In the era of meager profits, how do LED companies find profits?

As we all know, the era of high growth in LED profit margins has passed, and it will probably be a period of meager profits for some time to come. It should be said that the low profit situation is the result of the increasingly perfect market system and the result of economic laws. It is a normal state. The growth rate of corporate profits has dropped and losses have increased, indicating that the company has now entered a period of low profits. The arrival of the era of meager profits is independent of our will. Maybe it is a good thing to look at it from another angle.

Because meager profits can spur companies to strengthen management and technological innovation, abandon the old production and operation methods, and enhance core competitiveness, this is the most important choice in the meager profit years and the era of meager profits.

At the just-concluded Annual Conference on Enterprise Competitiveness, based on the judgment that "China's industry and economy are entering a period of adjustment after rapid growth," Liu Shijin, deputy director of the Development Research Center of the State Council, believed that a considerable number of industry enterprises must seek space for their own survival and development in an environment where profit levels tend to be meager. Our enterprises are also facing some new tasks: turning their attention from excess profits in the original market where demand exceeds supply to cultivating their own core competitiveness. Specifically, we will screen and reorganize businesses and products to highlight products and businesses with advantages. Second, we must speed up technological management and organizational innovation. The third advantageous enterprises actively and prudently carry out corporate mergers and acquisitions. Judging from domestic and foreign historical experience, when a company falls back, it is often the best time for corporate mergers and acquisitions.

In fact, in the past two years, this has indeed been the case in the LED display industry, with numerous mergers and acquisitions integration cases between companies emerging. In response to this industry trend, industry insiders believe that now that the entire industry has developed to a certain stage, it is the need for industrial development and the need to optimize resources. In the early stage of product development, everyone worked independently. Now due to trend needs, the industry is developing towards a more centralized development. At the same time, due to various shortcomings in the current industry, problems such as price wars and bankruptcies frequently occur, which is not conducive to the healthy development of the industry. Therefore, the industry still needs vigorous integration. Integration is conducive to the centralized development of industries, the opening of the civilian market, and the segmentation of the market.

Indeed, as Jin Bei, deputy director of the Institute of Industrial Economics of the Academy of Social Sciences and president of the China Business Newspaper, said, small profits indicate the intensification of competitiveness. Due to the intensification of competitiveness and saturation of the market, the phenomenon of small profits has emerged. We must conduct a scientific analysis of small profits themselves and study the issue of small profits with a more positive attitude. Small profits also indicate the end of the shopping-style competition of Chinese enterprises. In the past, corporate competition took the form of shopping, using large amounts of low-priced resources to expand scale. Such a competitive state has come to an end in the era of meager profits. It also shows that China's economic growth is approaching the boundary of resource advantages. The competitiveness of resource-based and monopolistic enterprises must shift from the advantages of scale competition to efficiency competitiveness. Enterprises in general competitive industries must improve their management level and strengthen technological innovation. Technological innovation is the most fundamental way to break through the dilemma of low profits.

China's LED industry is now entering a period of sudden change in corporate competitiveness, which means that the source of corporate competitiveness will change. So, how to find profits in the era of meager profits? Here are some suggestions to share with you.

Deal profits from management and execution

Facing the advent of the era of meager profits, when we realize that in an environment where the average profit rate of the industry is declining, the overall scale of the company, management level and new product research and development capabilities are the three magic weapons to enhance the competitiveness of the company. Now we propose to seek profits from management, comprehensively optimize resource allocation, adjust internal product structure, and deeply implement business management to reduce costs while comprehensively improving execution capabilities.

In addition, low profit is first and foremost a concept. At present, the LED display industry has entered an era of low profit. It is impossible to make huge profits, so we can only achieve long-term success by always holding a small-profit mentality and a small-profit mentality. We consider how the supply chain should be budget-conscious. Turn where you used to spend money into saving money or making money. Marketing efficiency is all about streamlining and saving. We say that the entire business operation is the process of turning costs into capital. There won't be anything more, it's just produced in these few links.

