A year ago, the leader of a well-known domestic brand once predicted: "For at least 10 years, up to 20 years, the top two in the world's construction machinery are Chinese companies!" Indeed, Chinese companies have such confidence, starting in 2010 , 11 of the world's top 50 construction machinery companies are Chinese companies. In 2019, XCMG Group and Sany Heavy Industry have ranked 4th and 5th in the world. It seems that winning the world's number one is just around the corner!
Is the development path of Chinese brands really that optimistic? Being prepared for danger in times of peace, the author would like to put forward some different views to remind the industry to think.
In the past 10 years or so, Chinese brands have developed rapidly, constantly creating new records. It is undeniable that the quality and reliability of Chinese construction machinery products have been greatly improved. Domestic brands and foreign brands of excavators can already compete in terms of quality. In the most fierce competition in the Chinese excavator market, domestic brands The market share of the company has also far exceeded that of foreign brands.
However, big does not mean strong. The leading position in the Chinese market does not necessarily mean success in the international market. Whether Chinese brands can stand on top of the world, the following issues must first be resolved.
Chinese brands lack long-term strategic thinking
What is a strategy? If a Chinese enterprise thinks that striving to be No. 1 in the world is the strategy of the enterprise, then it is a big mistake! It is not a strategy, but the result of the implementation of the enterprise development strategy. Harvard Business School Professor Michael Porter pointed out: "Strategy is a set of long-term choices a company makes in order to differentiate it from its competitors. Fundamentally, a strategy is a company’s choice. The most basic choice is which Customer service. The worst strategy is to try to serve all customers. You cannot meet the needs of all customers. This is impossible."
However, many Chinese companies do not agree with the practice of choosing customers. There are not many customers. Why should you restrict yourself? They think that the larger the target customer group, the higher the chance of a deal. Therefore, many companies lack a clear strategy. It is just trying to increase the market participation rate, trying to provide products and services to all customers. The result is a lack of brand differentiation. The competition between companies is only focused on price and payment terms, which is a price war in plain terms. However, Professor Porter also pointed out that if your opponent fights a price war, you also fight a price war. In this way, it is impossible to gain a competitive advantage.
Due to the impact of the new crown epidemic, the US government has issued a large number of currencies to stimulate the economy, which has also led to a sharp increase in the prices of commodities and raw materials. It can be said that now is the best time to increase the price of construction machinery and equipment. What is puzzling is that not only did the price of construction machinery not increase with the increase in raw materials, but the company continued to increase market share through continuous price reductions, which led to a decline in profits.
Professor Michael Porter pointed out: "Another major strategic mistake of an enterprise is to do the same thing as a competitor in the competition. If the competitor lowers the price, it is impossible for you to gain a competitive advantage by lowering the price. The strategy is To be different from your competitors, if you follow your competitors to do the same thing, it means that you have no strategy at all."
How to make brand differentiation? How to win in the fierce market competition? Many Chinese companies lack in-depth thinking. As a result, they can only follow their competitors to fight a price war. At the annual meeting of the Excavator Branch in December last year, many companies They clearly expressed their determination and confidence to meet the price war. They knew that there was no future in doing so, but they couldn't help but follow other companies, because they didn’t know what other options there were, and they were even more afraid of being snatched by competitors. The first opportunity.
Chinese brands still have problems and risks
The current situation of China's construction machinery market is very good, people are full of good expectations for 2021, but who sees the problems and potential risks in the industry? Companies have begun to fanatically pursue sales and market share, and the risks have begun Rising; equipment ownership continues to increase, but the operating rate is not high. Have we thought about: What does it mean to the industry when users don’t make money? Equipment sales have hit record highs year after year, but agents have not made money; the sales situation of the whole machine is gratifying, but the aftermarket is facing difficulties, with a large loss of old customers and free service. If agents cannot make money, who will provide services to customers in the future? How can the company develop sustainably? How to solve the problem that agents do not make money? If one day agents withdraw from the market, manufacturers will change to direct sales system, sales and service will change What does it look like?
