Behind the foreign capital grabbing the stocks of the United States: the shortcomings follow

On January 16, the shares of Midea Group held by foreign investors through QFII/RQFII/Shenzhen Stock Connect accounted for 27.95% of the company’s total share capital, a record high, only 0.05 percentage point away from the 28% “purchase limit”.

We know that the three red lines for the proportion of foreign shares held in my country are 26% (warning point), 28% (buying suspension point), and 30% (mandatory reduction point).

According to the requirements of the China Securities Regulatory Commission, if a single foreign investor holds shares of a listed company through a qualified foreign institutional investor, the shareholding ratio shall not exceed 10% of the total number of shares of the company; all foreign investors hold A shares of a single listed company The sum of the proportions shall not exceed 30% of the total shares of the listed company.

Once the total shareholding ratio of foreign capital reaches 28%, the Shanghai and Shenzhen Stock Connect will suspend buying and can only sell. Of course, foreign investors can continue to buy through the account of the Shanghai and Shenzhen Stock Exchange; after 30%, all foreign investment channels will be closed. Can be sold, and the excess part shall be bought later and sold first until the shareholding ratio is less than 30%.

As various opening-up measures in China’s financial sector are gradually being implemented, foreign capital continues to flow in, and A-shares are being bought by foreign capital more and more frequently. At the same time that Midea Group was bought out, the shareholding ratio of foreign investors in China Test Testing also hit a record high, reaching 26.37%.

However, from the perspective of Midea’s development in the past year and the current situation, Midea’s situation can be described as “two heavens of ice and fire”, with obvious internal shortcomings and external capital assistance. This is both an opportunity and a challenge for Midea. It depends on how Midea will deal with it in future development.

Beautiful prospects are beautiful, but reality is difficult

At the beginning of 2018, Midea Group formulated the development strategy of “Globally Operating Technology Group Company”. Since then, “Global Management + Technology Group” has become Midea’s “corporate dream”. However, at present, Midea’s global operations have not yet become a reality.

In 2016, Midea Group’s overseas revenue accounted for nearly 50%, but this does not mean that Midea Group has become an international company. The fact is that Midea Group’s own brand revenue from overseas markets is very low, let alone profit contribution. In this regard, Haier is the best home appliance company in China. At present, Haier is the most influential Chinese home appliance brand in the world.

In 2019, in a “Top 50 Chinese Brands Going Global” published by BRANDZ, Midea ranked 49th in China’s overseas brand influence, which is far from Haier’s ranking of No. 7 and far lower than Gree’s No. 29. Ranking.

It can be seen that Midea’s overseas influence is much lower than Haier and Gree. At the same time, this also reveals that Midea’s “global management” development road still has a long way to go.

So, what will be the development of Midea in the section of “Technology Group”?

Since 2016, Midea Group has increased its investment in scientific research year by year, and its determination to transform into a technology company is quite firm. According to Midea Group’s statement, Midea’s R&D investment may exceed 12 billion yuan in 2019. This is currently the largest R&D investment in China’s home appliance industry.

Speaking from facts, a company that values ​​R&D and innovation is bound to have a good future. This can be confirmed from the development of Huawei.

But the facts also have another side. Continuous R&D investment has not fundamentally changed the status quo of Midea products. For example, many netizens said that they don’t think there is much difference between the beauty of today and the beauty of 5 years ago at the product level. Moreover, judging from the high-end brand COLMO launched by Midea Group in 2019, the products are indeed not as good as expected.

At the 2019 Midea Group Business Management Annual Meeting held at the beginning of last year, Fang Hongbo said that Midea’s changes in 2018 in one year were greater than those in the decade from 1998 to 2008. He said, “Winter is inevitable, and Midea has to face it. “. For 2019, he said, “Don’t talk about goals, only pursue high-quality growth.”

From Fang Hongbo’s words, we can understand what the beauty is going through. However, 2019 has passed, and we still don’t know what Midea’s “high-quality growth” is. The only thing that can be determined is that Midea will have a difficult journey on the road of “global operations” and “technology group”.

