A Flowchart Approach to the Haier Household Electrical Appliances Industrial Cluster

Section Two A Flowchart Approach to the Haier Household Electrical Appliances Industrial Cluster Sun Jian 42 A Flowchart Approach to the Haier Household Electrical Appliances Industrial Cluster I. From Industry Chain to Industry Group Supply Chain Management (SCM), a new management idea and mode brought forward in 1990s as a countermeasure to the drastic competition, is an innovation at microcosmic level. SCM is taken as “the third origin of profit” in the time of tiny margins when the profit space is compressed by competition. The basic idea of SCM is a net-chain-framework comprised by providers sub-supplier，shopkeepers and the eventual users circling the core enterprise. The core enterprise rapidly accommodates itself to the variation market by transferring, integrates all the resource advantages on the supply chain. Instead of the pure competitive relationship, enterprises on the chain are partners who have formed an all-win relation comprise both competition and cooperation. The supply chain is a material chain but an information chain, a capital chain and an increment chain. Industry group intimately relates to a city’s competitive advantages. First, an industry group can integrate a city’s resources to form the industry aggregative effect. A city can arrange its local characteristic industry group according to the market demands on the basis of local resource conditions and industry basis. This local characteristic industry can exert the advantage of group predominance such as specialization, low costs, market-sensibility, and scale economy, then, engenders a territorial scale economy and accelerates the development of the produce industry. Second, an industry group can aggregate information and forward it to the industry chain. The middle and small firms have to firm the specialization of a kind of production from its accessory because of the limitation of capital, technique and human resource. However, when the specialization is promoted to a certain stage, it is necessary to rearrange the work division complying with the mutual complementary principle in order to extent the industry chain and aggregate the certain industry to form a group. In this process, 43 the enterprises have developed a mutual complimentary mechanism that can activate the inner resources of the enterprise and promote the ability of mutual complement, competition and cooperation. Third, an industry group can form a group character of large enterprises then promote the brand effect of a city. In recent years, with the affect of the industry group, a brand character symbolized with special industry group has emerged. In these cities, the industry bands have enlarged the effect of the cities’ band effect such as what happened in Qingdao, which has developed a characteristic industry aggregating around electrical equipment industry represented by Haier and improved its competitive power. The aggregation of large enterprises and industries can prolong industry chain, exert the effect of industry air fleet, enlarge the brand effect all over and found a firm base of durable development of industry economy. The competitive predominance of industry group mainly comes from four aspects; First, the effect of external economy. In an industry group, a firm may disperse its special technology to the cooperative firms through various paths and benefit those firms in the knowledge dispersion. A great amount of technology intercourses result in the decrease of space costs and urge the firms to cooperate while competing. By this way, the productivity is improved eventually. Second, the effect of human resource aggregation. A group comprising of professionals attracted by the industry group will gather to serve the industry congregation. The aggregation of professional leads to the human resource flowing among firms in group thus provides a support to the industry upgrade and technology innovation. Third, the effect of knowledge innovation. The competition among enterprises in one industry group results in knowledge innovation, which transfers in the group and makes the firms in one group get new knowledge as well as technology. Fourth, the effect of industry aggregation. Industry aggregation will affect correlative mutual complementary goods and gender a predominant industry group. Generally speaking, industry aggregation at growing stage may become not 44 only the hotspot attracting professionals but the emphasis area of technology import and innovation, the concentration area of correlative firms, moreover, the develop and research center of the world. The strategic aims of promoting industry congregation for a city or region are as follows. First, by industry congregation, a city can fabricate a durable development industry system and found its brand and resource predominance, based on which the city may attract international capital, enterprises and technology transfer and promote a new round of congregation and cooperation. Second, by industry congregation, a city can perfect industry supply chain and accessory provision network and corresponding soft and hard environment. Third, by the effect of aggregation and attraction, a city can proceed with the attraction to certain group of enterprises and consumers. In the condition of global industry transfer and the competition of capital and business invitation, industry aggregation has become an important factor. So many regions in and out of China have built regional brand by industry aggregation, as the result, they obtained predominance of regional industry and realized the durable development of industry economy. The industry congregation, deriving from either market or capital transfer, plays an important role in regional industry-framework upgrade and the emergence of the industry competition predominance. First, industry aggregation helps the enterprises in the region to keep information predomination by bring them valuable technology and market information. In the aggregation region, information about market such as price condition, variation of provision and demand, fashion style, etc. is abundant and acquirable, which makes firms in the region obtain the usable information at a low cost comparing to the external firms and promotes their competitive advantage. 45 Second, industry aggregation realizes the share of resources and productions in industry. The external benefits come from the public resources attracting more external cooperation and opportunity for the firms internal. Actually, the industry aggregation adds intangible assets to the firms in the aggregation region that reduce the distance between enterprise and market as well as clients. Third, industry aggregation promotes the productivity and makes the firms pursue the advanced technology. Generally speaking, firms adopt advanced technology and system will survive in the competition with others. The action of imitation in the aggregation region also speed the spread of advanced technology, high additional value and modern enterprise system. Innovation is the endogenous variable in the technique of durable development and improvement of competitive ability. Fourth, industry aggregation favors the internal specialization. Some working procedure will separate gradually and develop as an independent integrate department participating into the aggregation net when the aggregation reaches to a certain scale. Specialization working division is the important precondition to both the increase of scale yield and the innovation. In general, industry itself has a competitive predominance that can transform to the competition ability of the region. By using the industry aggregation rule, a city can import more international investment and create a better foreign capital utilization environment. As the result, regions where have higher aggregate densities are more competitive and attractive to foreign capital. It has been verified by the affect to competitive predominance and the relation between industry aggregation and direct investment, a number of industry aggregation regions will emerge with international competitive ability when global industry transfer combined with the promotion of industry aggregation. Meanwhile, if more attention is paid to attracting the direct investment and taking part in regional competition, an industry aggregation can also emerge without the base of specialization market. 46 Ⅱ. The Mode of Industry Aggregation Industry aggregation is a phenomenon of firms in a common industry tight aggregate together and a process in which industry capital factors continuously gather together in a certain space. The certain mode of industry aggregation is the competitive and cooperative relation of enterprises in an aggregation forming with the core of production. It has a direct relation to the construction of regional industry system. Now, there are five main types of aggregation in China. This aggregation is developing on different ways in different backgrounds and has participated in the global competition of value chain by different methods. 1. Depending on local entrepreneur spirit and tradition of industry, aggregations on base of country or town industry have formed some small professional towns, such as the labor- congestion-industry regions in Wenzhou, Zhejiang province, hundreds of which can be found in Zhejiang. With the great help of the aggregations, the export of Zhejiang has kept increasing in the competition of global value chain for 3 years from 1999 on. 2. High-tech-industry aggregation based on the carving out of

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