First of all, the "total cost leading strategy" is rooted in the spirit of enterprise.
Just as a person needs a spirit to live, an enterprise should also have its own spirit. Enterprise spirit embodies the values of all employees, is the core content of enterprise culture, and is the criterion from enterprise strategy and strategic planning to daily operation and implementation.
Wahaha, born in a school-run factory, has been adhering to the 16-character policy of enterprise spirit of "make great efforts, struggle hard, be brave in pioneering and constantly strive for self-improvement", guiding the actions from the president to the ordinary employees. The first two idioms "make great efforts and struggle hard" are the image expressions of the leading strategy of the total cost of enterprises. Different from some enterprises that only stay in the slogan stage, Wahaha's 16-character enterprise spirit of "make great efforts, work hard, be brave in pioneering and constantly strive for self-improvement" is deeply imprinted in every employee's mind and truly implemented in every employee's behavior.
Mr. Zong Houqing, a business leader in China's Rich List, is a model of practicing the 16-character policy and "hard struggle". For example, he can fly economy class and never fly first class; On average, every two or three days, most sales notices are written on the back of waste paper; Eat the canteen three times a day; Chinese food is often fermented bean curd and pickles that cost only a few dollars; The clothes on his body cost tens of hundreds of yuan, and luxury brands almost missed him.
"Come with me", what kind of leaders there are, what kind of employees there are. Especially in Mr. Zong's highly centralized organization, every employee must follow the entrepreneurial spirit of hard work, both subjectively and objectively.
The following explanation of "hard struggle" is taken from the corporate culture in Wahaha Sales Management Manual:
Hard work is not only a fine tradition of the Chinese nation, but also a value that conforms to the spirit of the times ... Our country is in the start-up period, Wahaha Company is still in the start-up period, and it is far from the time when it is no longer enjoyable. Therefore, hard work is one of the most important spirits of entrepreneurship. With this spirit, it means a tenacious fighting spirit of perseverance and tenacious struggle, an enterprising spirit of self-improvement and courage to take responsibility, a tireless pursuit of sacrifice and selfless dedication, a pragmatic style of hard work and thrift, a sober attitude of always worrying and being prepared for danger in times of peace, and a noble attitude of not being rich or poor. An enterprise with this spirit will be an enterprise that can unite the strength of all employees and forge ahead bravely towards lofty goals; An enterprise with this spirit will be an enterprise that can overcome all kinds of difficulties and obstacles and survive and develop continuously; An enterprise with this spirit will be an enterprise that does not covet temporary enjoyment and constantly pursues greater achievements. ...
The values of "thought determines attitude, attitude determines action" and "hard work" determine the attitude and habits of all employees in Wahaha, and also determine that the total cost leading strategy of enterprises has a solid conceptual premise and foundation.
Second, the enterprise value chain activities everywhere reflect Wahaha's total cost leading strategy.
Value chain theory is a very effective tool to analyze the competitive advantage of enterprises. Through the analysis of all aspects of enterprise organizational activities, it accurately and in detail judges the advantages and disadvantages of cost or differentiation in various organizational activities of enterprises. According to the value chain theory, if an enterprise wants to gain a fundamental competitive advantage, it must be superior to its main competitors in cost control; Or create differentiation in research and development, marketing, products and so on. , so as to gain competitive advantage through differentiation; Or pay attention to cost control in some links and differentiation in some links.
In the marketing industry, Yangshengtang is a typical representative of successfully implementing the differentiation strategy. Whether it is a product or a new category of market segments, packaging, design, pricing, brand development, advertising demands, public relations planning, Yangshengtang's differentiated competition strategy makes the management respect.
But the cost of differentiation is also very expensive, and the cost leading edge is often lost. Differentiation and cost leadership are almost the relationship between fish and bear's paw, so it is difficult to have both.
The infinite mystery of strategy and marketing lies in the grasp of success, and it is ideal to have both. However, if the ability of an enterprise is really limited, it should try its best to make one of them cost-leading or differentiated, while taking into account the other.
Although Yangshengtang won unanimous applause from experts in the industry because of its differentiation, and was named as "Top Ten Enterprises" by Sales and Market magazine, its net profit in recent years is less than one tenth of Wahaha, which focuses on the total cost leading strategy and gives consideration to the appropriate differentiation strategy, because its president, Mr. Zhong Shanshan, ignores the cost and is crazy about the differentiation strategy.
Wahaha's total cost leading edge mainly comes from the following six aspects of enterprise value chain activities.
(A) Wahaha low-cost manufacturing
Pursue high efficiency, backward integration, economies of scale and minimization of raw material cost of production equipment.
Beverage belongs to "equipment manufacturing" industry, in other words, the performance of beverage production equipment not only determines the quality of products, but also determines the efficiency of production quantity. In terms of investment in production equipment, in order to ensure first-class quality, Wahaha spared no expense to fully introduce first-class equipment such as reverse osmosis equipment, injection molding machine and capping machine from Europe and America. On the surface, the import of huge amount of capital is expensive, but careful analysis shows that the production efficiency of first-class equipment is higher and the unit cost is lower. As long as there is market demand, the depreciation cost of equipment allocated to each bottle of beverage is almost negligible.
