Scale effect

Synonymswitheconomiesofscalegenerallyrefertotheeffectsofscale.

Definition

EconomiesofscaleTheconceptofeconomicsofdevelopment.Theeconomyofscaleisacomprehensivebenefitindexthatreflectstheeconomicdevelopmentdegreeofaneconomy,whichisrelativetotheeconomicscaleindexthatreflectstheGDPgrowthmode.

Interpretation1

Macroscopically,economiesofscalerefertoaneconomy(usuallyacountry)integratedbythehumandevelopmentindex,socialdevelopmentindex,socialwelfareindex,andpeople’shappinessindexAmeasureofthedegreeofeconomicdevelopment.Atthemicrolevel,economiesofscalerefertodevelopmentindexesmeasuredbyproducts,enterprises,industrialaddedvalue,andcomprehensivebenefits.Economiesofscalealsorefertothebenefitsofeconomiesofscale,thatis,theincreaseinthemarginalbenefitsofenterprisesbroughtaboutbytheintegrityoftheindustrialchainformedbyacertaineconomicscale,theimprovementofresourceallocationandtheefficiencyofregeneration.Themicro-scaleeconomycannotbeseparatedfromthemacro-scaleeconomy,andthemacro-scaleeconomyrestrictsthepromotionandguidesthemicro-scaleeconomy.Regardlessofwhetheritisamacroeconomyoramicroeconomy,thescaleoftheeconomyisnotequaltotheeconomiesofscale.Theeconomicscalethatcanbringabouttheeconomiesofscaleistheindicator,goal,andpathofeconomicdevelopment.

Interpretation2

Effectsofscalearealsoknownaseconomiesofscale,thatis,theincreaseineconomicbenefitsbroughtaboutbytheincreaseinscale,buttoolargeascalemaycauseslowinformationtransmissionandcauseinformationdistortion,Disadvantagessuchasmanagementbureaucracy,onthecontrary,produce"diseconomiesofscale."Scaleeffectisaneconomicresearchtopic,thatis,productionmustreachorexceedthebreak-evenpoint,thatis,scaleefficiency.Thescaleeffectineconomicsisderivedfromthediminishingmarginalcost,whichmeansthatthecostofafirmincludesfixedcostsandvariablecosts.Mixedcostscanbedecomposedintothesetwocosts.Afterthescaleofproductionisexpanded,variablecostsincreaseinthesameproportion.Thefixedcostdoesnotincrease,sotheunitproductcostwilldrop,andthecompany'ssalesprofitmarginwillincrease.

Scaleeffectbecauseanyproductionhasacost,whichgenerallyincludesfixedcostsandvariablecosts.Toachieveprofitability,salesrevenuemustbegreaterthanproductioncosts,andthefixedcostsareconstant.Therefore,themoreyouproduce,thelessfixedcostsareallocatedtoasingleproduct,andthemoreprofitsyoumake.

Economiesofscale(economiesofscale)iswhentheoutputscaleofanenterprisereachesacertainlevel,theorganiccombinationofproductionfactorsproducesa1+1>2effect.Theaveragecostisshowingadownwardtrend.Theassemblylineisoneofthemanifestationsofeconomiesofscale.

Correspondingtotheeconomiesofscale,itistheeffectthateachfactorrestrictseachotherandtheaveragecostrisesaftertheoutputofacompanyreachesacertainscale.

Externalfactors

Thisproblemactuallydependsonmanyfactors,sothatwetendtoanalyzethesizeoftheenterpriseasa"result"like"grossdomesticproduct"insteadofRaiseitasa"problem".Roughlyclassified,theexternalfactorsthatdeterminethescaleoftheenterpriseare:

(1)The"markettype"ofthegoodsprovidedbytheenterprise

isroughlydividedintothree:

Thefirstcategoryisinfrastructure.Forexample,companiessuchasLucentorNorTel,thepriceofeachdevicetheysellisoftenmillionsofdollars,andtheirtechnologyrequiresThereisalmostnolimittothe“economyofscale”(comparedtothescaleofmarketdemand),soitisalmostalwaysinthestageofincreasingreturnstoscale;

Thesecondcategoryismassconsumption,becauseproductswillsoonbecomesaturatedorobsolete,Andbecauseofthelowbarrierstoentryinthemarket,theinitialinvestmentof"sinking"capitalisrelativelysmall,sothattheincrementalincomephasecausedbythesettlementcostisveryshort,whichistheeasiestmarkettypetoenterthestageofdiminishingreturnstoscale;

Thethirdcategoryisemergingareas.Themainriskhereisthatthe“standard”(orcustomer“taste”)hasnotbeenestablished.Ontheonehand,thesizeoftheenterprisemeanshighrisk,andontheotherhand,itmeansparticipatingintheformulationofstandards(or“taste”).Therefore,“scale”isoneofthestrategiesoftheenterprisegame.Itonlyaffectstheefficiencyofresourceallocationinadynamicsense.

(2)Thestageofmarketdevelopment

Itcanberoughlydividedintothree:

earlystage,rapidexpansionstage,andlatestage.Thesethreestagesconstitutean"S"-shapedgrowthcurveforproductsandmarkets.Companiescanhaveextremelydifferentoptimalsizesatdifferentstagesofthiscurve.

(3)Thewayoftechnologyupdate

Itcanberoughlydividedintotwo:

Thefirstiscontinuousevolutiontechnology.Forthistypeoftechnologicaladvancement,thesizeoftheenterpriseseemstocontributetotheaccumulationofknowledgeandrisksharingoftechnologicaladvancement,solargeenterpriseshaveagreatertechnologicaladvantagethansmallenterprisesinanaveragesense;thentherearemutationtechnologies.Forthistypeoftechnologicalprogress,aspointedoutbyHarvardBusinessSchoolprofessorChristensen,largecompaniesareoften“lockedinto”thesuccessofexistingtechnologiesbybureaucratictendenciesandvestedinterestgroupsandareunwillingtoenternewtechnologicalfields.Thusitmissedthevaluable"technicalprogresswindow"andwaseliminatedinthenextroundofcompetition.

