Source: Sales and Marketing (ID: cnmarket)
Amid a general slowdown in global economic development, China's economy continues to show strong vitality and steady progress. Behind this, it is difficult to provide a reasonable explanation solely from the perspective of corporate marketing, technology and product innovation, or even classic marketing theory.
To understand China's economic achievements and examine Chinese enterprises, we need a broader perspective: Where does today's business come from? Where is it going? How will it get there?
On December 17, 2021, at the "19th China Marketing Summit and First China Commercial Circulation Conference" hosted by Sales and Marketing with the theme "Future Business, Born Anew," we invited Mr. Jin Huanmin, a strategic marketing expert and senior researcher at Sales and Marketing, to share his insights.
Based on my understanding of Chinese enterprises, even after China's economic miracle, it is still hard to believe they possess such energy—while Japan experienced a prolonged recession, China developed rapidly in a compressed process; while renowned Japanese companies, especially home appliance makers, declined rapidly, China became an electronics kingdom.
You can explain this from the perspective of a huge potential market or from the perspective of late-mover advantages, but it is difficult to explain it solely from corporate marketing, technology and product innovation, or even classic marketing theory.
The answer must lie in a grander narrative.
Evaluating China's Development: Seeing Both the Trees and the Forest
To study marketing in China, one must first understand the socialist market economy.
Experts and proponents of free economies, when studying the success code of Chinese enterprises, discussing antitrust and anti-unfair competition, or even participating in debates such as "interpreting Lenovo," often overlook the fundamental attribute of China's "socialist market economy."
1. The Dual Mechanism Dominating Chinese Marketing
The attribute of "socialism" determines that China's purpose in developing the economy is "people-centered," providing more opportunities for wealth creation and entrepreneurship for more people, and pursuing common prosperity.
The attribute of "socialism" also determines that China places greater emphasis on national strategy in economic development. Replacing planned economy with national strategy based on economic and market laws is a major breakthrough in China's governance and economic development since the reform and opening-up, and a significant contribution to market economy theory and practice.
The attribute of "market economy" is first guided by the essential attribute of "socialism," balancing fairness and efficiency, thereby maximizing the role of market mechanisms in resource allocation. When liberal scholars use the so-called market economy to deny national strategy, their blind spot lies precisely in ignoring what the essential attribute of "socialism" means.
One of the important sources of the "Four Confidences" is that China has broken down all barriers between socialism and the market economy, allowing socialism to fully utilize all advanced factors to serve economic and social development.
It can be clearly emphasized that China's socialist market economy is fundamentally different from the US market economy dominated by the wealthy, in terms of purpose, logic, and operation.
In summary, China's economy and market are jointly dominated by national strategic mechanisms and market mechanisms, that is: market mechanism → national strategic mechanism → Chinese market → Chinese and foreign enterprises. On this basis, the success of China's economy is first the success of China's national strategy, and then the success of Chinese enterprises based on the national strategic platform.
Reform and opening-up → Three-Step Strategy → Coastal Special Zones → Rise of Central China → Development of the West → Free Trade Zones → Belt and Road Initiative → Large-scale infrastructure; Investment attraction policies → Import substitution policies → Industrial policies → Digitalization policies → "Mass Entrepreneurship and Innovation" policies → Supply-side structural reform → Expanding import policies → "Dual Circulation" policies.
Imagine if the above national strategies were removed, and the state merely acted as a so-called "night watchman," would China's economic miracle still have occurred?
Any economic behavior has external effects. When evaluating China's development, we must not see only the trees but not the forest. We should correctly view the two mechanisms and attribute reasonably—we cannot see only corporate contributions and not the contributions of national strategy; we cannot see only the role of market mechanisms and not the role of national strategic mechanisms; we cannot only value the value of independent corporate decision-making and deny the value of state regulation.
How we understand these issues directly affects the macro vision and strategic decision-making of Chinese enterprises.
2. Common Traits of Successful Enterprises
From 2013 to 2015, in response to China's economic environment and conditions, the central government made judgments on the "three-phase superposition" and the "new normal," and made decisions on supply-side structural reform, "mass entrepreneurship and innovation," and "Internet+" with policy encouragement.
How many enterprises actually made strategic and tactical responses to these?
Clearly, Xiaomi responded, e-commerce responded, and today's so-called new consumer brands responded. They have therefore become the most active components of China's economy.
China's county-level economy has been somewhat impacted. The reason is nothing more than relatively backward production capacity there, and facing important and urgent innovation pressure, they lack the ability to respond and cope.
