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Today's article
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Today is the 2221st day that Shan Renxing accompanies you
01
Yesterday, a student asked me, all said to do differentiation, my current business does not seem to be bad, what is the significance of differentiation?
I think there's an example that explains very well why companies want to differentiate and how to create differentiation.
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2
Today's mobile phone manufacturers in addition to Apple, others are doing folding screen mobile phones, especially domestic brands, the recent year seems to be a fight in this area.
Why are domestic mobile phone brands doing folding screens?
The answer is simple, two words, profit.
The pursuit of profit is the core demand of economic individuals in commercial society, and it is also the fundamental logic that drives behavior.
Folding screen mobile phones have unique marketing selling points and can be sold very expensive.
However, this answer seems to be a bit superficial, and we can dig deeper into this question:
What determines the profit of mobile phone manufacturers, what is it?
Is it a folding screen?
This is just an outward manifestation of the core cause, and the real reason should be deeper: differentiation.
Why is differentiation the core factor affecting the profits of mobile phone manufacturers?
We can start from the principles of economics.
When can manufacturers only get average profits?
The answer is when there is full competition.
What kind of market can form a situation of full competition?
That is when the supply is sufficient and the homogenization of products is very serious.
So, in the face of a homogeneous market, if my products can be differentiated, and only I can make them, am I a relative monopoly in a small range?
What does monopoly mean?
That's pricing power and excess profits.
Therefore, when we look at Apple's data, we can clearly feel the power of differentiated monopolies:
Apple's global market share in 2021 is not high, only 16%, but its revenue accounts for 60% of the global mobile phone market, and its profit accounts for 75% of the global mobile phone market profit.
Why is this happening?
Because there are only two kinds of mobile phones on the market, one is an Apple phone that is only sold by Apple, and the other is an Android phone that everyone else is selling.
Apple's mobile phone equipped with ioS system and A series chips has completed a monopoly;
However, Android mobile phones equipped with Android systems and Qualcomm chips have 84% of the market share to be "rolled in" and fully competitive.
So, did Apple really do what everyone liked and earned 75% of the profit?
No, Apple's mobile phone market share is only 16%, but it grasps a core differentiated selling point, only I can do, others can not do, relying on 16% market share to earn 75% of the excess profit.
And fully competitive Android phones, sorry, the price war is everyone's fate.
Understanding this, we can understand why domestic mobile phone brands are doing folding screens.
Because the folding screen is a kind of differentiation, who does a good job of the folding screen first, who can form a certain degree of "monopoly" in the field of folding screen and obtain higher profits.
03
So, this has a question, since domestic mobile phone brands now want to make money by "differentiation", what money are they making before?
The answer is very cruel, that is, domestic manufacturers sell mobile phones, and they do not make money at all.
We only need to look at Xiaomi's financial report to understand.
From 2018 to 2021, Xiaomi's channel commission and Internet advertising revenue accounted for only 10% of total revenue, but contributed 40% of profits.
Looking at the gross profit margin alone, the gross profit margin of smart phones is much lower than that of the Internet business, which is a common problem of all domestic mobile phone manufacturers, and selling mobile phones does not make money.
Why?
It's not that mobile phone hardware really doesn't make money, but that domestic mobile phone brands all have a common identity: assembly plants.
Of course, what I need to explain is that a mobile phone is made of thousands of parts, and there is no mobile phone company in this world that can produce independently.
Strictly speaking, all mobile phone manufacturers are "assembly factories", but domestic mobile phone brands are "assembled a bit thoroughly".
The core processor that compares value is to buy Qualcomm, the architecture is ARM, the screen chip and storage components are bought from Samsung.....
These companies also have to make money, and some of them also make mobile phones themselves, and you are still competitors.
Then they must not stab you in this area?
The domestic mobile phone manufacturers that have been slaughtered have fallen into an endless price war cycle because the accessories used by each other are the same, which further depresses the profit margin.
Therefore, the hardware business of mobile phone manufacturers does not make money, and it is not that Ray is always joking.
However, by squeezing channel providers and making money from Internet advertising business, can this model last?
The answer is obvious, not long-lasting, and not stable.
Because this model determines the amount of market share occupied and the profit of the enterprise is equated, that is, the greater the market share, the more advertising revenue.
A good "science and technology" enterprise has made a small profit and a high sales, killing peers, relying on quantity to win the manufacturing enterprise, it is difficult to have technical barriers.
04
Of course, talking about technical barriers every day, don't these companies know?
Naturally they know, but it takes more than just a little money to get into technology.
This is the root cause of our Chinese enterprises, and even the Chinese scientific community: it is difficult to start late, and it is difficult to catch up behind.
The gap in the military industry can still be covered by the state finances and chased step by step.
Mobile phone chips, operating systems such as such a "consumer-grade" technology gap, consumers vote with their feet, the market does not believe in tears, how to chase it?
There are two answers:
First, vigorously produce miracles.
Huawei is taking such a path.
I have my own communication business, which is a cash cow blood transfusion, and can invest tens of billions of yuan in technology research and development every year, and rely on spending money to catch up.
However, huawei, which has a cash cow business that can transfuse blood and dares to transfuse blood, may be a unique seedling among domestic mobile phone manufacturers, and even rare in the entire Chinese technology enterprises.
Moreover, the cost of Huawei's sanctions has also given others a warning:
What is the use of your light design? Who made it for you?
This further discourages the enthusiasm of domestic manufacturers for independent research and development.
So they chose the second path: overtaking in curves.
Domestic manufacturers may not have the ability and motivation to do self-developed chips and operating systems, but they also know that the profits of the "assembly plant" that only do the bottom cannot be raised, and the days are unstable.
They also want differentiation, but also want to engage in local monopoly, so what to do?
I can't catch up with you in your area of expertise, so I'll change to a new track and start at the same starting line as you, even if I can't beat you, I won't be a lot behind.
Just like domestic fuel vehicles, surpassing imported cars?
Of course not, people's accumulation of hundreds of years is not a joke, but in the field of electric vehicles is different, our products are now more and more able to play.
Therefore, for domestic mobile phone manufacturers, the folding screen is not only a means to enhance their own differentiation and improve profits in the short term, but also a gamble on the future direction and seek the possibility of overtaking at the next intersection corner.
05
Of course, whether the folding screen can become a "corner overtaking" point, no one can guarantee.
Will consumers necessarily buy it? This requires a test of the market.
But can you lay out and master the core technology in advance, is it not a kind of progress, a choice?
For our company, it is perfectly normal for there to be a gap in technology, and core differentiation will certainly be a place where competitors are strictly guarded.
Fair competition is still difficult to pursue, not to mention the existence of unpredictable obstacles and patent barriers.
For enterprises, on the one hand, we must know how to push back the current development route from the results, subdivide the differentiated related markets, avoid the advantages of the opponent's strict defense, and change a curve to save the country.
On the other hand, product differentiation can bring first-mover advantages in marketing layout, and the use of whole network marketing to lay out differentiated markets in advance can bring faster performance to enterprises.
I think this is the reason why domestic mobile phone brands should do folding screens, and it is also the reason why enterprises need to rethink the significance of differentiation.
Although I have only talked about the mobile phone market today, I think all companies can think along this line of thinking.
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Responsible editor| Luo Yingfan
The pictures in this article are from the Internet