Packaging industry: price war without a winner

In recent years, the word “price war” has appeared frequently in various media, from VCDs and color TVs several years ago to refrigerators to current air conditioners and cars. "Price leverage" has been repeatedly used by manufacturers. Although it has repeatedly been successful, it has endless troubles. The reason is that price wars will affect the whole body. Manufacturers will not give profits to customers inevitably, and they must work hard to reduce costs. As a result, the price of upstream upstream suppliers is bound to decrease. However, due to the fierce competition among suppliers, and the "price war" of suppliers is often more tragic than the "price war" of manufacturers, the result can be imagined, and the manufacturers who lose money to do business abound.

This phenomenon is most evident in the carton industry. Carton wars that have continued so far have already left more than one million yuan worth of carton plants worth more than 100 million yuan. The profit and other loss operations have basically lost the necessary conditions for the sustainable development of the company. From an industry perspective, the direct result of the price war is that companies lack sufficient development funds, causing the overall level of the domestic carton industry to be low, and there are few companies that can produce high-grade and heavy-duty corrugated cartons. What's more, Changzhou Changfeng, one of the few large companies in the country that can produce high-grade heavy-duty corrugated boxes, has fallen to the end of the acquisition by Japan’s Tehran.

I do not know if you still remember the “cans price increase” incident in January 2002. At that time, three Beijing Can suppliers of Coca-Cola took Coca-Cola at almost the same time. This incident is apparently due to the peak sales season. The cost of personnel and production costs is relatively large. The original price is no longer applicable and the new price must be implemented. The deeper reason behind this is the large area of ​​the industry caused by the “price war” of cans. The loss has decreased from 1.1-1.2 yuan per product can in 1995 to 0.6 yuan at the beginning of 2002. However, the aluminum prices in the same period did not fluctuate much, resulting in the cost ratio of the cans. It's also a stupid thing that costs 0.1 yuan. Consequences can be imagined that 22 cans in the country stopped production, and 26 production lines stopped 8.

The same war started again last year in the Crown and the lid industry. The price of each lid is getting more and more fierce, and each lid's small profits are calculated in terms of production, to the point where you die, and the competition has become fierce. However, the leakage of houses leaked on every side of the rain. On May 24, 2002, the MOFTEC announced anti-dumping measures for temporary protection of some steels. Tinplate also included tariffs from 5% to 7% to 25%. It was pushed into the abyss of the entire industry loss.

Price reductions and discounts appear to be a major feature of the current Chinese market. There are mainly three situations in which companies cut prices: First, the pioneers take the initiative to cut prices after gaining market leadership, in order to maintain their leading position; second, passive followers cut prices and are forced to do so. Contingency measures; Third, the survivors initiated a price war in order to challenge the leader. For example, microwave oven price cuts in previous years successfully managed to resolve the chaos in the microwave oven market and finally determined the dominance of Galanz. There are also color TV battles, the success of the Changhong, Konka, TCL became a color TV giant, and therefore; in the country, to the world, such examples have repeatedly appeared recently. Therefore, some scholars believe that according to "4P" in economics, theory, price war is the most effective way to eliminate backward companies and form a reasonable market structure for competition.

However, the author believes that although the theory of "price war" can play a role in helping the superiority and promote the role of mergers and reorganization, but in the development of China's packaging industry does not apply. Because most of the packaging companies in China are not very strong, China has not yet had a packaging giant that compares with giants such as Galanz and Changhong. If a company wants to increase its market share through price cuts, unless it has a cost advantage of 30% or more, it will inevitably trigger a suicide price war. This code requirement has not yet been achieved in China's packaging industry. There is no winner in the price war. The "price war" was a dozen, and the weaker ones were even weaker, and even closed down. The so-called advantage enterprises were not strong enough because of their strength, and they were also scarred. They did not have the strength to go and merge with other companies. Moreover, the price war will also lead to a decline in the profits of the entire industry, affecting the stamina of the development of the packaging industry. The only result is that the country’s assets are constantly devaluing, and packaging technology has long been low at low levels. If this situation continues, it will only pave the way for foreign packaging giants to enter China. The acquisition of Changzhou Changfeng Company by the Japanese special-resistant king is a typical example. Therefore, at the current stage, a proper "price coordination" for the packaging industry is conducive to the healthy development of packaging companies, timely technical upgrading, and improve the ability of enterprises to adapt to the market economy. And a certain degree of “price coordination” cannot result in a “price monopoly”. It is just a price measure that was temporarily formulated to prevent disorderly competition among enterprises and will gradually disappear as the Chinese market economy continues to improve, but We are constantly improving the level of packaging technology and the continuous emergence of packaging giants.

