Zhu Dejun, the GM of Startek, talks about the sustainable development of small and medium-sized ente
Small and medium-sized enterprises account for 98 percent of the total number of enterprises in China. They provide 50 percent of the tax revenue and 75 percent of the jobs. In China, 65 percent of China's invention patents, 75 percent of its technological innovation and more than 80 percent of new product development are all undertaken by small and medium-sized enterprises. They play an important role in the national economy and in promoting national strength and reserving the social stability.
However, small and medium-sized enterprises are not all doing well in China, with an average life expectancy of 2.5 years, less than a quarter of that in Europe, the US and Japan. It is shocking that a large number of enterprises fail and cause resource wastes. At the same time, labor disputes and unclear debt caused by the poor management would also cause unstable factor in the society.
Then how could we solve the survival problem of the small and medium sized enterprises?
First: There should be multiple markets for the product.
The enterprises should not put all their eggs in a single basket. The sales target should be achieved from selling products to different clients. They could change the staff bonus by paying more attention to more clients instead of the sales volume. With the development of e-commerce, the era of big fish eating small fish has gone, while the era of fast fish eating slow fish has come. Large enterprises are not quick enough in reacting to the change of the market, which is like the elephants are not able to tread on ants. Smaller companies need to lower the transaction threshold for new customers and cancel the minimum order quantity. Technical information and product samples required by new customers should be prepared in advance, so that the demands could be met with immediately. Our enterprises will keep moving forward when we have more and more new customers.
Second: Don't expand the business blindly.
We have seen a real case in which a man founded an enterprise of 20 million value, while he had only 2 million available funds. Then he had to loan in order to pay the debt; in this way he kept increasing debts. With the new debts and old debts, the company finally went bankrupt and all the equipment facilities became wasted. Different from this case, we believe that we should have abundant funds to keep the company going, which is like using a sledgehammer to crack a nut and would sure win. We have three indexes to check whether our enterprise is secure: 1. Make sure we have available funds for the next 3 years. 2. Make sure the gross profit of each month is three times the expenditure of the company. 3. Make sure that even without the top 10 clients, the rest of the clients could bring the company enough gross profit to cover the expenditure of every month. If two of the three indexes could meet the standard for 6 months in a row, we would consider the possibility of expanding the company.
Third: To be creative
One simple kind of creativity is to design new appearance to make the products new and unique. It wouldn’t cost much in this kind of change, but the clients would be looking forward to this new experience. The other creativity is to lower the cost with better craft and less wastage. The product could be redesigned with simpler inner structure and more benefits would be created. Then comes the better way of creating: to improve the function of the products. We could make the engines fuel efficient, make the liquid crystals brighter and make the software easier to operate. We could also make use of the old technology. For example, the monochromatic LCD has already taken shape for more than 50 years. It is now delicately used in the liquid crystal glass; hence the transmittance could be easily adjusted and no curtain is needed because of it. Now we are making research on how to put this glass into windshield. It is transparent when the automobile is driving and it turns dark when the car stops. It is not transparent from the outside. Well, there are certain fields we could not step in, like TV sets and mobile phones. Yet we have made 10-inch liquid crystal players, which could be set in public restroom putting advertisement. It is more expensive than 55-inch TV set with much less function.
Forth: To offer high-quality products.
We emphasize quality over quantity, in other words, we have to make sure that all the products are of good quality before we have the mass production. The more defective products we produce, the more we will lose. The more they are sold, the higher the after-sales cost will there be and the more problems will be caused. If we could detect the quality problems, we would spend less in solving them. That is why we should not sell bad products to our consumers. Apparently, customers seem to care about the price, yet what they really care about is the quality. The low-priced products that were sold 10 years ago are gone now while the expensive products of well-known brands could still exist. That is because customers will ultimately choose quality over price and they will choose good products and service at reasonable price. Strict control of quality in the product design phase can reduce defective products by 40%. Raw material should also be under strict control, that is, the unknown source, expired and second-hand, bad-quality raw material could never be accepted. In doing this, we could reduce defective products by 30%. If we could be extremely dedicated to the production process, we could reduce the defective products by 20%. In addition, inspection equipment, inspection personnel are also very important. We could never compromise in quality inspection, the more we save in inspecting the product quality, the more we will lose in the future.
Fifth: To put efficient advertising
Advertisement should focus on the advantage of the products, for example, Volvo sells its security and environmental friendliness while Nongfu Spring sells its natural spring. Our advantage is we would neither stop producing any items nor would we refuse small quantity orders, which draws many clients. What is more, we should make our company known in both influential media and ordinary media. Startek used to put advertisement in Alibaba.com. On June 24th, 2019, I was invited to converse with the host of CCTV program, Creditable China. After that, our new clients never bargain after they watch the video of this program. The clients believe the authority of the influential media and would not doubt the credibility of their advertising. Once the clients recognize the quality of your product, they would accept the price.
To have market diversification and enough accumulation is to guarantee the survival of the enterprise.
Brand building is the driving force of enterprise development; innovation is the source of brand; product quality is the foundation of brand, and advertising is the bright light of brand. Entrepreneurs should be far sighted and try to find a balance between profit and innovation investment, to find a balance between profit and quality, to find a balance between profit and advertising, to find a balance between the interests of enterprises and that of its employees. The entrepreneurs should have the courage to refuse profit maximization, that is, to earn and spend in the reasonable way. That is why we have made it a rule that we would keep enough reserved fund for three years and the rest of the surplus will be all spent. The success of our enterprise is not to be measured by our available cash, but to see how much money we can earn. We believe that the resource is always more important than the cash, therefore, the money should be used to employ talented people, to update and improve the product quality, to build our brand and make it known. We should not focus on earning money, instead, the money will come to us when we have made enough effort to keep the sustainable development of our enterprise.