Internalfactors

Analyticalperspective

Afterconsideringtheabovecomplex"externalfactors",wecanenterthemoreimportantanddeterminethesizeoftheenterpriseDiscussionof"intrinsicfactors".

Aftertheentrepreneurseesclearlytheexternalfactorsthatdeterminethesizeoftheenterprise,thequestionhefacesis:Basedonthegivenexternalfactors,howcanthebestenterprisescalebeachieved?Inotherwords,howtocombinevariousproductionfactors(labor,capital,naturalresources)inordertoachievethebestscaleofoutput.Inthedomainofthisissue,thevariousstrategiesofenterprisedevelopmentcanbeexpressedasacontractonpropertyrightstransactionssignedbyentrepreneursandvariousfactorowners.Whatkindofscale?”Thisquestioncanbetransformedintoaquestionofinstitutionaleconomics:“Whatscaleofoutputshouldandsupportthevariouscontractssignedbyentrepreneursandfactorowners?”ItisalsointhissensethatwewanttoexploretheenterpriseWealsowanttofurtherpointouttherelationshipbetweenthecapacityofdomesticenterprisesandthescaleofenterprises:theinstitutionalinnovationabilityofentrepreneursmaybethemostcriticalfactorlimitingthesizeofChineseenterprisesinthenextfewdecades.

Theabilityofentrepreneurstolimitthescaleofenterprisesisactuallytheabilityofentrepreneurstocoordinatethosewhoparticipateinthedivisionoflaborthroughcontracts.Moderninstitutionalanalysisemphasizesthatthemethodofcontract(andthusthesizeoftheenterprise)istheresultofsocialgame.Giventheabilityofentrepreneurs,differentqualitiesofpeoplecanleadtodifferentmethodsofcontractandthescaleofcooperation.ThisleadsourdiscussiontothefouraspectsofZhangWeiying'sarticle.

Thefouraspectsoftheproblemcanbesummedupasfollows:Itisthesupervisioncostofthecontractthatdeterminestheefficiencyofthecontractfororganizingcrowdcooperation,andthesupervisioncostofthecontractiscomposedofthesumofthecostsofthethreesupervisionmethodsofthecontract..

Threekindsofsupervisionmethods

"Firstpartysupervision",namelythemoralself-disciplinediscussedbyZhangWen;"Secondpartysupervision",namelytheinternalincentivesystemproblemdiscussedbyZhangWen,Alsoknownasthe"self-enforcementmechanism"ofthecontract;andthe"third-partysupervision",thatis,thegovernment'sprotectionofprivatepropertyrightsdiscussedbyZhangWen.The"speedofdevelopment"discussedbyZhangWenisactuallyaproblemoftherelationshipbetweencorporatecultureandcorporatescale.

Problemsfacedbyenterprises

AsfarasChinaisconcerned,Ithinkthebiggestchallengeourenterpriseswillfaceinthenextfewdecadesisthe"systemadvantage"enjoyedbymultinationalcompaniesbasedonlong-termexperience.".Becausetherulesofthegamearebasicallyformulatedinotherpeople'ssocietyandhavebeen"developed"intooursociety.Ourcompanymustparticipateininternationalmarketcompetitionevenifitenjoyslocaladvantages(market,resources,culture).ThemoreimportantinstitutionaladvantagesofWesterncompaniesarenotapparentinthecorporatesystembutimplicitinthecorporateculture(suchasHPculture,IBMculture,andMicrosoftculture).Theessenceofthiscorporatecultureistomaximizetheinnovativespiritofemployees.Theinternalincomedistributionmechanismestablishedundertheinfluenceofthisculturalsubstancecanbasicallybesummarizedas"allprofitsbelongtotheinnovator",becausetheinnovatorisexactlythe"entrepreneur"thatXiongPittalksabout.Ofcourse,amongall(technicalandinstitutional)innovations,theentrepreneur’sinstitutionalinnovationhasthemostsignificantimpactonthesizeoftheenterprise.Theessenceofentrepreneurialsysteminnovationisthatentrepreneurs,basedonadeepunderstandingofthequalityofthepeopleparticipatinginthecooperation,seekacontractmethodthatminimizesthesumofthecoordinationcostandtechnicalcostofproduction.Paternalisticbusinessmanagement(orevensimply"family"businesses)maysavethecoordinationcostofdivisionoflabor,butitoftengreatlyincreasesthecostoftechnologicalinnovation(suchasfamilybusinessesinSouthKorea).Toomuchdecentralizedmanagementmaygreatlyencouragethecreativityofemployees,butoftenleadstotoohighcoordinationcosts(suchas"Apple"computercompany).

TherealityofChinesesociety

The"trust"crisisininterpersonalrelationshipsandthelaginthetransformationofgovernmentfunctions.Theformerledtothe"first-partysupervision"ofthecontractalmostcompletelyineffective,andthelatterledtothehighcostofthe"third-partysupervision"ofthecontract.Asaresult,entrepreneurscanonlyimplementsysteminnovationswithintheenterpriseaimedatreducingthecostof"second-partysupervision".Withoutthesupportoftheothertwomethodsofsupervision,itisdifficultfortheindependent"second-partysupervision"towork.Inmyopinion,thissituationinitselfconstitutesthemostseverechallengetoChineseentrepreneurs.