At the same time, the surplus white-label production capacity, guided by e-commerce or leveraging e-commerce's power, launched a devastating sprint toward the lower-tier market—the most tactically valuable strategic market after China's marketing completed its "three major campaigns." This was even the first time Chinese commerce systematically built a supply chain.
I have always believed that this was the first time Chinese enterprises truly made a strategic response to changes in the macro environment. Entrepreneurs who responded effectively succeeded, and innovators who responded effectively also succeeded.
The success of e-commerce, on the surface, is the success of "Internet+", but that is only a very superficial and one-sided conclusion. The deep-seated reason is that they seized strategic opportunities such as the three-phase superposition, the new normal, supply-side structural reform, and "mass entrepreneurship and innovation," and switched tracks to "shear wool" (exploit opportunities), thereby missing the strategic opportunity to guide the upgrade of traditional low-end manufacturing.
Nor should we optimistically believe that leading enterprises in various industries have developed respect for the macro environment through this period of training. On the contrary, they still turn a deaf ear to the warnings made by the Politburo meetings in the past two years.
For example, in 2019, "ensure no systemic financial risks," and in 2020, "handle the resolution of various stock risks and prevent incremental risks." Consequently, the "outstanding" among them encountered "major overturns."
3. Example of a "Major Overturn": Lenovo
Perhaps Lenovo was once the Chinese enterprise most adept at leveraging the macro environment and policies. This was the core factor enabling it to stand out and remain invincible for a long time.
In fact, for high-tech companies, choosing between "technology-industry-trade" and "trade-industry-technology" is a false proposition.
Lenovo's strategy, given China's actual situation at the time, was essentially still "technology-industry-trade": on one hand, supported by the combined golden signboards of the Chinese Academy of Sciences and the Institute of Computing Technology; on the other hand, supported by Ni Guangnan's genuine, domestically leading innovative achievements.
Before Shenzhen competitors rose, Lenovo was like a lone seedling in a large field, also like a baby passed down for ten generations, extremely precious.
After its old capital was nearly exhausted, it was very fortunate to acquire IBM's PC business, which IBM considered a "chicken rib" (something of little value) but Lenovo considered a treasure.
The reason IBM gave up PCs was that it was difficult to sustain innovation and lead innovation in PC and smart device businesses. Not only IBM, but also HP and Dell failed to do so, and even Apple did not. Apple's prominence was due to its mobile smart device business, with its PC business becoming a supporting role.
The acquisition of IBM's PC business allowed Lenovo's PC business to move beyond "domestic first" and, at least in brand image, enter the world's advanced ranks—although the PC business as a whole had largely lost its high-tech industry attributes, being the world's largest in scale was genuine.
At the same time, Lenovo's acquisition of the once-unreachable IBM led many Chinese at the time to mistakenly believe that Lenovo had achieved technological leadership. Did Lenovo itself not think so? Did it not guide public opinion in this way?
Lenovo enjoyed a series of dividends from the macro environment but was unaware; it enjoyed late-mover advantages, and even when it had the ability to invest in technology and product innovation, it remained indifferent. Lenovo did not have a strategic misstep; it was a firm strategic choice—using China's hungry, huge market to choose arbitrage marketing. BATs and so-called new consumer brands are based on the same strategic choice.
Lenovo's crisis is not being eliminated externally, but the ossified mindset and the top management who have tasted the sweetness have lost the courage for strategic adjustment.
The Current State of Marketing in China
China's industry-leading enterprises, from a global perspective, are almost all market followers.
They have built strong capabilities mainly in two areas.
First, strong 1-to-N technology and product innovation capabilities
What makes developed countries, mainly the US, unable to complain is that Chinese enterprises are indeed innovating, and in areas where Chinese enterprises have 1-to-N technology and product innovation capabilities, they can provide good, cheap, and extremely cost-effective products to the market.
The rationality of this kind of innovation is that it is indeed independent innovation, but in essence, it is creative "imitation." The more creative you are, the less room 0-to-1 innovators have to survive.
But in the end, this is not based on originality. Entering the Fortune Global 500 in this manner will only attract more unfounded and unreasonable resentment, not respect. The more you enter, the stronger your strength, the more resentment you attract—China has made the world realize that 1-to-N technology and product innovation capabilities can create more market opportunities and wealth effects.
From the perspective of impacted Chinese leading enterprises, isn't Xiaomi hateful? It is indeed innovating, and it does provide customers with higher cost-performance, but what is its contribution to the industry? What is its contribution to technological progress?
It has already sprinted into the Fortune Global 500, and with a change of appearance, it may become a powerful challenger. It is believed that Xiaomi, which has also high-profile entered the new energy vehicle field, can still make some entrepreneurs who have been deeply cultivating for many years die before dawn, or gain nothing.
