Chapter 1006 The Role of Government

The path of industrialization corresponding to the world factory. In the twentieth century. A big country like Songyibao may never be able to get through again. The expansion of traditional heavy industry and chemical industry will consume a large amount of resources and require huge sacrifices to the ecological environment, which is unbearable for China's fragile ecosystem. This is also one of the reasons why the West, while calling China the world’s factory, continues to create various versions of the China threat theory.

Fan Wubing said worriedly, "It's a pity that some people in China can't hear the ridicule and evil in it. Instead, they feel that they have been praised by foreigners, and they feel a little complacent. It's really ridiculous!"

Another meaning of the so-called China becoming the world's factory is that China's dependence on foreign trade has further increased. Currently, China's dependence on foreign trade has reached 70%, and import and export trade are still growing at a double-digit rate every year. .

Such an economic structure is similar to that of a small country rather than a large country.

The demand in the United States and Japan mainly comes from domestic rather than foreign countries, and their dependence on foreign trade is only between 20 and 30 percent. If consumer demand relies too much on exports, the potential economic risks and external shocks will be great.

An issue that China should urgently solve in its economic development is to increase the share of domestic demand in total demand. Establish a. An open big country economy that matches China’s population size, territory, and international status.

China's urbanization and industrialization process, population size and employment pressure require the establishment of a manufacturing industry capable of producing everything from socks to computer chips.

The world's factory was a compliment in the 19th century, but now it is not a compliment.

The nineteenth century was an era of industrial mass production. The country with the strongest industrial production capacity was the most powerful country at that time, so the world's factory back then was also an empire on which the sun never sets.

However, after entering the 21st century, the world economy is no longer an era in which industry is king. China's title of world factory is just another term for foundry. It is synonymous with low added value. It is by no means a sign of a powerful country.

After entering the industrialization era, craftsmanship can be materialized in machines and equipment. The social division of labor was further refined, and the assembly line production model emerged. Initially, European and American companies adopted a vertical production model that integrated design, manufacturing, and packaging. As market demands changed and science and technology progressed, some companies began to seek innovative production models in order to meet the needs of multiple varieties and small batches of products. Changes have resulted in the separation of design, manufacturing, and packaging industries, and the foundry industry has emerged.

OEM is the production of products according to the exact specifications proposed by foreign multinational companies. The products are acquired by the multinational company and sold to the market under its own brand.

As the trend of economic globalization further accelerates,

OEM demanders are likely to select OEM suppliers from a wider range, especially to countries and regions with low processing and manufacturing costs.

In the 1960s and 1970s, the economic structure of developed countries changed from labor-intensive and capital-intensive to technology-intensive. These labor-intensive and capital-intensive enterprises turned to neighboring countries and regions for development. Many countries and regions such as the four Asian countries Xiaolong, Brazil and Argentina in South America have all benefited greatly from this, and export-oriented manufacturing has been moved to areas with lower labor costs.

"In Asia, in order to attract capital and technology and quickly occupy the market, Japanese companies were the first to adopt the production and trade form of international OEM. The rise of the Four Asian Tigers is inextricably linked to OEM. Among them, Taiwan has long become the world's largest OEM. OEM base, India has also become the world's largest exporter of computer software through OEM," Fan Wubing explained to Shen Ying, "The American Nike company has annual sales revenue of almost 2 billion US dollars, but it does not have any. A production factory that only focuses on research, design and marketing, and uses OEM methods for all its products. Most of its OEM factories are located in East Asia, such as China. What we lack now is not the manufacturing technology, but the brains and awareness to make money. "

Shen Ying nodded in agreement. As the boss of a series of companies, she knew this very well.

For foundries, cost is the core and the key competitiveness of foundry companies. Cost directly determines the survival of an enterprise. The reason is simple: if the cost of OEM is higher than the cost of own production, then why do we still need OEM? In addition, management is key, because the quality of management directly determines cost and product quality. The management mentioned here includes financial management, personnel management, production line management and other aspects.

From an economic point of view, the OEM model is relatively simple. The value created by the enterprise is the value of the processed products, and this value includes costs and profits, and its equipment costs and labor costs are the most important costs. In other words, some of the value created by foundries is the value brought by hardware investments such as equipment and factories, and another important part is the value created by workers.

