Application And Enlightenment Of Midea Group’s Strategic Cost Management Based On Value Chain

With the progress of science and technology and the transformation of modern management system,the competition among enterprises is becoming gradually fiercer,and the development of economic globalization has intensified the crisis faced by enterprises.To compete in a dominant position in the profession and further exploit the domestic and foreign market,the enterprises must reinforce their own competitive ability.Technological innovation and the change of political and economic environment make enterprises have to seek for new operating strategies.In order to seek their own survival and sustainable development,enterprises need to plan their strategies from an overall and long-term perspective.The conventional cost management mode simply places emphasis on lowering the production cost of products,with too narrow scope,failing to meet the demand of enterprise strategic management and long-term development.Strategic cost management combines the enterprise’s cost control with its tactic,controls the cost from a global viewpoint through the approach of value chain analysis,to provide the enterprise’s strategic management activities with support.As a whole,China’s home appliance industry is faced with a series of real pressures,such as market saturation,impact of foreign home appliance enterprises,consumer’s consumption upgrading,increasing costs in raw materials and labor.While,after 50 years of development,Midea Group has grown from a township enterprise into one of the giants in China’s home appliance industry,gradually occupying the competitive edge in the industry.This paper studies the strategic cost management strategy of Midea Group by mainly adopting value chain tool.Through the introduction of Midea Group’s overall situation,it shows its development history and status quo,as well as its prominent achievements in home appliance industry.In the strategic development of Midea Group,the strategic cost management measures based on the value chain are comprehensively and thoroughly analyzed.This paper first describes the external value chain of Midea,including the upstream and downstream chains in the industry value chain and the rivals of the enterprise.By analyzing its external environment,it puts forward the various cost management methods adopted by the Midea Group on the basis of the external value chain via the analysis of its exterior environment,and then leads to the analysis of enterprise internal value chain in its management and production process,and its related measures to cope with the complicated market environment and the shocks from its competitors,to promote enterprise internal cost control capacity.By means of increasing investment in innovation and research and development,Midea Group not only ensures the efficiency of research and development,but also propels the intelligent development of products and manufacturing processes,so as to realize differentiation and low cost advantage.At the same time,Midea focuses on optimizing the purchasing system and creating the original "T+3" production mode,which has got better results in reducing inventory,production and marketing costs.In terms of marketing,Midea has used corresponding sales methods to effectively control marketing expenses aiming at different market environments at home and abroad.At last,this paper summarizes the cost control effect of Midea Group’s application of value chain,and proposes some enlightenment for the home appliance industry,to offer reference for decreasing enterprise cost and strengthening enterprise competitive advantage.