Where will Changhong’s state-owned enterprise reform path go in the future?

In the era of mobile Internet, companies seeking development have all embarked on the road of transformation. Affected by the large scale of traditional manufacturing, domestic home appliance companies are facing different transformation challenges during the transformation process. In this process, Changhong, as a long-established state-owned home appliance enterprise, has repeatedly become the focus of this topic.

Complex structure becomes a bottleneck for transformation

In addition to Changhong, Haier, Gree, and TCL, which are also home appliance companies with state-owned backgrounds, have also embarked on a new round of reforms.

In this regard, industry observer Liu Buchen pointed out that compared with the above-mentioned home appliance companies, Changhong has three fundamental shortcomings - institutional constraints, brand aging, and lack of product competitiveness. Among them, the state-owned enterprise system and mechanism is the biggest shortcoming and the most difficult to overcome.

Data shows that in the first quarter of this year, Sichuan Changhong's revenue was 12.5 billion yuan, down 3.53% year-on-year, and its net profit was 9.23 million yuan, a sharp drop of 93.75%. Compared with the same period last year, TCL Group achieved almost the same positive growth in net profit in the first quarter, while Gree Electric and Qingdao Haier increased by 68.86% and 20.28% respectively. The gap between Changhong and its competitors forced it to overcome its biggest shortcoming.

To this end, Zhao Yong, chairman of Changhong Group, said that first of all, the "three relationships" must be straightened out, namely the relationship between Changhong and the government, the relationship between the board of directors and the management, and the relationship between the parent company and its subsidiaries; secondly, industrial adjustments must be made, and strategic restructuring or withdrawal must be carried out on subsidiaries that do not conform to the company's strategy and are a drag on development; thirdly, personnel reforms must be made, with some senior executives withdrawing from the management level so that the management level can truly assume operational responsibilities and be hired through market-based mechanisms.

Reduce government intervention and let the invisible hand of the market dominate the direction of enterprise development; restructure assets and businesses, strengthen advantageous projects and get rid of burdensome businesses; appoint personnel by themselves and let real talents become the core of the enterprise. These have become the urgent situations that Changhong, a state-owned enterprise, needs to achieve when facing transformation.

From Zhao Yong’s logic, we can see that, like other large state-owned enterprises that need to be reformed, whether the internalized reform tasks can be completed is related to the future direction of the entire Changhong Group.

Military industry becomes the trump card

Just last October, Sichuan Changhong announced that it would raise no more than 4 billion yuan through a private placement to integrate the military assets of its major shareholder Changhong Group (Zero Eight One Group), and invest heavily in building smart trading and smart R&D platforms to promote the transformation and upgrading of its home appliance business. In addition, it also plans to dispose of and divest its loss-making plasma business and assets through equity transfer.

It is worth noting that the 081 Group is affiliated to Sichuan Electronic Military Industry Group Co., Ltd. Changhong Group was originally established as a military industry, and implemented a strategic reorganization of the 081 Group in 2008. Changhong, which is reshaping its military industry business, said that this acquisition will help stimulate the business vitality of military enterprises, give play to the synergy of personnel, brands and channels of listed companies, accelerate the industrialization and application transformation of the 081 Group's military-civilian integration technology, and promote the in-depth development of the military-civilian integration industry.

Obviously, Changhong has seen the huge business opportunities brought by China's strong military industry development needs. Data shows that as of September 30, 2014, the total assets of 081 Group were 3.201 billion yuan, the revenue in 2013 was 1.047 billion yuan, and the net profit was 97.9253 million yuan.

It is understood that among electronic military products, many civilian and military products can be produced across borders. In other words, when civilian commercial demand declines, government demand will fill the corresponding gap.

At present, the civilian demand for home appliances is not strong. Changhong can use government demand to develop military products. When civilian demand rises, the government will regulate it. The general trend of industry development will enable it to focus on civilian smart electronic products to welcome the arrival of a prosperous market era.

A bold move to pave the way for intelligence

After Panasonic announced in November last year that it would stop producing plasma panels, Samsung and LG also stopped producing plasma TVs this year. Changhong transferred the equity of its company responsible for plasma business for 64.2 million yuan because the market size of the plasma industry was shrinking, resulting in heavy losses for Hongou Company, which was mainly responsible for Changhong's plasma business.

Since Changhong released its smart strategy in October last year, it has launched the CHiQ series of TVs, refrigerators, and air conditioners. The new proposition of "Let Imagination Happen" has given the brand new vitality. After getting rid of the burdensome plasma business, Changhong still chooses to focus on smart home appliances as its main business in the future.

It is reported that 1.3 billion yuan of Changhong's private placement is intended to be used to invest in the construction of intelligent trading platforms and model construction projects, intelligent R&D management platforms and system construction projects, and the remaining 500 million yuan is intended to be used to supplement working capital. Among them, the intelligent trading platform will mainly build three major contents: trading platform, O2O business model and B2B, B2C business model.

Liu Haizhong, director of Changhong's planning department, said that the intelligent trading platform invested and built by Changhong can intuitively display product technical indicators, prices, inventory, etc., and can achieve information symmetry between the front and back ends. The intelligent trading platform has functions such as online payment, payment-driven accounting, and automatic order creation, which reduces manual intervention and improves the user's consumption experience. The intelligent system management platform will connect the Internet, big data, cloud platforms, intelligent manufacturing, intelligent R&D, and intelligent transactions, improve human, financial, and material efficiency with advanced manufacturing and basic management, and evolve from internal collaboration within the enterprise to collaborative applications in the industrial chain.

Reform is never a one-off effort, nor is it a panacea that will produce immediate results. For Changhong Group, a large state-owned enterprise that has been involved in multiple fields such as black and white appliances, kitchen and bathroom appliances , small household appliances , parts and components, and military industry, the heavy industrial burden and weak growth make its transformation imperative.

Whether it is for self-protection or breakthrough, large national enterprises must pay more patience and courage to "change blood and turn around". Whether Changhong, which will develop military electronics and smart home appliances in the future, can smoothly enter the fast lane of transformation depends on the execution strength and effect of this round of reforms.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.