Industry: What Is The Turning Point To Local Enterprises?

Over the past ten years, local manufacturing, especially the small batch industry, has developed rapidly, and many of them have become global leaders. For example, HUAWEI first surpassed Ericsson in 2012, leading the global telecom equipment industry; Sany ranked 37 in the global rankings of construction machinery in 10 years, leapt to sixth in 2012; Zhenhua heavy industries occupied 80% of the international port machinery market a few years ago. Many varieties and small batch industries have always been the weakness of the local manufacturing industry, and the overall development in the past ten years is also very gratifying. In terms of construction machinery, in 2003, China's equipment sales accounted for only 1.6% of the world's top 50 sales. After 10 years, the proportion increased to 16.9% and 10 times 10 times.

The compound growth rate of two digits year by year has increased the international status of local enterprises, and has also brought about blind optimism and overconfidence, and the inevitable arrival of inflection points. The rapid development of more than 20 years is not normal, and it is not normal to get used to it. As for HUAWEI, if someone asks Ren Zhengfei, "how long have you been taller this year," you will definitely say that this person is crazy. But for "HUAWEI is not successful, only grow up", why do so many people applaud? "No success", reflecting Ren Zhengfei's low key and prudence, perhaps the reason for HUAWEI's success. "Only growing up" makes people listen to wonder: how can a company grow indefinitely when people stop growing?

Over the years, local enterprises are always worried about their youth and aim at catching up with overseas competitors. In fact, how many people realize that they are also middle-aged and larger in scale than competitors, and will soon be faced with problems that have puzzled their competitors for many years, such as low growth, no growth or even negative growth. Just like today's Zhenhua heavy industry: high speed growth strategy leads to over investment, excessive investment leads to excessive depreciation of fixed assets, and along with the decline in revenue since the financial crisis, the cost problem is just like a stone's surface, causing the company's first loss since its establishment. Now the stalls are so large that the company is inefficient and fixed costs are high. Although revenue has returned to pre crisis levels, Zhenhua's return to profitability has a long way to go.

With the rapid development and scale expansion of manufacturing enterprises, the following three problems will become increasingly acute and turn white at the turning point. Forward-looking enterprises will constantly optimize and adjust to cope ahead of time; organizations that are rigid and extensive in business are not necessarily destined to suffer when the turning point is coming.

Whether you admit it or not, you are falling into the "growth trap".

At the time of rapid growth and rapid development, local manufacturing enterprises mostly adopt high growth and high cost competitive strategies, such as expanding production facilities, placing more stocks and employing more employees. Under such a strategy, the rate of increase in costs tends to exceed the rate of increase in revenue, especially when enterprises have a certain scale and market share to a certain extent. As a result, the profit margins of enterprises are diminishing, "there is a market, no profits" and "making money is earned, but all the profits are in stock", which vividly describes the embarrassment of the company at this stage. With the market share increasing to the critical point, the growth rate is slowing down, and under the effect of inertia, the cost continues to grow, especially when the fixed facilities of the high growth stage begin to operate and depreciate, and after eating only a little profit, the company is caught up in the "growth trap" which is unsustainable with high growth and high cost.

So the company's center of gravity has to shift to profit margins. But at this time, the cost is too rigid, such as high inventory of idle stock, inadequate utilization of production facilities, large organization and complex process, which can not fundamentally reduce the operation cost of the supply chain. So we have to sacrifice revenue, abandon high cost, low profit items or products, and shrink from market development, resulting in stagnant revenue or even negative growth.

There is a large equipment manufacturing enterprise. Before long as the international competitors bid, they will do whatever they want to win or lose, so that they can achieve more than half of the global market share. However, since the financial crisis, the revenue has been greatly reduced, and the company has lost money. Because of the profit consideration, it can not continue to do so, resulting in a further decline in revenue and a more prominent disadvantage of high cost. In this way, the company falls into the "growth trap" of low growth and high cost, and it is no longer a continuation.

"Growth trap" is encountered by fast-growing companies, and explains why companies cannot grow indefinitely. On the face of it, this is the trade-off between market share and profitability. In essence, it has to find answers in the supply chain of the company, that is, how to meet the needs of customers at lower cost, better quality and faster speed.