The operational philosophy and behavior of a capitalist

The only purpose of operating an enterprise is for profit. Any means can be applied to earn interest and profit, including harming the interest of many consumers and the public. An entrepreneur and a capitalist have the same purpose of achieving profit through careful operations, but a capitalist does not have a sense of social responsibility.

An entrepreneur’s purpose to pursue profit is not for the sake of profit. An entrepreneur regards the operation of an enterprise as a social business. The enterprise must make profit since it is the life-blood unit for social economy. Without profit, an enterprise would go bankrupt, not to mention its social responsibility and interests. The social responsibility assumed by entrepreneurs should be based on the enterprise’s profit, or else entrepreneurs couldn’t realize their social responsibility.

Although capitalists hold mercenary operation ideas, objectively, they still assume a certain social responsibility. The maximization of profit itself is equaled to the realization of social responsibility. Without social interests, an enterprise cannot realize profit interests, which is the contradictory unity of the opposites. The operation concept of an enterprise determines its behavior. The overlooking of social responsibility in the pursuit of profit hurts consumers and other social interests. Enterprise is bound to belong to society, so is the money. Nobody could bring in fortune at their birth or bring it out at death. Fortune comes from society, to society it will finally return. Therefore, the enterprise operation ideas of a capitalist should be the same as those of entrepreneurs. We need to learn from Japanese Panasonic and other entrepreneurs and strive to be excellent entrepreneurs.

The relationship between the individual and the enterprise

The relationship between the individual and the enterprise is:

The enterprise’s influence on the individual

Similarly, the enterprise’s influence on the individual is:

When we compare these orientations one by one, we may clearly define the correct relations of the enterprise and the individual. The future enterprise has five orientations:

The future development of modern enterprises should depend on the five above-mentioned orientations. The success of an enterprise will depend on whether the five orientations can be met.

In the above analysis, the enterprise knows the demand of employees, and employees know the demands of an enterprise; this is very important to the leadership and strategic decision making of the enterprise.

1. Values. Enterprise effectiveness and consumers prevail. Everything will center on consumers’ demand and will serve consumption, with consumer satisfaction as the supreme goal.

2. Boundless concept.

3. Market-orientation. To pursue consumers’ demands, enterprises should create new needs of consumption, serve consumers, and satisfy them.

4. Social responsibility. The enterprise comes from society, serves society, contributes to society, and returns to society.

5. Enterprise development and management philosophy. Enterprise development is emphasized while management is applied for balance; this is the rule emphasis–balance, balance–emphasis.

• cutting off non-profitable units

• revitalizing derelict assets

• reforming the institution and carry out restructuring

• developing new sales modes by developing new high-tech products to win the favor of direct consumers in the road to rebirth for enterprises.

Formulating a plan

An enterprise’s consumption, budget control, and operation planning management will be formulated in accordance with the long-term, mediumterm, and short-term strategies and tactics of the enterprise. The long-term plan usually covers more than five years, the medium-term plan covers two to five years while the short-term plan usually covers one year. The shortterm plan is subdivided into monthly plans. It is the general method and rule for plan formulation. Middle and short-term plans are implementation plans; in particular, the yearly plan is the specific implementation plan. Sometimes, some part of the long-term and medium-term plan will be juxtaposed with the short-term plan. Although the operation plan budget and control benefit management are formulated based on objective reality, they still belong to the subjective scope while the objective practice is in motion every minute. The plan should be tested by reality. Therefore, during the implementation of the plan, leaders should monitor and control the implementation process, summarize experiences, and correct problems. They should carry out a plan check every half-year to rectify the plan to ensure the completion of the shortterm plan. At the end of each year they should summarize the experiences and lessons in the implementation of the short-term plan and then formulate a short-term plan for the following year. At the same time, they should modify and improve the medium-term and long-term plan.

The management of enterprise benefit budgeting from the perspective of a profit and loss equation

Under the condition of ordinary relative market and regular enterprise operation, the enterprise’s profit and benefit are unknown. Then the existing resources of the enterprise will be utilized to reasonably arrange and develop the sales volume and revenue of consumption commodities, to control their cost, and to achieve profit benefit. When the objective is determined, scientific and systematic budget planning and profit management will be carried out.

The formula of sales volume required for achieving target profit is:

The formula of unit variable cost required for achieving target profit with established sales volume is:

The fixed formula required for achieving target profit under the condition of established sales volume is:

According to this profit and loss equation, the profit budget model can be displayed by cost–volume benefit diagram as shown in Figure 15.3.

There are six stages:

According to the cost–volume profit interest diagram under profit budget management, we may see that under fixed cost, if the unit price rises, the slope of sales income will increase and the crossing point with VO line based on target profit will go down. Thus, the target profit will be realized in advance. The target profit can be realized with a relatively small amount of sales income. This is shown in Figure 15.4.

Under a fixed unit price, if the unit variable cost rises, the ramp of VO line based on the target profit interest will correspondingly drop and the crossing point with sales income, the breakeven point, will reduce too. Thus, the target profit interest will be realized in advance, as shown in Figure 15.5.