The shortcomings of high-end brands hinder the future of Midea

Someone once said that the biggest feature of beauty is that it has no obvious advantages and no obvious shortcomings. But I don’t think so. At least, the shortcomings of Midea compared with other domestic home appliance companies have already been highlighted, and it may affect the future development of Midea.

Midea has always referred to itself as “national home appliances”. Such a brand positioning determines that Midea is only attractive to middle-income groups, but not to high-end consumer groups and young groups advocating Internet thinking.

However, from the perspective of Midea’s development layout and strategic adjustments in recent years, Midea has also made many improvements in this area. However, in terms of the products launched, apart from higher pricing and the addition of some simple AI capabilities, they are in other respects comparable to ordinary household appliances. There is not much difference between the products.

If you ask Midea’s most eye-catching action in 2019, it must have been launching two independent brands in succession: COLMO and BUGU.

In October 2018, Midea launched the high-end brand COLMO on Mont Blanc, the highest mountain in Europe. According to the explanation given by Midea, COLMO means “climbing” and is committed to serving 1% of the world’s people. Obviously, the COLMO products launched by Midea are focusing on the high-end brand market.

But in fact, this series of products launched by Midea has not been recognized by users. Moreover, as AI has become a platform-based technology for all brands of home appliance products, promoting an almost indistinguishable platform-based technology as the biggest selling point does not have any characteristics.

Judging from the current development strategy of “Globally Operating Technology Group Companies” formulated by Midea, in order to better penetrate the international market and establish a firm foothold, it must be supported by its own high-end brands. The current development of Midea in this area is indeed immature, and the influence of high-end brands needs to be improved.

Smart home deployment is lagging behind

In recent years, with the promotion of technology and the implementation and popularization of technology, many pain points of smart homes have been effectively solved, such as high-speed data transmission, fast and stable connections, and timely response to user needs. Therefore, in the near future, the user experience brought by smart homes will be greatly improved.

And, with the development of 5G, AI, and the gradual advancement of Internet of Things applications, the smart home market will become a new growth point in the field of home appliances. Regarding this new development trend, judging from the actions of various Internet giants and mobile phone brand manufacturers in 2019, they all seem to have a deep understanding of this.

In March, Huawei released the Hilink platform, highlighting its comprehensive solution capabilities for the “cloud management edge core”, and proposed the “enable three-piece” to achieve the ecologicalization of the Internet of Things and directly address the interconnection problem.

In June, the Xiaomi Mijia brand released 6 new home appliance products and established a home appliance business department. Lei Jun personally set off; through Alibaba Cloud and Tmall Genie, Alibaba Bar seems to be determined to enter the smart home of the future. Suning released more than a dozen home appliances, which is also a reflection of its offensive intelligence system.

The logic and path for these giants to cross the industry boundary is very clear. They want to go from smart home appliances to capturing smart home scenarios and new user traffic portals.

In fact, these giants have led the industry to enter a new trajectory in the domestic smart home market. The main competitors are no longer limited to home appliance companies. The competitive landscape has become clear, with BAT, Huawei, and Xiaomi as the representatives. Three camps.

Representing Internet and technology companies, the commercial camp of domestic home appliance manufacturers represented by Midea and Haier, the operator camp represented by mobile communications, and the e-commerce platform camp represented by JD.com and Suning. It is understood that in 2019, Midea Group carried out a series of “operations” on its IoT platform from the construction of the underlying technology, application software integration, user experience improvement to the construction of the talent team in order to further deploy the smart home. And launched a unified user APP-Meiju.

According to statistics, as of the end of June last year, the number of downloads of the Mercure application reached 30 million times and the number of daily active users reached 3 million. However, Midea still lags far behind Huawei and Mijia in terms of smart home deployment.

The installed capacity and activity of the Meiju application in the home appliance and smart home industries still cannot rank high. In addition, in the field of smart home in the Apple App Store, Mercure is also second to Mijia.

Therefore, in order to solve the pain points of connecting the distribution network of smart home appliances, Midea can only cooperate with IoT platforms such as Huawei, Alibaba, Suning, and JD.com to realize cloud-to-cloud connection and jointly explore the prospects of the smart home industry.