Finally,IwouldliketopointoutthatthescaleofChinesecompaniesisrelativelysmallcomparedtotheinternationallevel,orthescaleofHongKong’scompaniesisrelativelysmallcomparedtotheaveragelevelofJapan,orthatthescaleofTaiwan’scompaniesisrelativelysmallcomparedtotheaverageleveloftheUnitedStates.Therelativelysmallleveldoesnotmeanthattheefficiencyoftheenterpriseisnecessarilylow.Thesizeoftheenterprisemaybeproportionaltothescaleoftheriskthattheenterpriseassumestoagreaterextent.Forexample,statisticsshowthatthe“mortalityrate”ofacompanyisinverselyproportionaltothesizeofthecompany(GlennCarrollandMichaelHannan,"TheDemographyofCorporationsandIndustries",PrincetonUniversityPress,2000).Largecompaniescansurvivethelong-term"depression"stagebyshrinkingtheirscale,whilesmallcompanieshavenosuchroomforshrinking.Ontheotherhand,statisticaldatashowsthatitiseasiertostimulatethetechnologicalprogressofenterprisesintherecessionphasethanintheprosperityphase.Thecombinationofthesetwoaspectsmakesapositivecorrelationbetweenthesizeoftheenterpriseandtheprobabilityoflong-termtechnologicalinnovation.

So,thekeyquestionis:Howdoourentrepreneursshapetheirowncorporatecultureandincentivemechanism,soastomaximizepeople'sinnovativespirit.

NeedleFactoryExperience

Inhisfamousbook"StudyontheNatureandCausesofNationalWealth",AdamSmithdescribedhisvisittoaneedlefactory.Smithsawthespecializationamongworkersandtheresultingeconomiesofscalethatleftadeepimpressiononhim.Hewrote:

Onepersonpullsthewire,theotherstraightensit,thethirdcutsitoff,thefourthsharpens,andthefifthpolishesthetiptoinstalltheroundhead;therearetworequirementsforroundheads.Threedifferentprocesses;fillingtheroundheadisaspecializedbusiness;whiteningtheneedleisanother;evenloadingtheneedleintothecartonisalsoacraft.

Smithsaidthatbecauseofthisspecialization,eachworkerintheneedlefactoryproducesthousandsofneedleseveryday.Heconcludedthatifworkerschoosetoworkindependentlyinsteadofworkingasateam,"thentheycertainlycan'tmake20needlesperpersonperday,maybenotevenone".Inotherwords,duetospecialization,largeneedlefactoriescanachievehigherpercapitaoutputandloweraveragecostperneedlethansmallneedlefactories.

ThespecializationSmithobservedintheneedlefactoryisubiquitousinthemoderneconomy.Forexample,ifyouwanttobuildahouse,youcantrytodoallthework.Butmostpeoplelookforbuilders,andbuildershirecarpenters,plumbers,electricians,painters,andmanyothertypesofworkers.Theseworkersspecializeinacertainjob,andthisallowsthemtodobetterthanwhentheyweregeneral-purposeworkers.Infact,theuseofspecializationtoachieveeconomiesofscaleisonereasonwhymodernsocietyissoprosperous.

Scaleeffect

Industrybackground

Injustoneyear,theglobalPCindustryhasmovedsignificantly.AfterHPsurpassedDelltobecomeNo.1inthemiddleoftheyear,AcersurpassedLenovotobecomeNo.3inthesecondquarter.AtthesametimethatthePCgiantschangedtheirseats,rumorsabouttheacquisitionofbrandedcomputerbusinessessuchasTCL,Founder,andGatewayfollowedoneafteranother.Theso-called"nowindwithoutwaves"provestheanxietyandanxietyofvariouscompaniesinthenewroundofintegrationinthePCindustry.

AnalystsbelievethatthescaleeffectofthePCindustryismoreprominent,anditisinevitablethattherewillbeatideofintegrationagain.Thereporter'sinvestigationfoundthatfirst-tiermanufacturersarereluctanttoaccept,second-tiermanufacturerscannotacceptitandarecautious,andthepreparationoftheselleriseagertodivestbusinessduetoitsownoperatingpressureandcompetitivepressure,whichisthemaintoneofthisroundofM&Aprelude.

Thetopspotischanging

HPispullingthedistancefromDell,andAcerhasovertakenLenovo.Thewinnersarestillaccelerating,andthetemporarilylaggardsarealsostrugglingtoovertake.

SinceitsmarketsharesurpassedDellinthesecondquarter,HPhasbeenacceleratingthewideninggapwithDellinthesetwoquarters."AfterMarkHurdbecametheCEO,HP'scostawarenesscombinedwithitshigh-qualityserviceschangedHP'simageanditsmarketsharenaturallyincreased."GuoChang,asenioranalystatCCW,commentedonHP.ButapersonwhoknowsHPbelievesthattherearealsosomehiddenworriesinHP'shigh-speedadvance:"MarkHurd'sveryrefinedmanagementisdifferentfromthetraditionalextensive'HPWay'.Noweveryoneisunderpressureontasks.Itisverybig.Althoughithascompletedtheperformance,itmayalsoleadtosomeshort-sightedsituations."

ThebiggestproblemoftheglobalPCbossHPisthecompetitionwithLenovointheChinesemarket."HPusedtodigpeoplefromLenovoatallcosts.AslongasLenovopeoplewanttocome,theywillarrangeaposition,notbecauseoflackoftalenttodig."ApersonfamiliarwiththemattertoldreportersthatHPhastargetedsomefirst-linemarketpersonnelfromLenovo..Inaddition,HPhaslaunchedsuitableproductsspecificallyfortheChinesemarket,andthereisnolongertheimpressionofbeingveryexpensiveinChina.

