Industry analysis considerations

Brief analysis of several major industry classifications

1, consumer goods industry

? From the perspective of macro logic and industrial logic, there are several important factors to be noted in the consumer goods industry:

1) The demographic dividend of consumption has basically disappeared. China's special population structure (especially the result of the one-child policy in the past) and the rapid expansion of production and channels in the past two decades have basically completed the popularization of goods and the penetration of channels; In the future, the number of customers and per capita consumption will hardly increase or even decrease, and the growth era of large single products will basically end.

2) In the next few years, the ratio between the middle class population and the Internet generation population will increase rapidly, and there will be opportunities for structural upgrading and category innovation in the stock market. The demand for experience, service, health and beauty will become an important factor in the purchase decision, but the marginal contribution of innovation will be reduced, which will not be too great for large companies.

3) The relationship between manufacturers and consumers. From the past manufacturer orientation to the present consumer orientation, the ultimate consumer is the most influential orientation, but good manufacturers deeply understand that consumers should surpass consumers. For manufacturers, the most important thing is to establish an efficient and interactive communication mode with consumers. Today's IT technology may help them do this, using big data to record the whole process of consumption behavior, and using these data for deep mining. Make the process more optimized and the supply chain more efficient. On the basis of these data, we will continue to stimulate effective innovation and bring more products through correct production and marketing. In the past, manufacturers produced too many products with qualified quality that consumers could not afford. In the future, more should be more accurate.

4) Brand and product strength. The popularity of the Internet has basically eliminated information asymmetry, the cognitive ability of consumers has been greatly improved, the bargaining position of consumers relative to manufacturers has risen, and the challenge of brand loyalty is greater, but at the same time, the efficiency of high-quality brands to gain more market share will be higher. What is certain during the period is that the channel value has been greatly compressed and inferior brands have been quickly eliminated. In this sense, the value of product strength (including service in a broad sense) will be more easily reflected, and the continuous product innovation ability, effective and accurate communication (instead of traditional image endorsement and advertising) and benign interaction with consumers will become more and more important.

Under such macro logic and industrial logic, observing the micro-business and financial data of enterprises has different emphasis from the past. For example, we need to see whether the gross profit margin of an old category is improving or maintaining, whether the proportion of new categories is increasing, whether the marginal profit of new category innovation is increasing, and whether the market share of the total is increasing.

For example, the observation of consumers depends on multiple dimensions of business data and financial data, such as the number of customers, customer unit price, repurchase rate and so on. To verify whether this enterprise has the ability of continuous learning and innovation.

2. Service industry

Macroscopically, under the background of the popularization of commodity consumption, the proportion of experience consumption and service consumption will continue to increase, which is also in line with the characteristics of residents' consumption tendency after the per capita GDP in the macroeconomic sense reaches a certain level; At the same time, the integration of goods and services is becoming more and more common. For consumers' cognition, "service is product, and product is advertisement". Under the current macroeconomic background, the proportion of the middle class is rapidly increasing, and there is still a lot of room for the service industry.

From the perspective of industrial logic and Maslow's hierarchy of needs theory, after the survival needs such as physiological needs and security needs are met, the belonging needs such as socialization, respect and love and the spiritual needs of self-realization will greatly increase. Therefore, the most important thing for the service industry is to establish a better experience, word of mouth and user stickiness from the user's point of view, so as to enhance the overall utility of consumers in terms of functional needs, experience satisfaction, emotional demands and cultural identity.

Following the above two logics, there are some important dimensions to look at the business and finance of service enterprises:

1) the number of users and their changes, which is the basis of everything, especially the number of users who can generate transactions or pay;

2) Customer's repeat order rate (corresponding churn rate) and ARPU value (or ASP), which are the best data verification for word of mouth and experience;

3) Marginal cost and profit of obtaining new customers: It is very important for an enterprise to obtain new customers through brand, communication and advertising, and whether there is marginal profit in obtaining new customers; For example, the customer recommendation rate index is very good data (NPS value, net promoter score, net recommendation value (NPS)= (number of recommenders/total sample number) × 100%- (number of detractors/total sample number )× 100%, and consumer goods are also suitable for this idea), and good products or services are the best for old customers.

4) Whether the learning cost of customers is low enough and the switching cost is high, that is, customers are more likely to come in and not easy to leave.

Of course, service industry is a very broad concept, including both traditional service industry and various information services based on the Internet, but the core logic behind it is similar, and the framework of understanding and research can be completely opened. However, there are significant differences between the traditional service industry and the emerging service industry with internet attributes in the development path of business and financial data such as users, traffic or sales, cash flow and net profit. The traditional service industry is closer to linear growth in time and space, while the emerging service industry with internet attributes shows some characteristics of exponential growth, resulting in a winner-takes-all industry pattern (very few companies occupy most of the market share).

3. Manufacturing industry

From the macro logic point of view, manufacturing (including hardware in a broad sense) has the following points:

1) The overall manufacturing capacity of China is still difficult to be replaced by other economies. After more than 20 years of accumulation, the comprehensive supporting capacity of China's manufacturing industry still has strong competitiveness in the world, and even this competitiveness will be further improved;

2) Although the overall demographic dividend in China has disappeared, the human resource dividend of engineers and high-quality workers may remain for a long time;

3) The more special factor is that China has a very large domestic market as a good testing ground. For many enterprises, the cost of trial and error is much lower than that of other economies;

4) Due to the overall economic depression in developed countries, the financial situation of some manufacturing enterprises is not good, which brings rare opportunities for globalization to leading enterprises in China.

