The Essence of Enterprise Core Competitiveness

The essence of enterprise core competitiveness

In our daily economic life, products are becoming more and more abundant, providing more and more convenience to our lives, thus promoting the improvement of the quality of life of the whole human race! With the development of modern agriculture and logistics, our ordinary people can eat more fresh fruits and vegetables than in the past Princess; with the development of modern textile industry, we can wear more comfortable than in the past close to the body thin and healthy clothes; with the development of automobiles, high-speed rail, airplanes and other transportation industry, the dream of the sky at hand is becoming a reality, time and space distance is becoming increasingly small constraints on us; with the emergence of computers, networks and With the emergence of computers, networks and products such as cell phones, instant messaging has become an indispensable standard part of our daily lives.

In the enjoyment of these products to bring us the convenience of the back, is a myriad of these products or indirectly provide us with the products of the enterprise, it is the enterprise to support our economic life, not only to provide us with all kinds of rich products, but also provides most of us work to get paid for the job of earning a living, the enterprise is the basic economic organization of social and economic life. In our enjoyment of more and more rich products, comparison of three constantly optimize the choice, behind it is the market competition between enterprises.

1, the scale of development of enterprises

Once the scenery of pagers, VCDs, VCRs and other products and enterprises have long been forgotten; smart phones, online shopping, 3D printing, hybrid cars and other products are gradually coming into people's lives. In the choice of the market, there are enterprises being eliminated, and there are also new enterprises being born. Enterprises that satisfy people's life consumption preferences and bring greater value to customers will be favored by customers and can survive and develop; otherwise, they will be abandoned. Every enterprise from the date of birth, in order to win customers and meet market demand and continuous efforts, in order to survive and develop in the hard search and exploration, in the search for business immortality recipe.

The enterprise can develop to what size, Coase (Ronald Coase) with the transaction cost doctrine explains the enterprise can reach the boundary; when the transaction costs within the enterprise is equal to the market transaction costs, at this time the size of the enterprise is the enterprise's largest scale, more than this scale, the enterprise due to the lack of operation and management capacity will be incurred losses. In the fierce market competition, the birth and demise of enterprises at an alarming rate, how can enterprises do to survive? What can be done to survive? These depend on the profitability of the enterprise, depending on whether the enterprise can win in the market competition. How can an enterprise win in the market competition? How to achieve competitive advantage? Prahalad (C. K. Prahalad) and Hamel (G. Hamel) will be able to sustain the ability to achieve competitive advantage called the core competitiveness of the enterprise, so what is the core competitiveness of the enterprise, how can the enterprise to obtain core competitiveness.

2, the competitive level of the enterprise

Enterprises want to win the favor of customers, in the market competition, must have a competitive advantage over peers.

From the level of market competition, enterprise competition exists at five levels: 1, spell price; 2, spell technology; 3, spell standard; 4, spell brand; 5, spell value (value chain control ability). From the structure of market competition, business competitors are divided into: leaders (with a market share of about 40%), challengers (with a market share of about 30%), followers (with a market share of about 20%) and make up (with a market share of about 10%).

The typical case of price fighting is the color TV price war launched by Changhong, Changhong, with its own economies of scale, through the price war, many of the scale, quality and other strengths of the weaker enterprises out of the game. The price war is the inevitable way for many industries to move from the rough development to the intensive development, which generally occurs in the industry from the rapid growth period to the maturity of the transition stage. The typical case of spelling technology is China's color TV industry in the early stage, China is a big color TV country, but due to the lack of core technology, the movement needs to be imported from abroad, resulting in the color TV enterprise profit is very thin; later, some enterprises took the initiative to adjust the strategy, invested in resources to engage in research and development, and eventually won the market, now the domestic color TV industry into a large-scale enterprises can generally produce their own movement, there is no movement technology of enterprises is basically in the margins of the industry or has been eliminated. The enterprises without movement technology are basically at the edge of the industry or have been eliminated. The typical case of standardization is the telecommunication industry, which enterprise is in the leading position in the industry, and takes the lead in formulating the industry standard, and has a certain customer base, and the enterprises that enter the industry later can only buy the right of use from the standard-setting enterprises in order to conform to the rules of the existing market, and are led by the nose by the standard-setting enterprises, and are in a disadvantageous position in the competition. Spell brand is a typical case of luxury industry, the same bag, functional materials and workmanship gap is not large, but because of the different brands, LV, Hermes, etc. can be more expensive than similar packages dozens or even hundreds of times; on the surface is to spell the brand, in fact, than the competition is the function of the enterprise's products, technology, quality, service, reputation, etc., is the comprehensive strength of the enterprise competition. The typical case of value is the smart phone industry, Apple has the control of the value chain of the smart phone industry, from guiding the customer demand for marketing, R & D technology, production supply chain, logistics, service and so on the whole value chain, Apple has no one to match the control, so as to have the right to price the product and the pricing of the value chain of the various segments of the pricing, access to the entire value chain of the high-end profits (the maximum profit), the other enterprises in the value chain share the middle and lower part of the value chain (the maximum profit). Other companies in the value chain share the low-end profits; Samsung has become a challenger in the smartphone market by virtue of its own strength, and Lenovo, Xiaomi, Huawei and other companies have become followers of the smartphone industry, but their product margins are much lower than those of Apple.

