Analysis of industrial value chain: a case study of industrial value chain analysis

With the gradual implementation of China's commitments after China's entry into WTO, as well as the entry and market penetration of foreign tobacco companies, China Tobacco Industry Company is facing unprecedented competition and challenges. As an important source of financial revenue in China, tobacco industrial companies must enhance their competitiveness before the "monopoly" system is liberalized. China is one of the few countries in the world that implement tobacco monopoly system. Compared with multinational tobacco groups, the competitive disadvantage of China Tobacco Industry Company is mainly reflected in its ability to control costs. There is a big gap between China and developed countries in cost management concepts, methods, means and mechanisms. Cost management is an important part of enterprise management, but the goal of cost management is not only to control the production cost of products, but also to run through all the contents of the production and operation cycle, that is, the control of the whole process strategy. Using the method of industry value chain analysis, we can manage the cost from internal expansion to the outside of the enterprise, provide the cost information of each stage of the enterprise product life cycle, support and help managers to find the way to maximize the sustainable cost-benefit of enterprises, which is of great significance to improve the management level of China's tobacco industry.

First, the industry value chain analysis

Industry value chain refers to countless valuable activities experienced by the whole industry from the initial input of raw materials to the delivery of final products to customers. Industry value chain analysis includes upstream supplier value chain and its relationship with enterprise value chain, downstream customer value chain and its relationship with enterprise value chain. The main purpose of analyzing the relationship between upstream suppliers and enterprise value chain is to establish strategic partnership, determine the strategic advantage of competition and seek opportunities to reduce costs. The specific steps are: to understand the profitability of suppliers, evaluate the rationality of the relationship between supplier value chain and enterprise value chain, and take strategic improvement actions. By analyzing the relationship between downstream customer value chain and enterprise value chain, enterprises can establish cooperative partnership with them, form stable sales channels, expand market share of products and reduce relative costs.

Second, the industrial value chain model of China Tobacco Industry Company

The industrial structure of China tobacco companies can be roughly divided into three levels: upper, middle and lower reaches. Upstream is the foundation of the whole cigarette industry, which refers to the supply of raw materials needed by industrial companies to produce cigarette products. The middle reaches, including manufacturing and products, is the core link of cigarette industry and consists of cigarette production enterprises. Downstream refers to the market sales of tobacco products, which is an important link between the cigarette industry and the vast number of tobacco consumers. In addition, due to the importance of the cigarette industry to the national finance and taxation, and the special side that tobacco is harmful to human health, government actions (mainly referring to the tobacco monopoly system and industrial policies) are also very important to the value formation of the cigarette industry. The industry value chain of China tobacco industry companies can be simply represented by charts.

The Industry Value Chain of China Tobacco Industry Company

Influenced by the concept of long-term planned economy, the cost management scope of tobacco companies in China is narrow, and they pay attention to the production cost management in the middle reaches, ignore the external value chain of enterprises, ignore the management of upstream suppliers and downstream sellers, and pay insufficient attention to the procurement and sales links. This concept of cost management is far from meeting the requirements of the market economy environment. Through the analysis of industry value chain, we can make clear the position of the company in the industry, decide the competitive strategy according to the life cycle of the industry, and then make clear the focus of cost management; Obtain the information of the industry and related industries, and revise the cost management mode according to the changes of the external environment.

Third, the analysis of industrial upstream value chain

For a long time, China has implemented a strict monopoly system on raw tobacco leaves for cigarette production. National macro-control has a great influence on tobacco purchasing, and tobacco industrial companies have no right to influence tobacco prices. With the steady improvement of China's cigarette output and cigarette structure, in recent years, the material procurement of industrial companies has shown two characteristics: large purchase volume; The procurement scale has grown rapidly. Take Shandong China Tobacco Industry Company in 2007 as an example. In 2007, the tax-included purchase amount of cigarette materials alone reached 2.7 billion yuan, while the net profit in 2007 was about 654.38+0.7 billion yuan. If the purchasing cost of cigarette materials decreases by 654.38+0%, the contribution to the net profit will reach more than 20 million after deducting the tax impact, that is, the net profit will increase by about 654.38+04%. Therefore, the analysis of accessories in the upstream value chain is the focus of tobacco industry companies.

At present, it is common in tobacco industrial companies that the purchasing department blindly pursues the purchasing link or the lowest cost of the department, and rarely considers the overall interests of the company: the cost management of the purchasing department aims at reducing the short-term purchase volume, but fails to consider the long-term sustainable cost reduction strategy, and the ideas and methods of industry value chain analysis tools are not deeply applied in the practice of purchasing cost management. We can consider improving the cost management of tobacco industrial companies from the following aspects and establishing a new strategic cooperation relationship between supply and demand:

(A) to help suppliers rebuild the value chain

In the face of the unfavorable situation that the prices of basic raw materials and energy continue to rise, in the long run, the space for reducing procurement costs is very limited. Only by establishing a deep strategic cooperative relationship with suppliers, helping suppliers to improve procurement and production, taking the composition of supplier cost as the key content of supplier management, reducing the ineffective cost of supplier supply chain and improving the overall supply chain, can tobacco industrial companies provide sustainable space for the company to reduce procurement costs, so that the company's procurement cost reduction can be truly based on the solid foundation of supplier cost reduction.

(two) to achieve business information sharing with suppliers.