Chinese leading enterprises with strong 1-to-N technology and product innovation capabilities generally have two possible futures. Those that have become global leaders either take on the responsibility of market leaders, like Huawei, focusing on revolutionary innovation in 0-to-1 technology and products, promoting technological progress, and winning world respect; or they are willing to "peacefully coexist" with market leaders, carefully working for upstream enterprises in the value chain, supply chain, and industrial chain, not daring to cross the line, just like Lenovo.
Second, strong strategic sales capabilities
No matter how much you dislike Lenovo, you cannot deny that it used 1-to-N technology and product innovation, with the help of strategic sales, to successfully acquire the world's most influential leading brand and become the world's number one.
Chinese enterprises' "marketing" is sales-oriented—Chinese enterprises mainly invest resources in two key points: production capacity modernization and strategic sales.
Production capacity modernization ensures steady improvement in production efficiency and quality, and continuous cost reduction; while channel wars, promotion wars, price wars, and advertising wars, and the resulting market share and market position, point to brand awareness.
Before 1-to-N technology and product innovation capabilities were formed, the brand logic of Chinese manufacturing was "awareness is brand." Enterprises with resources quickly gained awareness through advertising; this is the so-called brand-driven approach.
Enterprises with scarce resources slowly increased awareness through deep distribution and promotions; this is the so-called channel-driven approach. As for the so-called technology-driven approach, that came many years later.
China's industry-leading enterprises have objectively possessed the ability to launch a sprint toward 0-to-1 technology and product innovation, but many subjectively lack such confidence and courage, and still hope to lie in the "comfort zone" of arbitrage marketing.
Chinese enterprises, especially FMCG companies that have tried every means to please consumers for decades, have mostly not won the respect of consumers and the public.
- "Awesome, my country"—that was the public saying to aerospace;
- "Awesome, my country"—that was the public saying to the rapidly upgrading military industry;
- "Awesome, my country"—that was the public saying to the infrastructure maniac;
- "Awesome, my country"—that was the public saying to scientific workers.
- Which FMCG giant or business giant has won such praise?
Even, apart from a handful of entrepreneurs, how many once-prominent business celebrities can still represent Chinese manufacturing and Chinese commerce? This is a phenomenon worth reflecting on.
If Chinese enterprises do not try to catch up with multinational companies, continue to use their products and parasitize their systems, they will not be "choked." But the result is being dependent on others and working for them. For example, in 2018, the total profit of China's top 100 information industry companies was only 50% of Apple's.
If Chinese enterprises try to change this situation, they will inevitably be "choked."
The Future of Marketing in China
If not for the rapid rise of China's economy, the world economic pattern would have been basically solidified long ago. Before launching trade and technology wars against China, the US had already dealt with all those who tried to surpass it.
A definite conclusion is that China's leading enterprises will fully participate in global technological innovation competition and in shaping the future of world business. Moreover, this is a competition that can only succeed, not fail. This "new normal of the external environment" determined by the once-in-a-century changes will profoundly affect the future of Chinese marketing and commerce.
Chinese marketing must seriously think about and answer some fundamental questions at the level of business philosophy, and re-initiate marketing enlightenment and reshape marketing concepts. The future of Chinese commerce lies in the answers to these questions.
1. What social responsibility should Chinese marketing establish?
In capitalist countries, the gap between rich and poor is an inevitable product of the market economy. In the United States, the most developed market economy dominated by capital, the most serious and difficult-to-govern wealth gap has emerged, causing severe division in American society.
From the perspective of economic and market development stages, Chinese enterprises have moved from the primitive accumulation period to the period of capital accumulation and concentration. During the primitive accumulation period of Chinese enterprises, the overall concept was "entrepreneurship" and "getting rich," and the wealth gap did not lead to class differentiation and solidification.
But marked by the rise of BATs, competition among Chinese enterprises has truly risen to the capital level (either self-owned capital or pulling global capital), the nature of competition has undergone a qualitative change, and the ability to harvest wealth has also changed qualitatively, causing the public's impression of capital to plummet.
When enterprises want employees to work harder, make greater contributions, and be responsible to the enterprise, and when enterprises want the public to understand and tolerate corporate behavior more, enterprises must think about and answer the expectations of employees and the public.
Strengthening regulation, antitrust, and advocating for more opportunities for wealth creation and entrepreneurship for more people have nothing to do with the national system. It's just that Chinese enterprises should pay more attention to these issues.
The so-called Chinese hatred of the rich, and the idea that they worry about inequality rather than poverty, are all false propositions. First, because getting rich and living a moderately prosperous life has always been the pursuit of Chinese people; second, because Chinese people pay more attention to their own living conditions than to absolute wealth.
