Industry Chain Introduction and Detailed Information

Connotation

(1) The industrial chain is an expression of the industrial level;

(2) The industrial chain is an expression of the degree of industrial association;

(3) The industrial chain is an expression of the depth of resource processing;

(4) The industrial chain is an expression of the degree of satisfaction of demand

The industrial chain is a graphic description of the interlocking relations between industrial sectors based on technical and economic links. The industrial chain is a graphic description of the interlocking relationship between industrial sectors based on technical and economic links. The regional industrial chain, on the other hand, penetrates deeper into the regional industrial system, analyzes the chain-type correlation between various industrial sectors, and explores the division of labor and cooperation between urban and rural areas as well as between regions, complementary interaction and coordinated operation of industries. In economic practice, many regions are also making positive attempts to build and extend the industrial chain.

Types

The industrial chain is divided into narrow industrial chain and broad industrial chain.

The narrow industrial chain refers to the complete chain of production sectors from raw materials to end-product manufacturing, and is mainly oriented to specific production and manufacturing links;

The broad industrial chain is based on the narrow industrial chain oriented to the production of upstream and downstream expansion and extension as far as possible. The extension of the industry chain to the upstream generally makes the industry chain enter into the basic industry link and technology research and development link, and the downstream expansion enters into the market expansion link. The essence of the industry chain is the linkage between enterprises in different industries, and the essence of this industry linkage is the relationship between supply and demand among enterprises in each industry.

Formation

With the development of technology, the degree of roundabout production increases, the production process is divided into a series of related production links. The complexity of the division of labor and transactions in the economy through what form of linkage between the different divisions of labor and trading activities has become increasingly prominent issues. The organizational structure of firms increases incrementally with the development of the division of labor. Thus, the potential for searching for a business organizational structure that saves transaction costs and further facilitates the division of labor increases dramatically relative to the potential in production (Yao, Xiaotao, and Xi, Youmin, 2002). Firms can hardly cope with the increasingly complex division of labor and trading activities, and have to rely on interconnections between firms, and this motivation and practice of searching for the optimal business organizational structure becomes the condition for the formation of industrial chains.

As shown in the figure, the formation of the industrial chain is firstly caused by the social division of labor, and the deepening of the industrial chain organization is continuously caused by the role of the transaction mechanism. In the figure, C1, C2, C3 indicates the degree of social division of labor, in which, C3>C2>C1 indicates the deepening of the degree of social division of labor; A1, A2, A3 indicates the degree of market transactions, A3>A2>A1 indicates the deepening of the degree of market transactions; B1, B2, B3 indicates the degree of development of the industry chain, in which, B3>B2>B1 indicates the degree of development of the industry chain. gt;B1 indicates the continuous extension of the industrial chain and the increasing complexity of the industrial chain form. The origin of the intersection of the three coordinates is 0, which indicates that there is neither social division of labor nor market transactions nor the initial state of industry chain generation.

Starting from the C1 point instead of the origin means that the social division of labor is the starting point of market transactions, but also the starting point of the industry chain The existence of the social division of labor C1 promotes the emergence of the degree of market transactions A1, under the role of A1, the need for B1 forms of industry chain and its docking B1 the emergence of such forms of industry chain and promotes the further development of the social division of labor, and thus, the social division of labor Accordingly, under the action of C2, the degree of market transactions develops from A1 to A2, and A2 promotes the development of the industrial chain from B1 to B2.Then, according to the same principle, B2 promotes the development of C2 to C3, and C3 promotes the development of A2 to A3, and A3 promotes the development of the industrial chain from B2 to B3.... ...and so on, so that the industrial chain is continuously formed and developed.

The reason for the formation of the industrial chain lies in the realization of industrial value and the creation of the industrial chain is the fundamental way of industrial value realization and value-added. Any product can only be realized through final consumption, otherwise the production of all intermediate products can not be realized. At the same time, the industrial chain also reflects the division of industrial value. With the development of the industry chain, the industrial value is divided between different sectors into different industry chain nodes in the division of the industry chain is also to create industrial value maximization, the essence of which is to reflect the value-added effect of "1+1>2". This value-added often comes from the multiplier effect of the industrial chain, which refers to a node in the industrial chain when the benefit changes, will lead to other related industries in the industrial chain accordingly multiplier effect. The inherent requirements of value creation in the industrial chain are: production efficiency ≥ the sum of production efficiency of internal enterprises (multiplier effect of collaboration); at the same time, the transaction cost ≤ the sum of transaction cost between internal enterprises (network effect of division of labor). Inter-firm relationships can also create value. The value created by a value chain depends on the investments made between firms in the chain. Relationships between different firms will affect their investments and, in turn, the value created. Relationships can create value by encouraging firms to make investments that only make sense if the relationship is sustained.

