In recent years, data on the strength of Chinese enterprises show that one of the companies on the list has suffered a total loss of over 100 million yuan, and another company has seen its profits shrink. This cannot help but arouse our attention and thinking about the expansion behavior of some companies.
Since 2009, our country has conducted the selection of China's strongest enterprises for three consecutive years and twice rated China's small and medium-sized enterprises as highly competitive, which has attracted widespread attention at home and abroad. It has become the goal of China's industrial circles to make enterprises bigger and stronger and enter China and even the world. However, what is the standard for Chinese enterprises to become strong and large? What model should enterprises adopt to become strong and large? There are many issues worthy of our in-depth consideration.
1. Thinking big means strong is a misunderstanding of the enterprise
What is strong and big in enterprise development? The so-called large refers to the large scale of the enterprise. Generally speaking, the enterprise's sales revenue, total assets, and market coverage are used. Or measured by indicators such as occupancy rate and number of employees. The concept of strong is much more complicated. Generally speaking, people think that it is mainly reflected in the comprehensive competitiveness or core competitiveness of an enterprise and its ability to resist risks. Conceptually speaking, bigness reflects the size of the enterprise, while strength reflects the quality of the enterprise. The two are related but fundamentally different. Bigness cannot replace strength.
Our understanding of enterprise strength and largeness is not only impacted by the development concepts of modern Western enterprises, especially multinational corporations, but also influenced by the concept of the power of traditional Chinese social organizations. Western enterprises have gradually evolved from the free competition of the century to the monopolistic competition of the century. In this context, the rapid expansion of multinational companies aiming to obtain monopoly profits has become the main force of the capitalist market economy. Correspondingly, in recent years, almost all the lists of the world's strongest enterprises include multinational monopoly companies. On the basis of oriental culture and philosophy, the Chinese have established the concept of great unity, which is the beauty of greatness and regards greatness as strong. This has resulted in the emphasis on bigness in enterprises and the inevitable result of seeing strength as bigness.
In fact, although there is a certain connection between the size and strength of an enterprise, being big does not necessarily mean that it is not strong. Being big is often the beginning of corporate decline or even collapse. Under the planned economic system, we have used administrative orders and government intervention to shape a number of large enterprises and companies at the industry level and even at the national level. These enterprises that have monopolized or even dominant positions in the region and the same industry have emerged in the tide of the market economy. After many changes such as restructuring and reorganization, except for enterprises that rely heavily on national policy protection, there are not many companies left that rely on large enterprises to survive. Similarly, some large groups that were formed through the intervention of government administrative measures during the reform of state-owned enterprises are now struggling and have not developed into a strong company. Large enterprises that are forced to form without the law of internal efficiency of the enterprise, or large enterprises that are patched together and do not adapt to the market competition trend, fail to produce the strength of the enterprise. On the contrary, they may be deformed enterprises that are large in size and weak in quality. The worship of large enterprises and the misunderstanding that large enterprises are powerful are precisely misunderstandings in our understanding of enterprise development models.
2. Efficiency determines the boundary of enterprise expansion
Transaction costs determine the boundary of enterprise scale expansion at a certain stage. Coase, who won the Nobel Prize in Economics for his theoretical research on the enterprise, argued that the reason for the emergence of enterprises is that enterprises save transaction costs. The boundaries of enterprises are determined by marginal transaction costs. Companies in the market cannot expand indefinitely because business organizations also have costs. When an enterprise expands to such a scale that the cost of organizing one more transaction is equal to both the cost of other enterprises organizing the transaction and the cost of the market mechanism organizing the transaction, static equilibrium is achieved between the enterprise and the market. The boundaries are drawn. If there are dynamic factors added, such as a certain technological innovation that makes the transaction costs of a certain enterprise organization drop compared with the past, the original equilibrium state will be broken. At this time, the distribution pattern of transactions between enterprises and markets and between enterprises will be adjusted. The scale of enterprises that adopt this technological innovation will expand. Therefore, in a certain period of time, under a certain market structure and the internal production technology relationship of the enterprise, the scale expansion of the enterprise is restricted by transaction costs. The bigger the enterprise, the better.