Originally, Midea could rely on years of accumulated technology, products, channels, scale advantages and past transformation experience to compete for the top players in this field, but because the deployment was too late, it could only share a piece of “soup” with other giants.

Why is it beautiful to be bought and exploded?

As a diversified home appliance company, Midea has a full range of home appliances in addition to TVs. But you will find that air conditioners can’t do Gree, refrigerators and washing machines can’t do Haier, kitchen appliances can’t do Fangtai and Vantage. Therefore, it is difficult for us to give the Midea Group an appropriate “label”, and compared with its biggest competitor, Gree, Midea does not seem to have any obvious advantages.

So, why is it Midea that has been bought and exploded by foreign capital, not Gree or other domestic home appliance companies?

1. The platform has high operating efficiency and strong competitiveness

In recent years, the innovative strength and commercial influence of Midea Group has been continuously spreading from China to the world, and it has established its own new pattern of global innovative enterprises.

In the 2019 Fortune Global 500 list, Midea ranked 312th. This is the fourth consecutive year that Midea has been listed on the Fortune Global 500 list, and the ranking is also rising year by year.

Behind the steady increase in business value and influence, it is the result of Midea Group’s promotion of lean management and excellent operation of the entire value chain in the era of the Internet of Things. Of course, this has also enhanced Midea’s competitiveness.

Through the C2M model that meets the customized needs of customers, Midea empowers channel changes, digital systems for inventory management, and the integration of new technologies such as artificial intelligence, big data, and cloud computing, and covers 15 overseas production bases, 24 The international 632 project of informatization system of 20 sales and operation organizations and 20 R&D centers has realized Internet-based high-efficiency operations.

The 2018 annual report shows that Midea Group’s own funds increased by 15% year-on-year to 78.3 billion yuan, cash flow from operating activities increased by 14% year-on-year to 27.9 billion yuan, and the gross profit of main business reached 28.8%, a year-on-year increase of 2. 6%. This is due to the excellent and effective operation of Midea.

At the same time, it has also achieved Midea’s new industrial Internet platform M. IoT makes Midea Group the first complete industrial Internet platform provider in China that integrates independent industrial knowledge, software, and hardware.

2. Effective corporate governance structure

Someone once compared the beauty of beauty to a student who achieved top grades in every subject but not outstanding in every subject. Obviously, this is “Tucao” Midea has no outstanding advantage. In fact, the outstanding advantage of Midea lies in its soft power, that is, its corporate governance structure.

This is also one of the reasons why most investors are optimistic about the United States.

If you compare the Midea led by Fang Hongbo and Gree led by Dong Mingzhu, you will find that there is a significant difference between the two: Midea Group under Fang Hongbo’s leadership is logical for most of the investment, while Dong Mingzhu’s leadership For Gree Electric, investment decisions are often “one hammer on the other, one hammer on the other,” and there are no rules.

For example, in 2016, Midea’s acquisition of KUKA was entirely based on Midea’s positioning of its future development as a technology group, as well as China’s rising labor costs, higher and higher product standardization requirements, and the replacement of manpower by machines. The actions taken by the current situation. This is much more pragmatic than Gree making mobile phones.

Not only that, at the leadership level, Midea also has an advantage over Gree. In terms of age, Fang Hongbo is 14 years younger than Dong Mingzhu. At least for the next 10 years, Midea does not have to worry about the potential risks that may be brought about by the change of leaders. Because the most likely change in the turnover of senior leaders of a company is a fault in the company’s strategy, which puts the company in uncertainty.

In addition, a good system design will automatically filter the management’s personal decisions, so that the probability of passing wrong decisions is very small, and the risk of the enterprise is also reduced. Therefore, in Midea, you can hardly imagine that Fang Hongbo’s decision to make a TV or mobile phone will be approved by the board of directors.

Although Fang Hongbo’s business wisdom at this stage is not so “old-fashioned” and cannot be the same as the leaders of other giant technology companies, it is an indisputable fact that the probability of Midea making big mistakes is far lower than that of Gree.

Transformation layout, learn from Huawei

In recent years, Midea Group has learned from Huawei in research and development, and has invested more and more in research and development. And in terms of the growth that Midea Group has shown in the past five years, it is indeed similar to Huawei. But if you want to say that Midea has the attributes of Huawei, it seems unrealistic.

