In recent years, one of the topics that private entrepreneurs have been talking about the most is how to grow and strengthen their businesses. There are quite a few successful examples in this regard. However, overall, small and medium-sized enterprises (SMEs), especially small ones, still account for the majority, while large enterprises are relatively fewer. If we analyze further, it's not hard to find that another prominent characteristic associated with "small scale" is "locality." For instance, there are 37,000 brewing companies in China, with almost every county, or even many towns, having their own baijiu or beer factories. Even the largest few brewing enterprises have a very low national market share.
This situation cannot be entirely attributed to institutional reasons; it cannot be denied that the current state of market segmentation in China is still widespread, and a unified domestic market has yet to form in many industries. But we must also face another reality: under similar institutional conditions, companies like Lenovo, Haier, Changhong, and Hope Group have managed to grow strong, sharing a common reason - clear strategic choices. Mr. Liu Chuanzhi once regarded "building a team, setting strategies, and leading the troops" as the three key factors for Lenovo's growth, and the implications are worth pondering.
Here, let’s look at an example of a small enterprise making the right strategy and growing rapidly. Star Company is a small private enterprise engaged in the production and sales of electronic products. Established in Zhongguancun, Beijing in 1996, it started with only 3 employees and less than 20,000 yuan in assets. After six years of careful management, it has grown into a group company with 16 subsidiaries, 300 employees, and nearly 2 billion yuan in assets. The company's business scope involves more than ten areas such as communications, security, and network applications, with over 500 types of products. The rapid growth of the company relies on practical and efficient strategic choices and the planning and control capabilities of the corporate strategy. Specifically, it manifests in five aspects:
1. Skilled at surviving in areas where large enterprises have not ventured. It is unrealistic and lifeless for small enterprises to produce large-scale series products. Small enterprises must clearly understand which products large enterprises cannot or do not want to produce. Small enterprises should be active in areas that large enterprises are unable or unwilling to enter, learning to survive and grow in these areas.
2. Fully utilizing the technological talent resources of Zhongguancun. In its corporate culture, Star Company has a very strong concept: if the quality of technical personnel is low, they cannot develop high-quality new products, and thus lack competitiveness in the market. Despite being a small enterprise, it must use top-notch technological power for development work to bring products to market in the shortest possible time. By leveraging Zhongguancun's technical personnel, the company has gathered a group of highly qualified technical personnel, continuously launching products that meet market needs, focusing on several core products for continuous production, quickly expanding its market share, and establishing a foothold.
3. Cost control. The price of raw materials purchased by small enterprises is generally higher than that of large enterprises, and due to the smaller scale of the enterprise, it is easy for comprehensive costs to be higher than those of large enterprises. Therefore, small enterprises must conduct cost and price calculations more strictly than large enterprises. In the calculation, it is important to consider losses caused by unavoidable risks and errors. In this regard, Star Company's product pricing strategy always adheres to scientific and rational principles, and can make very accurate judgments on customer purchasing needs and abilities. This ensures both product sales and the company's profitability.
4. Horizontal cooperation, relying on growth. In long-term market practice, Star Company has found a shortcut suitable for its own growth: seeking stable large enterprises as relatively fixed partners. Wang himself believes that in addition to producing specialized products that others cannot compete with, small enterprises should also find one or more large enterprises as relatively fixed partners, providing them with their own products on a long-term basis. This way, their products will have a stable sales channel, and production can maintain relative stability. In 2000, four years after the company was founded, it found a large foreign buyer who purchases approximately $8 million worth of series配套products from Star annually, giving the company a relatively fixed export route and significantly enhancing its reputation.
5. Capital operations. In 2001, Star Company seized the market demand for enterprise network informatization. In addition to producing reliable network security products, it also provided a complete set of network sales solutions based on enterprise-wide applications, receiving widespread popularity among enterprise users. Based on a serious evaluation of the market size, Star Company actively negotiated cooperation with foreign customers, seeking ideal investment partners for the comprehensive development of enterprise network application software. Two months later, relying on the excellent reputation established by Star over many years in the industry, it attracted a $10 million investment from the well-known US-based Swell Systems Co., Ltd., jointly establishing Star Group. With such a batch of stable large enterprises as long-term customers, the future rapid growth of Star Company is more firmly guaranteed.
