Chinese Economy

One of the world’s most powerful economies is that of China. China’s economy is primarily fueled by high manufacturing output and economies of scale achieved through mass manufacture of its goods. The strongest economy in the world, the United States of America, has China as its main economic competitor. If the United States does not improve its production potential, many economies predict that China will overtake the United States’ production capacities within the next ten years. The fact that the Chinese people are workaholics and that the country’s educational system promotes science and technology demonstrates the manufacturing industry’s importance to the country as a whole. The increase technological uptake in China is the primary cause for the increased production activities in the country. According to statistics, about 40% of the Gross Domestic Product of China emanates from the manufacturing sector (Chen, 2009). Additionally, about a third of the total workforces within China are employed within the manufacturing sector. The leading firms regarding economic production in the country are in the areas of food processing, textiles, aluminum, automobiles, and fertilizers. There are many multinational companies, including enterprises of the United States of America that are making a consideration to set up their enterprises in China (Chen, 2011). Apple Inc. is one of leading US firms that has established its production base within the country. Currently, there are no significant challengers to the state owing to the labor costs in the country. China has the privilege of investing heavily in technical and technological training, thus, enabling it to produce high-quality work. Additionally, the labor force in the country is relatively cheap since many people are trained into the workforce.

Most of the manufacturing firms in China are privately owned. However, the government plays a crucial role in ensuring that it create a conducive environment for doing business. The government also encourages mergers and acquisitions in the manufacturing sectors to empower the existent firms to compete effectively with their international rivals. The State Council plays a lead role in ensuring that the mergers and acquisitions process is efficient and meets the needs and demands of the investors. Additionally, the four government institutions that are playing the role of facilitating mergers and acquisitions include China Securities Regulatory Commission, China Banking Regulatory Commission, Ministry of Finance and the Assets Supervision and Administration Commission (Chen, 2009).

The manufacturing sector is instrumental to the economic growth of the country. As stated above, approximately one-third of the entire workforce of China are employed in the manufacturing sector. The government also plays a crucial role in ensuring that economic policies favor the industry and through incentives for the companies to operate. The government has been for mass production in the industry and encouraged mergers to protect employment within the industry.

Over the past five years, there are significant developments that have been witnessed in the sector. Some multinational firms and companies are settling in China and mergers and acquisition within the domestic companies. The stability in the industry is a leading cause of economic security that is being witnessed in the country.

Strategy Exploration

Some of the three competing within the manufacturing sector include Beijing Automotive Group, Cherry, and the Guangzhou Automobile. The three companies have a primary focus on automobile production. Each of the three companies pursues three strategies that enable them to maintain their market segment and meet the needs and demands of their clients. The three strategies include economies of scale production, e-commerce strategies, and the new pricing strategy. According to Peng & Meyer, (2011), business strategy is the set of means or processes that are pursued by an organization to achieve the objectives of the firm. A corporate strategy often tends to accomplish the long-term goals and objectives of business (Peng, 2014). The game plan that a business has in meeting goals of an organization are all anchored within the business strategy that is under pursuit.

The three companies in the industry use the three chosen strategies for a noble and intended purpose. First, the economies of scale production enable the businesses to maximize sales and minimize the cost per unit of labor. The economies of scale also enable the companies to adopt specialization and departmentalization of the business processes within the firm. The domestic competition within the manufacturing sector and the automobile industry is stiff, and societies have to devise strategies that enable them to tap into the international markets. To meet the global demands and maintain high levels of profitability in the companies and the industry, the companies have to pursue economies of scale production. Second, e-commerce is based upon the incentive by the government to encourage and spread the use of the internet within the manufacturing sector. The e-commerce is also a basis that is utilized by the industry to minimize the business costs that the company may incur through the elimination of businesspersons. Through e-commerce, clients and local dealers can order for automobile directly, thereby, eliminating the need for executives. Third, new pricing strategies are utilized to enable the company tap into the mass market. The new pricing strategies are in tandem with the mass production strategies. Through the mass production plans, the company can evaluate the economic situation of the target market and produce automobiles that conform to the financial conditions of the market. Therefore, the new pricing strategies ensure that the business has to conduct regular research on the products that they offer to the target market, specific automobile needs and the ability of the target market to afford to the vehicles. New pricing strategies also minimize the risk of the company having dead stock within the enterprise. Dead stock is often a liability to a company and could lower the morale of a company to increase its production potential.

Strategy Analysis

Stakeholder Impact Analysis Table

(Impact on )

Strategy I (Economies of Scale Production)

Strategy II (E-commerce strategies)

Strategy III (New Pricing Strategies)

Customers

The economies of scale enable the customer to benefit from a wide range of automobile products from the company.