Bottled water industry is a typical scale economy industry. Take Wahaha purified water production line as an example. The production capacity of each production line is 20,000 bottles/hour. If it is produced at full capacity for more than 20 hours, more than 72 million bottles of pure water can be produced according to the calculation of half a year 180 days. Assume that the total investment of each production line is 20 million yuan, which is 6,543,800,000 yuan/half a year according to the ten-year straight-line depreciation method, and the depreciation sharing cost of each bottle of water is only 6,543,800,000 yuan/72 million bottles = 0.0 1 yuan. On the other hand, some domestic equipment only costs several hundred million, but the annual sales volume is several hundred million bottles, so the depreciation sharing cost of each bottle of water is much higher than that of Wahaha.
Similarly, the packaging materials such as plastic bottles and caps of Wahaha series drinks are all produced by our own investment, which creates the advantages of the value chain and internalizes a large number of transactions, thus minimizing the procurement cost. For example, for a bottle cap, Wahaha produces less than 0. 1 yuan, while the external procurement cost of competitors needs 0. 12 or even 0. 15 yuan. Don't underestimate the small gap between 2 cents and 5 cents. It is these that have accumulated Wahaha's cost manufacturing advantages bit by bit.
Companies such as Coca-Cola and Yangshengtang often seriously follow the principle of social division of labor-external procurement. The executives of these companies have to admit privately that it is really difficult to compete with Wahaha in cost manufacturing.
"Everything can be done by Wahaha except raw materials", and insisting on one-stop production and manufacturing seems to be quite different from the popular strategic model of OEM light assets. However, in order to truly create manufacturing cost advantages, truly control every link of the value chain, backward integration, and pursue economies of scale, Wahaha and other large enterprises that resolutely implement the "total cost leading strategy" to shape their core competitive advantages have to take this road.
In production management, the cost write-off method is implemented to save the production management cost to the maximum extent.
"Give full play to the factory's spirit of hard work and diligent management, carry out activities to save a drop of water, electricity and money, practice hard, keep your eyes inward and practice hard ..." The above slogan of cost saving frequently appears in Wahaha production management system.
Wahaha's unique cost control system of "two-level management, three-pole accounting" and "quantifying cost control to every employee" has been adhered to from the beginning. This is very, very difficult for a beverage enterprise group with the best benefit, the most famous and the richest in China. Without the enterprise spirit of "hard struggle" and the core strategy of "leading the total cost", how can such harsh production cost management persist until now and into the future?
In the field of production, there are countless cases of controlling costs on the premise of ensuring quality. Wahaha evaluates innovation awards such as "cost management" every year. Take Wahaha eight-treasure porridge as an example:
Wahaha canned eight-treasure porridge has an annual output of 300-400 million cans, ranking first in the country in terms of production and sales. As a convenient food, it is easy to eat, carry and store, so it is favored by consumers, especially travelers. There is a plastic cover on the top of the can, which is mainly used to put the small spoon aside to ensure cleanliness and hygiene, which is convenient for travelers to eat.
Is there any cost saving place for the small plastic cover? Wahaha found that the plastic covers of many competing products are lighter than their own, and because their covers are heavy and hard, they are not easy to open, and there are redundant places on the covers, which not only affects the appearance, but also wastes materials.
The relevant departments of Wahaha tackled the problem one by one. After more than four months, the results came out.
By removing the redundant parts of the plastic cover and changing the shape of the built-in spoon, each plastic cover is now reduced by more than 1g, and the cost can be saved by about 0.0 12 yuan, which can save nearly 4 million yuan a year. In addition, the lighter and softer plastic cover has also been greatly improved, and it will never scratch your fingers again.
(B), distribution cost control
The industry characteristics of beverages determine that the distribution cost is relatively high. In order to fundamentally solve the problem of product distribution cost and speed, as early as ten years ago, Wahaha put forward the strategy of "selling real estate" with foresight, that is, directly set up production branches in the main sales areas of each product and produce it locally and nearby. The distribution scope of each production base is controlled within 500 kilometers.
From 1994 to Fuling, by the spring of 2008, Wahaha had more than 120 production bases, which were evenly distributed in all provinces of China. In the beverage industry, Wahaha took the lead in completing the national layout of productivity for more than ten years. The number of its production bases is 5- 10 times that of Ding Xin and Uni-President Beverage Base, and far exceeds the number of bottling plants of Coca-Cola and Pepsi-Cola in China.
"Selling real estate" is the key strategy in Wahaha's cost leadership strategy. Many competitors can't keep up with the distribution cost advantage brought by so many branches close to the consumer market in the short term. Nongfu Spring, which was in the limelight a few years ago, lost a good opportunity to catch up with Wahaha quickly because of the constraints of the number of bases and distribution costs.
On the specific policies of product distribution, Wahaha also strictly controls costs, sometimes even at the expense of distribution speed. For example, Wahaha's automobile distribution in the province must be based on the whole vehicle, and the train transportation must be based on the whole vehicle skin, at least with 10 ton vehicle as the starting unit. The company refuses the request for less-than-truckload transportation of trains and cars for any reason (because the price of less-than-truckload is much higher than that of the whole vehicle with the same weight).
"Wahaha spent three months writing a thick demand analysis report in the process of company process reengineering informatization. Among them, the biggest demand put forward by Wahaha is' optimizing distribution network and reducing costs' ".
In the scheduling support of product distribution, Wahaha's scheduling and distribution department took the lead in introducing world-class sap software system to further control transportation costs and improve efficiency. While some other widely popular management software, such as oa and crm, Wahaha may think that it is not necessary for the time being, and there is no systematic introduction, which shows that the company attaches importance to logistics and distribution.
According to the author's comprehensive calculation, Wahaha's product unit distribution cost is lower than that of its main competitors by more than 20%.