Among the more than 5,000 private enterprises in Beijing's Zhongguancun "Electronics Street," only fewer than 500 have survived for over five years, and fewer than 150 have lasted over eight years. Star Company stands out in such a backdrop, with the key being appropriate strategic choices. Currently, the survival rate of small and medium-sized private enterprises is very low, with an average lifespan of only 2.9 years. Enterprises are not afraid of being small; what they fear is not being able to utilize the advantages of being agile and flexible. Star Company adopted strategies particularly suitable for small enterprises, such as finding opportunities in the "gaps" and adopting dependent operating strategies, continuously reducing costs, strictly calculating, attracting highly qualified technical personnel, continuously developing new products, and enhancing its competitiveness, thereby achieving a strategic high ground for long-term growth despite fierce competition in Zhongguancun.
So, under China's current system and market conditions, what strategies are available for small and medium-sized private enterprises to choose from?
1. Resource-oriented strategy
A resource-oriented strategy refers to the type of strategy where SMEs rely on local resources that are not conducive to the growth needs of large enterprises to achieve survival and growth. These resources mainly refer to unique local resources such as tourism resources, mineral resources, and human resources. Enterprises can specifically engage in regional resource development, tourism services, and the production and trade of special products and crafts.
2. Industry structure-oriented strategy
An industry structure-oriented strategy refers to the strategy where SMEs formulate long-term growth plans and measures based on changes in industrial structure and weaknesses in the current industrial structure. The key to the success of this strategy lies in whether enterprises can seize gaps or weaknesses in the industrial structure, making their own enterprises indispensable parts of the industrial chain, thereby achieving stable growth. Generally, there are the following options:
(1) According to the overall trend of product changes in socio-economic development and local conditions, choose industries and sectors in the rising and expanding phase, determining the direction of the enterprise's production and operation;
(2) Determine the enterprise's growth direction according to the characteristics and development of the local industrial structure;
(3) Enter emerging industries and seek opportunities to gain advantages and grow in "frontier" areas;
(4) Determine the enterprise's growth strategy according to the policy orientation of industrial structure adjustment.
3. Dependent operating strategy
A dependent operating strategy is also known as a systematic operating strategy. "Dependence" means incorporating or grafting the enterprise's production and operation activities and growth relatively fixedly onto a large enterprise or enterprise group, becoming a part of the series production of the large enterprise or enterprise group, engaging in specialized production and development services.
The benefits of choosing and adopting a dependent operating strategy lie in the fact that SMEs can obtain relatively stable supply and marketing channels, with a relatively single and clear direction for product development, allowing them to play to their strengths and avoid some of the pressure of intense market competition to a certain extent; additionally, they can collaborate through cooperative relationships, relying on the technical development capabilities and strength of large enterprises to break through constraints in funding, talent, and equipment.
4. Growth in the "gaps" strategy
In reality, except for a few technology-intensive SMEs, most SMEs have relatively low levels of equipment and technical development capabilities, making it difficult for them to directly compete with large enterprises on similar products. A strategy of growth in the "gaps" involves choosing the joint or peripheral areas of product market development, finding certain "gaps" with weaker competition but broad prospects, and developing the enterprise's growth space.
5. Competitive alliance strategy
Horizontal alliances are an inevitable trend of globalization. A competitive alliance strategy refers to changing the unfavorable position of SMEs in competition and compensating for the insufficiency of operating capital through internal organization within the enterprise and establishing cooperative relationships, based on the objective needs of SME growth. As SMEs, completely avoiding competition with large and powerful enterprises in the market is impossible; the law of the market is competition and natural selection. SMEs must also continuously enhance their competitive capabilities and strengthen their ability to withstand risks. They must adopt effective methods to solve the weaknesses and deficiencies of individual SMEs in terms of operational growth, aiming for survival and growth.
When private SMEs formulate operating strategies, they should first strive to make the best choices in terms of direction and type. When choosing strategies, the following principles are generally followed:
1. Consistency between the enterprise's future product operating direction and survival and growth strategy;
2. Consistency between the enterprise's specific circumstances and operating strategy;
3. Consistency between the enterprise's potential core capabilities and operating strategy;
4. Optimization principle for multiple types.
The 21st century is an era of change, and the attitude of responding to all changes with no change is no longer sufficient to deal with the successive intense competition. Only through the application of strategy can each change be tightly grasped. This is an era where talking about strategy elevates the class, and an era where talking about strategy shows the strength of enterprises. Undoubtedly, it is also an era where strategy determines victory. Those enterprises and entrepreneurs who haven't even had time to discuss strategy always have opportunities for failure everywhere. We must re-examine and place greater emphasis on the dominant role of strategy in the survival and growth of enterprises because strategy cannot go wrong; if it does, the enterprise will face catastrophic consequences.