Dell'ssituationisnotideal,andthereisnosignofimprovement."ThesubstantiveproblemthatDellcurrentlyfacesisitsbusinessmodel.Thedirectsalesmodelitadherestoisdifficulttocoverdevelopingcountriesandsmallandmedium-sizedcities.Ifthecompany'sdirectionandstrategydonotchange,evenifDellhimselfre-takescontrolofthecompany,Idon'tthinkHowmuchimprovementcanitbring?”YeLei,chiefanalystofGartner'sChinahardwaremarket,analyzed.Fromtheindications,Dellisstillstickingtothedirectsalesmodel.AfterDell'scomeback,itwillfocusoncontrollingcostsanddevelopingtheconsumermarket.Duringtheinterview,thereporterfoundthatDell,whichisconstantlylosingtalents,isentrustingaheadhuntingcompanytorecruitpeoplefromanumberofITcompaniestosupplementandreplaceitsseniorteam.

Lenovo’smarketshareinChina’soverallbusinessisincreasing.PeoplefamiliarwiththemattertoldreportersthattheChinesemarketsupportsLenovo'sglobalrevenueandprofits,butitholdsChina'swages.WhilebusinessintheUnitedStatesisdeclining,theyareenjoyingAmericanwages.Atthesametime,theChinaregionisdevelopingwell,butitisreceivingincreasingsalespressuretobeartheshrinkingregion.

Peoplefamiliarwiththemattertoldreporters:AfterLenovoacquiredIBM,therewasaculturalconflictbetweenLenovoandIBMemployees.SinceAmeliomovedfromDelltoLenovo,the"DellGang"hasmovedintoLenovoagain,makingitmoredifficulttointegratethethreeparties."LiuChuanzhiremindedAmelioonbehalfofshareholdersthattheintroductionoftalentsisgood,butthedirectionofintroductionshouldnotbetoosingle."LenovohiredWeiJianglei,directorofHP'sChinabrand,asthevicepresidentofstrategyandoperationsinGreaterChina.Tomaketalentsmorediversified,thesecondisthatthispersonhasverystrongcommunicationskillsandismainlyresponsibleforcommunicationbetweenLenovoGreaterChinaandtheheadquarters.

Fortunately,Lenovoisawareoftheproblemandhasacted:InearlyApril,itannouncedtheestablishmentofanewconsumerunit,ledbyLenovoGroupChairmanYangYuanqing.OnApril19,2012,itannounced1400globallayoffs,andatthesametimemovedsomehigh-costpositionstolow-costareas."Theirmovementsshouldbefaster."YeLeicommented.

Buyingandselling

Thesoundofbuyingandsellingisgettingdenser.DellacquiredFounder,DellHewlett-PackardcompetedforTCL,andAceracquiredGatewayintheUnitedStates.Theacquisitionwasrumoredoneafteranother,andthepartiesinvolveddenieditagainandagain.Duringtheinterview,thereporterfoundthatpeopleintheindustryheldthesameviewthatthescaleeffectofthePCindustryhasbecomemoreprominent,anditisaninevitabletrendthattherewillbeatideofintegrationagain,andthestrongweighthestrong.Atthistime,companiesthatdonothaveanabsoluteleadingpositioninthePCfieldareunderpressuretobesold;andthosewhocomeforwardtoacquiremaynotnecessarilybetheworld'slargestPCcompany.

Atthecuspofacquisitionrumors,aproductmanagerofHewlett-PackardCompanytoldreporters:"Ihaven'theardanynewsaboutacquisitionsinthecompany.Asaninsiderofthecompany,Ithinkacquisitionsareunlikely,Becausethisisnotveryhelpfultoourdomesticbusiness.Thestallistoobigtobeeasytomanage,unlessitistoexceedLenovo’sdomesticmarketshareintheshortterm,butcurrentlywedonothavesuchagoal."ThescaleeffectcanaffectRenheyiindustry.

Dellduetobusinessmodelconsiderations,theacquisitionmeansachangeindirectsales,thatis,givingupthedirectsalesthatithasalwayscalleditsownuniqueadvantage.Thisdecisionisnoteasytomake,soitwillbemorecautiousaboutacquisitions."Fromaglobalperspective,thesetypesofcompanieshaveacquisitionneeds:First,theymaynotnecessarilybethefirstandsecondcompaniesintheindustry.Thethird,fourth,andfifthcompaniesseemtobemorelikely.Theyurgentlyneedtomakethemselvesbiggerandstronger.Companiesthatcomplementeachotherintheglobalregionaremorelikelytoacquire,suchasGateway,whichisstrongintheUnitedStatesbutweakoutsidetheUnitedStates.Acquisitionisthefastestandmosteffectivewaytoenteranewmarket."YeLeiexpressedthisview.

Expertopinion

"Acquisitionsarenotaboutbuyingbrandsandtechnologies.Theyaremoreconcernedwithregionalcoverage,sales,channelcapabilities,andlocalsalespersonnel."YeLeiconcluded.Animportantmeasurementfactorforacquisitions.

Whowantstosell?YeLeibelievesthatthepositionofthePCbusinessintheentirecompanyisnotimportant,andthePCisnottheonlymainbusinessorcompaniesthatarenotthemainbusinessmaywanttosellmore.Infact,competitioninthedomesticPCindustryisverycruel,andsecond-andthird-tiermanufacturersareundergreatpressuretosurvive.

Althoughintermsoftrends,thereisabigdemandforacquisitionandintegrationintheindustry,butacquirershavebecomemorecautious."Youarenotdoingwellnowandyouwanttosell.IfIbuy,youneedtomakeupfortheholesbeforeyoucanconsiderthebusinessproblem.DoIhavetheabilitytomakeupfortheholes,andIdon'tevenunderstandwhat'swrongwithyou."GuoChangthought.Moreformsofequityparticipationandstrategiccooperationwilloccurinthefuture.

