Research On The Principles Of Financial Crisis And Early Warning Of Household Electrical Appliance Enterprises From System Perspective

The rapidly developing Chinese electrical appliances industry has become one ofthe most mature and highest competition industry, since the Reform and opening up.Especially after joining the WTO, China’s home appliance industry sufferedunprecedented opportunities and challenges, while a growing number of householdelectrical appliance enterprises have suffered a financial crisis. However, there isrelatively little study of the financial crisis for the appliance industry, making theappliance enterprises lack a more targeted early warming method to prevent theoccurrence of financial crisis. In this context, the establishment of early warningmechanisms and methods suitable for household electrical appliance enterprises toanalyze the causes of the financial crisis seems very necessary.This paper, firstly, recognizes the relevant literature on financial crises and givesa brief review on them; then introduces the paper’s guiding ideology of "systemstheory" and simplifies appliance business into a system consist of “flow” and “stock”with following the systematic theory. This part discusses the basic elements ofcomposition and feedback mechanisms between the presence or absence of financingunder two scenarios of system elements and analyzes the failure process under theimpact of factors leading to the financial crisis. It points out the factors may result inthe financial crisis are just blasting fuses, as the financial crisis could eventuallyproduce or not depends on the power of various circuits. In the process to financialfailure, companies can take measures to regulate the amount of “flow” and “stock” toavoid failure.At the end of the part, we come to the inclusion that the householdelectrical appliance enterprises’financial crisis mechanism is that the system suffereda decline in the stock enhancement irreversible vicious loop.This paper, basing on the understanding of the formation mechanism of thefinancial crisis, introduces the "four-quadrant financial prediction method” which wasestablished in system perspective. This method divides financial position of acompany into the health period, the potential onset period, the disease period and the mounts of stock.In the end, this paper selects the object KONKA Group as a casestudy to specifically demonstrate how to diagnose the current situation of finance andhow to look for the causes of financial crisis, and gives suggestions such as increasingthe investment in R&D, reducing sailing expenses and enhancing thevalue-addedabilities of main selling etc.