The Challenges Confronted by Rapidy Developing Chinese Companies
“You Can’t Use Your Old Ways to do Your Current Work Succeed in the Future” ——Bob Gogel from CYAMLAN INVESTMENT
The unprecedented growing speed of Chinese enterprises is the pride of the nation. Spirit of entrepreneurs in industrial and commercial society has made China as manufacturing center of various products for the world and without any doubts it will become centers of many other industries.
However, as economic principles, we couldn’t ensure the growth. In China, we have already witnessed some failed enterprises, number of which is enough for us to be alerted, and there are still lots of enterprises are at the edge of bankruptcy. If management levels would like to take modern management, many failures could be avoided.
Where will be easy for enterprises with high growth to make mistakes? We have listed five most ordinary reasons as follows:
Firstly, the expansion decisions are made on impulse, not financial, market and economic analysis. Most of the time, strategy of enterprise expansion comes from personal ambition of the owner rather than real understanding on company ability .The company have to produce and try sell to the market without enough financial resources, which put company in danger. Maybe it is just the intuition of entrepreneur that let company to make current achievement, but it couldn’t guarantee growth for the future, unless there is an market to match company ability and its financial status.
The other reason of failure is the after match of the above approach: the company borrow a lot for expansion and working capital get exhausted. Besides, the rapidly growing company would usually suffer financial management problems. Lots of debt turn into bad debt from over due, so they have no establish a set of credit management system to evaluate potential clients so as to avoid credit crisis.
The third reason for failure of high growth company is that the operation cost gets out of control. Business trip, entertainment, new real estate, super-luxury cars and mobiles, all of those can get a reason, but when you add them together, you will find total of them will take a large proportion in profit-loss rate（P/L）. The operation cost should be properly managed by a set of clear regulation.While in the growing period, one relevant problem to above mentioned, the bureaucracy come up normally, such as endless MOM, e-mail, meeting and report. How can you judge that you have become bureaucrat? You can just count the number of the email you sent and face-to-face communication you take.If it is 2/1, then probably you have hit into the wrong way.
The fourth reason for failure of high growth company is that they are lack of ability to listen to customer’s advice and make improvement immediately. Delivery and order execution usually lag behind sales expection and make the clients unhappy. Sales ability must be linked to other operation system of the company.
The fifth reason for failure of high growth company is that the employees couldn’t grow up along with growth of business. Staffs at all levels should be educated, supported, trained, encourages and properly awarded. As return, they will be loyal to the enterprise and support development of the company in the future. Along with sustainable growth of the company, they will be willing to help you avoid potential dangers. If you want to succeed one year, then grow crops; if you want to succeed for ten years, plant trees; if you want to achieve success for one hundred years, and cultivate talents.
If you are in high-growing business, you must emphiais on the above challenges and don’t make it un-recoverable (better late than never).