GuoChangbelieves,“Futureacquisitionsshouldnotoccurbetweendomesticfirst-tierandsecond-tiermanufacturers,becausetheirtargetcustomersbasicallyoverlap,anditisdifficulttoachieve1+1greaterthan2.Internationalmanufacturers’acquisitionsDomesticmanufacturersaremorelikely.Theacquirermaybesecond-tiercompaniessuchasAcerandBenQ,andtheirsituationinthecountryhasbeendelayed.ItismorelikelythattheacquiredpartyisacompanythatisnotthemainbusinessofPC."

Thefirst-tiermanufacturersarereluctanttoaccept,thesecond-tiermanufacturerscannotacceptitandarecautious,andthesellersareeagertodivesttheirbusinessduetotheirownoperatingpressureandcompetitivepressure-thisisthegeneralsituation.

ThePCindustryisundergoinganothermajorconsolidationtrend,butthistimesellingismoreurgentthanbuying.

Thescaleoftheancientbridge

Thesituationoftheancientbridge

AmarketingexperttoldthemanagerofBeijingGuqiaoElectricCompanythatBeijing’s"oldthreepieces"aresilencedInfact,Beijing’s"NewThreePieces"arealsofarbehind.Your"AncientBridge"issellinghot,canyoulastforafewyears?

Thisisnotajoke.Beijing'snewandold"threepieces"havefallenoutoffavoroneafteranother,buttheircounterpartshavedonealotofwork.ThenewlyemergingKelonrefrigeratorssoldmorethan600,000unitsin1993,andMeilingrefrigeratorssoldmorethan500,000units;thewashingmachineandcolorTVmarketswerealmostdominatedbysouthernenterprises.Thewindandsmokeoftheair-conditioningwarin1991hadjustbeenignited,anddozensofbrandsofair-conditionersimmediatelywentnorthward,andtheslogan"ConquerBeijing,OccupyNorthChina"screamedloudly.However,Beijing'senterprises,limitedbytheirownunspeakablesuffering,areindeedfacingtremendouspressure.

Seeingthathundredsofmillionsofinvestmentprojectshavebeencompletedonebyone,andbuildingslikestar-ratedhotelshaverisenfromtheground,the"Guqiao"peoplearenotenthusiastic,andtheirabacushasanotheraccount:Guqiaoairconditionersproduced20,000unitsin1991,50,000unitsin1992,and80,000unitsin1993arestillinshortsupply.Thecarslininguptopullthegoodswaitedanxiouslyunderthescorchingsun.Thesalesstaffurgedthegoodstodeliverthewholeboxofcolddrinkstotheworkerswhoworkedovertimeinordertotakeawayafewancientbridgeairconditioners.Guqiaoairconditionersareoutofstock,andthemarketingofsupplyanddemandmakesanyoneunderstandthat"Guqiao"hastheopportunitytomakeabigdifference.

Thewayoutoftheancientbridge

However,inordertoachieveitsowndevelopment,the"Guqiao"haswaited8yearsforthe40millionyuantechnicaltransformationfundithasstrivedfor.Thescaleof"Guqiao"isobviouslynotitsownadvantage.

Asthesayinggoes,youwalk,Iwalkonthebridge.GeneralManagerWangZifan’swordsarefullofphilosophicalprinciples:"Scalingcanyieldbenefits,andscalewillhavecompetitivestrength,butthisisnottheonlywaytoyieldbenefits.Thetechnicalcontentofproductsandtheimprovementofproductqualityarealsothesame.Benefit.Inthissense,newtechnologyandhighqualityarealsoscale."

WhileWangZifanwasstudyingabroad,heprovidedevidenceforthispointofview.Hecited,forexample,thattheoutputoftheworld-famousGerman"Benz"carneverexceeded500,000units,butthesalespricewas40%higherthanthatofthegeneralsimilarproducts,andtheproductswereeverlasting.Whattheysellisnotthepriceofsteelandiron,butinfacttheyselltechnology.Itdependsonthetechnicalcontentofyourproduct.

Thishighlyskilledcorporatemanager,afterinvestigatingthedomesticair-conditioningmarket,proposedhisownuniquecompetitivestrategy:

Inthecaseofexcessair-conditioningproductionandstablesales,Wemustmaintainastablemarketshare.Inthedevelopmentofamoderatescale,improvethetechnicallevelofproductsandobtainthesamehighprofitincome.TheinvestmentenvironmentinBeijingisdifferentfromotherplaces.Inaddition,thefinancialandmaterialresourcescannotbescaleduptoalargescale.Therefore,thecompetitivestrategyof"leadingtechnologyandfirst-classquality"isadvisable.Itrequiresbenefitsfromtechnology,variety,andquality.UsethismethodCompaniesofthesamesizearecompeting.

GuqiaoMarketPositioning

"Guqiao"ispositionedinthemarketinthisway.Guqiaotakesrootinthemarketbyvirtueofhightechnologyandhighquality,andwinsbenefits.

"First-classquality,leadingtechnology,moderatescale,twomarkets",thisisthe16-characterorderof"Guqiao".WangZifansaidthatinthisway,Beijing’s"Guqiao"willnotloseoutintheair-conditioningmarketcompetition.