Those Chinese entrepreneurs who have lost their reputation in recent years are not because their wealth caused public dissent, but because their untimely words and deeds aroused public anger.
2. How should Chinese marketing integrate national strategy and corporate strategy?
Whether Chinese enterprises have realized it or not, Chinese marketing is the integration of national strategy and corporate strategy.
Practice has proven that China's national strategy, industrial policies, and macro-regulation are indispensable for the healthy, sustained, and rapid development of China's economy, and are the ballast stone for China's economic, technological, and social development.
Without national strategic support and guidance, it would be difficult for China's leading enterprises to achieve today's achievements, including the self-inflated BATs. In terms of policy support and regulation, the government's care and tolerance for them are unparalleled.
Under the national strategic goals of building a "dual circulation" development pattern, the 2035 long-term goals, and common prosperity, how to constructively handle the relationship between corporate strategy and national strategy will be a major issue concerning the development of China's leading enterprises.
3. How can Chinese marketing win the respect of the world?
We must admit that from a global perspective, Chinese enterprises have been producing products that other countries already have, mainly to make money—we call this learning and imitation, rarely thinking about how to develop new items to satisfy the market. This kind of marketing is essentially arbitrage marketing. Our so-called strategic sales above is of this nature.
This kind of repetitive production aimed at seizing existing market share will cause homogenization, simple market saturation, competitive deadlock, and hellish marketing.
E-commerce platforms seem to create market increments, but in fact they mainly seize existing market share. They are just a different guise repeating the traditional Chinese business routines online with greater intensity, making it the largest arbitrage action in the history of Chinese commerce.
Regardless of how the world views this arbitrage marketing, now that innovation awareness has been enlightened, even the Chinese public has begun to disapprove.
China has become the world's largest market. The more segmented this market is, the deeper the specialization, the faster and more technological progress, and the higher labor productivity. But Chinese marketing so far still pursues rough segmentation, which is both caused by insufficient technology and product innovation capabilities and in turn limits the space and motivation for innovation.
If China tries to change this situation, the only way is to break free from the constraints of the existing system of developed countries, like China's aerospace (space station, Beidou), launch a batch of original achievements, and rebuild an innovation system based on new technology, culture, and lifestyle underlying logic outside the system dominated by the US and its allies.
Xiaomi and others use products from developed countries, within their system, and use 1-to-N innovation to redo the products; Huawei, through original core parts, achieves solutions that can be independently controlled and industrial upgrade choices that are independently controlled, equivalent to creating another technology and product system outside the system controlled by developed countries.
In many industries, China's leading enterprises already have such conditions. The problem is that they have not placed original innovation in its proper position, and the creativity of R&D teams has not been truly activated.
A modern marketing system consists of: 1) 0-to-1 innovation system (original technology and products) + 2) 1-to-N innovation system (derivative innovation based on industry original technology and product platforms) + 3) market promotion and operation system.
Relatively speaking, China's industry-leading enterprises are strong in 2 and 3, but weak in 1. Fundamentally, the reason for weakness in 1 is that they have not yet incorporated original innovation into the core position of marketing capability building. The opportunities for Xiaomi and others, and for China, lie precisely here.
4. Chinese marketing calls for true entrepreneurs
True entrepreneurs can lead enterprises to achieve stronger innovation, better quality, higher efficiency, and greater influence, and be loved by the public.
In an economic society, entrepreneurs are expected to be great and should be protected. But this does not mean that all entrepreneurs will be respected. Because respect is earned, not given.
Entrepreneurs cannot act recklessly just because they have strong capital, saying whatever they want.
Entrepreneurs cannot just pay taxes and provide employment and be done. "Every man has a duty to his country" is not only for ordinary people; entrepreneurs should also bear social responsibility. The state and the public treat enterprises well, and enterprises treat society and the public well, are mutual.
In short, future entrepreneurs should continuously improve themselves in patriotism, innovation, integrity and law-abiding, social responsibility, and international vision, and strive to become the new force in the new era for building a new development pattern, modernizing the economic system, promoting high-quality development, and achieving common prosperity.
At the same time, as the first generation of entrepreneurs fades, Chinese marketing is moving from entrepreneurial marketing to routine marketing and coordinated marketing; as the scale, number, and influence of listed companies grow, the separation of ownership and management is spreading from state-owned enterprises to private enterprises on a large scale.
In this context, how to learn from the experience and lessons of American-style professional managers and establish a professional manager system that conforms to Chinese culture, Chinese system, and Chinese path is also urgent.
Are you "watching" me?