These factors provide favorable conditions for the upgrading of China's manufacturing industry, but only a few excellent enterprises may seize the opportunity in these aspects.

From the perspective of industrial logic, the core logic of traditional manufacturing industry is the standardization and scale of products and processes, thus realizing the self-replication ability in time and space. Lean production, represented by Japanese enterprises at the end of last century, fully embodies this logic, and it will still be applied in China for some time now, and China white electricity industry also fully illustrates this logic.

On the other hand, with the rapid development of computing technology, big data and cloud computing at present and in the future, non-standard products that were difficult to scale in the past can also realize the digital transformation of the whole process to a considerable extent, and may realize personalized mass production, which is in some sub-sectors (such as customized furniture, clothing and other industries that were very difficult to improve industry concentration). In order to break through the possibility of "scale is the enemy" of non-standard products, of course, the exploration process of this process will be very long, the sunk cost in the early stage of R&D will be high, and its difficulty will be much higher than the capacity replication scale of standard products, but the barriers will be higher after success. The research in this area should pay attention to the long-term strategy and be rigorous and patient in the investment time.

From the commercial and financial logic point of view, there are two very important factors in manufacturing industry, whether it is the mode of capacity replication or personalized mass production. First, whether the generalized production capacity scale (including fixed assets, intangible assets, goodwill and other factors in finance, as well as the number of front-line personnel such as manufacturing, R&D and marketing) has expanded. In business understanding, it will bring positive marginal profit, and good expansion will also bring about an increase in marginal profit rate, thus improving the overall ROE level of the company.

Second, whether this scale expansion will bring significant long-term competitiveness improvement, such as mastering the core technology with barriers, the continuous accumulation of terminal scale in the brand, and the product premium and share increase brought by this brand. To sum up, it is to form scale and cost advantages in space and accumulate brand premium in time.

4.TMT industry

From the macro logic point of view, technological progress is one of the most important factors of long-term economic growth potential. In the past few decades, TMT industry has concentrated the largest technological progress and business model innovation in human history, and it has also been the most important growth driver in the world in the past few decades. The scientific and technological revolution, especially the internet revolution in the past 20 years, has completely reconstructed the global economic structure, industrial evolution and human lifestyle.

But from another point of view, perhaps the speed of technological progress has exceeded the growth rate of macro aggregate demand, and the characteristics of creative destruction have shown the effects of low economic growth and low employment in the past decade. The scientific and technological revolution, combined with the power of modern financial technology and capital, makes the initial distribution easier to concentrate on technical elites and capital (shareholders). The remuneration of ordinary workers has not been significantly improved, and the polarization between the rich and the poor in the world, including developed countries, continues to intensify. Perhaps this is one of the deep-seated reasons for the financial crisis since 2008. As mentioned in A Brief History of Mankind, the economic value of ordinary people, whether as workers (replaced by machines and data to a greater extent, the productivity of machines may be greater than that of people) or as consumers (with little increase in remuneration and lower consumption elasticity), may continue to depreciate.

From the perspective of industrial logic, the technological evolution path of TMT, the commercialization of technological achievements and the innovation path of business model brought about by it are particularly important. The leaders of technology and business models will continue to expand their leading edge and market share for a long time due to the principle of increasing income, and the industry concentration will increase rapidly. Both hardware, software and services show this feature, such as chips, monitors, storage, various applications, traffic platforms, social networks and other sub-industries. Therefore, the fate of different companies in the same sub-industry is very different, and the research on the meso-level of the industry is particularly critical.

From the current point of view, the popularity of smart phones and traffic dividends have basically ended, new technological progress needs to cross the next S-line curve, and large-scale technological innovation may take a long time to explore. The forms of big data, cloud computing and the next generation of intelligent terminals (AI, AR/VR, it is difficult to form hundreds of millions of standardized projects, and it is more likely to be the integration of hardware, software, content and services) will be the same as the development logic of the previous two decades.

From the business logic of enterprises, the wrong cost of TMT industry technology path selection is very high, and the wrong choice will be a disaster. Some "great enterprises" in the classic business reading "The Pursuit of Excellence" are now either bleak or gone; It is particularly important to study the whole industrial chain formed by the leading position of mainstream technology.

From the perspective of financial logic, the changes of income, profit and cash flow of science and technology enterprises are not linear like those of traditional manufacturing industries. For technology R&D enterprises, technicians and R&D expenses may increase first, and then income, net profit and cash flow lag behind; For service-oriented enterprises with innovative business models, the latest embodiment may be traffic and users, followed by income growth, and finally net profit and positive cash flow.

The above-mentioned major industries are not a strict distinction, and these thick lines of big logic simply illustrate some important things of * * * and regularity. Many industries themselves may have multiple characteristics, of course, these characteristics will have a significant primary and secondary relationship, so it is necessary to conduct a more in-depth analysis of specific sub-sectors and form a rigorous logical framework. In addition, under the current economic and industrial background, interdisciplinary and comprehensive research is becoming more and more important.