Based on the research findings, further discussion matching the reviewed literature with the research findings will be provided; and the research contributions and implications of the study will be manifested in the following discussion.
A series of market impacts were outlined in the reviewed literature, such as rising production costs, increasingly diverse demand market, and advancement of e-commerce. Table 7-2 presents a summary of common actions taken by the firms in response to the impact of the fourth structural change, and identifies the key actions led the company to a successful strategic fit of the alignment. As revealed, common actions initiated by the majority of the interviewed companies still performed on the continuation of traditional supply and production business model, either retaining the production capacity expansion based on previous demand requirements, or using sales promotions to ease the overstock problem. Many companies attempted to gain business advantages by developing e-commerce and multiple channel retailing, and invested resources in continuous expansion. With the growing market competitions creating more diverse and volatile demand, few were aware of the importance of understanding new demand and buying behaviours, and building niche products and services under this new market condition. The findings of this study has contributed to the understanding that it is vital for businesses to consider not only using e- commerce to increase sales points and channel accessibility but also to continuously upgrade the product mix to correspond with the emerging consumer requirements, and to provide efficient avenues to fulfil the orders. The findings also specify some of the key methods adopted by the companies in terms of managing multiple channels. These include, but are not limited to: downsizing the physical franchised retail network to cut operational cost; centralizing online-and-offline product assortment, price management and information flow to keep consistency; and building strong customer relationship and brand awareness using social media platforms.
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Table 7-2: Actions Taken by the Firms in Response to the Impact of the Fourth Structural Change External impact on the industry (reviewed
literature)
Common actions taken by the five companies (findings)
Key actions taken for strategic fit of SCM alignment (findings)
Demand-side operation
More segmented market with diverse buying behaviours (Chen and Cheng, 2008; Zhou, 2010; Chan, 2011; Wang and Guo, 2014; Fung Business Intelligence Centre, 2014)
Fiercer competion on the retail market (Kwan et al., 2003; Liu, 2007; Hong, 2006; Zhao, 2013; Tong and LI, 2013)
Thriving e-commerce (National Development and Reform Commission, 2007; Retail and Ecommerce, 2016; The Economist, 2013; Hua and Guo, 2012)
Set up online store in addition to the physical stores (Companies A, B, and E) Launched multiple sales touch points
through electronic devices (Companies B, D and E)
Lauched a series of sales promotions and advertising through multiple retail channels (Company B, D and E)
Upgraded product mixes and brand features, and continously worked on product development (Companies C and E)
Downsized physical franchised retail network to cut operational cost (Companies C and E) Worked on understanding customer demand and
emerging trend (Companies C and E)
Supply-side operation
Increasing manufacturing cost (Chen and Shih, 2004; Hong, 2006; Yuan and Xu, 2010; Wang and Guo, 2014)
Oversupply and overstock issues (Mo, 2010; Wang and Guo, 2014; Hua and Guo, 2012)
Continously relied on production capcity expansion (Companies A, B, and D)
Used sales promotions, and utilized mulitple retail channels to sell large inventories (Companies A, B, D and E)
Collaborated with multiple 3pls to achieve higher logistics capacity (Companies C and E)
Invested on enhancing information system (Companies C and E)
Centralized product delivery and last mile distribution by using store-fulfillment method (Company E)
Strategic management
Emergence of different business models (Yi and Jaffe, 2007; Yu and Ramanathan, 2012; Hua and Guo, 2012; Zhou, 2010; Chi, 2015)
New entrepreneurship (Kshetri, 2009; Fung Business Intelligence Centre, 2014; Retail and Ecommerce, 2016; The Economist, 2013)
Adopted a test-and-go practice and invested significant resources on expanding business model (Compnaies B and D)
Allocated required recouces to leverage coporate competitveness on the new emerging market (Companeis C and E)
Provided sufficient skill training and nurtured staff enagament among all levels of the management team (Company C)
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On the other hand, with the increasingly rising labour costs, the findings highlight the important role of 3pls and the growing logistics and IT capacities for cutting the overall supply chain operational cost. Many companies intended to strengthen logistics capacity by working with multiple value- added 3pl service providers and building supportive information systems to enhance product traceability. Some of the key methods adopted by the industry in terms of resolving increasing cost include but are not limited to: adopting a centralized store fulfilment method to control the downstream product flow; assigning different tasks to various 3pls working for product delivery, tracking, assortment, and last-mile parcel dispatches; and regular stock taking to monitor inventory and restructuring the ordering process to reduce lead time.
The findings of this study also point out the deficiency of resource management and staff engagement existing in most of the companies. Although various business models, i.e. click and mortar and omni-channel retailing, emerged, most companies were not good at allocating required resources to leverage their own business model aligning with the corporate strategic incentive. The case studies show that many firms encountered disruptive changes in the corporate leadership and operations; and conflicts arose across different levels of management teams during the business model expansion period. Besides this, the firm with a traditional mindset, such as SOE, was much influenced by the remnants of state control, which required middle level managers to be obedient and efficient in implementing orders or decisions made by a senior authority. As such, corporate dynamism was not a common character of middle-level managers, and they were also not encouraged to respond to the external dynamisms.
Underpinned by the above discussion, this study summarizes a list of the following research implications for the Chinese FA industry:
With the emerging demand trends and market opportunities, Chinese businesses should not continuously proceed with production capacity expansion, and should turn the emphasis on demand management to prevent further overproduction and oversupply problems.
Leveraging logistics capacity is not the only way to enhance the supply chain efficiency; supply chain process mapping should be taken into consideration for more streamlined and integrative SCM. This could be leveraged through various ways, for instance, cutting supply middlemen for shorter supply chains, selecting right suppliers based on product lines and strategic partnerships, and centralizing downstream fulfilment via pooling product assortments in a few regional store warehouses and distribution centres.
In order to facilitate demand and supply chain integration, Chinese businesses should allocate resources for strategic initiatives aligning with the corporate vision, adjust the
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business structure to nurture a shared value, and engage staff and management teams with more skills training and infrastructure support.
Concurrently, government authorities can also provide appropriate avenues to mobilize the resources for industrial transformations, and alleviate the negative effect caused by overcapacity. An example of this can be related to the strategic government plan of One Belt, One Road11 released in 2013. The project has proposed to redirect the country’s domestic overcapacity and capital for regional infrastructure development to improve trade and business relations with Association of Southeast Asian Nations (ASEAN), and Central Asian and European countries. This presents an example of government’s influence on the domestic economy, which gradually can manifest through the build-transfer-operate scheme in large state-owned enterprises and a few leading private companies in the industry.