From the competitive level of enterprises can be seen, from top to bottom, the previous level of competition are included in the next level of competition, the higher up, the more abundant the elements and means of competition, the more intense the competition. General small-scale enterprises, some for the machine or complete sets of equipment supporting the production of parts and components of the enterprise in the price, spell technology level; general with the scale and brand, to provide the machine or the overall solution of the enterprise is in all competitive levels are covered by the spell value level.

Nokia from a paper enterprise, after more than 100 years of development, once 15 consecutive years topped the cell phone market share of the first, its market value was more than 100 billion U.S. dollars; is recognized as the traditional function of the cell phone industry hegemony, and its technological advantages in the function of cell phones, is recognized as its core competitiveness. But from 2008, because of its customer consumption preferences did not grasp, its previous competitive advantages in the feature phone market, technology, quality, brand, etc., did not continue in the smartphone, by Apple, Samsung and other companies in the smartphone beyond the loss of industry leadership, its market value had fallen to more than 7.1 billion U.S. dollars. In just five years, a century-old store through thick and thin, a proud 15 years of industry hegemony, its market value evaporated nearly 100 billion U.S. dollars. From this, we can see that the fierce competition in the market, once the industry leader, can not accurately grasp the market demand, accurately judge the customer's consumption preferences, can not have control over the value chain in the industry, and can not create greater value for customers, will soon be abandoned by the market. The competition on the value chain is an all-round competition, a competition for the optimal allocation of resources under the guidance of corporate strategy, and a competition for the control of the value chain; this competition is faster and stronger, and enterprises will be quickly abandoned if they lose their competitive advantages on the value chain, and the former industry hegemony will lose its leading position in the industry!

3. Value chain control analysis

The enterprise's value chain control and position in the industry can be most intuitively demonstrated through pricing power.

Apple's control over the smartphone value chain and Apple's leading position in the smartphone market gives Apple full pricing power over Apple phones. Samsung phones are in a challenger position, so Samsung's phones mimic and follow Apple's phone features and win customers with cost-effective pricing that is always one notch lower than Apple's similar phones. Lenovo, Xiaomi, Huawei, etc. is a follower of the cell phone market, its product performance is obviously lower than Apple Samsung a grade, pricing is basically with reference to similar products in the market and their own cost-plus pricing, belonging to follow the pricing, the lack of independent pricing power.

Figure 2 is the enterprise value chain control force analysis model. As can be seen from the figure, due to limited resources, the enterprise can not be in all markets for resource allocation, the enterprise can only be in a certain market segment, to provide target customers to meet customer expectations of value, so that the target customer value maximization, in order to achieve the largest market share in the market segment. From the flow of the entire industrial value chain, from the upstream to the downstream, through each link, value added, the value of the downstream link is higher than the value of the upstream link, and ultimately make the value of the customer side of the value chain is at the highest point of the entire industry. Customer value is equal to the customer utility (customer revenue) and customer cost ratio, see the following formula:

V customer value = F customer utility (customer revenue) / C customer cost (fees)

According to this formula can be seen, only to maximize the value of the customer's business, in order to obtain customer favor in a market segment, and may occupy the leading position in the market, the ability to maximize the value of the customer is also the competitive advantage of the enterprise. Maximizing customer value is also the competitive advantage of the enterprise. According to Figure 2, the enterprise can only prove that it has value chain control if it has strong pricing power in the whole industrial value chain. According to the principle of economics, the scarcity of resources is inversely proportional to their value, and the scarcer the resource, the higher the value. If the enterprise has the control of the scarce resources in the whole value chain, the enterprise has gained the control of the whole value chain, and the enterprise also has the pricing power in the whole value chain; and through the pricing power, the deployment of resources in the whole value chain. The following two cases to verify this argument, one is the traditional industry of the steel industry, a representative of emerging technology products smartphone industry.

Iron ore mining enterprises are the upstream enterprises of the entire steel industry, the technical content, capital strength, industrial scale, management difficulties, etc. are not as good as the downstream of the iron and steel joint ventures, but from 2003 to 2012, China's entire iron and steel industry's profits add up to less than the same period of iron ore producers BHP Billiton and Vale of the profits of the two iron ore producers. This is mainly because these two iron ore companies monopolize 70% of the world's iron ore supply, artificially creating a scarcity of iron ore resources, thus raising the price of iron ore, access to the entire value chain of the steel industry, high profits. China produces more than 700 million tons of steel each year, but there is no control over the value chain of the steel industry, there is no pricing power, can only watch the entire value chain of the iron and steel industry value chain of the high profits by the two iron ore companies to take away.