Adopt new management methods such as instant supply management and supply chain management. In the process of purchasing, we can consider registering spare parts, hardware and wearing parts; Cigarette materials can be purchased in an extended and unified way, and the price can be negotiated with suppliers to reduce the purchase cost by increasing the purchase volume; To implement centralized warehouse management, we can consider transporting bulk materials to a warehouse in a unified way, and then distributing them to the three-dimensional warehouse of each production point according to the needs of each production point; At the same time, discuss the storage mode of raw and auxiliary materials with suppliers, and lease the company warehouse to suppliers for use and management. By realizing the enjoyment of commercial information, the overall inventory cost of goods in the channel can be reduced, and at the same time, the adverse effects caused by the "whip effect" of goods flowing in the whole supply chain can be eliminated to the maximum extent.

(C) the establishment of assessment indicators to measure the effect of cost management

The current cost management mode of the procurement department will inevitably damage the overall interests of the company's value chain while pursuing the maximization of the interests of the procurement link. Mainly reflected in the follow-up costs of large purchases. For example, low-priced but poor-quality raw materials will lead to an increase in the quality cost of enterprises. Relevant assessment indicators should be set to quantify it to measure the effect of cost management implementation. You can set assessment indicators, such as timely delivery rate of materials, return rate of materials, cost reduction rate, etc. It should be noted that the evaluation index value cannot be absolutely said to be good or bad. According to the specific situation of enterprises, regions and markets, appropriate evaluation criteria should be selected to find out the problems or advantages of enterprises. See table 1 for the comparison between the new strategic cooperative relationship between supply and demand and the traditional supplier relationship:

Comparison table of new strategic cooperation relationship between supply and demand and traditional supplier relationship comparison project traditional supplier relationship between supply and demand New strategic cooperation relationship transaction target material+service supplier selection standard single emphasis on price multi-standard parallel consideration (qualification certification standard) supplier scale and supply are small, supplier quantity is small (few but fine, long-term close cooperation) The stability of suppliers changes frequently and is relatively stable. A long-term close cooperation contract is characterized by a single transaction. Long-term contracts have open information exchange, and proprietary information enjoys quality assurance, quality control and delivery inspection (the supplier is fully responsible for the quality). In addition, they can also seek long-term cooperation with excellent suppliers in the industry. Suppliers can increase the value chain by obtaining a large number of stable orders, while companies can obtain high-quality and cheap materials, forming a low-cost advantage; Taking advantage of the abundant financial advantages of tobacco industrial companies, merging suppliers and moving the value chain system backward can continuously reduce the procurement costs of enterprises and enhance their competitiveness.

Fourthly, the downstream value chain analysis of the industry.

According to the current tobacco monopoly law, cigarettes produced by cigarette manufacturers must be sold through tobacco companies, which wholesale cigarettes to retailers with tobacco monopoly retail licenses, and retailers sell cigarettes to consumers. The value chain of cigarette products is a monopoly value chain under the special monopoly system, which forms the strategic position that industrial companies are cigarette product suppliers and commercial companies are cigarette product sellers in the value chain.

In the past two years, with the deepening of tobacco industry reform, the composition and cooperation mode of cigarette industry value chain have undergone major changes, and the division of labor has become more professional. The cooperation mode has gradually developed into deep cooperation characterized by strategic alliance, complementary advantages, resource sharing, process docking and cultural integration. This requires industrial companies not only to ensure product quality and constantly develop new products that meet the market demand, but also to provide brand unique value for distribution channels through advertisements, and to assist commercial companies in brand promotion, promotion and service guarantee at retail terminals: commercial companies can obtain consumer demand by operating the market well, and industries can provide satisfactory sales services to realize manufacturers' brand strategy and sales policies; Accordingly, industrial companies should take measures to optimize their own value chain, provide products needed by commercial companies, and provide a satisfactory after-sales service system, so as to establish a good corporate image.

In a word, the analysis of industrial value chain can reveal the cost information about the competitiveness of enterprises from many aspects, which plays a very important role in formulating strategies to eliminate cost disadvantages and create cost advantages. China Tobacco Industry Company must rebuild the traditional cost management system in terms of concepts, systems and methods, so as to adapt to the increasingly fierce domestic and international competition environment and improve the competitiveness of enterprises, so as to make itself invincible and further develop. The industrial value chain begins with the producers of basic raw materials and ends with the delivery of final products to customers. The key of industry value chain analysis is to understand and make use of the company's comparative advantages in this industry. The following figure describes the value chain of bearing manufacturing industry and the value chain of a company in this industry.

In order to find out the links that constitute the industrial value chain, we must first answer the following questions:

1) Is there a market for the output of this link in the industrial value chain? Is the determination of market value objective?

2) Is there a company that only produces and sells products in this link?

If the answers are all in the affirmative, then the part considered by this industry is an independent link in the industry value chain. After determining the industry value chain, the company should evaluate its relatively strong position in the industry value chain.

The first step of Ekmi's industry value chain analysis is to identify the independent links of the industry value chain, and then estimate the profits and return on assets of each part, as shown in the following table (table 1):

Industry gross profit margin and return on assets can help companies evaluate the relative advantages of each link in their industry value chain. For example, Table 2 shows that the manufacturing part of the bearing system receives much less return than the infrastructure manufacturer.