process. Because mass customization can share R & D platform, technology platform, manufacturing platform and marketing platform, its cost advantage is unimaginable by the original invisible champion. This will fundamentally change the foundation of global industrial competition. This is the best combination of integrated innovation strategy and global industrial integration for Chinese enterprises. Haier's theory of chopping wood is the truth. CIMC's Chinese style growth is also a perfect demonstration of this strategy. But it needs to be emphasized that the integrated innovation strategy requires very high background management, depending on whether the whole system can be systematized, repeated and large-scale. This is the key to the implementation of integrated innovation. Meanwhile, as a newly rising multinational company with relatively scarce resources, Chinese enterprises must integrate their resources based on the whole world. Process innovation BYD: it will take tens of millions of dollars to turn a machine into a human production line. How can a company that has only 3 million 500 thousand yuan in cash, lacking capital and technology, start and survive? The answer of BYD, a Chinese battery maker, is to create a production line to restore the machine to the most scarce element in China. The core of process innovation strategy is how to make use of mature technology creatively. The key is innovation in production process. BYD is a classic case. The most distinctive feature is to transform the capital intensive industry of battery manufacturing into a labor-intensive industry under the disadvantage of capital shortage and transform it into a labor-intensive industry. By combining the technology with China's comparative advantage to the maximum, the cost advantage of foreign competitors can not be achieved and the market share can be quickly gained. The second advantage is that we have a very flexible production process that allows us to make varieties more quickly and economically. With low cost, small step and multi tune, to meet the individual needs of customers. This is the additional advantage later found. The semi-automatic and semi manual production process has great advantages in flexible production, so that it can meet the requirements of mass customization, which can not only satisfy the personalized requirements of customers, but also achieve the low cost of mass production. The competition in the mobile phone industry is very intense, which requires battery manufacturers to respond quickly, with various models and low cost. This is an important reason why BYD can rise rapidly in this industry. In the battle against price competition between multinational giants, BYD won the big win - less than ten years ago, this new shortage of new recruits became the boss of the global battery industry. In the long run, innovation through pipeline will become more and more difficult, because China's labor costs continue to increase, and environmental protection and resource concerns will impact this pattern. But this time period may not be in the short term, it may be in 8, 10, or even longer periods. The biggest competitive advantage of this strategy innovation will be the semi automated manufacturing line.