Distributional characteristics Completeness

An industrial chain is a set of related industrial activities, whose constituent unit is a collection of several economic activities with related relationships, i.e., an industrial ring or a specific industrial sector; and an industrial ring (industrial sector) is a group of several firms engaged in the same economic activities. Enterprises engaged in similar or the same economic activities in order to maximize their own interests, will inevitably strive to explore their own economic activities in the best location. In this process of "following the best push", on the one hand, the micro-constituent unit of the industrial ring (industrial sector) - enterprises, in order to obtain the economic benefits of agglomeration, and gradually gathered to the best location suitable for its development and growth, i.e., the original distribution of the same kind of enterprises in the region in the best location to realize the "enterprises pile up" (Clusters); on the other hand, the various industrial ring (industry sector), in order to obtain the benefits of the geographical division of industry, due to the different economic characteristics and the different economic activities of enterprises, in order to maximize their own interests. On the other hand, each industrial ring (industrial sector), in order to obtain the benefits of geographical industrial division of labor, tends to be spatially dispersed due to different economic characteristics and the pursuit of their own superior location. In this way, the spatial economic result of the enterprises and sectors in the industrial chain system following the optimal migration is that the links of the industrial chain are respectively laid out or configured to the specific locations suitable for the characteristics of their economic activities (Specific Locations). Because of this, when the scale of economic zoning is large, such as large economic zones, large economic zones, provincial or watershed economic zones, or large enough to encompass almost all the links of the industrial chain in the geographic space, the industrial refining shows obvious integrity; when the scale of economic zoning is small, for example, only municipal areas, counties, or concentrated industrial development zones, the geographic scope of its generally difficult to include the links of the industrial chain, which for a certain economic region, the regional economic zones, the economic zoning of the city, county, or industry concentration development zone, its geographic scope of the industrial chain is difficult to include.

This is the first time that an economic region has formed a specialty industry, but the industry chain has shown obvious discontinuity.

Hierarchy

The industrial chain is an organic unity in which industrial rings are accumulated step by step, and the accumulation of a certain chain ring is the process of additional labor input, capital input, and technology input to the previous link in order to obtain the added value, and the more the chain ring moves downward, the more capital-intensive and technology-intensive the chain is; the more the chain ring moves upward, the more its resource-processing and labor-intensive nature is obvious. As a result, the type division between less developed regions and developed regions is often based on their specialized division of labor roles in the pattern of the geographical division of labor. Generally speaking, less developed regions are more engaged in resource extraction, labor-intensive economic activities, its technology content, capital content is relatively low, its added value rate is also relatively low; developed regions are more engaged in deep processing, finishing and fine processing economic activities, its technology content, capital content is relatively high, its added value rate is also relatively high. Therefore, there is an intrinsic correlation between the type of region and the level of the industrial chain, with the less developed regions generally possessing the upstream links of the industrial chain, and the downstream links of the industrial chain generally laid out in the developed regions.

Directionality

The preferred location directs the industrial chain to be either concentrated or dispersed in different economic locations, which is manifested in the obvious spatial directionality of the industrial chain. This spatial directionality is mainly manifested in the following aspects: First, resource endowment directionality, the industrial ring based on the pursuit of preferential location, is bound to rely on the regional resource endowment to some extent, and the latter's spatial non-concentration caused by the spatial decentralization of the industrial ring of the resource endowment chase. Secondly, the directionality of the geographical division of labor, the geographical division of labor makes each region have its own specialized production direction, the industrial chain's pursuit of the benefits of the specialized division of labor causes the spatial dispersion of the industrial ring. Third, the regional traditional economic activities, regional traditional economic activities are usually the embodiment of the region's specific resource endowment and regional economic characteristics, the path of economic activity dependence and inertia makes the region in the industrial chain division of labor has a deep imprint.

Product Integration Integration Essence

The essence of integration is to adjust, combine and integrate the status quo of the separated state. Industry chain integration is the process of adjusting and synergizing the industry chain. The analysis of industry chain integration can be carried out from the perspectives of macroscopic, industrial and microscopic. Industry chain integration is the process by which a dominant enterprise in the industry chain adjusts and optimizes the relationship between related enterprises so that they act in concert to improve the operational efficiency of the whole industry chain and ultimately enhance the competitive advantage of the enterprise.

Integration Mode

The position of the integrating enterprise in the industry chain can be divided into three types: horizontal integration, vertical integration, and mixed integration. Horizontal integration refers to the constraints on the same type of enterprises in the industry chain to increase the concentration of enterprises, expand market power, thereby increasing the control of market prices, so as to obtain monopoly profits. Vertical integration refers to the vertical maximization of industrial profits through output or price control by firms in the industry chain by imposing vertical constraints on upstream and downstream firms to accept integration or quasi-integration contracts. Hybrid integration, also known as oblique integration, refers to the integration or constraints of enterprises closely related to the industry, which includes both horizontal and vertical integration, and is a combination of both. Integration can be categorized into equity mergers and acquisitions (M&A), spin-offs, and strategic alliances, depending on whether the integration involves the transfer of equity. Equity mergers and acquisitions are equity mergers and acquisitions type industry chain integration refers to the integration mode in which the dominant enterprise in the industry chain controls the enterprises in the key links of the industry chain by means of equity mergers and acquisitions or holding, in order to construct a smooth, stable and complete industry chain. Splitting refers to the original enterprise including multiple industry chain links to divest one or more of them from the enterprise, changing the enterprise division of labor into market division of labor, in order to improve the core competitiveness and specialization level of the enterprise. Strategic alliance-type industry chain integration refers to the strategic alliance between the leading enterprises and key enterprises in the industry chain to achieve the purpose of improving the competitiveness of the whole industry chain and the enterprises themselves.

1. It is conducive to the reduction of enterprise costs.

2. Favor the emergence of new enterprises.

3. Favor the formation of an innovative atmosphere in the enterprise.

4. Favor the creation of "location brand".

5. Favor the development of regional economy.