The Difficult Choices at Baifu Electric
Guangzhou Baifu Electric Equipment Co., Ltd., founded in 2007, specializes in frequency converters and water-pump controllers. Chairwoman Zhang Xuemei once saw profits in the furniture industry and diverted her energy there for a decade, only to regret it later and return to her main business. The company was hit when Zhejiang firms copied its products at lower prices, but lean management helped bring costs down enough to respond.
Last year, thanks to the national rollout of smart water systems, Baifu won its bids and had more than enough orders. But by April and May this year, orders dropped sharply, and overseas orders were also declining. Faced with uncertainty, Zhang Xuemei is weighing three directions: focus on the pump-control frequency-conversion niche; move into smart water-system integration; or develop Internet of Things products.
Manufacturing Requires a Measure of Perseverance
Zhang Xuemei reflects that both choice and persistence matter for an enterprise. When economic opportunities are plentiful, it's easy to get distracted. But "if I had put everything into frequency-converter R&D back then, in another 10 years we would surely have become the industry champion." She has come to believe that running a company requires "single-minded focus" and must not be derailed by every passing opportunity.
Manufacturing requires the spirit of long-termism. Some people can quickly seize every kind of opportunity, but firms in manufacturing, without that aptitude, will end up "drawing a tiger and producing a dog" when they blindly follow trends. Enterprises should concentrate on building core capabilities and avoid opportunism.
The Path Forward in an Era of Stock-Based Growth
In an era of stock-based growth, enterprises need to "know themselves and know their counterparts" — to understand their own DNA and positioning before they can find the right development path. "A choice made when there aren't many choices is the real choice."
Consultants have found that many enterprises perform poorly because resources are poorly allocated: multiple product lines fragment staffing and funding and actually lower overall profit. The advice for SMEs is to concentrate on one or two industries and do them to the hilt, using lean management to cut costs by more than 5% each year. Scale effects and genuine market standing follow from that.
Making Business Choices Grounded in the Industrial Spirit
China's commercial tradition grew out of an agrarian society's buy-low, sell-high pattern. True industrial spirit comes from the scientific rationality and relentless pursuit of perfection born of the Western industrial revolution. Today, "the West's de-risking from China" is like a receding tide; if a firm has no real value creation, it is "swimming naked."
Enterprises need to create new value through innovation in technology, management, and business model, not mere speculation. Chinese enterprises should fuse modern civilizational outlook with the distinctive qualities of Chinese culture and inject that into the commercial system, contributing to world civilization. At its core, the modernization of enterprises is an iteration of ideas and culture.
Originally published: Economic Observer · Microscope · 2023-07-22 · Read original →
Originally published in the "Economic Observer · The Walker’s View" column. The author is Executive President of the Guangdong SME Development Promotion Association. For reprints or citations, please contact the author or the Association Secretariat.