Wanxiang uses reverse OEM to expand overseas markets

At present, China's auto parts industry has a decentralized layout, low market concentration, and small-scale enterprises, and it is also facing a strong international competition. The terms of the WTO stipulate that since the first year of accession to the WTO, the import tariff on auto parts has dropped from an average of 23.4% to 10% within five years. Chinese auto parts companies will face severe market challenges.

In the continuous expansion of international mergers and acquisitions, Wanxiang not only has its own place in the market, but more importantly, it has become one of the most internationalized manufacturing companies in China. In 2003, the value of Wanxiang’s export products reached 380 million U.S. dollars and it held shares in 25 overseas companies.

What kind of pattern does the universal take?

In the export of products, Chinese companies often use foreign brands and use their own methods of OEM to sell in the name of the other party. Before Wan Xiang bought the American Scheele Company in 1998, it had been OEM for this company for more than ten years. After Wanxiang acquired Schoeller, production was its own product, and at the same time it controlled the brand by itself, which was called reverse OEM.

After the acquisition of UAI in the United States, Wanxiang has already owned two anti-OEM companies in the United States.

In foreign operations, Wanxiang adopts a localization strategy.

The first is the localization of marketing. That is, using local resources to establish its own market system. For example, in the United States, the sales of universal joints borrowed the power of Rockwell, and the bearings used the sales system of Japanese NTN and American General Bearing. In South America, Wanxiang absorbed the entire sales network of Schoeller; In Europe, personnel from the original GKN system are used. To tie in with the effective operation of the market system, Wanxiang has strengthened its hardware configuration, and has bonded warehouses in the United States, the United Kingdom, Mexico, and Brazil to meet customers' requirements for time and relieve customers of concerns about sources of supply.

Followed by the localization of the management system. Wanxiang employs local excellent human resources, manages the company according to the most stringent local standards, and the company’s financial accounts and legal affairs are all undertaken by local accounting firms and law firms, gaining the trust of customers and entering in the shortest possible time. Character. The universal management system is completely based on international standards. In February 2006, Wanxiang Overseas Corporation attempted property rights reforms. In the case of the establishment of an operator fund for Wanxiang United States companies, the Group’s profit growth exceeded 26.58% per year on the premise that the Group’s investment remained under the Group’s ownership. All of them, and through the purchase of new shares, gradually converted to a total of no more than 40% of the company's equity. The establishment of an operator's fund is not simply to clarify the assets, it is not to allocate the stock assets. The operation of the fund is entirely based on the creation of incremental assets. It is called activation of wisdom and distribution of the future.

Another is the localization of capital operations. The success of business management, bank and shareholder recognition is the standard of judgment. The operating efficiency and development speed of Wanxiang Overseas Company quickly attracted the attention of local banks. They are not only financially supported, they have increased their credit limit from US$5 million to US$80 million, and they have made suggestions for the development of enterprises. Now, the investment of universal American companies from local banks is twice that of their parent companies. The company is actively pursuing the listing and truly realizes the localization of the company's capital operation.

From "international marketing" and "international production" to the deployment of "international resources." With China as a manufacturing base, the United States has established an international market network and formed a global industrial layout for exports, support, and maintenance. Through the acquisition of patented technology, we have enhanced Wanxiang China's manufacturing capabilities to improve product quality, and used the acquired company's original brands and sales channels to enter the mainstream Western market, and gradually promote the "Universal" brand.

Wanxiang provides a reverse OEM model for China's manufacturing industry to join the global industrial division of labor—purchasing foreign companies and then OEMs for them. It is an independent innovation for Chinese companies in technology, globally integrating resources, and rapid development. model.

â–  Case review

Through the above-mentioned "universal phenomenon", we found that whether an enterprise can achieve and use its own innovation in the course of its own development is a good prescription for activating its own development.

Economic theory has long proved that innovation and technological progress are the most important driving forces for economic development. In the 20th century, 70% to 80% of the sources of economic growth in the United States were not due to the increase in capital and labor, but should be attributed to technological progress.

At present, 60% of China's equipment investment is used to purchase foreign products, of which 100% of optical fiber manufacturing equipment, 80% of integrated circuit manufacturing equipment and petrochemical equipment, and 70% of CNC machine tools are foreign products. The per capita expenditure on research and development expenditures of Chinese enterprises is only 1.2% in the United States and 1.1% in Japan. Although China’s research and development funds have maintained a relatively high growth rate since the 1990s, the proportion of research and development investment in GDP is still low. At present, it accounts for only 1.35%, which is much lower than many countries and regions in the world. Large and medium-sized enterprises have low costs for research and development, and they are expensive for market operations. Since the independent innovation capability of Chinese enterprises is not strong, there is often a situation of high technology dependence and low level of manufacturing. A large number of enterprises rely on the use of the cheapest labor force in the world, consume large amounts of energy, and produce huge amounts of pollution to obtain meagre profits. Foreign companies that have mastered core technologies are just a paper technology contract that can earn huge profits from China.

Enhancing the ability of independent innovation of enterprises is not only the development of new technologies and new products, but also the development of new markets. Therefore, there is a risk that technological innovation will succeed and if it can withstand the test of the market, that is, Many uncertainties and uncontrollable factors. From Wanxiang's case analysis, Wanxiang Group’s approach is to develop overseas potential and establish research and development institutions overseas, and develop with local corporate research institutions to learn from leading local users and develop potential technical capabilities of the company. To improve the company's core technological capabilities, and ultimately achieve the purpose of securing the domestic market while occupying part of the foreign market. Wanxiang's R&D activities are based on local technological innovations. The focus of technological innovation is to open up markets. Therefore, the company's independent innovation is faced with high competition, requires high investment, grabs time, catches up with the speed, and stays ahead of its competitors in the technology field to guarantee the excess profits from technological innovation.

Along with economic globalization, the strategy of independent innovation of enterprises is more and more reflected in the value of independent intellectual property and the strength of core competitiveness. The new generation of innovation giants emerged in the wave of global enterprise independent innovation is no leader. Many multinational corporations either spin off their own sub-sectors, or increase their efforts to promote industrial integration, or expand their own core industries, or establish strategic alliances with other giants, and seek to dominate the different stages of industrial development.

The independent innovation of the enterprise is the benign interaction and organic integration of technology and management, operation and organization. In the course of business operations, Wanxiang responds to competition and implements the company’s development strategy, expands and enhances the company’s potential technical capabilities, quickly penetrates the company’s products into the local market, recruits talents from abroad, and absorbs advanced science and technology from abroad. Knowledge, especially with overseas local companies and research institutions for R&D projects. In addition, localization of marketing and localization of management systems are also important components of Wanxiang Group's innovation mechanism. It can be seen that independent innovation of enterprises is a comprehensive process of relatively independent and interrelated series of dynamic systems. It not only needs to organize resources such as people, finances, materials, information, and technology, but also ensures that management is more efficient and makes the introduction of New products and new processes will be better commercialized and industrialized, and the entire industry will be promoted. If there is no positive interaction between all aspects and functions, independent innovation of enterprises will be difficult to achieve.

There are many models for independent innovation of enterprises, but without exception, they all require the organic integration of technological processes, management processes, business processes, and organizational processes to maximize the capacity for independent innovation. This requires companies to mobilize the enthusiasm of their employees, especially R&D personnel, to inspire employees' creativity and consciously and proactively carry out innovation activities.

In the long run, independent innovation should not be an expedient measure for enterprises, but should be a long-term strategy for the development of enterprises, and the formation of strategies is expensive. The implementation of specific talents is the key to independent innovation of enterprises.