  

Since 2017, Huawei seems to have become China’s “net celebrity” technology company. However, this “net celebrity” of Huawei is much harder than the average internet celebrity. And it has become a benchmark for many Chinese companies to learn.

Huawei’s success is essentially the success of the product, and the success of the product stems from technology and R&D. Over the years, Ren Zhengfei has always adhered to the belief: only technology leadership can lead to product leadership, and only product leadership can lead to market leadership. He believes that the leadership brought about by all other factors is unreliable, only the leadership brought by technology and products. It is reliable.

In April last year, Huawei’s “Voice of Heart Forum” published an internal speech by its founder, Ren Zhengfei, stating that Huawei’s consumer business goal is to reach US$150 billion by 2023. The entire Huawei Group has achieved USD 250-300 billion. To this end, Huawei plans to invest US$100 billion in research and development in the next five years.

When people exclaimed that “Huawei is becoming more and more radical”, they found that Huawei is not unrealistically proposing a seemingly impossible goal, but while proposing the goal, it has invested the same seemingly radical R&D resources. And in the past ten years, Huawei has invested a total of 480 billion yuan in research and development expenses.

Being willing to invest in R&D is a kind of courage, but also a kind of foresight. For a long time, most Chinese companies would rather spend a lot of money on marketing than invest in research and development. Therefore, most companies in China are still at the level of marketing-oriented companies, and it is difficult to transform into truly meaningful technology companies. This is the root cause of the lack of stamina for most Chinese enterprises.

Midea, which has always been looking forward to transforming into a technology-based company like Huawei, has continuously increased its R&D investment in recent years, and has become the home appliance company with the largest R&D investment, and its investment amount even far exceeds the second place.

If a company wants to develop for a long time, it must realize that the first driving force for the development of the company comes from technology rather than marketing. Huawei has today. Isn’t it the result of Ren Zhengfei’s establishment of a basic strategy of “technological establishment” many years ago?

R&D investment is the first in the industry, and future development can be expected

If you look at the strength of Midea Group from the perspective of R&D expenses, the continued increase in foreign holdings of Midea Group is a high recognition of the company and the result of Midea Group’s continuous R&D and innovation.

The core technology is not blown out, it is “smashed” by money. In recent years, Midea Group has continued to increase R&D investment, leaving a deep impression on the home appliance industry. For this reason, in 2018, Midea Group identified the company as a technology group.

At present, Midea Group has formed a “two-tier and four-tier” research and development structure. The central research institute is set up at the group level to carry out disruptive research, cutting-edge technology research, and general technology and future technology research; the following business divisions are responsible for personalized technology research and product development.

According to Midea Group, the R&D investment in 2018 was 10 billion yuan, and the R&D investment in 2019 may exceed 12 billion yuan. It has become the largest R&D investment enterprise in China’s home appliance industry.

In the first three quarters of 2019, the R&D expenses of the home appliance industry can be divided into four echelons: the first echelon has one company, and Midea Group has R&D expenses of 6.994 billion yuan; the second echelon has two, Gree and Haier, and the R&D expenses are 46. 300 million yuan, 4.46 billion yuan, the third echelon has three Hisense appliances, Sichuan Changhong and Hisense home appliances, the research and development expenses are 10.16, 10.15 and 577 million yuan, the other is the fourth echelon, all of which are insufficient 500 million yuan.

Even with its biggest competitor, Glibi, Midea Group’s R&D expenses are far ahead. From the perspective of R&D expenses, Gree’s investment level is only 66% of Midea’s, and the gap is very obvious. This has a lot to do with the relative concentration of Gree’s industrial layout in air-conditioning, but it also shows that Gree has not invested heavily in new fields, so that Gree’s mobile phone is more like a “show.”

Statistics show that from 2014 to 2018, Midea’s five-year cumulative R&D investment exceeded 34 billion yuan, an average annual growth rate of 21%. If Midea can continue to maintain such R&D investment, in the future, Midea Group will have a qualitative increase in both technological breakthroughs and product sales.

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