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Price Growth Is Only The Beginning, And The Terrible Thing Is That Small And Medium-sized Enterprises Fail.
Apr 02, 2018

Boom is only a start, many small and medium-sized enterprises will face the shortage of raw materials, environmental capacity, the foreign trade environment is more complex and powerful factories overseas expansion, funding, and the product unsalable and so on six big crisis, small and medium-sized enterprises will eventually explode failures.

The rise in prices is arguably the third wave of rising prices since the rally of the previous year. The most unpredictable price rise in history is the collapse of the wave. Are you ready?

Crisis 1: price difference.

Due to the transmission of raw material prices, the market has been able to clearly feel the price increase atmosphere is very strong.

It is reasonable to say that the rise of raw materials affects every enterprise, but why does the increase of small and medium-sized enterprises differ so much from that of large enterprises?

There are three reasons:

(1) the big enterprise raw materials using futures, and small and medium-sized enterprises of raw materials is commonly used now to buy now, due to the large demand for raw materials, single raw material suppliers are hard to meet all of its raw materials supply, so the general big enterprise's raw materials are using futures.

Futures trading can reverse the process of buying and selling goods, that is, they can be sold without a commodity, and they can be bought without a commodity.

Futures trading, this feature can make big business in the boom before the purchase of raw materials suppliers in the coming months the stability of the supply of raw materials, greatly reducing the impact of rising prices of raw materials to the enterprise;

Due to low demand of raw materials, capital and small and medium-sized enterprises co., LTD., is now commonly used first to buy, thus lead to price increases for raw materials of resistance is weak, has been a serious rise in raw material prices, the price also have to jump in to meet the cost of production.

(2) the big enterprise raw materials added value is high, strong ability against price risk, since in the past, a large enterprise with advanced technology, in the high-end manufacturing holds the high-end market, small and medium-sized enterprises can only with cheap low-end market.

But the same products, it brings to enterprise's profit is not the same, high-end products are selling less expensive, because their technology and manufacturing technology upgrade, the brand construction cost in the important part of the cost of its products and the proportion of the cost of raw materials is relatively small, rising raw materials for its entire product cost rise of small;

And small and medium-sized enterprises' products are relatively cheap, the cost of raw materials accounts for a large part of the cost of their products.

So the price of raw materials has skyrocketed, and their prices have skyrocketed.

(3) large enterprises have sufficient funds and good reputation.

Big business also has a big advantage in capital, the bank reputation is relatively high, can have sufficient cash flow to deal with this rise tide.

Instead, most of China's small and medium-sized enterprises, which rely on bank loans and loans, are still burdened with the bank's huge interest payments, which are relatively small in liquidity.

Therefore, the negative impact of this price increase on small and medium-sized enterprises is very large, which is likely to be the early arrival of small and medium-sized enterprises.

Crisis two: raw material shortage.

The Chinese government has shut down a large number of small and medium - sized raw materials producers because of environmental pressure.

Just after the Spring Festival this year, the prices continued to hit, raw material in the conduction, the voice of the increase in the price of all walks of life, so torture people, many companies say, there are orders can't pick up now!

Don't talk about the price in the future, the shortage will be the normal, your supplier has the goods to you, is the biggest success!

Big enterprise can through the futures and the big suppliers to sign long-term supply contracts, set up their own raw materials base and so on to ensure its own steady supply of raw materials, and small and medium-sized enterprise supply of raw material is difficult to ensure, on the one hand, raw material suppliers giant main supply big enterprise, on the other hand, small and medium-sized raw material manufacturers are a large number of closed, the rest of it is difficult to guarantee so much demand.

In 2017, China will adopt more stringent environmental laws, and the current situation of raw material shortage of small and medium-sized enterprises will become more serious. In the future, small and medium-sized enterprises will face a crisis of large-scale shutdown and even collapse.

Crisis three: environmental protection to capacity.

Recently, the environmental inspectors went to the eighth round and again rushed to the summit.

From the eighth round, the inspector changed the game.

The ministry of environmental protection (mep) said the ministry of environmental protection will carry out a special inspection on the detailed plan for the implementation of "atmospheric 10" in hebei and henan provinces starting from July 21. The special inspection will last for 84 days.

"Xingtai production, heze, linyi, henan, shanxi, all operations of the beijing-tianjin-hebei region, with a further two months all unqualified will shut down, then will be the era of wealth doesn't come in.

Business is afraid to connect, facing default, lawsuit, 2017 small and medium enterprises road in where!!!!!

There will be another "shut-down"!

China's small and medium-sized enterprises, most of which relied on policy support and borrowed money from Banks a few years ago, made the first pot of gold on the basis of repeated construction and price advantage.

And small and medium-sized enterprises (smes) there is a big part of high pollution, high energy consumption, raw materials manufacturers, with production capacity in recent years has been in surplus stage, enterprise capacity utilization is not high, lead to very little profit, it is hard to raise money to transform their factory production line, add environmental protection facilities.

Now, this part of the enterprise is hard to preferential policies from the government to come, in the face of government pressure, this part of the enterprise is left with two ways, either upgrade become high and new technology, the high-end manufacturing enterprise, or by merger and reorganization.

Crisis four: small business has no hope.

Factory is to circumvent anti-dumping not only large companies abroad, or for the use of foreign raw materials production, cheap labor, science and technology advantages, and so on to improve capacity, preempt the foreign market, gain more broad space for development.

With some big Chinese companies in countries such as Thailand, Vietnam, the United States, we can see the big enterprise in foreign factory capacity can meet the needs of foreign markets, and with foreign factories keep price and policy advantage of domestic small and medium-sized enterprises.

Future Chinese enterprises abroad steps to speed up the establishment of the United States to double the tax rate, the survival of export-oriented small and medium enterprises will be more difficult, that is why big companies factories overseas will also brings to the small and medium-sized enterprise crisis.

For overseas market demand is so much, according to the measurement of their factories overseas Chinese enterprises planning capacity can completely meet the needs of overseas market, therefore produced in China and exported to overseas market space will be smaller and smaller.

Crisis five: capital chain fracture.

As prices continue to rise, small and medium-sized enterprises will face financial difficulties and the risk of unmarketable products.

Here's why:

1, along with the rising prices of raw materials, to buy the same raw materials, the enterprise needs to pay more money, for a long time, some small and medium-sized enterprises rely on bank lending to survive, in the company's cash flow is insufficient, lack of company credibility and hard to borrow from the bank, financial difficulties is the key factor of corporate failures.

2. In the future, small and medium-sized enterprises will face the situation of unmarketable products, because the majority of small and medium-sized enterprises win the market by virtue of their price advantage.

However, after the rise of the rising tide, small and medium-sized enterprises have raised their prices by a large margin, with the highest price rising by 45 percent, while the increase of large enterprises and foreign brands is still around 10%.

That is to say, the boom in the low-end product prices and high-end price differential narrowed, more and more consumers when choosing products, there is no price advantage will abandon the low-end products, will spend a little money, buy in the high-end products.

Plus foreign antidumping, export is blocked and so on, the future small and medium enterprises are very likely to be slow to sell.

To sum up, these five crises threaten the survival of small and medium-sized enterprises in China, and the collapse of enterprises is likely to occur in the near future.

The management of small and medium-sized enterprises can get out of the predicament in the right way by seeing the plight of their own enterprises.

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