Smartphone market, Apple cell phone with fashionable appearance, excellent user experience, leading the user demand for system solutions and other advantages, as well as advanced management concepts and management models, so that it firmly owns the control of the entire value chain of Apple's smartphones, and then production, logistics, etc. all outsourcing, and give manufacturers Foxconn and other very low outsourcing production price, access to the entire value chain of high profits. High profits in the value chain; its position as an industry leader in the entire cell phone industry. With its control over the entire value chain, Apple continues to extend the boundaries of its products, expanding into areas such as Ipads, laptops, applications, peripherals, and software; and continually replicating its management model to improve its profitability, which has now become the world's largest company by market capitalization.

4, the essence of the core competitiveness of enterprises

From the above model analysis and case study, we can see that the enterprise's high-level market competition, is the competition of its industrial value chain control, the strength of the control of the industrial value chain, determines the enterprise's position in the industry, the industry position determines the pricing power of its products roles are: leader, challenger, follower, product pricing, product pricing, product pricing, product pricing, product pricing, product pricing, product pricing, product pricing, product pricing, and so on. The industry status determines the role of product pricing power: leader, challenger, follower, and product pricing power determines the profitability and profit level of the enterprise in the industry value chain. The profitability and profit level of an enterprise determines how fast and how large the enterprise can develop and whether it is sustainable. From this we can see that the control of the enterprise in the industrial value chain is the ruler that determines the competitive position of the enterprise in the market, the treasure that determines the survival and development of the enterprise, the constraint that determines whether the enterprise is sustainable development, and the core competitiveness that determines whether the enterprise has a sustainable competitive advantage.

Prahalad (C. K. Prahalad) and Hamel (G. Hamel) in 1990 in the "Harvard Business Review" published the "core competitiveness of enterprises" article, since then the concept of core competitiveness was rapidly accepted by the business community and academics, and is currently in the business community and the academic community, the enterprise can continue to obtain a competitive advantage of the ability to be known as the enterprise's core competitiveness. According to Prahalad and Hamel, the core competence of an enterprise is the ability of organizational learning within the enterprise, especially the `ability' on how to coordinate different production skills and integrate various resources to form a competitive advantage.

It is clear from the above concepts that the capabilities that enable a firm to sustainably gain a competitive advantage are the core competencies of the firm. Since it is a competitive advantage, it must be comparable through competition. Through the industrial value chain control analysis model, it can be seen that the enterprise's competitive advantage is not only related to the enterprise's internal organizational learning ability and resource allocation ability, but also related to the enterprise's position in the entire industrial value chain, the industrial value chain control is the focus of enterprise competition; enterprises such as the control of the industrial value chain, can be dominant in the competition, can be sustained competitive advantage, can achieve corporate profitability throughout the industrial value chain. value chain to maximize profits and maintain the leading position of the enterprise. Therefore, value chain control is the essence of enterprise core competitiveness. With value chain control, the enterprise will have the competitive advantage to win in the market, and it will be able to obtain high profits in the value chain, and it will be able to survive and develop at a faster speed.

How can we gain control of the industrial value chain? Through the above industrial value chain control analysis model and the above case study, it can be seen that the enterprise if the customer value can be maximized, will certainly win the favor of customers; at the same time, if the enterprise has a scarce resource in the entire industrial value chain, or control the scarcity of resources, that is, to make the entire industrial value chain the ability to make the scarcity of resources, the enterprise has a higher bargaining power and pricing power, then the enterprise will have the control over the entire industrial value chain. For example, BHP Billiton and Vale two mining enterprises through the whole steel industry chain make customers get the required steel products, and at the same time have the market share of 70% of the world's iron ore resources, which makes them have the control of the whole steel industry value chain, and thus obtain the high profits on the whole steel industry value chain. Apple Inc. through a good user experience and system solutions and other fusion of cell phones, making the customer utility maximization, and ultimately make the customer value maximization; at the same time, the enterprise has the leading innovation ability, and constantly launched to guide the customer demand for hardware and software technology and products, this scarcity of innovation ability, so that the Apple Inc. has full pricing power, can firmly have the control of the value chain of the Apple cell phone, to obtain high profits, and ultimately the success of the Apple cell phone value chain. This rare innovative ability enables Apple to have full pricing power, firmly control the value chain of Apple's mobile phone, obtain high profits, and ultimately achieve Apple's leading position as the world's No. 1 in market value. Because of the ability to maximize customer value, and thus firmly occupy a considerable portion of the market share; because of the scarcity of resources, thus enabling enterprises to dominate the pricing power of the product, and thus obtain high profits. Thus, maximizing customer value and resource scarcity are the key factors for enterprises to have control over the industrial value chain, which is the basis for enterprises to continue to gain competitive advantages, and is the main feature of the core competitiveness of enterprises.

