Chapter 5 Conclusion and Suggestion
5.2 Suggestion
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own specialty stores to promote their branded bicycles and offer more after service to consolidate their marketing strategy.
Instead of home market, the overseas market is important as well. Because China’s private bicycles companies entered the global market late China’s bicycle companies aimed at OEM orders to cooperate with foreign branded companies. This can give local companies to have a sheer understanding of global market and to precisely catch the trends of overseas market.
The invention of internet and great openings of international exhibit of bicycles and parts every year, local sellers have more contact with overseas buyers without intermediate parties to cut the profit of the sales. Global market offer China’s bicycle companies more sales opportunities and more competition.
4. Skilled labor of bicycle industry in China is mainly from state owned companies
Different from Taiwanese bicycle companies, the technical personnel were trained by the state owned companies. Especially in Tianjin, the laid off employee from SOEs in Tianjin are or have been recruited by the private or foreign funded companies because of their experienced knowledge about bicycle industry and sales marketing in China. Their long term contact with bicycles parts factories and close affiliation with sales channels are the keys for getting recruited by the bicycle companies. Tianjin is a province where located many state owned companies of heavy industry and overseas branded car manufactures. The car manufactures trained engineers who can learn from working for years and have specialties in producing battery for car, motorcycle and of course, for electric bicycle. This is one of factors that bicycle and electric bicycle industry cluster formed quickly in Tianjin. Now Tianjin can produce the largest volume of bicycles and electric bicycles production in China.
5.2 Suggestion
The bicycle industry in China has dramatically expanded industrial production capacity and economic scale. “Catch-up,” “leap forward,” and “upgrade,” has become the most popular buzzwords. There is a widespread cultural phenomenon that has percolated through all facets of social life: “seeking an eye-catching result from an extremely compressed process.” That is to say, when impatiently seeking eye-catching results, you could ignore the importance of the process and even attempt to bypass the indispensable process. The path and process are
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indispensable long-term goals of the industry. A viable path and an indispensable process is of crucial significance to determining and implementing a correct strategy.
1. Bicycle firms in China should meet the needs of the market and avoid overstocking Just like garment or shoes industries, Chinese bicycles manufactures focuses on OEM orders and tired of fighting against anti-dumping charge from overseas countries. Due to be dominated by the state owned enterprises before, Chinese bicycle manufactures didn’t have motive or pressure to build their own bands or new designed bicycles. Those state owned firms have become inflexible bureaucracies and therefore they have difficulty in coping with the new competitive circumstances. They often fail to meet requirements like short delivery times, are not aware of new trends in the market and ignore niche specialization.
Since China performed economic reform, bicycle hadn’t enjoyed its prosperous future.
Although bicycle production was managed by the state, the production can’t meet the requirement of the consumers which triggered the overstock, severe price competition and gradually brought in a series of breakdown of state owned bicycle companies. After privatization of the state owned manufactures and inflow of foreign investment and branded bicycle companies, export of Chinese bicycles had its beginning. At the mean time, following with rising incomes of Chinese people, the owner of motorcycles and cars were getting bigger and bigger.
There was a period of time the bicycles was viewed as barriers to block economic growth and caused traffic congestion in cities. This is one of factors which give great impact on sales of bicycles and lead to an overstock problem.
2. The establishment of the third parties integrating the firms, government, and academic sectors can accelerate the steps of technological innovation
With decentralization of SOEs and the push for economic growth, Chinese cities have received the infusion of foreign direct investment (FDI) and the globalization of economic activities, and are increasingly competing with each other over policies, resources, and opportunities. Nations cannot succeed in isolated industries, but in clusters of industries connected through vertical and horizontal relationships. An industry cluster represents the entire value chain of a broadly defined industry from suppliers to end products, including supporting services and specialized infrastructure. A neutral organization which integrates the business, governmental and academic sectors, is needed. The organization in the industry cluster can hold
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specific influences on a critical mass and improves knowledge, share resources, and stimulate creativity, innovation and entrepreneurship.
Policies must encourage the learning and the use of technology. The industry must formally connect with scientific institutions and educational organizations and development of domestic technology and foreign technology are interdependent. To cultivate the technology in home country rather is more important than to obtain technology from advanced countries only.
Knowledge accumulation, learning and interaction in the industry cluster are the active mechanisms for industry development. The facilitation of competitiveness in the industry can only be reinforced by interaction, learning and innovation, among the members in the industrial system. Chinese governmental should reinforce the development of technology-based SMEs’
community, and lower the risks and costs of innovation activities undertaken by technology-based SEs.
3. Bicycle firms in China should produce items for the niche market
Before privatization of state owned companies, Chinese bicycle companies were heavily dependent on economies of scale as a source for competitive advantage. It is clear that firms which have been exposed to competitive conditions are driven by the pressure to change and have more chance to been more successful. Confrontation with competitors highlights the importance of developing firm-specific competencies and forces firms to be positioned in the market, which is the brand of a firm. By doing so, they are stimulated to develop specific knowledge with which they can serve distinctive market segments.
