In a market economy, it is self-evident that enterprises must rely on the market. So, what is the point of being overly dependent on the market?
The business concept of Chinese enterprises has been deeply misled by the textbook style. For example, the one-sided rejection of the product concept, production concept, sales concept. In fact, the marketing concept must be inclusive of other concepts, or only when the marketing concept to lead the product concept, production concept and sales concept, to build a sound corporate marketing system.
Otherwise, it will fall into the strange circle of excessive reliance on the market.
The disadvantages of over-reliance on the market
Excessive reliance on the market must mean that enterprises will be more in the market with the help of marketing techniques to turn the tide.
1. lead to excessive competition. Over-reliance on the market is more likely to be endless, hellish price competition, promotional competition, promotional competition. Competition is often the result of all enterprises are always in a “wartime state”, no time for strategic cultivation. The vast majority of Chinese enterprises are in this state.
Did Lenovo’s “trade, industry and technology” really help it win the market competition? The recently disclosed “Lenovo map” and profit structure show that, on the one hand, its main business has not established a competitive advantage and is still in a large but not strong state; on the other hand, it is still in the expansion period, entering several “new industries” through financing. On the other hand, it is still in the expansion period, entering several “new industries” through financing, and seeming to be a leader, but its future is uncertain.
What determines the future of a company is its intrinsic competitive advantage, its value innovation and contribution, and its reputation and market share. These depend on the market, but ultimately are not determined by the market. The opportunities of the enterprise are external, but the merits are internal.
2. It leads to capital monopoly. Over-reliance on the market also inevitably leads companies to choose capital monopoly. Chinese superstores have also tried to move towards capital monopoly, but they have not been favored by international capital and have made a pot of “sandwich rice”. The Chinese platform e-commerce companies, on the other hand, relied on international capital and quickly achieved capital monopoly. As a result, they have provoked a short-lived battle for market share with each other and with brick-and-mortar businesses – not through competition, but through capital.
An unrecognized reality is that Chinese companies compete with each other, one by primitive accumulation, one by primitive accumulation + debt, and one by primitive accumulation + international capital. Their ability to expand is not in the same order of magnitude at all.
Monopoly is divided into two basic forms, one is technical monopoly and the other is capital monopoly. Technical monopoly still has the possibility of benign competition, while capital monopoly must be absolutely exclusive and full of killing opportunities.
3. leads to excessive extraction of human resources. Excessive reliance on the market will inevitably lead to high marketing costs. Opportunities come from the outside, and profits come from the outside, and pressure to reduce costs internally must exist. This may trigger: excessive extension of working hours of technical staff and labor force; polarization of employees’ income due to different contributions to profits; all the soldiers in the iron middle-income camp are running water.
In fact, although the market has been advocating a people-oriented approach for many years, it has not really become a mainstream culture in most companies.
4. leading to accelerated averaging and diminishing profit margins. Excessive market-level competition will inevitably lead to accelerated averaging of industry profit margins, accelerating the diminishing. In turn, because most enterprises are not willing to invest more in technology and product innovation, all industries accelerate into the deadlock of competition – only the survivors of the bruises, the lack of real standouts.
5. Leading to the loss of the pace of development of enterprises. Drucker advocates “making sales redundant” is based on the continuous rise of marketing costs. But in China, companies have been pursuing the “let sales become necessary”.
”Let sales become necessary” should be the Chinese companies to deal with the multinational competition, but this magic weapon has become so far, China’s large and medium-sized enterprises common, can not give up the competitive magic weapon – deep distribution has even continued from offline to online, and from online to kill back offline.
The reason is that Chinese companies marketing can not achieve the technology and product innovation as a competitive advantage from the comfort of the established market position and share to become a “giant baby” that can never be weaned.
When the “giant baby” the pursuit of more market share and interests, there will inevitably be disorderly expansion of capital and endanger the fair behavior, thus opening the “entrepreneur or capitalist” this social and public awareness of Pandora’s box.
For a long time, there is no concept of “capitalist” in Chinese society and public perception, and the social and public perception of capital is relatively neutral. Formally and essentially, capitalists do not meet the expectations of Chinese society and the public for business – although this is an issue that will eventually become a problem.
6. It leads to excessive marketing and the “eating and eating” of consumption. Without the push of capital, there would be no national-level cereal consumption in developed countries. Housing companies, car companies in their marketing to promote the phenomenon of consumer cinching, and platform e-commerce and financial institutions are expanding this local area, to all consumer areas. In the long run, this overdraft behavior is destroying the foundations of mass marketing, which is not conducive to sustainable, high-quality economic development.
Create a “double cycle” of business marketing
Between the enterprise and the market, marketing is a two-way mechanism. One is how to effectively receive corporate signals, and then provide attractive value to the market; one is how to study the competition, and then develop a winning competitive strategy. The former is a strategic attribute and the latter is a tactical attribute.
In essence, the marketing concept that focuses on consumer needs and the market as the starting point can only establish a high-quality mechanism between the enterprise and the market and make the enterprise evergreen when it is manifested in an innovation-led internal cycle as the main body and the internal and external cycles promote each other.
