Quanzhou Enterprises Shift The Cost Pressure From Brand To Brand

Since October 2008, the subprime bubble burst in the United States has rapidly evolved into a global financial crisis. The world has evaporated more than 5 trillion dollars, which has brought great damage to the society. The economic fundamentals of the world's major economies have deteriorated rapidly in the second half of 2008.

In the panic and lament of the domestic real economy, the mainstream economic circles and entrepreneurs in China began to deeply reflect and analyze the growth pattern of Chinese enterprises.

In December 2008, at the forum of "Shanghai financial investment and M & amp; acquisition summit" held in Shanghai, the most prominent private equity fund in Shanghai, Wu Kezhong, the partner of Shanghai's Ying Chu Cci Capital Ltd, strongly recommended the growth mode of Quanzhou enterprises. The Chinese enterprises have these three modes, the Dongguan mode. Because the products have no pricing power, the enterprises are in danger of failure. Wenzhou mode, enterprises make money by low cost, and occupy the market with low prices, and now they have cornered themselves. Quanzhou mode has little pressure in the financial crisis, and may take advantage of this opportunity to make their enterprises bigger and stronger.

"Only when the tide ebb is up, do we know who is swimming naked," and the mainstream economic circles in China seem to have found an oasis in the desert.

The growth pattern of Quanzhou enterprises, which has always been relatively low-key, suddenly rose to the surface. "Stunning" the land of Shenzhou has attracted a large number of risk investors' eyes.

Wu Kezhong believes that under the global financial tsunami, under the circumstances of internal and external difficulties, the growth mode of Chinese enterprises should be divided into three modes: one is the Dongguan mode, the other is Wenzhou mode, and the other is Quanzhou mode.

These enterprises are facing different challenges and facing different opportunities because of their different modes, cost structure and market.

Dongguan Enterprises: the lack of pricing power of products. In the Dongguan model, under the influence of the US financial crisis, it has triggered a crisis in the US industry and led to a decline in US demand, which also led to a sharp reduction in the order of enterprises in Dongguan, which mainly exported OEM products.

Dongguan's mode, because the export OEM processing enterprises do not have the pricing power when they sell products, all the pricing power is affiliated to the downstream enterprises, so when the United States is facing the risk of bankruptcy, many enterprises in Dongguan are also facing bankruptcy or bankruptcy.

Why do businesses fail?

For a very important reason, export OEM processing enterprises have only 10% to 11% gross profit margins.

Now, because of the increase in labor costs, plus export tax rebates and RMB appreciation, these enterprises are basically not profitable.

Although some enterprises are still in operation, they are barely living under present circumstances.

Therefore, as private equity funds and Vc firm pursuing high profits, they will not invest in such companies without autonomy and being led by their noses.

Wenzhou enterprise: the low price occupying market, Wu Kezhong, said that the second types of Chinese enterprise growth model are called the Wenzhou model.

The Wenzhou model is different from the Dongguan model, and is not represented by exports.

But to occupy the market at low cost and low price.

Such enterprises can quickly occupy the market because of low cost and low price.

For a time, such enterprises belong to the fast developing enterprises in the Chinese market.

But at present, such enterprises are also facing great difficulties.

Wenzhou enterprises give people the feeling of low cost and low cost to be unimaginable.

Wenzhou enterprises rely on bank loans to maintain the survival of enterprises.

But he borrowed money from the bank, but did not plan to repay the principal of the bank, only to ensure that the interest on the bank was paid every year, so they did not take into account the cost of the bank.

In this way, Wenzhou enterprises are making money by low cost and low price to occupy the market, but now they have cornered themselves.

Everyone knows that every venture capital is going to go to Wenzhou when it is financing or private equity funds are financing.

Wenzhou has changed from its original product output to the capital export place.

It turns out that many products are exported. Why do they become capital exports now?

The earliest known is the real estate regiment.

Last year and last year engaged in mines; last year and this year, private equity has been pferred; therefore, Wenzhou's enterprises are no longer exported but they are exported.

If he thinks his business has a future, his business can become bigger. Why do we need to export capital?

Instead of absorbing capital like other companies that want to grow bigger, they are constantly exporting capital. This is mainly because they also feel that the development space of Wenzhou type enterprises is very small.

The way to solve the problem of enterprises is to invest abroad. The second way is to move the enterprises out of Wenzhou and change the original low cost and low price mode so as to expand the market.

There are a number of enterprises in Wenzhou. Now they are occupying an industry or a certain market, such as CHINT, people electric appliances and so on.

These companies didn't want to go public before, but now they want to go public.

However, from the perspective of capital investment, these types of companies are not very valuable in capital market.

Because it already has a large market share, and you can't create more profits than you create at the time you invest money.

This has no investment value for VC companies.

Because VC companies pursue a high profit.

Although the market capacity of Wenzhou enterprises is very large, they are occupied by the market at a low price. Now, because of the price changes of raw materials, these enterprises have not made much room.

Because there are only two channels for an enterprise to become bigger, one is to seize the space of others and seize the market share of others; the second channel is the expansion of the entire market.

Now, the only chance left for Wenzhou's enterprises is the expansion of the whole market.

Private equity and capital markets do not like investing in this type of business.

Wu Kezhong: the third way of growth of Chinese enterprises is the Quanzhou mode. In Quanzhou, the company is going to shift the cost pressure to the brand.

Enterprises in Jinjiang once put a lot of advertisements on CCTV sports channel from 2003 to 2006. For a while CCTV sports channel was called "Jinjiang channel".

Why?

Because more than 80% of CCTV sports channel's products and commercials are products from Jinjiang.

In fact, Jinjiang's enterprises started to make OEM, whether they are food processing or shoes making, whether they are sports shoes, casual shoes or faucets and bathing products, they are all made OEM.

However, in 2002, the export of Quanzhou's enterprises suffered some setbacks.

So, at that time, some enterprises in Quanzhou realized that the risk of making OEM products was very great, and took the lead of Anta and so on, bringing the products that had made OEM to the domestic market and creating their own brands.

Many companies follow up.

Therefore, in recent years, there are many enterprises that make shoes in Quanzhou. They used to do foundry for Adidas, Nike and other world brands, and later began to make their own brands.

There is also a brand of bathing. The original Kohler and TOTO enterprises have begun to turn into domestic brands.

Therefore, in this global financial turmoil, Chinese enterprises are subject to internal and external pressures, and Quanzhou enterprises are better able to resist pressure.

At present, China's internal and external environment has exerted some pressure on all manufacturing enterprises, but after years of brand development, Quanzhou enterprises have been able to shift the cost pressure with the brand.

In view of this, the capital market is very clear.

Therefore, in the first two years to invest in Quanzhou, it is still suppliers and distributors living in five star hotels. Now there are many private equity, lawyers, brokerages and so on in the five star hotels in Quanzhou.

Because these investors and brokerages have been told that if you give me capital, I can make the business bigger and bigger, and now it is a very good opportunity for me to expand.

In the three modes of Chinese enterprises' growth under the global financial tsunami, Wu Kezhong thinks that the Quanzhou mode is the least stressed and may take advantage of this opportunity to make our enterprises bigger and stronger.

Yang Jing: editor in charge