In1993,"Guqiao"strengthenedtheideologyof"QualityFirst"forallemployees.,Don’tjustfightforthequantity,butlookforthegapinwardly.Theyinsistthatunqualifiedoriginalpartsarenotputonthemachine,andunqualifiedproductsarenotshippedfromthefactory.Theystrictlycontrolthequality.Theystartedbypurchasingpartsfromoutsourcingandenteringthefactory,strengthenedinspections,andactedstrictlyinaccordancewithtechnicalqualitystandards,andimmediatelystuckwhentheyfoundqualityproblems.Theintroductionofthismeasurehasincreasedthepassrateonthemachine.Inordertopreventqualityproblemsintheproductionprocess,theyselectedsomeskilledandresponsibletechniciansandcadrestostrengthentechnicalqualitymanagementintheworkshop,checktheprocedures,andimmediatelycorrectandsolvetheproblems.Inordertopursueproductreliability,theypurchasedadvancedtestingequipmentandstipulatedrandominspectionitemsarrangedbythestateundertheconditionoftightfunds,andthecompanychangedtomandatoryinspectionitems.Thepipingsystemintheairconditionermustbeexposedtwicetoensurethattheproductqualityisfoolproof.

Inthesummer,inresponsetothechaoticandlowtechnicalleveloftheinstallationteaminthesociety,theytimelyheldlecturesonthemaintenanceandinstallationofGuqiaoair-conditioning.InordertofurtherenhancethewarmimageofGuqiaoair-conditioning,thetechnicalservicedepartmentalsoThesocialmaintenancedepartmenthastrainedmorethan70technicians,sowingtheseedsofthereputationofGuqiaoproducts.

Competitivedevelopment

Withouthightechnology,productswillnotbecompetitive.Relyingonscientificandtechnologicalprogress,continuouslydevelopingmarketableandhigh-qualitynewproductsthatmeetmarketdemandisthekeytoenterprisedevelopment.

ThenewproductsdevelopedbyGuqiaoin1993arenotonlyhigh-grade,butalsomarketable,andhavecreatedconsiderableeconomicbenefits.Pleaseseethefollowingsetofmaterials:(1)DevelopKF-20GW(3)splitwall-mountedairconditioner,whichhasnoveldesign,beautifulappearance,completefunctions,stablecoolingcapacity,andisdeliveredtothecountryThetestingcenterpassesthetestonce,andislovedbythemajorityofusersafterbeingputonthemarket.In1993,morethan7,000unitsweresoldout.Accordingtopreliminarycalculations,thisproductalonegeneratedaprofitofmorethan2.8millionyuan.

(2)UsingSouthKoreanindoorunits,Guqiaohasdevelopedtwonewsplitairconditioners,KF-27andKF-35.Atotalof3,000unitswereproducedthroughouttheyear.Theywereverypopularafterbeingputonthemarket.Theancientbridgenotonlyaddsnewvarietiesbutalsobringsconsiderableeconomicbenefits.

(3)Thecompletionofthenoisetestroomprovidesagoodtestfacilityforthedevelopmentoflow-noiseairconditioners.TheKCS-18Jwindow-typelownoisedevelopedin1993droppedto49decibels,whichismuchlowerthanthenationalstandard,andhasbeenputintomassproduction.

(4)Accordingtothemarketdemand,theKFR-20splitheatpumpairconditionerKCF-20windowtypeonesupporttwoairconditionerhasbeenputintoproduction.Thesenewproductshaveahightechnicalcontent,reflectingthesuperbskillsandingenuityoftheGuqiaotechnicians.

Guqiaopeopleworkedhardforayear,sothatthecompany'stotalindustrialoutputvaluein1993increasedby111.4%comparedwiththesameperiodin1992,theannualoutputincreasedby59.2%comparedwiththesameperiodin1992,andthesalesrevenuecomparedwiththesameperiodin1992.Anincreaseof89%,a13.9%increaseinprofitsandtaxesoverthesameperiodin1992,anda67.6%increaseinoveralllaborproductivityoverthesameperiodin1992.

Thesuccessoftheancientbridge

Thesuccessofthe"Guqiao"onthebridge.Intheair-conditioningbattlebetweentheheroes,Guqiaohasbecometheleaderamongthefamousbrands.

Sincethebirthofthefirst"Guqiao"airconditionerin1979,ithasexperiencedupsanddownsfortenyears.Ithasgrownfromtheonlyproductintheinfanttoapowerfulfamilywith55modelsoffivemajortypes.Withlimitedcapitalinvestment,thisfactoryhascarriedoutfourphasesoftechnicaltransformationprojects.Nowithassevenproductionlines,threeassemblylines,onestampingproductionline,onesprayingproductionline,andtwoheatexchangerproductionlines.Theproductionimageof"Badizhan"hasdevelopedintoamodernproductionmodethatadoptsadvancedassemblytechnologyandcomputernetworkingmanagement.Nowadays,GuqiaoElectricCompanyhasadvancedmanagementmodeinproductionandscientificresearch,hastrainedanoutstandingtechnicalteamandtrainedalargenumberofskilledworkers.Today,ithastakenaleadingpositionintheindustryinadoptingadvancedmicroelectronicstechnology,energy-savingtechnology,andnoisereductiontechnology.Thefixedassetshavereachedtentimesofthoseintheinitialstageoftheestablishmentofthefactory,andthepaymentofprofitsandtaxesisequivalenttoaddingfourenterprisesofthesamescaletothecountry,andtheeconomicbenefitsareincreasingatarateof20%everyyear."Guqiao"airconditionerhasrepeatedlywoncityawards,ministryawardsandmorethan20othergoldawardsandtheBeijingOutstandingManagementAchievementAward.

Accordingtoinvestigationsbyrelevantagencies,inthefiercecompetitionamongmanymanufacturersandthecompetitionofstrongplayersinthecapitalmarket,Guqiaoaccountedfor50.2%,winningthefavorofconsumers.Thestrengthshownby"Guqiao"hasbecomealeadingenterpriseintheproductionofairconditionersinnorthernmycountry.Thistenderpastisgrowingintoastrongtree.

