First, the background and root causes of price wars
The behavior of enterprises is to maximize the interests, but in the buyer's market, some enterprises in order to increase market share, some enterprises in order to reduce inventory, they raise the banner of price cuts or disguised price cuts again and again. Under the pressure of competition, other companies have to follow up, and there has been a price war.
As far as the machine tool industry is concerned, as an early and fully competitive industry, the current price war is caused by overcapacity of low-end products and insufficient market demand. However, the price war has made the company further unable to take into account the research and development capabilities, and then fall into the trap of "low technology content → low price → low profit → low product research and development investment → low-end product surplus", and is trapped in a vicious competition.
Second, the price war is a serious hazard to the industry
First of all, it will cause the company's profits to fall, and even cause a large number of enterprises to close down and the entire industry to lose money. Because some state-owned enterprises took the lead in provoking price wars, disrupting the market order, seriously damaging the overall image and economic environment of the industry development, leading to the loss of state-owned assets, leading to a decline in the interests of the entire industry.
Secondly, in order to make up for the losses caused by product price reduction, it is easy to reduce costs by cutting corners and other means, which will inevitably lead to a decline in product quality and damage the reputation of the company itself. The price war may not only have the effect of seizing the market, but instead of smashing its own brand, the products are not in the market.
Third, because the company has no profit, or even a state of loss, the enthusiasm of the employees is not high, and the company will fall into recession.
Fourth, it is not conducive to the technology upgrade of the industry and the adjustment of product structure. At present, the company's technology upgrades and product structure adjustment funds mainly rely on self-accumulation, but the company's no profit or even loss status, there is no ability to invest funds for technology upgrades and product structure adjustment, that is, some enterprises rely on bank loans for technology upgrades. And product structure adjustment, but also unable to pay the bank's principal and interest, and finally dragged the enterprise to death.
Fifth, due to the decline in machine tool prices, the host manufacturer will be forced to lower the price of functional components. Every time the price reduction of the machine tool will be transmitted to the downstream functional component supporting manufacturers, the downstream manufacturers will be unable to develop new functional components, which is not conducive to the technical upgrade of the functional components of the whole industry.
Sixth, due to the price war, major manufacturers in the lathe industry are engaged in melee in the low-end market. There is no more energy, time, capital, etc. for the development of high-end products, so that foreign high-end products occupy the domestic market.
Seventh, in addition to stabbing competitors and hurting companies themselves, price wars also hurt middlemen and users. After the price reduction of enterprise products, the existing inventory of the middlemen will be greatly affected, which will seriously affect the enthusiasm of the middlemen. For the end user, this product price cut, but also look forward to further price declines, but also let users lose confidence in the quality of products and service levels.
Third, some suggestions on the development of China's machine tool industry
First, the industry's leading companies should play a leading role. As the leader of the machine tool industry, it should first be self-disciplined, set the price of the product at a reasonable level, and should not take the state-owned assets to fight the price war, resulting in the loss of state-owned assets.
The second is to establish a normal price negotiation mechanism to avoid vicious competition. Under the market economy system, competition is inevitable, and benign competition does not need to be contained. However, for vicious competition, it must be resolutely contained, and those who sell products below the cost price must be resolutely curbed.
The third is to give full play to the role of industry associations. Industry associations must formulate regulations, regulate corporate behavior, and prevent the spread of vicious price wars.
Fourth, a scientific system for investigating the performance of state-owned enterprise operators should be established. The state-owned enterprise operators are competing with state-owned assets, and the losses caused by vicious price cuts have nothing to do with them. The system of examining the performance of managers by market share will inevitably encourage malignant price cuts.
Therefore, it is necessary to change this system and establish a scientific system of business performance inspection. State-owned asset management departments should require enterprises to maximize return on investment, maximize corporate profits, and maximize corporate profits, and use this to assess and promote business operators. In short, in the current situation of China's market economy is still not perfect, the price war will cause greater disaster to China's machine tool manufacturing industry, the price war has not won, the only serious economic losses and psychological extremes brought to the enterprise. exhausted.
