Download Research on Management Innovation of Traditional Chinese

Research on Management Innovation of Traditional Chinese
Enterprises in Network Economy Era
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FU Haiyan , BAI Danxia
1. Department of Business,Northeastern University at Qinhuangdao, P.R.China, 066004
2. School of Business Administration,Northeastern University, P.R.China, 110004
Abstract
In the background of economic globalization, the development of all new network
economy modes which are based on the Internet and electronic business is becoming a new rise of world
economy. This article studied the effects of the network economy on the management mode,
organizational structure, produce mode and competition mode of the Chinese traditional enterprise. The
measures for implementing the management innovation of Chinese traditional enterprises in network
economy are put forward as follows. The enterprises should be rebuilt using the information technology
and network technology. The informational and networked administration mode should be designed
based on own core ability and competition advantages. The upstream and downstream of the supply
chain should be effectively combined. The individuation service should be supplied.
Key words
Network economy, Network economy age, Traditional enterprise, Electronic business,
Management innovation
1 Introduction
Since the early 1990s, with the rapid development of information and Internet technology, the
network economy began to emerge and developed quickly. As a new economy form different from
agricultural and industrial economy, not only did network economy accelerate the economic
globalization, it also caused a sound change on the type of production and living in the human society.
Nowadays, the development of network economy has become an inevitable trend, and the development
condition of one country’s network economy has been regarded as an important standard for measuring
its national power[1]. At present, the growth, integration, and sophistication of the information
technology and communications are changing our society and economy. The changes of the style of life,
working, and thinking are caused by the appearance of the Internet which can not be limited by time and
space, and it can break the borders of countries and areas and lead to the human being to share the
global resources and implement free trade. Consumers and enterprises have been particularly quick to
recognize the potential and realize the benefits of adopting new computer networks. Consumers now
routinely use computer networks to identify sellers, evaluate products and services, compare prices, and
exert market leverage. Enterprises use networks even more extensively to conduct and re-establish
production processes, streamline procurement processes, reach new customers, and manage internal
operations. Under the background of economic globalization, the Internet is playing an important role in
increasing the competition ability of global enterprises. In 2005, the trade value in electronic business
had reached 740 billion Yuan (RMB) in China, which is 50% more than that in 2004. The consumer
amount of online shopping had reached 22 million, which is 6 million more than that in 2004. In order
to accelerate the application of electronic business, Chinese government initiates the enterprise network
project, which encourages the enterprise to begin the electronic business activity through the network.
Up to now, the amount of the registered enterprise domain name has occupied over 80% in all domain
names. The development of the absolutely new commerce mode based on the Internet and electronic
business is becoming into a new increasing factor of the world economy. In this article, the influences of
the network economy on the enterprises are studied, and the concrete measures to innovate Chinese
traditional enterprise management are also expatiated.
2 The Influences of the Network Economy on the Traditional Enterprises
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As a new economy mode, the network economy makes the Industrial Business become E-Business,
and brings the business strategy, information technology, the role of senior management, organizational
knowledge processes, corporate assets, and organizational design many changes, as depicted in table
1[2].
Strategy
Technology
Management
Knowledge
Assets
Organizations
Tab.1 Transitions to the World of E-Business
Industrial Business
E-Business
Prediction
Anticipation of Surprise
Convergence
Divergence
Compliance
Self-Control
Utilization
Creation & Renewal
Tangibles
Intangibles
Structure
Edge of Chaos
The network economy has a great influence on production, exchange, distribution, consumption
mode in the condition of traditional economy. The economic operational mode social economic value
standard and increment mode of traditional economy have been remodeled. The application of the
network technology has cut the costs of the collection transmission, and processing of the information,
reduced the trade cost of the total economic activities, and also increased organization performance and
productivity, changed the industrial structure and economic structure.
2.1 The changes of operational modes
The electronic business based on the Internet greatly changes the operational modes of the
traditional enterprise, and it is not limited by the time and space and leads the human being to
implement the global resource share and free trade. The electronic business reduces the midst link,
shortens the trading time, decreases the operating costs, and extends the business scope. By using the
Internet, each link from purchasing to sale can become electronic, interactive and facile. Wal-Mart, for
example, is famous for its ability to combine information from companies across their supply chain with
demand and inventory data from its stores to minimize operating cost and reduce prices. It has about
3000 branch stores and 40 distribution centers in the global. Using the Internet, the company’s
headquarters can facilely contact branch stores, distribution centers, and all suppliers in the global to
supplement the goods, add to the order, and decrease the inventory.