Under a fixed unit price and a unit variable cost, if the fixed cost reduces, the VO line based on target profit interest will move downwards parallel to it, as will the crossing point with sales income, and then the target profit of the enterprise will be realized under relatively low sales volume. If the sales volume continues to grow, the over-target profit will be acquired, as shown in Figure 15.6.

This analysis illustrates that the fundamental principle of the management mode of profit benefit budgeting is that sales volume and cost are worked out by demand budgeting to achieve target profit on the premise that the target profit is established, and the enterprise can obtain over-target profit by expanding the sales volume and reducing cost on the basis of determined sales volume and cost. If sales and cost budget, cash budget, research and development expenditure budget, and so on are considered from the perspective of long-term decision making, these budgets are connected to form enterprise benefit budget management.

Analysis of the budget balancing point of budget management with a focus on profit benefit

The crossing point of sales revenue and total cost under the budget management mode with a focus on profit benefit is called the budget balancing point. At X point shown in Figure 15.3, the budget balance point is the direct basis for investigating whether the target profit can be realized by profit benefit budget management.

The significance of the budget balance point is that the realization process of the target profit can be visualized, and the financial meaning of the balance point over budget can be explicitly portrayed. The triangle area under the budget balance point indicates the realization process of target profit. The VO line contains the target profit benefit and total cost. The crossing process of this line with the line of sales income S is also the process of the realization of the profit target. The crossing area of VO, S, and J vividly depicts this process. The upper right area of the budget balance point, the right area with the crossing of S and VO, indicates the over-budget profit benefit area or over-target profit benefit area.

The crossing point of sales revenue and total cost under the budget management mode with a focus on profit benefit is called the budget balancing point. This point is of great significance in budget profit benefit management. In additional to normal situations, it also manages estimated market sales volume and total cost and profit benefit. It is important to strive for technical reform or increase sales revenue or take measures to reduce cost to guarantee and develop the target of profit benefit. It is the basis for the system of enterprise leadership management.

Figure 15.7 shows the management system of enterprise profit benefit budgeting.

In the budget system of enterprise profit benefit, all budgets compose a complete and supporting budget system, which is the carrier of profit benefit budgeting. In the system of profit benefit budgeting, sub-budgets have close connection and a certain order. The close connection indicates every budget supports and depends on all the others. Target profit benefit is supported by every sub-subject, and every sub-budget attaches itself to the target profit benefit.

The target profit is subdivided into sub-budgets, the completion of which is a forceful guarantee for the realization of the target profit. Meanwhile, during the compilation of the budget, each competent department should communicate under the guidance of the budget compilation principle, which should be the reference of the budget formulation in each department to avoid the irrational phenomenon that a budget may be favorable to a specific department but not to the enterprise. Sub-budgets are interconnected and the order is irreversible.

Under a vertical organizational structure, the enterprise budget plan is subdivided into the budget responsibility of various cost centers. The person responsible for each cost center is responsible for the costs in the area. Having analyzed operation activities, the basic cost center regularly sends cost information to the superior cost center. Having summarized the subordinate cost information, the superior cost center will report to its superior, and this continues up to the investment center at the maximum level, or the cost control center, which regularly reports the plan to the budget plan management committee.

Under a horizontal organizational structure, the enterprise’s budget plan is also subdivided into budget responsibility of various centers. The basic cost center regularly submits the analysis report of actual cost to the superior cost center. Having summarized relevant information, the cost center at this level will submit it to the superior profit center. Having summarized the responsibility cost and income, the profit center will report it to the superior investment center, or the cost control center. Having summarized the budget completion situation, various centers will report the corresponding information to the corporation headquarters. The person responsible in each cost center is responsible for responsibility cost in its area.

Having analyzed operation activities, the basic cost center regularly sends cost information to the superior cost center, which summarizes the subordinate cost information and reports to its superior till the investment center at the maximum level, or the so-called cost control center, which regularly reports the plan to the budget plan management committee. Having submitted the budgeting management of operation profit benefits to special organs for disposal, the corporation reports to the budget plan management committee.

The organizational system is the basic environment for the fine operation of enterprise profit effectiveness and budget management mechanism. The realization of the target profit benefit should be established on the perfect organizational system, which mainly includes the budget management committee, special budget department, and budget responsibility network.

The budget management committee consists of the board chairman or general manager, and responsible persons of relevant departments. During the management process, they are in core leadership positions, whose main responsibility consists of organizing relevant personnel to decide target profit benefits, review, study, coordinate, and balance various budgeting items. It is the supreme management organ of profit benefit management. The special budget department is directly affiliated with the budget management committee, in charge of the management of the budget plan.

The budget responsibility network is the main body responsible for the budget, consisting of the investment center, profit center, and cost center. Different responsibility centers have different status in the profit budget management system with the investment center on top, the cost center on the bottom, and the profit benefit center in between. The investment center, profit benefit center, and cost center build the responsibility chain network, which is an all-round network including the responsibility of each department and employee. Depending on the organizational form of the enterprise, the organizational structure of the budget responsibility network is usually vertical and horizontal in form, as decided by enterprise leaders according to the conditions based on principles of convenience and strictness.