What is gratifying is that while companies are fighting a price war, the leaders of associations and some companies in the related packaging industry have realized that this tragic price war will only harm the industry and will not have any advancing role. As a result, the “price coordination” meeting of various packaging industry associations was held continuously. The concept of “violating vicious competition and promoting fair competition” gradually penetrated into the business operations of the company.

The first to be at the forefront of the industry is the Shanghai Carton Industry Association. They promptly put forward the principle of “centralized plate making and decentralized box making” at the beginning of the carton wars. This not only ensures the interests of the carton factories, but also enables the carton factories to unite. Jointly resist unfair competition from small carton factories around Shanghai. Qingdao Packaging Technology Association for the disorderly competition of the carton enterprises, combined with Qingdao carton manufacturers solemnly announced to the large carton users, if the carton users to buy cartons at lower than the cost of the carton, then they will refuse to produce cartons. This move caused great shocks to the enterprises in Qingdao. The company also realized that it was not possible to cut off subsequent cooperation because of the immediate small profits, and thus properly increased the purchase price of cartons. In May 2003, the Heilongjiang Packaging Technology Association targeted the disorderly competition of corrugated paper and through careful investigation, determined the minimum price of corrugated paper and conducted "price coordination" in corrugated paper companies and announced to the carton factory that it was a short time. Inner-base paper rose by 100-150 yuan/ton, making the corrugated paper market resume its orderly competition, and carton companies also accepted it calmly.

Beijing's “cans price increase” incident was a price policy formulated by several cans at the time, and each of the cans rose by only 1 point or 5 cents, which had little impact on Coca-Cola, but it had a very negative impact on the profitability of the can industry. In the end, this matter was satisfactorily resolved. This brings about the turnaround of the can industry in 2002.

The association played a very important role in the solution of the aforementioned storm of the crown. According to the actual situation of the enterprise, the China Packaging Technology Association and the Baosteel Metal Containers Committee promptly submitted an emergency report to the former State Economic and Trade Commission and the Ministry of Foreign Trade and Economic Cooperation, and reported that the imported tinplate had no dumping facts. Finally, after seven months, the state identified the tinplate. The final safeguard measures are not applicable, which has solved a major problem for the development of the metal packaging industry, especially for the Crown Cap companies. The association also held a forum for the annual production of 1 billion crown-cap companies and set up a price coordination group, which has achieved very good results.

The author believes that continuous innovation is the key to winning the competition. It is time for "management innovation, business change". The packaging industry must innovate in business concepts, management systems, organizational structures, business processes, technologies, products, services, marketing networks, etc. in order to maintain the competitiveness of enterprises; must be based on changes in the production, supply, and sales of technology and the market Changes, adjustments to corporate organizations, business management concepts and management methods, management innovations to increase employees' awareness of innovation and enhance corporate vigor; to make system innovations to remove barriers to the constraints of China's corporate market competitiveness.

Price competition has never been the only means of market competition, and it is not the best means of competition. Enterprises should work hard to nurture and improve their own competitiveness so as to get out of the misunderstanding of vicious price competition. For example, consider enhancing the competitiveness of advertising, services, and other external factors, implementing cultural marketing strategies, and “enhancing the boat” to increase the visibility of the company; strengthening after-sales services so that the service exceeds the customer’s expectations and thus win customers in the mind; Cost, capital, and quality management to promote management innovation.