2.2 The changes of the organization structure
The form of the organization structure of traditional enterprises is pyramid-like. In this organization
structure, the right is concentrated in the top of the pyramid, and the information and instructions have
to be transferred from the top to the lower. This organizational structure emphasizes on the labour
distribution, right and responsibility, concentration and sequence. The operation and communication of
the organization strongly depends on the arrangement of the grade system and the position authority.
However, under the network economy, the borderline between departments in the organization structure
becomes ambiguous, and the horizontal information communication is dominant in stead of the vertical
information communication which is dominant in the pyramid-like organization structure. Cooperation
and knowledge share take the place of the restricting and blocking the passage of the information
between departments. The administration span is widened, and the administration links is decreased.
The organization structure is becoming flat, until form the network-like planar organization. This
structure is round. The leader is in the center position sending the instruction to the outside terminals.
The middle administrators who transferred the instruction from top to lower in transferring chain is not
needed. Networking and flattening of the organization structure rebuild the relationship between
employees and function. Employees are assigned according to the requirements of tasks. Tasks are not
invariable. Departments are dependent and supporting each other.
2.3 The changes of the production mode
With the wide adaptation and application of the network information technology in enterprises, the
network has already become the main media and applicable place in each link in the enterprise value
chain. Many operations, such as product design, manufacture, marketing, network auxiliary sale, and
auxiliary transportation are mainly carried out by means of the Internet. On-line product manufacture
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and service will become the main management style of enterprises in the network economy era. Each
production link contacts each other by the Internet, many production processes can be in operation at the
same time. The traditional linear production became the concurrent production in the condition of the
network economy, and then a lot of unnecessary waiting time can be saved. In the auxiliary production
department, the scientific network auxiliary transportation system can help to greatly increase the
efficiency of the cargo transportation[3]. In addition, a new production organization style, i.e. virtual
perpendicular integration occurs in the network economy. As leaders, the well-known world enterprises
possessing famous brands give the production process to the downstream suppliers by OEM Original
Equipment Manufacturer . The design and marketing are the only things they make. Moreover, it should
be note that the enterprise size is not important in the network economy. Because the threshold for
entering the virtual market is very low, each one can supply immaterial products to the global market,
and they needn’t to have production equipments themselves.
2.4 The changes of competition style
The competition ability of enterprises is affected by many factors, such as the environment,
resources, and the system. Michael E. Porter[4] indicated that the cost advantage and product difference
are the most important for the enterprise competition. Essentially, the enhancement of the enterprise
competition ability must be based on the advanced technology. The use of the information technology
will strengthen primary competition advantage or form the new competition advantage of enterprises.
For example, banks expand businesses on the Internet making every one deal with all businesses which
had to do in the bank beforetime on any computer entered the Internet. This new service style brings
many conveniences to people.
The deepgoing social reform caused by the network economy is faced to any enterprise. Many
traditional enterprises have been aware of the importance of the network economy from the height of
strategy. Taking part in the network economy development is the only choice for enterprises to expand
the new business channel and enhance the competition ability.
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3 The Concrete Measures to Innovate Chinese Traditional Enterprise
Management
China is the follower of the network economy. Limited by the economy development stage and the
national economy informatization horizontal, China has a big gap from developed countries in network
economy development. The technologic environment, legal environment and the market environment
are not good enough to the development of the network economy, such as the very high cost of using
Internet, lacks of the system of payment and distribution condition, imperfect systems of information
security authentication, electronic payment of bank and the community credit. These negative effects
greatly limit the course of informatization and the network.
In China, the informatization horizontal is low. Most enterprises can not regard the informatization
as the inherent requirement in the self-development of enterprises. The engraftment of traditional
enterprises with the network economy is only in the primary stage. Electronic business is a traditional
business based on the electronic, network. The traditional enterprise can do many things by means of
established websites, such as information publishing, customer service, network marketing, and market
expansion. However, the combination of most companies with the network economy is only limited in
establishing websites for self-advertising due to the limitations in cognition and the difference in
understanding to the network economy in China. Therefore, traditional enterprises must do the following
things for the engraftment with the network economy.