Because customer consumption preferences are dynamic and changing, and resource scarcity is relative, the strength of the enterprise's control of the industrial value chain is always dynamic and changing.

China's high-end liquor enterprises once had a scarce cellar and brewing formula and other resources, but due to macro-control and other reasons, customer consumption preferences change, once the value of high-end liquor customers become smaller (the whole industry sales decline), the customer side of the bargaining power stronger, making the enterprise's control of the value chain becomes weaker, which makes the high-end liquor enterprises in 2013 appeared unprecedented The benefits of the decline.

Kodak Film, with its unquestioned leadership in the chemical film sector, has undisputed control of the value chain in the chemical film industry, giving it undisputed product pricing power in the industry. Kodak was one of the first companies to develop a digital camera and was the first technology leader to develop a 1.3 megapixel digital camera. Kodak was hesitant to move forward with its competitive advantages in technology and resources on traditional film, or to develop in the direction of digital cameras, which did not have much competitive advantage; in the fast-changing development of digital cameras and their gradual acceptance by the general public, the customer's consumer preference led to the shrinking of the traditional film market, and Kodak was unable to continue to create greater value for its customers, and ultimately lost control of the value chain, and went into decline. Kodak lost control of its value chain and declined.

The two examples above are the result of shifting customer preferences, leading to a decline in the value of the industry as a whole, and the inability of the leading companies to adapt to market changes, leading to a weakening of their ability to create value, and ultimately a loss of control of the value chain.

Changhong was once China's largest TV producer, and by virtue of being the first to achieve economies of scale (which were a scarce resource at the time), Changhong took the leading position in the TV industry and was the first to launch a price war that eliminated many of the poorer companies in terms of scale and quality. With the development of the industry, TCL, Konka and other enterprises also have economies of scale, economies of scale can not become a scarce resource of the industrial value chain, Changhong in the television industry value chain control becomes weaker, so the television industry into the multi-oligarchical ****existence of the struggle for supremacy stage.

5, how to form the core competitiveness of enterprises

From the industrial value chain control analysis model, it can be seen that the enterprise to form a competitive advantage and have the basic elements of the control of the value chain is: 1, can maximize the value of the customer; 2, in the entire value chain with scarce resources control (resource scarcity). To achieve sustained competitive advantage, we must continue to meet the customer value maximization and have scarce resources control in the value chain.

To maximize customer value, only to provide customers with a complete product system solutions, and through the systematic analysis and optimization of the program, to find out to meet the customer's maximum utility, the customer's minimum cost of the program, in order to meet the maximization of customer value. Can not provide a complete system solution, or do not understand the complete system solution, it is difficult to maximize customer value to make a fine analysis of the customer's consumption preference changes and market demand is difficult to make timely and accurate judgment. This is also the main reason why many parts and components supporting enterprises are difficult to have control of the industrial value chain, and are generally at the low end of the industrial value chain.

On the basis of providing complete system solutions, it is necessary to identify the scarce resources in the resource allocation of the whole system program. According to the enterprise's own resource situation and market environment, etc., develop a strategy and business strategy to own the control of scarce resources in the value chain, and gradually realize it through the daily operation of the enterprise.

Enterprises have the control of the industrial value chain, can maintain the advantage in the market competition; enterprises want to continue to obtain competitive advantage, we must maintain the control of the industrial value chain, that is, the enterprise has the core competitiveness, so as to ensure that the enterprise in the industry has always been in the leading position.

6. Conclusion

Market competition is the source of the optimal allocation of resources. Through the above analysis and argumentation, only to meet the maximization of customer value and have scarce resources in the industrial value chain, the enterprise's industrial value chain control is strong, the enterprise will be able to obtain a competitive advantage; enterprises, such as maintaining the control of the value chain, the enterprise can obtain sustained competitive advantage, the enterprise also has the core competitiveness. It can be seen that through competition, resources can flow to the most competitive enterprises, so that resources can be utilized more efficiently. For this reason, only by striving to improve the ability to maximize customer value and scarcity of resources can an enterprise gain control of the value chain and thus possess core competitiveness. Value chain control is the magic weapon for enterprises to win the market, and it is the guarantee for enterprises to obtain high profits and rapid development, and value chain control is the essence of enterprise core competitiveness. Enhance the enterprise value chain control, is the strategic direction of the enterprise; deviation from this direction, countless facts show that, no matter how powerful and brilliant the enterprise once, will be heading for decline! Adhere to this direction, the enterprise can go strong!

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