Research On The Integration Strategies Of Enterprise Groups In Modern Southern Jiangsu (1895～1937)

In the late nineteenth century, a trend of integration in the world industrial enterprises had been set off, and big enterprise groups appeared. At this time, the trend was also in Chinese private industrial enterprises. There were eight groups appearing in modern southern Jiangsu, Rong’s Group, Zhou’s Group, Yong’s Group, Tang & Cai Group, Li Xin Textile Printing and Dyeing Group, and Yong Tai Reeling Group in Wuxi, Da Cheng Textile Printing and Dyeing Group in Changzhou, Guang Yu Group in Suzhou.The consciousness of integration has already been in modern China. Some business managers and company theorists considered and recognized it, and it reflected in business managers’ideas and constitutions.With the guide of the integration consciousness, the integration strategy of Southern Jiangsu enterprise groups had three stages, from 1895 to 1937. The first stage was the stage of charging and preparing, from 1895 to early 20th century. The second stage was the stage of horizontal integration mainly, from 1914 to the first half of the 1920s. The third stage was the stage of horizontal and vertical integration equal stress, from the half of the 1920s to 1937.There were two types of integration strategies, horizontal integration and vertical integration, among modern Southern Jiangsu enterprises as cases.The horizontal integration strategy of modern Southern Jiangsu groups formed three modes, one horizontal unit integration strategy, two horizontal unit integration strategy, horizontal multi-unit integration strategy. Yong Tai Reeling Group implemented one horizontal unit integration strategy in reeling, by two climaxes horizontal integrating in Xue Nanming age and Xue Chouxuan age. The reason of its success in regional monopoly was establishing perfect raw material supply system and foreign sales agent. Rong’s Group implemented two horizontal unit integration strategy in cotton textile and flour. The realization was by three way, establishment itself, office rent, merger and acquisition, and by vertical concerted action. There were three features in Rong’s group strategy, unlimited company as its strategy organization, massive debt as its strategy capital source, cotton textile and flour as strategy association. Zhou’s Group implemented horizontal multi-unit integration strategy, as well as Yong’s Group and Tang & Cai Group. Although the effectiveness of horizontal multi-unit integration strategy appeared preliminarily, implementation of this strategy was low quality, immature, and had many deficiencies, such as not a wide scope, too dispersed units business, unbalanced development among units, imperfect central administration.The vertical integration strategy of modern Southern Jiangsu groups formed two modes, vertical production integration strategy and vertical production and use integration strategy. It was that, boycott Japanese goods impacting on spun yarn transaction, the limited Chinese national spinning firm’s yield, and general problems in spun yarn transaction, made transaction costs much higher than original, and then some strong staining & weaving mill integrated spinning. Da Cheng Textile Printing and Dyeing Group and Li Xin Textile Printing and Dyeing Group implemented vertical production integration strategy, printing, weaving, staining and printing. By comparing Da Cheng with Qing Feng belonged Tang & Cai Group, there were two ways for vertical production integration strategy, Shuttle-extending and Unidirection-extending, and the former was more suitable for latecomer-small capital with cotton textile industrial environment at that time. Guang Yu Group implemented vertical production and use integration strategy, integration of textile machinery repairing and manufacturing with cotton producing, and this strategy was supported by horizontal real estate business. Although vertical production and use integration strategy, Iron and Cotton, saved Da Long Iron Works and Su Lun cotton spinning mill, the defect of internal strategy structure was the hidden danger of the whole Group.Integration strategy had an impact on enterprise groups in modern Southern Jiangsu, positive effects and negative effects. There were five positive effects of horizontal integration strategy, economies of scale, economies of scope, mutual aid cooperative, avoid atrophy, risk diversification, improving and using market. There were six positive effects of vertical integration strategy, transaction cost savings, easing the contradiction of supply-production-marketing, achieving high profit margins, ability to improve differentiation, enhancing the defense capabilities. On the other hand, horizontal integration strategy had some negative effects, increased management costs, inputting too many resources, uneconomical mutual aid actions, and so did vertical integration strategy, increasing cost of production management, problem of production balance. To the negative effects, enterprise groups in modern Southern Jiangsu had reactions. The positive effects of integration strategy were the major aspects.The integration strategy of enterprise groups in Southern Jiangsu was pursuit, autonomy, and diversity. The catching-up integration strategy reflected aggressive spirit of latecomer-small private enterprises in modern China. The autonomy integration strategy reflected the progress of the modern China enterprises’development and socio-economic even. The diversity integration strategy reflected the significant results obtained by modern China private enterprises in dire straits.In short, the integration strategy promoted the development of enterprise groups in modern Southern Jiangsu.