In recent discussions pertaining to the state of competition in various industries, the term "involution" has gained traction, particularly as it relates to inappropriate competition among businessesThis phenomenon describes a situation where companies obsessively compete against each other in a way that negatively impacts their profitability, leads to a waste of resources, and ultimately results in a stagnant marketSuch characteristics of competition often manifest through price wars, inadequate investments in innovation, and a lack of technological advancementsNotably, industries like electric vehicles, lithium batteries, and photovoltaic products, which were once viewed as advantageous sectors for Chinese development, are now grappling with serious challenges attributed to involutional competition.
The urgency surrounding the need to address involution became evident during the Politburo meeting on July 30, 2023, which emphasized the necessity of preventing "malicious involutional competition." Subsequent economic meetings have underscored the importance of comprehensive measures to regulate this type of competition, illuminating how critical it is to tackle these challenges head-on
As leaders within the Chinese economy, publicly traded companies must take the initiative to extricate themselves from the involution trap, and there are three primary strategies companies should focus on to navigate out of this predicament.
To succeed in today's fiercely competitive and ever-evolving business landscape, publicly traded companies must adopt a multifaceted approach to strategy and transformative change
Firstly, driving innovation for value enhancement is essential to break free from the dilemmas of involutionInnovation stands as the cornerstone for companies aiming to escape the hostile environment fostered by this competitive climateParticularly salient are breakthroughs in core technologies that not only require considerable technical prowess but also demonstrate clear applications
For instance, the field of semiconductor manufacturing has seen significant advancements where innovations in chip technologies, from shrinking manufacturing processes to optimizing architectural designs, have each given companies a competitive edge in the global marketplaceThese advancements do not simply enhance product performance; they also broaden the range of applications for these products, enabling sectors like AI and smartphone industries to flourish, thanks to superior chip technologyMoreover, innovation caters to the diversifying demands of consumersAs society progresses, there is a growing expectation for high-quality living and spiritual fulfillment, which businesses can meet through innovative product designs and service paradigmsA prominent coffee chain, for example, has successfully fused coffee consumption with social and cultural experiences, introducing unique beverages and merchandise that not only satiate taste buds but also fulfill consumers’ desires for social interaction and cultural engagement
This method allows companies to escape the low-standard price competition spiral and instead significantly elevate their core competencies and intrinsic value, ultimately creating new market spaces and improving profit margins on the trajectory of quality development.
Secondly, striving for high standards yields high quality, enabling companies to seize the competitive leadIn the fierce battlefield of market competition, firms must hold themselves to stringent standards, aligning their operations with national benchmarks in production, technology, safety, energy consumption, environmental protection, and quality controlSuch alignment not only demonstrates corporate social responsibility but also protects the quality of products and services offeredFor example, an automobile manufacturer aiming for recognition in both domestic and international markets must adhere to stringent safety and emission standards at every production stage, from component manufacturing to final assembly and quality checks
Furthermore, companies should aspire to lead in standard-setting, taking proactive steps in the development of industry and national standardsBy leading in standard formulation, firms can spearhead high-quality growth within their sectorsA telecommunications company exemplified this approach by leveraging its expertise in 5G technology to influence international standards, further solidifying its leadership position within the global telecom marketThis high-standard-driven development model assists companies in phasing out outdated production methods, mitigating surplus capacities, and optimizing the industrial landscape, ensuring they maintain their market influence and competitive voice.
Lastly, mergers and acquisitions play a vital role in optimizing resource allocation and restructuring industry competitive dynamics
As an indispensable strategic tool, M&A activities facilitate the integration of premium industrial resources, expeditiously clear low-efficiency assets, and enhance resource allocationIn light of the escalating involutional pressures across numerous sectors in China, the urgency for industrial consolidation and strategic partnerships has heightenedIndustry frontrunners are thereby shouldered with the responsibility to champion M&A initiativesFor instance, a large internet company expanded its realms by acquiring smaller firms showcasing unique business models, effectively broadening its service offeringsThis integration strategy allows for the amalgamation of advantageous resources, such as shared R&D capabilities and customer engagement channels, resulting in heightened industry concentrationAs market concentration grows, supply and demand imbalances remedy themselves, while the disruptive effects of price wars and resource squandering are curtailed