Thefutureoftheancientbridge

Can"theancientbridge"remaininvincibleinthefuturecompetition?PartySecretaryLiuXuguanghasamoresoberunderstanding.HesaidthatthepeaksalesseasoninMarch1994isstillaroundthecorner,andtheair-conditioningwarshavealreadyignited.Thisispressureandmotivationforus.Thekeyistoemancipatethemindandchangetheconcept.Especiallytochangeourconceptsandtraditionalhabitsthatarenotsuitableforthemarketeconomy.Forexample,iftheproductissellingwell,shouldwesellit?Wecan't"waitforthedoor",wehavetowalkoutofthecapital,crosstheYellowRiver,crosstheYangtzeRiver,andheadtoGuangdongandGuangxitoHainan.Peoplearegoingnorthwardinabigway,andwewillgosouthtofight.Ifyoudon'topenupthemarket,howcanyoutalkaboutoccupation.Newproductdevelopmentandinvestmentmustalsomakegreatbreakthroughs.Scienceandtechnologyaretheprimaryproductiveforces.Intoday'sera,whoeverhashigh-precisionandcutting-edgeproductscanoccupythemarket.Itisimpossibletowiniftechnologylagsbehindthemarket.Guqiaoair-conditioningfreshairunit,windowmachinewithonesupportandtwoair-conditioning,low-noiseandenergy-savingair-conditioning,etc.shouldbelaunched.Wewillalsogoallouttodevelop3-hp,5-hpcabinet-typeheatpumpairconditioners,andheatpumpsplit25wallairconditioners.Thenewproductsmusthavethecharacteristicsofsmallsize,lightweight,beautifulappearance,lowcost,andhighefficiency.Outoftheancientbridgefeatures.

TheyoungsecretaryofthepartycommitteeisnotonlydrawingtheblueprintofGuqiaoairconditioning,butalsotellingpeopleaboutGuqiao’sstrategyofdevelopingonamoderatescale."Guqiao"hasblazedanewpathinthefiercebattleintheair-conditioningmarket.Itmayhavelessonsforthedevelopmentofsmallandmedium-sizedenterprises.ThefutureofGuqiaoisanunchanginglaw.

Academicliterature

Scaleeffect

1.Scaleeffectmeansthattheproductionofmostproductsofmodernindustrymustreachacertainlevelofscaletobeaneconomicallyreasonableoutput.Thethirdfeatureisthatmodernindustrialtechnologyisusuallylabor-savingandthedistributionoffactorsiscapital-intensive.2.Scaleeffectmeansthatsmallcompaniesoftenperformbetterthanthemarketaverage,thatis,small-capstockshavehigheryieldsthanlarge-capstocks.,Itreferstothecreationofavirtuallearningenvironmentforstudentsontheinformationnetwork,whichenablesteachersandstudents,studentsandstudentstointeractthroughelectronicmedia,promoteslearners’understandingandapplicationofknowledgeincommunication,andrealizesemotionandpersonalityTheperfection.

3.Theso-calledscaleeffectmeansthatthehighertheproductionscale,thehighertheproductionefficiency,themorereasonablethepriceoftheproduct.Thetypicalindustryofscaleeconomyistheelectroniccomputerindustry.ResourceIntergenerationalCompensationTax1.IntergenerationalWealthTheconnotationoftransferIntergenerationaltransferreferstothefreetransferofwealthfromonegenerationtoanother.

4.Previousstudieshaveshownthattheso-called“scaleeffect”meansthattheexcessreturnsofsmall-scalecompaniesinthestockmarketarehigherthanthoseoflarge-scalecompanies.Thishasbeenreportedbymanyscholars.Itwasconfirmedintheresearch.

5.Theidealexpansionperiodmodelusuallyhasaphenomenoncalled"scaleeffect"inengineeringconstruction.

6."Effectofscale"referstothefactthatthereturnonstockinvestmentdecreaseswiththeincreaseintherelativesizeofthecompany,especiallythephenomenonthatthereturnonstockinvestmentofacompanywithasmallmarketvalueexceedsthemarketaverage.Itisalsocalled""Smallcompanyeffect"(smallfirmeffect).

7."Effectofscale"referstothedifferenceinregionaleconomicdevelopmentcausedbythedifferenceinthelevelofeducationaldevelopmentindifferentregions.FromthestatisticaldataofJiangsuandJiangxiprovinces,itisobviousthateducationThereisasignificantpositivecorrelationbetweeninvestmentandeconomicdevelopment(expressedinGDP),andthecorrelationcoefficientsbothreachzero.

8."Scalingeffect"referstotheexistenceofaconcaveoraconvexcurverelationshipbetweenthecityscaleandmanyeconomicindicators.Inlayman'sterms,manyeconomicindicatorsareonlyavailablewhenthecityscaleOnlywhenitreachesacertainlevelanditisthislevelcantherebegreaterdevelopment.

9."Effectofscale"referstotheeffectthateachmemberunitofanenterprisegroupmaintainscontinuouslarge-scaleproductionthroughspecializeddivisionoflaborandcooperationsothateveryonecanachieveeconomicscale.

10.Aninverserelationshipbetweenrateofreturnandscaleisthatthestocksofsmallercompaniestendtohavehigherratesofreturninthesameperiodoftime,especiallythesmallestgroupthathasasignificantlyhigherrateofreturn.Thiseffectforthesecondgroupingandothergroupsiscalledthe"scaleeffect".