Budget variance analysis is the analysis of historical data, which does not guide production and operation (production consumption is viewed as operation) unless it is carried out sensibly and frequently (preferably once a week). The cause of budget variance mainly involves the internal working efficiency of the enterprise and the change of external elements. For the analysis and treatment of budget variance, different treatment measures are taken in accordance with the specific cause of the variance.

Ownership of responsibility for budget variance incurred by internal work efficiency should be clarified according to the controlling principle. Performance should be correctly evaluated. Combine actual performance of each budget executive body with its immediate interests through the reward and punishment system, confirm the resulting improvement measures according to reasons, and actively find new benefits growth point. If the change in factor variance incurred by external factors is a long-term trend, the operation strategy of the enterprise will be affected, which should be an investigation factor for the next phase of the budget compilation. We should properly adjust the budget goal of the next phase. On the contrary, the confirmation of the next phase of budget goal will not be influenced. Meanwhile, determining the responsibility for budget variance incurred by external factors, the principle of equal risk benefit should be followed, and risks caused by variance should be shared by various responsible organs, enterprise operators, and subscribers.

In the management model of profit benefit budgeting, budget variance analysis will begin with profit benefit variance analysis. Profit benefit variance will be gradually decreased and put into other elements related to target profit benefit, and these related elements will be analyzed one by one, so as systematically and fully to represent the cause of the actual profit benefit in budget period being above or below the target profit benefit. Figure 15.7 roughly shows the relations of various elements forming profit benefits variance. The main factors influencing the realization of the target profit benefit include sales income, sales and various variance costs, fixed costs, and management costs. During the disposal of the budget variance analysis, apply different treatment principles to different responsibility centers. Generally speaking, if a cost center can turn out products of the same quality at a cost lower than budgeted, it signifies better performance of the center.

Although management expenses belong to fixed cost, regarding the profit benefit budget, the reduction of management expenses will directly increase the profit benefits of an enterprise. Therefore, during variance analysis on management expenses, the enterprise should make reasonable judgments about work quality and service level with regard to other management systems (such as evaluation system of talents’ performance), cement this phase level, and actively seek an improvement principle to treat budget variance fairly and objectively. The profit benefit variance of the profit benefit center should be supplemented with non-currency measuring methods, including productivity, market positioning, product quality, employees’ attitude, social responsibility, balance of short-term and longterm goals, and so on.

Tables 14.1 to 14.7 illustrate the information required in budget plans.

In case there are fluctuations in enterprise budget, profit, and effectiveness control and price positioning, the budget and profit plan should be adjusted.

These are some explanatory points:

There are many such examples. There are successful pricing experiences in Sansui Corporation, successful pricing of many products, including Sansui Oral Exposed Liquid; there is also failed product pricing (very good products, patent products, and so on), with experience and lessons very dear to the enterprise.

The enterprise takes as it focus profit benefit management, adopting budget profit benefit plan management, which is an integral systematic project. The table is a tool of the management process, but the tool can be improved or replaced. However, the profit benefit of the enterprise is not calculated, except through decision-making, balancing, and mobilizing all employees to participate in its management by giving full play to their creativity and wisdom in the operation management and enterprise development to create management benefit and development benefit in the process of plan management.

The budgeted profit and effectiveness is the goal of enterprise operation planning, which is a kind of power and motivation. The active distribution policy is the direct source of employee dynamics. To implement enterprise planning, budgeting and profit management, the employee rewarding mechanism should be implemented in the whole area of responsibilities, rights, and benefits, and should be made specific to individuals to mobilize the enthusiasm of all the employees. Meanwhile, we should pay adequate attention to quality training of all employees to let them participate in quality management, with work quality ensuring product quality to achieve impeccable quality goals. If the leader focuses attention on just accounting management while overlooking development, only the management is emphasized and the risk is intolerable, which will consequently adversely impact the development of enterprise. The management has a bottom line, but development is infinite.

The way out for an enterprise is the market. The enterprise should keep a close eye on direct consumers, and the commodity exchange channel is the bridge used to reach the target, direct consumers. The way out for the enterprise is satisfaction and favoring the product’s direct consumers and the shared goal of the manufacturer and the distributor is the direct consumer.

Various manufacturers and distributors direct consumers together, resulting in complications, and severe risks in market competition. The market changes so quickly some things cannot be planned. Therefore, managers will use planning and budgeting to strengthen accounting management and will study the competition in the market and the new demands from consumers, and improve their own policy and mode of sales service to satisfy the continual new demands of consumers. Then they can grasp the initiative in market competition; if they are passive, the targeted benefit of the operation plan cannot be realized.

The dynamic model of target operating profit

The control and management of planning and budgeting of target profit benefit of an enterprise begins with compressing costs.