Since the cost of equipment is fixed, whether a company can make a profit depends crucially on the value of labor, and the important source of corporate profits is the labor force. That is, wages, benefits, etc.

China's comparative advantage in labor prices is the main factor that keeps China's foundry industry profitable. However, the labor price advantage is not sustainable for a specific enterprise. As China's economy develops, the comparative advantage of labor price will definitely weaken.

Now, due to rising labor prices. Many companies have been troubled by declining profit margins. Secondly, because the cost advantage derived from labor prices is the advantage of Chinese export-oriented companies over similar production companies in other countries, rather than the unique advantage of a specific Chinese company, so in Within the scope of domestic competitors, this overall advantage does not constitute the competitive advantage of a specific enterprise.

The core competitiveness of a successful OEM company is to minimize labor costs, and maximizing this value often requires the strictest management, resulting in many contradictions.

For enterprises operating under the OEM business model, they must implement an operating strategy of three highs and one low. That is, high delivery, high quality, high flexibility and low cost. Therefore, we use the human sea strategy of 24-hour shifts, mass production of multiple varieties and batches, quick changeover, and relatively short product life cycle, so that customers can seize the opportunity from order receipt to delivery in one go.

A distinctive feature of OEM companies is that each position is a part and screw on the entire company's large machine. The processes are simple and repetitive but must be followed step by step. Their management model is basically paramilitary or militarized. Strict hierarchy and discipline. High pressure and high obedience lead to a serious lack of freedom and individuality in employees' work behavior.

In OEM companies, high-pressure management abounds, such as the provision of collective dormitories and collective canteens. This not only ensures that employees can come to work on time at all times, but is also a requirement put forward by many brand customers when placing orders, so as to maximize the company's pursuit of efficiency.

"From the logic of new institutional economics, the reason why enterprises exist is because there are transaction costs in the market. The command and obedience system within the enterprise can save a lot of transaction costs from market bargaining to ensuring contract execution, thereby reducing costs in the production process. Uncertainty and various risks. This centralized management is nothing more than internalizing transaction costs, thereby achieving the ultimate level of cost control.

Fan Wubing said with emotion. “OEMs are at the end of the industrial chain and rely on reducing labor costs to make profits. This has led to the extreme development of their management models, which has promoted human alienation, semi-military dormitory life, and overtime work that is ostensibly voluntary but is actually difficult to get rid of. Add to that the high-stress, high-obedience work model, the insignificance of individuals and the indifference of people on the endless assembly line. For every employee on the OEM assembly line, this is the worst kind of heaven and the best kind of hell. "

"At present, most of the foreign companies in China are OEMs? Especially Taiwanese and Japanese companies, they are basically the most mean and exploitative factories. I have also heard people call those companies sweatshops!" Shen Ying Said to Fan Wubing.

Fan Wubing nodded and replied, "This is normal, because Japan has ruled Taiwan for fifty years, so the corporate structure is the same. Not only is the family-style management phenomenon serious, but the underworld management model is also criticized. What's going on here? Darkness cannot be explained clearly by ordinary people.”

"But, is it possible for China to not engage in OEM industry at present?" Shen Ying asked Fan Wubing.

After Fan Wubing thought for a while, he shook his head and said, "It's not impossible, but it depends on whether the government's role is reflected?"

"What do you mean?" Shen Ying was a little confused about the meaning of Fan Wubing's words.

"In the past, when the Internet launched a market economy, there was a loud saying that if you have problems, go to the market, not the mayor. You must have heard this, right?" Fan Wubing asked Shen Ying first

question.

"I've heard it before. This is a very classic saying. It directly pushes the company to the market." Shen Ying nodded and replied, "But what does this have to do with what you said?" "

"Of course there is a connection," Fan Wubing replied. "When the economy is in transition, this is true. Everyone needs to have the awareness to solve problems by themselves instead of waiting to rely on the government for relief. The government has no Such great ability.”

Shen Ying nodded in agreement.

"But now that this sentence is still being used frequently, something is wrong." Fan Wubing continued.

"Why is something wrong?" Shen Ying didn't think there was anything wrong with this sentence. She looked at Fan Wubing in confusion. I want to hear him explain the difference in detail.

Fan Wubing was about to write a prescription when his cell phone rang again.