Rise like the Red Army

Author: Yu Xiangxin / Country: Mainland China
Publisher:
Publish Date: 2006-09-01
Features: The Microenvironment of Enterprise Operations
The microenvironment refers to external factors that directly impact business operations, such as customers, competitors, suppliers, and market structure.
I. Customers
The definition of a customer is an organization or individual that accepts a product. Having customers means having a market, meaning the company's products have buyers, but customers do not necessarily have to accept a specific company's products. In this sense, customers can determine the success or failure of a business. Therefore, businesses should focus on customers, understand their current and future needs, meet customer requirements, and strive to exceed customer expectations. Only in this way can they win customers and ensure the survival and development of the company. "Focusing on customers" should be a fundamental business principle.
II. Competitors
Other businesses in the same industry that provide similar products to customers are competitors. However, competitors are not necessarily enemies, and non-competitors may also be enemies. The competitiveness between competitors depends on the goals, capabilities, strategies, and similarity of products between businesses. The outcome of competition is naturally survival of the fittest, with the strong becoming stronger. Smart businesses will achieve mutual growth through cooperation rather than competition.
III. Suppliers
A large enterprise often has many small and medium-sized enterprises providing services for it. For example, General Motors in the U.S. has as many as 5,000 suppliers. Currently in China, many businesses tend to adopt the JIT (Just-In-Time) production method, but their supplier management is relatively chaotic, transferring more risks and pressure onto suppliers. Additionally, many businesses compress their suppliers' profit margins by lowering purchase prices and extending payment terms to ensure their own product profits. While these practices may be driven by intense market competition, they are not advisable. Suppliers, businesses, and customers are three indispensable components of a supply chain. If suppliers collapse, the entire supply chain will collapse, and businesses will naturally be unable to survive. Businesses must recognize that their relationship with suppliers is one of mutual benefit and interdependence. Collaboration with suppliers can enhance the ability to create value. Many businesses now focus on establishing strategic alliances with suppliers, achieving cost savings, ensuring quality, and accelerating product launch times through sincere cooperation. This is a practice worth promoting.
IV. Market Structure
Market structure can be divided into the following types.
1. Perfect Monopoly Market: This is a market where only one manufacturer and seller exist for a particular industry or product, with no competitors. Customers have no other choices because other businesses cannot enter the market. The reasons for this situation include the following.
- A single business controls most or all of the resources in an industry, making it the dominant player in that industry. For example, Alcoa in the U.S. controls over 90% of the aluminum mines in the country, making it the industry leader.
- A business holds an exclusive patent for a product, allowing it to produce the product exclusively under legal protection for a certain period, becoming the sole monopolist. This is common in the pharmaceutical industry.
- Government: Some products have a significant impact on national security, residents' lives, and social stability. To safeguard national security and maintain social stability, the government often issues licenses to allow one or a few businesses to operate these products, creating a monopoly market. Examples include the military industry and banking sectors.
2. Imperfect Monopoly Market: This is a market with both monopoly and competitive elements, characterized by many businesses producing and selling differentiated but similar products. Monopolistic competition is the most common market structure in reality, with the vast majority of businesses operating within it. The characteristics of monopolistic competition include the following.
- There are many businesses in the industry, and competition is very fierce. A few large businesses may partially dominate the market. As monopolistic factors increase, the degree of market monopoly will also grow. Large-scale businesses may achieve complete monopoly through joint efforts.
- There are no significant barriers to entry, allowing businesses to enter or exit the industry freely. As long as there is profit, new businesses will continuously enter the industry; when the market is unfavorable and unprofitable, most businesses will exit. However, as monopolistic factors increase, the difficulty of entering the industry will also grow.
- Businesses engage in both price and non-price competition. Recognizing that product homogenization is becoming increasingly severe, businesses understand that engaging only in price competition will lead to mutual destruction. Therefore, each business emphasizes its unique strategies and methods to differentiate its products from competitors. Large-scale businesses have partial pricing power in the industry, influencing the market price. The larger their scale and monopoly degree, the greater their impact on the market price. They may even use price cartels to protect their profits or target competitors.
3. Perfect Competition Market: In this market, all products are almost identical with little differentiation. Many businesses produce homogenized products, and the output and market share of any single business are very small, making it impossible for them to control the market price. They can only passively accept the market price. In a perfect competition market, non-price competition strategies are not very effective. The market for grain, oil, eggs, and vegetables in China is basically a perfect competition market.
If the founding of the Jinggang Mountains base was the result of Chairman Mao predicting and leveraging the macroenvironment of the Chinese revolution, then the defense of Huangyangjie was the Red Army commanders and soldiers utilizing the microenvironment that directly affected the outcome of the battle—the rugged terrain. It was precisely because of the proper use of the terrain and the skillful deployment of defenses that the Red Army, with forces of less than a company, was able to defeat an enemy ten times its size and preserve the Jinggang Mountains base. The historical impact of this battle on the Chinese revolution was profound, and it holds valuable lessons for business operations today.
P23-P25