In 2020, 292,864 excavators and 106,572 loaders will be newly sold in the Chinese market in 2020. Based on a technician serving 40 equipment, only these two types of products require approximately 10,000 new technicians to provide service guarantees. Where can I find so many service technicians? How much does it cost to add 10,000 service technicians? Who will bear these costs? By the end of 2020, the number of construction machinery and equipment in China will exceed 8 million. How many technicians are needed to provide service guarantee? About 4 million operators are needed to run 50% of the equipment! However, now that the post-90s and post-00s are reluctant to go to the construction site to do such hard work, many bosses face the situation of no operators available. How to solve the problem of shortage of service technicians and operators?
People have no foresight and must have immediate worries. If we turn a blind eye to the above problems, one day there may be serious problems that affect the healthy development of the industry.
The internationalization of Chinese brands has a long way to go
We are very lucky because China is the world's largest single market for construction machinery and equipment. If not relying on this local market, can Chinese brands win today’s achievements? I once communicated with Swedish friends. Although they were surprised by the progress made by Chinese brands, they also envied the huge Chinese market and believed that the success of Chinese brands. To a large extent this is due to the rapid development of the Chinese market. If our brand was not born in China, but in Cambodia, we would not have the chance to achieve such success.
Chinese brands must not think that their management capabilities are outstanding. Our biggest advantage is actually sitting on the "home field" of the Chinese market. In 2009, China's construction machinery sales accounted for 50% of the global market, making it the world's largest infrastructure. In the past few years, China has continued to be the driving engine for the development of global construction machinery. Especially in the past 2020, the world has been severely affected by the new crown epidemic. It seems that the "pause" button has been suddenly pressed, while China has quickly Coming out of the new crown epidemic, sales of construction machinery hit a record high again!
However, relying solely on the Chinese market cannot be on top of the world. The Chinese market has already shown the saturation characteristics of the stock market, and the risk of market decline is also rising. The internationalization of Chinese brands is still struggling, and many companies are setting up factories overseas. , But there are few successful cases. The internationalization index of Chinese companies (that is, the percentage of overseas market turnover in total revenue) is still around 10%. In contrast, the internationalization index of multinational companies such as Volvo, Sandvik and Atlas used to be as high as 95. % Above, Caterpillar’s contribution rate in the international market has reached 50% to 70%, and the average internationalization index of the world’s top 50 construction machinery is 45%. Obviously, the internationalization of Chinese brands still has a long way to go.
Although 11 Chinese companies have entered the world's top 50 construction machinery since 2010, the total turnover of the world's top 50 Chinese companies only surpassed Caterpillar for the first time in 2019. Not only that, Caterpillar and other international leading companies have taken the lead in many fields such as unmanned driving, smart mining, electric drive, big data prediction and diagnosis, augmented reality and artificial intelligence, and have laid out the layout for the future development of construction machinery. . What about Chinese companies? If we are not prepared for the future, then be prepared to have no future!
In fact, Chinese brands have long installed GPS and various sensors for each newly-built device, and massive amounts of equipment operating data are sent back to the enterprise every year. However, how much data is used by companies to analyze customer usage habits and predict equipment failures? Mining data and portraying customers can data become assets and wealth; and if data is shelved, data can only become corporate burden.
I often wonder why domestic brands can beat foreign brands in the Chinese market but struggle in overseas markets? It’s not that our products are not competitive enough, but that our service network is too imperfect and we lack a long-term development strategy. It is difficult to win long-term partners. If agents cannot make money, it is impossible to invest in good customer service. Price wars may increase market share in the short term, but in the long run it is a dead end. Without profits, manufacturers cannot Develop next-generation products; without profit, agents cannot provide quality customer service.
I believe anyone can understand such a simple truth. If a company lacks a long-term development strategy and can only follow its competitors and get tired of dealing with it, then the company has only today and no future. The author has no doubt about the development potential of Chinese brands, and looks forward to the day when we reach the top of the world, but no great success in the world is accidental. Relying on hard work alone cannot ensure success. If there is no long-term Strategic thinking, then success will only get farther and farther away from us.