The balance point for measuring enterprise transaction costs can be analyzed by the changes in benefits caused by enterprise expansion. When the expansion of an enterprise causes the enterprise's benefits to decrease instead of increasing, it means that the expansion of the enterprise has shown negative effects, and rational decisions should be made in response to the expansion behavior. The purpose of enterprise expansion should be to optimize the allocation of social resources with the minimum allocation cost to maximize enterprise and social benefits. Data on the strength of China's enterprises in 2017 shows that some of the companies on the list suffered losses totaling 100 million yuan, and another company saw its profits shrink. This cannot help but arouse our attention and thinking about the expansion behavior of some companies.
3. The two-tier structure and two-way development model of Chinese enterprises
From the relevant data on the strong competitiveness of Chinese enterprises in 2018 and the strong competitiveness of Chinese small and medium-sized enterprises in 2017, we can clearly see the two-tiered structure of the development of Chinese enterprises. It coexists with the two-way development model, that is, the centralized monopoly development of a small number of large enterprises, mostly organized by administrative forces, and the cluster competitive development of a large number of small and medium-sized enterprises, mostly organized by market forces.
Although the number of Chinese enterprises only accounts for .% of all state-owned and non-state-owned industrial entrepreneurs above designated size, the total operating income accounted for .% of the country's total that year, which shows their pillar role in China's economic development. . In addition, the proportion of state-owned and state-holding enterprises in the strong market is as high as %. Among them, many of the large enterprises affiliated to the central government are among the top shortlisted companies in monopoly industries. The modern enterprise system of these large state-owned enterprises has not yet been fully established. Their development and growth depends largely on the inertia of government power and the obvious existence of monopolies caused by policy factors. As the reform deepens, the sustainability of the scale and efficiency of these enterprises will be tested by market competition. Comparing the larger replacement rates of the shortlisted companies before and after the three evaluations can illustrate this point.
According to statistics, there are currently about 10,000 small and medium-sized enterprises registered in China, accounting for % of the total number of enterprises in the country. The total industrial output value and export volume account for % of the country, and the labor force absorbed accounts for % of the total number of enterprises in the country. China's economic growth relies heavily on small and medium-sized enterprises. Small and medium-sized enterprises have now grown into the main force in China's export-oriented economy and the main source of employment. A large number of small and medium-sized enterprises have gradually developed in the fierce competition of the market economy and have strong vitality. A few of them stand out and expand into large enterprises. A large number will remain small and develop in different regions and industries, reflecting the response to the market. Flexibility advantages of small changes.
The two development models of large-scale concentration and small-scale concentration will coexist in the long term, each showing its own advantages. This is determined by the fact that our country's enterprises must cope with competition in the two major markets, international and domestic, and the two path-dependent models of enterprise development. The common problem of these two models is to become stronger.
4. Strengthening is the theme of Chinese enterprises at this stage
There is a big gap between the strength of Chinese enterprises and the strength of enterprises in the world. The entry of Chinese household enterprises into the world's top enterprises in 2018 represents the rapid development of Chinese enterprises. But overall, there is still a huge gap between the domestic powerhouse and the world powerhouse. The asset size is only .% of the latter's and the profit is only .% of the latter's. Per capita operating income, per capita profit and per capita assets are respectively equivalent to only .%, .% and .% of the same indicator of world enterprise strength. This gap is by no means something we can bridge by expanding the total to a comparable scale through mergers and reorganizations. The huge gap in efficiency reflects the qualitative differences between enterprises, that is, the differences in their core competitiveness. It will take a long process of accumulation and development to make the core competitiveness of Chinese enterprises comparable to that of world-class enterprises. This is not only a competition between enterprises but also a competition in the institutional, humanistic and social environment for enterprise development.
At present, Chinese enterprises, even large enterprises that have entered China and even the world, as well as small and medium-sized enterprises with strong competitiveness, are facing a common theme at this stage, which is how to become stronger. Only by relying on the strong core competitiveness of the enterprise to establish a solid ability to resist risks can the enterprise stand out in the fierce international and domestic market competition and become a strong and large enterprise at the national level and even the world level.
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