The behavior of enterprises is to maximize the interests, but in the buyer's market, some enterprises in order to increase market share, some enterprises in order to reduce inventory, they raise the banner of price cuts or disguised price cuts again and again. Under the pressure of competition, other companies have to follow up, and there has been a price war.
As far as the machine tool industry is concerned, as an early and fully competitive industry, the current price war is caused by overcapacity of low-end products and insufficient market demand. However, the price war has made the company further unable to take into account the research and development capabilities, and then fall into the trap of "low technology content → low price → low profit → low product research and development investment → low-end product surplus", and is trapped in a vicious competition.
Second, the price war is a serious hazard to the industry
First of all, it will cause the company's profits to fall, and even cause a large number of enterprises to close down and the entire industry to lose money. Because some state-owned enterprises took the lead in provoking price wars, disrupting the market order, seriously damaging the overall image and economic environment of the industry development, leading to the loss of state-owned assets, leading to a decline in the interests of the entire industry.
Secondly, in order to make up for the losses caused by product price reduction, it is easy to reduce costs by cutting corners and other means, which will inevitably lead to a decline in product quality and damage the reputation of the company itself. The price war may not only have the effect of seizing the market, but instead of smashing its own brand, the products are not in the market.
Third, because the company has no profit, or even a state of loss, the enthusiasm of the employees is not high, and the company will fall into recession.
Fourth, it is not conducive to the technology upgrade of the industry and the adjustment of product structure. At present, the company's technology upgrades and product structure adjustment funds mainly rely on self-accumulation, but the company's no profit or even loss status, there is no ability to invest funds for technology upgrades and product structure adjustment, that is, some enterprises rely on bank loans for technology upgrades. And product structure adjustment, but also unable to pay the bank's principal and interest, and finally dragged the enterprise to death.
Fifth, due to the decline in machine tool prices, the host manufacturer will be forced to lower the price of functional components. Every time the price reduction of the machine tool will be transmitted to the downstream functional component supporting manufacturers, the downstream manufacturers will be unable to develop new functional components, which is not conducive to the technical upgrade of the functional components of the whole industry.
Sixth, due to the price war, major manufacturers in the lathe industry are engaged in melee in the low-end market. There is no more energy, time, capital, etc. for the development of high-end products, so that foreign high-end products occupy the domestic market.
Seventh, in addition to stabbing competitors and hurting companies themselves, price wars also hurt middlemen and users. After the price reduction of enterprise products, the existing inventory of the middlemen will be greatly affected, which will seriously affect the enthusiasm of the middlemen. For the end user, this product price cut, but also look forward to further price declines, but also let users lose confidence in the quality of products and service levels.
Third, some suggestions on the development of China's machine tool industry
First, the industry's leading companies should play a leading role. As the leader of the machine tool industry, it should first be self-disciplined, set the price of the product at a reasonable level, and should not take the state-owned assets to fight the price war, resulting in the loss of state-owned assets.
The second is to establish a normal price negotiation mechanism to avoid vicious competition. Under the market economy system, competition is inevitable, and benign competition does not need to be contained. However, for vicious competition, it must be resolutely contained, and those who sell products below the cost price must be resolutely curbed.
The third is to give full play to the role of industry associations. Industry associations must formulate regulations, regulate corporate behavior, and prevent the spread of vicious price wars.
Fourth, a scientific system for investigating the performance of state-owned enterprise operators should be established. The state-owned enterprise operators are competing with state-owned assets, and the losses caused by vicious price cuts have nothing to do with them. The system of examining the performance of managers by market share will inevitably encourage malignant price cuts.
Therefore, it is necessary to change this system and establish a scientific system of business performance inspection. State-owned asset management departments should require enterprises to maximize return on investment, maximize corporate profits, and maximize corporate profits, and use this to assess and promote business operators. In short, in the current situation of China's market economy is still not perfect, the price war will cause greater disaster to China's machine tool manufacturing industry, the price war has not won, the only serious economic losses and psychological extremes brought to the enterprise. exhausted.
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