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Small and Medium-sized Private Enterprises Require Innovation Urgently


“As lots of advantage elements are transferred into qualification elements, small and medium-sized private enterprises are falling into unprecedented distress”, Zhang Landing, vice president of Shanghai CYAMLAN INVESTMENT, who has devoted an service od company turnaround, spoke to journalist, “The alarm that small and medium-sized private enterprises are facing bankruptcy couldn’t be discarded.”


More horrible than “lots of southeastern coastal export oriented enterprises go bankruptcy” in financial crisis, the current saying that small and medium-sized private enterprises are facing “bankruptcy trend” worries the world. In this June, as per data of related ministries and commissions, “In the first two months of this year, 15.8% of small and medium company above certain scale in deficiency, with loss increasing 22.3% compared with the same period of last year; and the deficiency of smaller enterprises are even more serious.”
Per Report on the Implementation of the 2011 Plan for National Economic and Social Development delivered to Provincial People’s Congress Standing Committee of Guangdong Province in July, 50% of enterprises in Guangdong are under deficit or profitubility is lower than 2% and only 22.2% of enterprises are above 5%. Besides, according to research, at present small and medium-sized enterprises are in the situation “more production , more less”. Market personage may ask why this situation occurs.
“In macro level, on the one hand, it is due to the significant increase of production cost, such as raw materials and labor and so on, and on the other hand it is because the Chinese capital market is not well developed: the private loans cost too much and the tighten-ing more policy has toughened financing problem.” Zhang Landing told the journalists in interview, “in micro level, the endlessly emerging vicious competition in the market has also caused numerous advantage elements to be turned into qualification elements.”
The so called “advantage elements being turned into qualification elements” means the first-mover advantage of single enterprise is caught up by competitors in the fierce market competition and industrial doorsill is increased automatically. Finally first-mover advantages disappear. It is introduced that, at present enterprises all over the country are mainly small and medium-sized enterprises, most of which are grown up in the past ten years. “The past ten years are just like time of the ‘baby boom’ for Chinese small and medium-sized enterprises”, but the problem is that most of the small and medium-sized enterprises grown up in ‘baby boom’ have no competitiveness. What they have is just the first-mover advantage.” Zhang Landing said, “Those enterprises will face bankruptcy soon or later if they couldn’t find out their position and make adjustment immediately.”
However, it is not so easy to get back the first-mover advantage, because the “baby boom” of Chinese small and medium-sized enterprises is still going in China. For example, as the seamless underwear industry is with lower doorsill, lots of manufacturers emerged in Yiwu and some other areas earlier. The industrial profit has been decreased below 20% from previous several times. “There is no advantage at all. The small and medium-sized enterprises are just manufacturing platforms and logistics platforms. Once powerful competitors show up, this industry will be taken over soon.” Zhang Landing told, this situation will force small and medium-sized enterprises to learn innovation. Zhang Landing thinks that the first way for them is to explore new industries and step towards specialized market. The second way is to take strategy of low-cost,it should can be fulfilled by technical upgrade which is different from old one of low loser cost low transportation cost.It should also rely less on manpower.By the low-cost,it should also get the advantage of economy of scale.