Toast to 2012

The year of 2012 has come as the New Year’s bell has been sounded. However, the previous question we have been facing for a long time is not yet answered. The question is seemingly simple but profoundly challenging and unavoidable: “Where are we, the Chinese companies, heading?” In the modern times, the great business leaders of the multinational economic groups in the developed countries have been continually creating numerous business miracles, from the legendary Rockefeller to the recent tech icons Bill Gates and Steve Jobs. Some of us may observantly realize that their businesses are founded on the successful integration of human resources, which means they created and constructed, one after another, some powerful business platforms of resource integration. This may have served as the key element to their ultimate success.

Recently, the “6+1” theory, raised by Larry H.P. Lang, indicates that the whole world has already entered the era of the War of Industry Chain.

According to the “6+1” theory, the multinational corporations from the developed countries, especially the United States, has been integrating strategically the China’s manufacturing industry into the whole industry chain (this is the “1” in Lang’s theory). In the mean time, all of the non-manufacturing processes, including the product designing, raw material purchasing, storage and transportation, order processing, wholesale dealing and terminal retailing are still controlled in their own hands definitely. (These six processes are the “6” in Lang’s theory). The “6” is the “soft” aspect of production, while the “1” is the “hard” production process. Under this circumstance, the manufacturing industry in China has no alternative but to be settled at the most low-end of the value chain. This is the so-called “the war of industry chain” 

Let’s take the production of the Santa Claus toys as an example. In China, the manufacturer of the Santa Claus toys receives one dollar for every toy it manufactures. However, the same toy will be eventually priced and sold at nearly ten dollars in America! In this industry chain of Santa Claus toys, we can only make one dollar while the American companies are collecting the other nine dollars. This simple fact indicates that, whenever we create a value of one million dollars domestically, the American corporations are making nine millions dollars simultaneously! So the more hard-working we are and the more products we make, the wealthier American will be.

Undoubtedly, in the following ten years, the biggest challenge for the Chinese entrepreneurs as well as the Chinese corporation is figuring out the most suitable business model for us under this ongoing global integration.

In the near future, a company will not be successful domestically if it can not survive the increasing intensity of competition in global market. Global models, global operations, global resources, global brands, global talents and even the global cultures are all the subjects we have to face. This will be the cruelest challenge for all the Chinese enterprises.

As a small company growing from the Nanchong city in Sichuan province, without special background and any core technologies, we make every effort fearlessly to expand our business in the African markets and achieved some initial successes. This is all because we understand the following and always do it in practice:

1. The 21st century is the century of global integration. Any individuals or enterprises that decline the integration and sharing of global resources will be eventually abandoned by the era.

2. In order to have a say in the international economy, to obtain the power of bargaining, to address the existing and upcoming global issues, ultimately to break the Lang’s 6+1 theory, it’s imperative that the Chinese corporations must figure out how to integrate the local and global resources, integrate the industry chains as well as the global resources effectively. We should not be afraid to give up the old idea completely and adopt the new mindsets. We must understand that these issues will not be resolved by one individual or one corporation.