Reducing the enterprise’s cost consumption is the internal work of enterprise management; talents are the source of enterprise wealth. Talents need a stage or opportunity to show the capabilities, while the stage needs talents for existence. Reducing enterprise costs begins with cutting personnel with low labor efficiency. When the number of employees of the enterprise decreases and labor efficiency rises, costs are reduced and enterprise profits are increased. Personnel costs can be reduced by:

In this way the number of enterprise employees is reduced, labor efficiency is enhanced, costs are lowered, and the enterprise’s profit is increased.

Table 15.8 shows an example of the annual target operating profit benefit of Enterprise A.

When the total revenue of Enterprise A stays the same, the enterprise improves the level of business proficiency through strengthening personnel training and enhances the level of workers’ labor skills and improves the level of piecework labor; while the original management tool stays unchanged, the application of management by objectives and responsibilities improves the use of eight work hours to non-piecework posts (any unit or post to which piecework cannot be applied will be managed by post rationing), workload rationing, personnel rationing and work quality requirement rationing, salary rationing, bonus rationing, and target responsibility management rationing (excluding internal management of the enterprise). Therefore, the finished product rate is increased by 3% to 99%; 10% of cost – 270 million Yuan is saved; the increased benefit of 270 million Yuan caused by management is divided by the original basic benefit of 300 million Yuan to get 90%, or 270/300 = 0.9, and the management benefit rate is increased by 90%, and the labor benefit rate is increased to 19%. It can be seen that while sales revenue is not increased, only by strengthening the internal work of enterprise management is the annual profit of Enterprise A increased to 570 million Yuan from 300 million Yuan; the profit amount is increased by 90%, and the profit rate is increased to 19% from 10%.

Let us continue with Enterprise A, on the basis of 10% reduced cost consumption, management expenditure is reduced by 10% in the second year, travel expenses are reduced by 10%, environment expenses are reduced by 10%, and other consumptions are reduced by 10% and 5.832 million Yuan is saved. In the second year, the gross profit of Enterprise A is increased to 628.32 million Yuan from 570 million Yuan in the first year. Therefore, through two years’ internal management of the enterprise, while the annual sales revenue stays the same, 3 billion Yuan, the annual enterprise benefit is increased to 628.32 million Yuan from the original 300 million Yuan.

Let us continue with Enterprise A; in the third year, the annual cost of the company is reduced by 10% through managing and reducing raw and auxiliary materials – 37.2 million Yuan. Hence the direct cost consumption is reduced to 874.8 million Yuan from 0.972 billion Yuan, and the enterprise benefit is increased to 725.52 million Yuan in the third year.

It can be seen from the above analysis that under the condition of fierce competition in the market, especially full competition of products, when it is difficult to increase the total sales revenue of the enterprise, it is advisable, practical, and feasible to increase the operating benefit of the enterprise by practicing internal management and strengthening comprehensive enterprise management while the original sales revenue stays the same. Furthermore, the benefit can be doubled. However, the method has limitations, for product cost consumption is limited rather than limitless, and cannot be reduced any more when a certain level is reached. That is exactly the limitation of management benefit. An enterprise must develop, or it cannot have scale or enhance the double benefits – enterprise development benefit and management benefit (discussed otherwise) – to the largest extent. Now let us return to the market consumption competition of the enterprise.

Assume the product of Enterprise A is in a full-competition market during the process of sales market competition. The equilibrium profit rate in the market is 10%, and the original profit rate of Enterprise A is 10%, which is equal to the average profit value of comprehensive market competition.

During the process of fierce competition in the selling market, the average profit rate decreases to 5%, and some poorly operated enterprises with an original profit rate of only 4% are sure to be closed. When the enterprise profit rate is 5% or a little higher, the profit rate of Enterprise A is still 19.184, and the profit is 150 million Yuan, hence 725.52 million Yuan – 150 million Yuan = 575.5 million Yuan.

Assume in the fifth year (calculated from the first year in which Enterprise A is assumed), the average profit rate in the market decreases to 3%, and a large number of enterprises are closed. The profit of Enterprise A is reduced to 508 million Yuan from 575.5 million Yuan. In the fourth year, with the absolute advantage in fierce market competition, Enterprise A takes over a closed factory, and carries out production technology reform (because Enterprise A has huge capital) and improves advanced technical equipment. In addition, technicians and managers are assigned to operate Enterprise B, achieving sales revenue of Enterprise B of 2 billion Yuan. Enterprise A itself expands its factory and production, increasing the sales volume of 1 billion Yuan, increasing to 4 billion Yuan from the original 3 billion Yuan. Hence the sales volume is doubled during the process of fierce competition. Although the average profit rate in the market is only 3%, the profit of Enterprise is increased to above 1 billion Yuan because of its doubled sales volume and the merit of increased scale. Furthermore, in the sixth year, because of the fierce competition in the selling market, the selling price returned to 7% from the reduced price owing to supply exceeding demand, and the original level of supply–demand relations is restored in the sixth year. Suppose the retail price level under the supply–demand relations in the first year creates an average profit level of 10%.

Now Enterprise A has an annual sales revenue of 6 billion Yuan and a sales amount of 6 billion Yuan × 24.8% (profit rate) = 1.45104 billion Yuan (profit). We can see that its sales are doubled, and that its annual profit is 1.451 billion Yuan/300 million Yuan. Because of the development of the enterprise, the profit benefit is multiplied by 4.8 times.

