In the eyes of customers, industrial groups offer a convenient platform to compare and choose products from various suppliers. For enterprises, being part of an industrial community means having access to the closest raw material and equipment suppliers, allowing them to purchase inputs at lower costs, with higher efficiency, and faster speed. This includes not only physical goods but also a wide range of social services and human resources.
This kind of proximity fosters a competitive yet collaborative environment, where companies can benefit from vertical integration while still maintaining autonomy and choice. The overall advantages of industrial groups are clear and significant.
As a form of industrial organization, these groups avoid the high management and agency costs associated with large-scale integration, as well as the transaction and logistics costs that come with long-distance dealings. They promote deep division of labor, which encourages specialization and refinement, leading to improved efficiency and greater innovation.
Within an industrial group, many companies adopt a business model of “core competence plus outsourcing.†Each company focuses on its core strengths, striving to be the most efficient, high-quality, and cost-effective in its field. Other tasks, such as production, design, and sales, are outsourced to specialized firms. As a result, each product represents the combined expertise of multiple companies.
Take Zhongshan in Guangdong as an example. Over the years, the city has developed a highly complete hardware supply chain. From the north of Zhongshan, you can find everything needed for rapid prototyping, making it easier for businesses to transform their ideas into real products quickly.
The world’s largest Stanley hardware tool company is located in the northern part of Zhongshan, which has become a cornerstone of the local hardware industry. According to reports, a simple lock can consist of over 40 parts and go through more than 123 steps—many of which are completed right there in the region.
Additionally, there are over 360 packaging and printing companies in Zhongshan, playing a crucial role in ensuring smooth product delivery.
Being part of an industrial community helps reduce transaction costs. Companies have direct access to nearby suppliers, enabling them to source materials, components, and services more efficiently and at lower prices. This creates a more dynamic and responsive business environment.
The mutual promotion between industrial groups and professional markets supports the formation of specialized markets. These markets, in turn, further drive the growth of the industrial groups.
First, the presence of a strong professional market helps boost product sales by increasing visibility both domestically and internationally. Second, with numerous professional markets available, companies can easily access affordable raw materials and components. Third, these markets serve as both product and information hubs, gathering products and market intelligence from around the world.
This access to timely information allows companies within the group to quickly adjust their product offerings and improve their variety. It also pushes them to continuously reduce costs and stay competitive.
Competition within the industrial community is intense, as similar products are made by multiple companies. This face-to-face competition drives innovation and quality improvement. Many companies are even located close to one another, creating a highly competitive yet collaborative atmosphere.
Industrial groups also attract investment. By studying various regions across the country, it's evident that industrial clusters provide one of the best investment environments. These groups represent real market opportunities and act as incubators for new projects and businesses.
Visionary investors often identify gaps within these clusters, and investments in these areas help strengthen the supporting systems and service networks. As a result, the industrial chain becomes longer and more robust over time.
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