Chapter 1298 – Strategic Product
Tai Hua Holdings is holding its regular meeting for the second quarter. As Feng Yu is in Shanghai, he decided to attend. He also has some things to say to the subsidiaries’ representatives.
When they heard Feng Yu is attending this meeting, Liu Chuanzhi, Li Mingde, etc., all rushed over to attend the meeting. In the past, they will send their companies’ General Manager, or President, to attend.
“… that’s all I have to say. Next, let’s welcome our Tai Hua Holding’s Chairman, Feng Yu, to say a few words.”
After Zhong Qingxian finished, everyone started applauding. They respected Feng Yu a lot and felt they could get to where they are today is all because of him. They can learn a lot from Feng Yu every time they spoke.
“I am seldom in the company, and I want to thank Zhong Qingxian, the higher executives, and the heads of each subsidiary for taking care of the company. In terms of managing a company, I am nowhere near each of you here.”
The audience laughed. All of them felt Feng Yu is joking with them. But Feng Yu is telling the truth. He doesn’t know how to manage such a big company.
“Of course, I believe the salary and benefits given to all of you are the highest in the industry. You all had treated me with sincerity, and I will also do the same. Although I am the biggest shareholder of this company, you all are also shareholders. This company belongs to all of us here.”
“I am not going to hold an award presentation for the contributions you all had made to the company today. If I am going to talk about all of your contributions today, this meeting will have to go on for days. Your family members will start scolding me behind my back.”
Everyone laughed and is moved by what Feng Yu said. Feng Yu had always treated them with respect and had never overlooked their contributions to the company.
Tai Hua Holdings is the controlling shareholder of most of the subsidiaries. Still, Feng Yu has never interfered in their hiring or operations. This is very impressive for everyone.
Some of them had thought of starting their own company. But after some considerations, they gave up. After they had become successful, it is hard for them to give up everything they have now.
Also, it’s hard to bring their subordinates away with them. They cannot afford to give them the same salary and benefits. They also don’t dare to try and acquire Tai Hua Holdings’ shares. Feng Yu can easily crush them with his assets. Furthermore, Feng Yu is also close with the higher-ups.
“Alright. Enough with the jokes. I want to talk to you all about strategic products today. The strategic products I am referring are also known as product strategy. Product strategy, brand strategy, and organization strategy are similar but different.”
“For example, I believe all of you understand what strategic product is. Old Li, I will use the automobile industry as an example. You must listen carefully. General Motors is the biggest automobile company in the world. They own more than twenty brands and also have shares in several automobile companies. They are the most powerful automobile company in the industry. They used to own more than 70% of the US market share, but their market share has been dropping in the last ten years. The Japanese cars had overtaken them now, and European brands are also eyeing their market. This shows General Motors have a serious problem with their organization strategy.”
“The Japanese automobile companies’ strategies are using smaller and fuel-efficient cars to compete with General Motors. Most US cars have high fuel consumption, and as oil prices kept rising, car owners faced high financial stress. General Motors saw this issue and took countermeasures. All three major US automobile companies had taken countermeasures to be profitable again.”
“At this time, the Japanese automobile companies did not increase their supply to the US market. Instead, they limit their exports to let those three US companies recover. This might look like a wrong decision, but it is a long-term strategy. When the Japanese automobile companies start to enter the European markets, the US automobile companies, especially General Motors, made the wrong decisions.”
“They thought people still prefer big cars and did not make changes to their cars’ fuel-efficiency to increase their competitiveness. They thought the worse was over, and they can make a comeback. The worst mistake they made was to promote all of their brands, hoping to increase their sales. Their brands are all independent of each other. They have their developments, manufacturing, sales, after-sales services, etc., and are not consolidated. This increased their cost by a lot.”
“Multiple brands strategy is for targeting different market segments. But if you have too many brands, consumers will have a paradox of choice, and there will be self-competition.”
“These problems are the issues arising from using the wrong strategic products. General Motors lack a model that can influence the international automobile market. For example, those sportscar brands have a model that is selling well for around ten years. When you mentioned Honda, you all will think of Honda Accord. When I mention Toyota, Corolla will come to your mind. For Volkswagen, you all will think of Santana. But what about General Motors?”
“General Motors owns many brands, but they don’t have an international top-selling car model. Having a global strategic car model is critical. Look at Accord. It is selling well for more than twenty years and has kept upgrading through different versions. Their new versions are not much different from their previous versions, and their new technologies are not complicated. But every time they release a new version, it will sell well around the world.”
“This flagship product model has a big advantage. It will lower the production cost greatly and increase the profits of a single product. I believe all of you can guess what I will be saying next. That’s right. Flagship product.”
“Everyone knows about economies of scales. With higher production, we can lower the cost easily and increase the profits. Look at Philips. They sold billions of one single shaver model. How many profits do you think they have gotten? If they had sold billions of shavers through dozens of different models, their profits would be much lesser.”
“You all can interpret the strategic product I mentioned as the Flagship product or the star product. If we develop lesser new products in the future, it must be impressive and can sell well. Then we can consider it a success. That’s why we must have a main product and secondary products during our product development. We must have at least one main product.”
In Feng Yu’s previous life, Audi A6, Camry, Accord, etc., are everywhere because these models are all main products of their companies. These companies have other models, but they did not market them as hard as the main product. A company that can sell the same model for up to twenty years is not weak. It is their strength. With so many new models available, why are the consumers still buying the same model?
“This is the same for the internet. Every internet company must have something that people can remember. For example, Tencent’s QQ, Sina’s news and blogs, Sohu’s forum, and videos, NetEase’s games and email, Baidu’s search engine, Chinese Web, etc.”
“All of you understand organization strategy, as you all had attended the higher management training course by our company. But I want you all to remember about strategic products. Our target is very simple. Make money!”