The customers have the benefit of interacting with the company direct and purchase the automobile from the company, thus, eliminating the extra cost of paying dealers.

The customers have the benefit of reduced costs for the automobiles owing to the new pricing strategies.

Employees

The employees are to benefit from specialization, as they are to base on a single line of production.

Some employees could lose their employment opportunities owing to the digitization process of the company’s operations.

The new pricing strategies would compel the employees to be highly innovative in the jobs that they are doing to ensure that high quality is marinated at relatively low prices.

Community

The economies of scale would ensure that the company increases its production leading to increased job opportunities for the community.

The e-commerce strategies would lead to internet connection to the communities living in close geographical proximity to the business.

The new pricing strategies would further make the products produced by the company to be affordable to the community.

Government

The increased production would lead to more taxes being collected by the government leading to increased in the revenues earned by the government.

The e-commerce is in line with the quest by the government to digitize the business operations of the existent firms.

The price strategies are in line with the government policy to reduce the cost of doing business in China. Additionally, the price strategies would make the products competitive and available for sale in the international markets, thus, improving the profile of the Chinese government in the international realm.

Alliances

Increased mass production is a policy that encourages firms in the same industry to form alliances.

E-commerce encourages the establishment of alliances owing to the ease of communication and supervision of the business activities.

The price strategies would catalyze alliances to form to minimize the level of internal competition amongst the Chinese firms.

Competitors

The economies of scale would ensure that the business has an advantage over their competitors.

E-commerce encourages efficiency leading to the reduced business costs, thus, enabling the business to have an operational advantage over the competitors.

The price strategies enables the company to forge a strong rivalry with the competing firms, thus, shredding off competition from the competitors that charge relatively higher for their products.

Investors

Economies of scale production would encourage investors to buy the company’s stocks with the hope of higher productivity in the company, thus, relatively high dividends to be paid to the investors.

E-commerce enables the investors to have hope of the business reducing costs, thus, leading to low costs of doing business. Such encourages investors.

The price strategies could discourage some investors with the expectation of reduced profit levels, thus, low return on capital and reduced dividends to be paid out for the investments.

Competitive position analysis

The companies in the manufacturing sector will be able to deliver products after using the three strategies. First, the economies of scale would lead to increased specialization and mass production in the company. Second, the e-commerce strategies would ensure that the company eliminates some redundant staff and reduces intermediaries in the business chain, leading to higher efficiency in the firm processes. The pricing strategies would result in reduced profit margins earned by the company. However, pricing strategies enable the businesses to be competitive than the rival firms and increase their production potentials.

Conclusion

The e-commerce, economies of scale and the pricing strategies are all set of decisions that would ensure long-term economic growth in the industry. The three approaches are closely related, and they seek to ensure that the business processes are all taken care of in the management process. The interplay of the three strategies aims to make sure that there is increased production potential in the company and further eliminates the cost of doing business in the businesses and the entire sector. The basis of reducing the cost of doing things is to ensure that there is low operational cost and increased productivity in the firm.

The most interesting aspect of doing the paper is the insight on how strategies that are used by the companies could have a long-term effect on the business. Companies choose their plan based on the way through which the policies reduce business operational costs, increased operational capacity and reducing the competitive pressure from the competitors. The choice of a strategy is also dependent on the nature of the business operations that the company may wish to pursue.

The potential developments that could seriously change the outlook of the manufacturing sector despite the strategies used are an increase in economic stabilities in the global economy and the increased technological uptake. Currently, the manufacturing companies in the leading economies in the world are making considerations for the use of technology where the companies adopt the use robots in the production process. The increase in the use of technology for the rival firms would further leverage the competition amongst the competing companies. The opportunity for the economic stabilities in the world would result in increased inflation. The increased inflation further ensures the financial capability of the target market to buy commodities in the business. The sector entirely depends on of the ability of the clients to purchase the company’s products. Therefore, a global financial meltdown is detrimental to the continuity of the business operations. As such, there is need to continually review the business strategies that are explored by an organization to ensure that they meet both the long and short-term goals of a firm.

References

Chen, C. (2009). China’s integration with the global economy: WTO accession, foreign direct investment and international trade. Cheltenham, UK: Edward Elgar.

Chen, C. (2011). Foreign Direct Investment in China: Location Determinants, Investor Differences and Economic Impacts. Cheltenham: Edward Elgar Pub.

Peng, M. W. (2014). Global strategy. Mason, Ohio: South-Western, Cengage Learning.

Peng, M. W., & Meyer, K. E. (2011). International business. London: Cengage Learning.