For most manufacturing firms, the majority of orders are derived from customers of large enterprises. The contract manufacturer’s business operations are confined to business-to-business, and there is no opportunity to develop business-to-consumer marketing and sales operations. For this reason, SMEs tend to ignore the consumers’ real needs, which can result in a situation where high productivity is combined with low consumer satisfaction. If Chinese SMEs expect to transform themselves from cheap and mass-producing ones to high-value-added ones, they need to focus innovation on branding and on building their operations into meeting with consumers’
needs.
If China wants to make the leap from being a manufacturer of goods, often for other countries, to being a country of world-class inventors and innovators, the Chinese government should set out its science and technology objectives, which included the development and
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eventual increase in indigenous innovation capacity to reduce China’s reliance on foreign techniques. Future policy should expand the range of government services to SMEs. Government should develop an industrial cluster plan for small enterprises, as well as a financing and technological innovation system for SMEs. Chinese governments could learn some lessons from the history and devote attention to supporting policies for the development of small enterprises.
4. Governmental policy for long-term development of bicycle industry is needed
To Taiwanese bicycle firms, setting factories in Southern China is just an initiative of globalization for facing shrinking profit caused by high labor costs in Taiwan and sever competition between bicycle manufactures. Moving the low end of bicycle product line to Southern China, Giant is targeting on China’s home market, set the first company in central region in Kunshan. For the Taiwanese bicycle manufactures, which still stick in Taiwan, the Chinese local bicycle manufactures in Southern China yet cannot supply the qualified or fitted parts for Taiwanese firms or Westerners customers of Taiwan bicycle firms. In other words, the bicycle clusters in Southern China cannot be fitted in the embedded network of bicycle clusters based in Taiwan for exporting high end products since assembly bicycles needs delicate coordination of assembly of parts in international standardization and unified specification for every type of bicycles.
It is acknowledged that many Chinese small and medium enterprises have formerly acted or are currently acting as outsourcing partners themselves, mainly for multinational corporations from Europe or the USA, which represents a form of external partnering for the small and medium enterprises. The removal of trade barriers will ensure that, in the future, China has to compete on the basis of their real innovative capabilities. China will no longer be able to hide their weaknesses behind artificial barriers. Consequently, local capabilities embedded in the industry cluster will become the main source of competitive advantage. These local capabilities are immobile and difficult to imitate. Using typical local capabilities such as the existence of suppliers, culture, consumer demand, is a possible way for firms to achieve a sustainable competitive advantage in an internationalizing world. A firm embedded in a stimulating environment can in this way build up a competitive advantage over other firms.
Policymakers, both at the national and regional levels, must recognize that the process of business growth has significant policy implications for government services, and determine ways to address these implications. Implement the macroeconomic regulation and supply the local
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government service. Guide the random innovation activities of SEs to follow the national development strategy so as to build up the innovation ecosystems representing national competitiveness.
5. An overall green traffic policy can provide Chinese bicycle enterprises solid ground Most of greenhouse gas emissions from transport came from road transport. Road transport represents on average 80 % of the total energy consumption in transport and cars represent almost 50% of the total energy consumption of the transport sector, while its share is decreasing after 1990. Since cars consume four times more energy per passenger-km than public transport this decrease had a negative impact on the energy consumption of passenger transport.
Bicycle users and pedestrians are key beneficiaries of the low-carbon mobility agenda in urban China. International experience suggests that there is potential for significant gains in addressing congestion if people who have choices can be persuaded to use bicycles as a mode of transport, especially for short trips. On top of that, bicycle industry is also one the industry who benefits from the green policy. Green policies are pursued to achieve the goals in long term and will be failed if policies were taken in short term. One or three-year carbon reduction is not the pursuing goal for the governments. The sustainable urban mobility and the promotion of cycling policies supported by central and local governments offer the bicycle industry a long term and prosperous future.
Bicycle companies compete not only with the counterparts in different countries but also compete with other industries, such as motorcycles and cars in the road. Accompanying with higher income, and the concerns of convenience of motorcycles and cars, the number of bicycle owner ship has been affected by the growth of alternative transportation.
The Road Transportation Safety Law effectively classifies e-bicycles as a non-motorized vehicle, giving them the same rights as bicyclists. This law, besides giving users the right to ride in the bicycle lane, gave e-bicycles proponents in industry and government legal standing in defending e-bicycle use and sale in many cities. E-bicycle can be a new design besides traditional bicycles and may become a new fashion. Chinese local governments adopted different policies and safe standard on e-bicycles. There are some cities banning e-bicycles or regulating the usage of the local firm produced e-bicycles only in the cities. Both local governmental policies banning motorcycle and bicycles or e-bicycle place high impact on the development of the industry. Incoherent policies would be an obstacle for promotion of bicycle’s usage.
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The importance of bicycles has caught global attention as an environmental friendly tool.
Under the promotion of government’s green policy, and ecological traveling by bicycles, bicycles’ heat will not vanish soon. Facing the difficulties from the anti-dumping charge, Chinese bicycle industry can turns its export driven policy toward home market oriented ones and enjoy the prosperous growing in industries, such as ecological traveling, and the related traveling business. By upgrading bicycle technology and cooperating with bicycle-friendly environment can offer China both economic growth and carbon emission reduction.
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