According to the above-mentioned six years’ development process, Enterprise A stands firmly in the market competition by strengthening internal enterprise management and reducing cost consumption. Other enterprises are closed or operate with little profit. Owing to its management advantage, high product quality, high finished product rate, and low cost consumption, Enterprise A gains a profit rate higher than that of other enterprises in the industry and achieves further development and nearly 4.8 times of annual benefit. There are two lessons from this. First, we should practice the internal work of enterprise management, enhance product quality, and reduce the consumption cost of the enterprise to the largest extent. Second, we will develop the scale of the enterprise, winning by scale. The scientific development of an enterprise is a huge (but not limitless) prospect, which is the task of an entrepreneur. Enterprise A will be the most successful enterprise in the world. The entrepreneur is Jack Welch, who is a successful and great entrepreneur.

• the price of each bottle of wine

• the elegant and high-taste logo attached on the packaging and the label on each bottle with the prize-winning declaration; the mystic winery is used to emphasize the artistic and scientific nature of the winery

• highly invested marketing; raise the popularity of the product in the fiercely competitive market and win the favor of distributors and retailers on a kind of wine

• the reputation and historical background of the winery (list names of manor and castles and historical era when the wine factory is established)

• the brewery quality of wine

• the complexity and elegance of wine

• seven wines of different kinds ranging from chardonnay to merlot, made according to different brewery to satisfy the tastes of customers.

1. The new value curve promotes the pursuit for differentiation and low cost in the enterprise, so as to break the relationship of the tradeoff between value and cost.

2. It can remind the enterprise that the enterprise should not increase its cost structure and over-design products and service only for growth and creation. Many enterprises are caught in such situations.

3. It is easy and can be understood by managers at various levels, so that it can be fully participated in and supported by the whole enterprise during strategy implementation.

4. It drives the enterprise to strictly consider every competition element in the industry, so as to find out the assumptions implied in the industry, which are usually unconsciously taken for granted by competing enterprises.

Improve the management of profit benefit budget and develop a patented product without competition

If the patented product can meet a market demand, it will be a consumer-preferred product. Since it is the consumption product solely produced by the enterprise, the product enjoys patent protection in the sales market, without competition from other products of the same type and quality (the competition from replaceable products is possible), therefore, we define a patented product as a product with relatively little competition. Patents, trademarks, copyrights, and other intangible protection-rights assets belong to the scope of enterprise management, which will be monopolized products at a certain time, space, and locations with certain technology since its price is far away from its value. With the expiration of a warranty period this technology will be pushed onto the market for the general public. Other enterprises can produce this product losing the protection of the patent. Sales of the product at the same quality will be popular, with prices rapidly declining to a relatively low level. The product enters the full-competition market.

The invented Sanzhu Oral Exposed Liquid I chaired is the first high-tech product of our company with a patent (patent number: ZL93115272.0, initiated in China and leading the world trend). When the product is launched on the market, it was popular with the broad masses. In 1994, sales revenue in the first year after launching was RMB 0.125 billion; the second year it was RMB 2.35 billion, the third year RMB 8.04 billion, the fourth year RMB 7.75 billion, with total taxes, RMB more than 2 billion. Both assets accumulation and social benefits are good. Another patented invention chaired by me is Fuxinkang Oral Exposed Liquid (patent number: ZL95112116.2). In the first year of its launching in 1995, sales revenue was RMB 0.5 billion, achieving many economic and social benefits. We are applying for international patent for this product and the invented ecological cosmetics I Chaired-Economic Beauty (patent number: ZL97112152.4). It earned sales revenue of RMB 0.5 billion in the first year after its launch in 1995.

At the beginning, the patent product of Sanzhu Corporation was relatively non-competitive. With the development of its competition in the market and rapid expansion of new-tech products and similar replaceable products, the price of the patent product gradually reduced to approach the optimal market rate, finally leading to full market competition.

Bill Gates from Microsoft invented the patented technology of computer chips, taking the monopoly position in the international sales market, with a product price far deviating from value rules. The enterprise made a good profit and developed fast to be listed in the global top 500.

Therefore, the prime task for the development of an enterprise is to build up new technical and differentiated products in the market and to create a new demand from consumers. Through enterprise activities of marketing and promotion (sales and management are discussed otherwise), consumers can know, accept, buy, and even prefer new technical products, realizing the social benefit value of new technical products and the operating value of the enterprise, which are necessary to realize the enterprise’s development benefit.

Taking an overview of the progress of global civilization, we may discover that its various historical stages were initiated and created by a new tech product for consumption. Therefore, new creations made by the enterprise should be the source of dynamics for its development.