3.1 Rebuilding enterprises by application of information technology and network technology
Considering the information strategy of the enterprise, the technical reconstruction for the
traditional management style should be performed by applying the electronic information technique.
This will promote the upgrading and optimizing of enterprise structure and advance the reform of
enterprise management system and the innovation of operation pattern, reforge the business process and
organizational model raise the level of operation and management of business process.
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3.2 Building core ability and competition advantage
Different enterprises should design their own management mode of informatization and the
network and business mode in developing electronic business according to their own core ability, the
competition advantage, the macro environment, and the change of marketing. The concrete procedures
are as follows:
(1) Building the electronic information management platform and electronic business platform.
(2) Building the office automation to satisfy the high efficient computer supported cooperative
work.
(3) Building the enterprise website and promulgating information.
(4) Building the system of electronic business support and the system of enterprises core business
management and application, for example, ERP (Enterprise Resource Planning), CRM (Customer
Relationship Management), and SCM (Supply Chain Management).
Especially, small enterprise can set up a simpler management mode such as using e-mail to advise
customers of upcoming sales promotions and new products, or to accept customer orders. They never
even build an independent website themselves. They can develop electronic business by platforms of the
online transaction, like eBay, Alibaba, and Yahoo.
3.3 Combination of upstream with downstream firms in the supply chain to supply personalized
service
Electronic business methods enable enterprises to link their internal and external data processing
systems more efficiently and flexibly, to work more closely with suppliers and partners, and to better
satisfy the needs and expectations of their customers. With the improvement of material life and
spiritual life, customers demand more and more personality of the product and service. Supplying the
open personalized service is one of the characteristics of the second generation network. It is possible
the automatic service become work-for-me which is enjoyed by customers. The direct selling model
used in Dell is a typical case of personalized service. The enterprises should implement a transportation
planning and optimization system to enhance their downstream supply chain operations[5]. This broad
upstream and downstream supply chain co-ordination using the Internet is what we call e-integration.
Most importantly, products are delivered quickly and reliably when and where they are needed.
3.4 Strengthening the brand management by the strong combination ability of the Internet
The Internet offers enterprises an accessible, low-cost platform for reaching consumers and
business partners alike. The brand can increase the loyalty of customers. Loyal customers can help the
enterprises to get the huge sale increase and the market share. Loyal customers appreciated regular
communication and various other information content from the brand more than mere offers. The
Internet has the effects of strengthening the core competition ability of the brand and obtaining the brand
equity, which cannot be substituted by other media[6]. Application of scientific methods in building
brand can give prominence to the personality and increase the difference of brands. By the Internet the
brand globalization can be achieved. The Internet becomes the only media for the potential customer
and investor in any place in the world to search and find the enterprises and their brands.
3.5 Accomplishing the network strategy transition
At present, although it can’t be predicted the date when the electronic business mode is able to
become the main model, the development potential of electronic business market is great. Not only the
increase of potential consumer is amazing, but also the increase rate of trade value in electronic business
is very speedy. According to the estimate by Forrester, the well-known consulting corporation, the trade
value in electronic business can reach 12800 billion US dollars in 2006, which will occupy 18% of the
trade value in the global, and the increase rate will be above 30%. In the present world, the electronic
business market has a highest increase rate of the trade value and cheerful prospect. Thus, Chinese
traditional enterprises must find the right point of contact to develop the electronic business and
implement the network strategy transition. These strategies include electronic business profit strategy,
customer relationship strategy, and supply chain strategy, etc. In process of the network strategy
transition, enterprises should reconsider the consistency, continuity and dependability of the
combination of business process, and the market positioning as well.
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4 Conclusion
The development of network economy brings us both new opportunities and challenges, so Chinese
traditional enterprises must adopt new thought, new sense, new knowledge and technology to confront
network economy, follow the development tide of the network economy and innovate the enterprise
strategy, the operation pattern, and organization structure in order to enhance their core competitiveness.
So and so only they will not be defeated in the global competition.
References
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[4]Michael E. Porter. Competitive Advantage. Beijing: Huaxia Publishing House,1999:35 53(in
Chinese)
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