China'sscale

Thehighlightofthescaleeffect

Sincethereformandopeningup,China’seconomyhascontinuedtodeveloprapidlyatanaverageannualgrowthrateofover9%.undeniablefact.So,howdoyouviewtheimpactofChina'sriseontheworld?Inmyopinion,fromaglobalperspective,theimpactofChina'sriseontheworldcanbesummarizedasthescaleeffectinthefollowingaspects.Thefirstistheeffectofpopulationsize.

WecanseethattheU.S.economytookoffat42millionin1870,accountingforonly3.16%oftheworld’spopulation.In1950,whentheJapaneseeconomytookoff,itwas83million.,Accountingforonly3.3%oftheworld’spopulation,butwhenChina’seconomytookoffin1978,itstotalpopulationhadactuallyreached960million,anditaccountedformorethan22%oftheworld’spopulationatthattime.Inthefuture,becausenotonlyChinabutalsoIndia,theriseofsuchalarge-scalepopulationwillitselfcreateanewgoldenperiodofdevelopmentintheworld.Fromaglobalperspective,1870to1913wastheworld’sfirstgoldendevelopmentperiod,whentheworld’seconomicgrowthratewasroughly2.12%;1950to1973wastheworld’ssecondgoldendevelopmentperiod,whentheworld’seconomywasatthattimeThegrowthrateisroughly4.2%;since1990,ifyoucounttheriseofIndiaandChina,theglobaleconomicgrowthratehasreached3%.ThisiscalculatedaccordingtoWorldBankdata.Inthefuture,theworld'sthirdgoldendevelopmentperiodmayoccur.,Thatis,the30yearsfrom1990to2020willcreateagoldendevelopmentperiodsimilartothefirstandsecondtimes.Suchadevelopmentperiodhasalottodowiththepopulationscaleeffect.

Thesecondisthescaleeffectofjobcreation.

Let’slookatsomedata.In1960,thetotallaborforceinOECD(OrganizationforEconomicCooperationandDevelopment)high-incomecountriesaccountedforroughly20%oftheworld’stotallaborforce.By2002,ithaddropped.To15%,judgingfromChina'sdata,ithasbeenmaintainingaquarteroftheworld'stotal.Butifwedeductagriculturallaborandonlycountasnon-agriculturallabor,wecanfindthatin1980,China’snon-agriculturalemploymentaccountedforonly6.5%oftheworld’slaborforce,butby2002ithadnearlydoubled,exceeding12%.%.Accordingtothedevelopmenttrend,iftheproportionoftheOECDcountry’slaborforcecontinuestodeclineandtheproportionofChina’snon-agriculturallaborforcecontinuestorise,thenweestimatethatChina’stotalnon-agriculturallaborforcefrom2010to2015willbeequivalenttothatoftheOECDhigh-incomecountries.Allthelaborisgone.Thisshowsthatifwecanstillmaintainrelativelyhighhumancapitalinvestmentandrelativelylowlaborprices,thenitisinevitablethatjobsfromallovertheworldwillmovetoChina.

Effectofscaleoroffsettingcostrisk

Thethirdistheeffectofsuper-largeeconomicscale.

AccordingtothelatestforecastmadebyMadison:ChinacansurpasstheUnitedStatesinitseconomicaggregatearound2015,andbelievesthatChina’sshareoftheworld’stotaleconomycanreach23.1%.Ofcourse,notonlyChina,butalsoIndia,willrapidlyexpanditsshareoftheglobaleconomy.Suchahugeeconomicscalewillcreategreatopportunitiesfortheworld.Fourthisthescaleeffectofopeningupmarketsandexpandingtrade.

WhentheU.S.economytookoff,tradeaccountedfortheworld’stotaltradevolumewasrapidlyincreasing.Wecanlookatthedata:China'stotalexporttradeaccountedforonly0.8%oftheworld'stotalin1978,andreached7.2%in2006.By2010,itshouldbecloseto10%.Ofcourse,theimpactofthiskindofexportontheworldismultifaceted,bothpositiveandnegative,butonthewhole,theincreaseinourexportshasalsoledtotheincreaseinouroverallimports.ItcanbesaidthatChina'stradestillhasconsiderablegrowthpotentialinthelongrun.

However,thingsalwayshavetwoaspects,andweshouldalsoseethenegativeaspectsofChina'seconomicgrowth.Thisisthescaleeffectofresourceconsumptionandenvironmentalpollution.Withchangesintheregionalandnationallayoutoftheworld’seconomicaggregates,aswellasmajorshiftsinindustriallayout,includingchangesintheproportionofexports,wecanseethattheproportionofprimaryenergyconsumptionintheUnitedStatesandtheEuropeanUnionintheworld’stotalisrapidlydeclining.AlatestreportfromtheIEA(InternationalEnergyAgency)showsthatitisverylikelythatChinawillnothaveuntil2015,andChina'senergyconsumptionwillreplacetheUnitedStates.Ofcourse,after2030,theremaybeachangeoforderbetweeneachother.Thisisfromtheperspectiveofprimaryenergyconsumption.

Let'stakeanotherlookatthemarginalresourceconsumptionimpactofChina'srise.AccordingtodatafromBP(BritishPetroleum),from1994to2004,China'senergy,coal,oil,andsteelhadagreatimpactontheworldmarket,notonlytheconsumptionofresources,butalsotheworld'sresourceprices..WehavealsocalculatedandcalculatedtheeconomiclossesofnaturalassetsinChinaandtheUnitedStatesbasedontheWorldBankdatabase.WehaveseenthattheGDPoftheUnitedStateshasfallen,andwehaverisen.Fromtheaboveanalysis,itcanbeseenthatChinahasbecomethelargeststakeholderintheworld’sthreemajoreconomiesincludingEurope,AmericaandJapan.Therefore,Chinaneedsnotonlyanindependentrise,butalsoanopenrise;notonlyarapidrise,butalsoa"Greenrise".

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