The decision-making committee

An enterprise decision-making committee centering on the president and general manager, which is the supreme authority of the decision-making level of the enterprise, should be established. The committees should include the vice president for the market or the general manager, the financial director, and the person in charge of the market information department of the enterprise, and external consultants hired to take part in decision-making; Decision-making does not mean that the minority is subordinate to the majority, instead, it means scientifically evaluating the credibility of data, the feasibility of investment capital’s return cycle, and the potential and medium-term or long-term possibility of selling in the market. A positive decision can be made when the success rate is 70% and the risk is 30% while a negative decision should be made when the evaluated success rate is 60% while the risk is 40%. Why can a big decision allow 30% risk? The development of a sales market involves a dynamic social change process, with multiple variables and unanticipated factors. Any scientific evaluation report cannot contain all unanticipated factors. Therefore, even the best decision making contains risks, which just brings more development and investment impetus. That is the reason for the existence of venture capital. The decision-making process and the final decision-making plan display knowledge, wisdom, experience, education, and a cognitive level of understanding and inspiration.

The duty of a decision-making committee

The decision-making committee will not be in charge of the management of the double operating benefits of the enterprise but make significant decisions of the enterprise. Its duty is to evaluate and make decisions about the significant problems of the enterprise throughout the management process of double operating benefits. Once a decision is made, it will be carried into practice by the president and the organization’s business administration organization.

Monitor the process of implementation and management decision making

The implementation process will be monitored and evaluated regularly once or twice a year, and will be adjusted to reduce the loss caused by wrong decisions as much as possible. Therefore, enterprises must try to ensure that correct and scientific decisions are made, or serious and uncorrectable loss will occur.

Correct decisions of Sanzhu Corporation bring huge success while important decision-making mistakes cause big losses (due to incorrect information). Therefore, enterprises should seriously summarize experience and lessons, which are important for the enterprise leaders and the enterprise.

Enterprise form of organizing

The configuration of the enterprise management mode is the behavior model of the organization’s structure set in accordance with the enterprise’s production purpose, production mode, subject of labor, and the need of all the enterprise’s resources allocation. It should be established according to the size of the enterprise itself, such as flat mode, matrix mode, layer mode, and so on.

Organization structure should be simple and scientific

Organization structure should be simple and scientific. In order to set the organization structure scientifically, tight links and cross-linkage functions should be provided in it, which is guaranteed by strict discipline. The requirement for the execution of discipline should be severe; the treatment of problems should be serious, or else the organization’s power and characteristics will be lost. Management leaders at various levels should discover whether management is proper. For example, if the organization establishes a center, department and divisions, with one leader managing three or four units, or even as many as six units, bureaucratic mistakes will emerge if there are too many employees under one leader, which will affect their work. For example, the organization of the army usually adopts the system of three above three, or four above four. It will no longer be scientific with five above five system.

Bureaucratic organization will be strictly controlled

Bureaucracy is when leaders command and make decisions without considering the actual situation for a period of time. Bureaucracy is behavior that doesn’t conform to actual conditions, which is a frequent mistake made by leaders. Therefore, bureaucratic organization is a formidable enemy for management, the source of every fault during the management process and the source of wasteful consumption. Bureaucracy brings the enterprise’s management organization into failure.

To overcome bureaucracy, organization overlapping should be strictly avoided.

Reduce the number of assistants. Too many assistants are the root cause of bureaucracy. Due to too many assistants, the first leader will work by depending on assistants, who won’t go further and listen to reports. The first leader will just make decisions and command relying on reported information. Personnel will not truly report pros and cons of an issue since all this is connected to their responsibility, power, obligation, and interests so as to cause major leaders to make bureaucratic mistakes.

Overstaffing in an organization is the root cause of bureaucracy. It keeps major leaders away from practice, causing bureaucracy, which cannot be controlled by people’s will. Overstaffing in an organization is sure to cause excess employees, low work efficiency and productivity, and serious wasteful consumption.

Organizational power is generated when humans exploit and create consumption materials from nature; this encourages the fight between humans and nature, among human groups, and even among nations. Therefore, enterprise management should regard organizational management as the first priority of leaders.

The target consumer group of products will be managed

Before investing in production, the object of consumption for a product must be positioned. At the same time, the positioned object of consumption will be studied, with or without competitors, full competitors or non-full competitors, and then a study should be carried out to exploit or gain some direct consumers who are ready to consume the product. Meanwhile, you should study competition on the same type of products from other enterprises or replaceable consumption products. During the fierce competition process in the sales market, use consumer management to increase the loyalty of consumers for your products to enhance the sales volume and double the benefits of the enterprise’s consumption products.

Object of consumption during production process

All consumptions of the enterprise in creating new consumption commodities are included in the production process of the object of consumption. Only when all consumptions in the production process are transferred to a certain product, which is becoming a new commodity consumed by the direct consumer, can the value of production purpose be realized.

Consumptions during the production process include the consumption of subject of labor, the consumption of tool depreciation, the consumption of management expense, the consumption of labor expense, and the consumption of social environment expense. The selection of the object of consumption is important to determine consumption cost and product quality.

The selection of targeted consumers determines the consumption cost and quality of products. Disqualified raw materials, poor production instruments, and unskilled laborers would result in high consumption costs, poor products, and even poor operation, loss, or closedown of the enterprise.