Excellent brand is core competitiveness

In the era of meager profits, it is particularly important to build a brand based on products and services. With the full development of the market economy, competition in the industry has become increasingly fierce, and it is an indisputable fact that there is pressure on corporate profit margins. In this kind of environment, if an enterprise wants to survive and develop, has endless motivation, and wants to create a kind of brilliance, what should it do? Building an excellent brand is the long-term way for an enterprise to win, and it is also the core competitiveness to win the market.

The words of Liu Cheng, general manager of Shenzhen Opte Silicone, are even more evocative. He said, although I cannot yet say whether we have entered the meager profit era, and it is difficult to determine when it will enter the meager profit era, but a question we often think about is once we truly enter the meager profit era, what can we ultimately rely on to remain invincible? My point of view is to build brand trust from the inside out. How to establish a long-term trusting relationship and ensure the evergreenness of the enterprise is the challenge we face. Building brand trust is the most important strategic weapon for enterprises.

The companies that really make a lot of money are actually low-profit companies

Baidu CEO Robin Li said that Baidu's development strategy has always been to cultivate and educate the market and does not pursue short-term profits. This has been very clear from the persistence over the past many years and the subsequent communication with investors during the listing process. He said: In the early days, we launched the search service for terminal netizens for the first time, and at the same time we also launched the PPC service. When PPC was first launched, most domestic enterprises did not understand what kind of business model it was, so they first needed to conduct market education. The first to accept this model were small-scale enterprises that knew a lot about the Internet. In the past quarter, more than 12,000 active customers joined Baidu PPC, which is the largest number of our customers ever.

The nearly six years of Baidu’s existence have been a very exciting six years of ups and downs for the Chinese Internet. In the early days, there was the Internet bubble, and later various business models were developed. However, we remained unmoved and continued to cultivate our own market, which is the search engine or bidding ranking market. How can your business survive, develop or even grow in the era of meager profits? You may not be able to make a lot of money with each customer, but when you have a certain scale effect, you can make more and more money. The companies that really make a lot of money are actually low-profit companies. If their market is very large and their customers are very large, they can make more and more money.

Real opportunities for industry consolidation will emerge in the era of low profits

It is precisely because low profits lead to industry losses that real industry consolidation will occur. Just like the current color TV industry, steel industry, pharmaceutical industry, and real estate industry, wonderful industry integration will occur in 2016. Every industry in China is big, but individual companies are not big, which shows that our integration is not enough. In the era of meager profits or even in the era of industry-wide losses, only some giant companies can survive and develop better and become more competitive through true integration.

In the face of such opportunities, we pay more attention to the development of our own connotation. Fosun's development has two legs. One leg is to continuously carry out mergers and acquisitions, and the other leg is to continuously launch organic growth. At this time, great attention should be paid to capital flow. On the one hand, we must make profits with cash flow; on the other hand, we must create profitable cash flow. It doesn't matter if the profits are thin in this regard. Sometimes when looking at some corporate statements, the most terrifying thing may be that the profits are very thick but they are all fake, because they are all created from receivables. Therefore, we must do a solid job in running a business and have something that can actually make money. If we see a low-profit situation, there are many things to do, including branding, technology development, and many aspects. At this stage, we must balance our resources, balance our industry, balance our R&D investment, and balance our talents. We need a level environment and then keep moving forward.

What to do with small and medium-sized manufacturing companies

In response to this problem, Liu Cheng, general manager of Shenzhen Opte Silicone, gave a prescription: small and medium-sized enterprises are very advantageous enterprises. Looking at the classification of enterprises around the world, it may be small and medium-sized enterprises that really make money, not necessarily large enterprises. The key is the product selection of small and medium-sized enterprises. To be a more dedicated supplier to large enterprises, the profit margin will be very good. For small and medium-sized enterprises that directly enter the terminal, choose the supply of a certain product with technical content from large companies, so that your smoothing may be better than that of large companies.

Mr. Liu believes that what we are facing now is a low-profit era. From now on, small and medium-sized enterprises need industrial upgrading and technological innovation. In other words, we have to say goodbye to the huge profits and extensive economy of the past. What is taking shape at this time is industrial restructuring, and the reshuffle is about to begin. In other words, every enterprise must improve its core competitiveness in the next round of market competition. If you don't have core competitiveness, if you can't improve it, you will face being eliminated. This is the cruel reality in the next round of corporate competition.

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