The key to the innovation-led internal cycle lies in the creation of value chain.
The value chain was proposed by Michael Porter, a professor at Harvard Business School, in 1985. He believes that the value creation of a company is constituted by a series of activities. These activities can be divided into two categories: basic activities, including production, supply, marketing and internal and external logistics, and auxiliary activities, including procurement, technology development, human resource management and corporate infrastructure. These different but interrelated production and operation activities constitute a dynamic process of value creation, i.e. value chain.
Value chains are ubiquitous in business activities. There are industry value chains among upstream and downstream affiliated enterprises; the value chains of enterprises are formed among business units within enterprises. Each value activity in the value chain has an impact on how much value the enterprise can ultimately create and realize.
Therefore, the competition among enterprises is not just the competition of a certain link, but the competition of the whole value chain, and the comprehensive ability of the whole value chain (internal value chain, competitors’ value chain and industry value chain) determines the competitiveness of enterprises.
Every enterprise is a collection of activities in the process of designing, producing, selling, sending and supporting its products. All these activities constitute the internal value chain of the enterprise, and its strength determines the ability of the enterprise to integrate the industry value chain in order to cope with the competition of competitors’ value chains. Simply put, enterprise value chain = internal value chain + the ability to integrate industry value chain.
The core part of the internal value chain is the ability of independent innovation of technology and products – the originality from 0 to 1 and the originality from 1 to N. The only way for enterprises to get rid of excessive dependence on the market and move towards leading the market and dominating the market is to establish leading independent innovation capability, build an advantageous internal value chain, and then establish a strong ability to integrate the industry value chain.
Internal factors play a decisive role. Excellent companies are not elected by consumers, but are the result of corporate values and strategic genetic decisions.
Competitive advantages dominate the external cycle, including brand advantages, product advantages, market share, status advantages, sales management advantages and market operation advantages.
When a company lacks these advantages, it will fall into over-dependence on the market. The essence of over-dependence on the market is that it is difficult to extricate oneself from the deep tactical marketing and cannot comfortably build the internal value chain of the enterprise, much less be able to strongly integrate the value chain of the industry. This is the main contradiction faced by both traditional and emerging Chinese industry leaders, as well as the major difference between Chinese industry leaders and multinational companies that occupy the top end of the global value chain.
In terms of mutual relationship, although enterprises must be market-oriented and consumer-centric, they are the internal cause of competitive victory; although the market determines the choices of enterprises, it is still the external cause of success as far as the logic of marketing is concerned.
Any enterprise that goes with the flow in the market is unlikely to reach the other side of success.
Marketing in the face of the laws of the market, market trends and the mystery of the market environment, but also lies in the marketer how to define the relationship between the enterprise and the market.
Establish a marketing concept based on “living well
An interesting question is, do multinational companies really follow a consumer-centric marketing concept? Or what does consumer-centricity really mean?
No comparison, no harm. Chinese consumers are in the best position to comment on this question – MNCs have made the most profits in China in recent decades, and according to the general logic of marketing, they are supposed to take good care of Chinese consumers.
So how have the multinationals viewed and treated the Chinese consumer over a long period of time? Are they looking down or looking up? Are they treating them equally or differently? We are often indignant that some Chinese companies are “cutting the leeks” of consumers, but haven’t multinationals been harvesting globally for a longer period of time and in more areas?
The difference is simply that we believe that multinationals are entitled to harvest because of their technological and product leadership, and that the vast majority of them do provide consumers with quality products and super utility. Some Chinese companies, on the other hand, are simply harvesting the “IQ tax”.
The truth is that in a market economy, only those companies that are weak or relatively weak, seeking to survive and thrive, will really show that they are consumer-centric and that they really care about the voice of the consumer. Some traditional Chinese companies, in front of the strong advantages of multinational companies, have to resort more to cost performance. And those who can not even do the cost performance of the enterprise, can only play the concept, to fight “intelligence”.
Even a serious scholar like Drucker, in order to rigorously interpret the concept of marketing, can only say that “the purpose of business is not profit, is to create customers, service customers” “business has and only two functions: innovation and marketing”.
The capitalist market economy of Western countries, based on private ownership, inevitably leads to a highly capitalized market economy. They defend more the interests of capital and are more inclined to the efficiency that capital is concerned with; a socialist market economy based on public ownership must move toward a people-centered market economy, more in the interests of consumers and the public, and more inclined to the fairness that society and the public are concerned with.
In just a few decades, China has gone through the industrialization process that developed countries have gone through for hundreds of years, creating two miracles of rapid economic development and achieving overall prosperity. The United States as a marketing “lighthouse country”, once led to social harmony and wealth, but in recent decades, but not so – 1% of the rich control more than 90% of the wealth of the United States, while more than 40% of the population’s real purchasing power for nearly 40 years did not improve.
Powerful corporate marketing must avoid moving toward monopoly and disorderly expansion of capital, and should instead provide society and the public with more opportunities for labor to become rich, entrepreneurship to become rich and innovation to become rich, and promote the continued prosperity of science and technology, the economy and the market.