Consumption and management mode of productive enterprises

The management of a productive enterprise will be determined by the production mode, which is determined by the production purpose, production technology, and process and production tools. Since production purpose, production technology, and process constantly develop, and new production tools are constantly invented, the production mode should change constantly. Because of the constant change of the production mode, the management mode must change with the change of the production mode to adapt the development of productivity, or the development of productivity of the consumption society will be impacted and hindered. This is one of the important reasons why enterprise management is a topic of study.

For example, the management of the production mode of the family workshop is totally different from that of the intensive production mode of steam engine industrialization; the management mode of a labor-intensive production mode is different from that of a new high-tech intensive production mode; and the management mode of a general laborintensive production mode is different from that of an intelligent and automatic production mode.

Therefore, the management mode should be determined based on the actual production mode to make the management mode adapt to the production mode so that the maximum productivity of the consumption society can be displayed.

Sales management mode (including operating and selling enterprises)

The management model of business enterprise

Conference marketing and its management mode

Strategy

Enterprise is the economic cell of society. All operation activities of the enterprise are elements of the social dissipation movement. Enterprise development is a spiral development led by three important consumptions; it is developed in mutual competition. The survival, decay, or elimination of an enterprise is a natural phenomenon, which is an inevitable consequence of economic development led by consumption.

In order to ensure competitiveness and development, the enterprise must discover a strategy to succeed in competition. The strategic decision of the enterprise is of great significance for the direction of the enterprise, such as low-cost strategy, talent strategy, development strategy, new technology development strategy, novelty strategy (including blue ocean strategy), product quality strategy, market competition strategy, brand, and so on. The process of studying, formulating, and implementing strategy is the development process of enterprise management – the process of routine enterprise management and the development process management. It is also a development management process with emphasis and balance. Among specific projects and various systems, the process is not a balanced and parallel development but a coordinative development with focus and emphasis. During the marketing process there are ‘six firsts’:, quality first, technical content first, service first, network first, environment first, and management first.

During the competition by products, we should give the first priority to product quality. To meet the maximum need of consumers with high-quality products is fundamental and the key to market competition. Technological content should be first. Only those products with high-tech content and huge market potential can have fundamental competition. During market exploration, we should focus on service first. The development facts of countless enterprises at home and abroad indicate that consumers are ready to buy products from those enterprises that really regard consumers’ satisfaction as the standard of service value and provide an efficient service for consumers with improved service.

During service marketing, we should insist on ‘network first’. The network is scale; without scale, there won’t be scale benefits. Either in cementing the current market of products or developing new product markets, we should attach importance to network scale and improve operation efficiency and the benefits of network. In addition, during marketing we should attach importance to the internal and external environments of the enterprise: ‘environment first’. Without a favorable environment, nothing can be fulfilled. Environment is the condition for enterprise survival. Therefore, internally, we should attach importance to ideal education and cement the building of enterprise’s cohesive and centripetal force, enhance the cooperation and unity of the employees; externally, we should build a good enterprise image, product image, and brand image to seek support from all walks of life and create favorable external and internal environments for the overall development of the enterprise. During the operation of the whole enterprise, we should follow ‘management first’. Flexible and efficient management mechanisms and precise and accurate management systems are crucial for the effective operation of enterprise.

The six firsts are not parallel, but a consideration of the overall operation of the enterprise at different perspectives. Therefore, we should always insist on these ‘six firsts’ and treat them with a view to strategy.

The marketing plan of the enterprise is the crystallization of wisdom and creativity, the soul of product marketing. Marketing strategy, tactics, policy, and stratagem are the life of marketing enterprise.

Tactics

Tactics serve a strategic objective. A strategic objective is the ‘target’, while tactics are ‘arrows’ or ‘swords’. The two make up the unity of oppositeness. Once the strategic objective is determined, the tactics, policy, and strategy will be formulated to realize the strategic objective, and tactics implementation will be guaranteed to achieve the purpose of a strategic target.

Manoeuver

Manoeuvering is the method to achieve the strategy, indicated by certain rules, which determine the development life of the enterprise together with the policy of the enterprise. Policy is open standard behavior, while a manoeuver does not disclose the objective directly but involves lateral or other regular behaviors that serve the realization of the objective plan. With dual nature, manoeuvering has functionality as a management rule and strategy as a method. The service objective of manoeuvering is strategy while the functionality objective of the working method is specific persons. However, the implementation of all strategies and manoeuvers are conducted and executed by persons.

For example, in the competition for direct consumers, the enterprise with relative weak strength should avoid big cities with fierce competition and develop in medium and small cities with relatively weak competition. Having won trial successes and acquired experience and learning, and a certain competing force, the enterprise should improve itself, develop, and expand to large cities. It is a manoeuver of strategy. The overall strategy aims at the sales market. It is the method of manoeuvering to take sales markets in medium and small cities, which serves the realization of strategic objectives.

To learn and study application strategies is the art and capability of leadership and the commanding level of the overall system. Therefore, in order to ensure the enterprise will gain better benefits with far-sightedness and advantage, major leaders of the enterprise should use strategy, policy, and manoeuvers to organically combine management benefits and development benefits.

Formulating assessment standards

Complete assessment standards will be formulated to serve as the basis for the performance assessment of specific units or individuals in the enterprise, instead of assessment by subjective judgment of leaders. The content and standard of the assessment will guide personnel to move forward. If the enterprise aims at profit benefits, the assessment standard is the systematic assessment standard focusing on benefits; thus all employees will take profit benefits as their goal. If the assessment standard centered on sales, the employees would focus on sales instead of profit benefits. The assessment would result in higher sales volume. Although employees get their due interests according to the assessment standard, the profit benefit of the enterprise would be relatively low or even at a loss. Therefore, the management of the operation activities should be focused on benefit to assess sales volume and develop scale benefits.

The need for supervision provided in enterprise

Consumption and management in the enterprise’s operational activities should be carried out in accordance with articles and clauses, regulation and discipline. Enterprise regulations are the code of conduct to standardize the operation activities of enterprise employees. Supervision exerts no functions on discipline-observing employees. Supervision is directed to non-compliant behavior during the process of enterprise operation. What is more important, these non-compliant persons severely disrupt the display of the team’s force and operational tasks cannot be completed in time. These behaviors will harm the enterprise’s operation and marketing. Every non-compliant person will be supervised, identified, and punished, and then the normal operation and marketing of the enterprise can be ensured.

Establishing regular supervision and auditing departments

The enterprise will provide a full-time regular supervision and auditing organization to supervise and inspect the enterprise’s operation and marketing process on behalf of the board of directors and the highest manager of the enterprise, and the large enterprise will establish supervisors’ meetings, a supervision department, and auditing department while the small enterprise will establish a supervisor and full-time auditors to carry out regular work, which is very important.

Product quality as an element of productivity of the consumption society

The evaluation of product quality is based on product quality standards. Product quality has broad social property. The factors influencing product quality are numerous, complicated, and take a long time to be formed. In the production process of the same type of product in different periods and stages, different enterprises have different quality standards and requirements. Some products apply to national standards while other products apply to enterprise standards, with varied requirements on product costs, since productivity value in producing the product varies a lot. For example, the difference and value difference of 90% eligibility rate, 99% eligibility rate and 100% illegibility rate (the product is rejected due to the substandard) will directly influence the enterprise’s economic interests, intelligible brand assets, property rights, and the value benefits of product.

The quality of the product is productivity, the realization of whose function is restricted by the internal management conditions and management levels of the enterprise, laborers’ skills, the technical level of production means, and the quality level of the subject of labor, and so on. All these factors influence quality standards and develop in constant change. If an enterprise can turn out eligible quality products popular with consumers with less input and lower cost, products produced by this enterprise will become popular with consumers and the enterprise will develop very quickly. When the product produced by an enterprise is no longer popular with consumers, the enterprise will go bankrupt. Therefore, quality is the lifeline of an enterprise. The enterprise should ensure and constantly enhance product quality. The enterprise should implement a comprehensive whole-process standardized and responsible overall system management of product quality. Comprehensive quality management is the core of enterprise management, which is the most important thing. The finished product level of product quality marks the level of the enterprise’s comprehensive management.

Policy, discipline, and organization of enterprise quality management

Product quality is the life of an enterprise. The enterprise must establish regulations, policy, and discipline to manage product quality. The policies, regulations, and disciplines should be made to ensure employees full participation in quality management, to guarantee product quality with their work quality, and to combine part-time and full-time personnel in the quality management division. For example, with regard to the quality insurance system, Jinan Sanzhu Pharmaceutical Co., Ltd. has established the Quality Management Committee led by the general manager.

1. The people in the column represent groups in the enterprise.

2. The two straight black lines on each side of the column represent national law and the regulations and discipline of the enterprise, used to standardize the unified action of all members.

3. The yellow line under the column is a warning line that represents the last-one-out system, a propelling force for all members.

4. The vertex of the cone in the upper part of the diagram is the accumulation point of four-layer gravitation, including leaders’ integrative competence, leadership thinking methods, working methods, and artistic soft management.

5. There are four types of gravitation: of the enterprise goal, of individual development goals, the enterprise culture and concept, and policy transformed by the three motives, which is the direct gravitation of all employees. (These are explained below.)

6. There are four levels of gravitation from top to bottom. The upward blue line represents life force and the infinite vitality of personnel. All employees on the first level accept material, spiritual, and informational gravitation. Everyone has material, spiritual, and informational demands, which are direct, comprehensive, stratified, and differentiated, with personal nature and social nature. The second layer is thought governing the gravitation of cultural ideas and soul. The third layer is the gravitation of the individual development goal. The fourth layer is the gravitation of the integration of the overall development goal of the enterprise and individual development goals.

1. Formulate the objective and task.

2. Formulate the standard requirement of the objective and task.

3. Define the person responsible for completing the task.

4. Set the time requirement for the objective and task.

5. Specify the discipline of rewarding and punishing for the task.

6. Seriously summarize experience and lessons; move forward by promoting achievements and correcting shortcomings.