Chain Leader Model: The Construction and Game of Vertical Industrial System in the Industrial Era
Guide Reading
The chain leader model is a basic industrial organization form born in the process of industrialization, and it is also the core industrial operation system in the initial stage of the global real economy. Relying on leading enterprises that master core technologies, production capacity scale and industry discourse power to dominate the operation of the entire industrial chain is a development model widely adopted by countries during the period of industrialization construction. Affected by differences in regional industrial foundations, commercial cultural concepts and development strategic orientations, the chain leader operation models formed by different countries show significant differentiated characteristics. This paper sorts out the overall development history of the chain leader model, explores the objective causes of its formation, analyzes the actual benefits of different participants in the upper and lower parts of the industrial chain, dissects the inherent drawbacks existing in the operation of the model, completes case analysis by combining benchmark enterprises at home and abroad, compares and distinguishes the core differences between Chinese and foreign chain leader models, and sorts out the historical value and development limitations of the chain leader model. At the same time, it is clarified that the chain leader model, as the industrial base, is the precondition for the subsequent platform model and industrial ecosystem model to take shape and develop.
I. Basic Concepts and Core Features of the Chain Leader Model
The chain leader model belongs to the classic vertical industrial chain operation form of industrialization. It refers to leading enterprises with technical barriers, production capacity scale, brand influence and the right to set industry standards within the complete industrial chain, occupying the core position at the top of the industrial chain, and coordinating the production division of labor, quality standards, production rhythm, resource allocation and market layout of upstream and downstream supporting manufacturers. Relying on their comprehensive strength, chain leader enterprises form a leading effect on the whole industrial chain, coordinate and promote the orderly progress of all production links, and ensure the smooth implementation of the whole process of business activities such as product R&D and processing, parts manufacturing, finished product assembly, and market sales. Its core is not just "large enterprise scale", but that the enterprise can organize the production capacities scattered in different links, so that originally independent enterprises can form stable cooperation around the same product, the same set of standards and the same market.
From the perspective of operation form, the chain leader model has distinct inherent characteristics. First, it has clear hierarchy: there is a clear status division in the industrial chain, leading chain leader enterprises are at the top, and parts processing and finished product supporting enterprises are in the middle and lower reaches, forming a top-down pyramid industrial structure. Second, it has standardization attributes: chain leader enterprises will formulate unified quality specifications and production requirements according to their own product needs, and downstream supporting enterprises need to carry out production work in accordance with established standards to ensure the unified and stable quality of finished products. Third, it belongs to a linear industrial structure: industrial resources flow in the order of raw material processing, parts production, and finished product assembly, and industrial connections have a fixed sequence. At the same time, the chain leader model focuses on improving production efficiency and building supply chain stability, relies on large-scale production to reduce production costs, and avoids the risk of production supply interruption by relying on a fixed supporting system, which is also the core reason why this model can be rapidly popularized in the industrial era.
From a deeper perspective, the chain leader model solves the most basic problem in the industrial era: how to organize a large number of enterprises with different capabilities and different distributions in accordance with a unified production rhythm. In the handicraft era, a product can be completed independently by a few craftsmen, but after entering the modern industrial era, a complex product often involves a large number of raw materials, parts, equipment and processing links. If there is no strong core enterprise to coordinate, the more detailed the industrial division of labor, the higher the coordination cost. Therefore, the chain leader enterprise actually undertakes the role of the "general dispatcher" of the industry, and its existence itself is the result of the continuous deepening of large-scale socialized production.
II. Historical Context of the Development of the Chain Leader Model
(I) Development History of the Global Chain Leader Model
The development process of the global chain leader model takes shape gradually along with the advancement of industrialization, and is generally divided into three major development stages. In the early stage of industrialization, the assembly line production model was officially implemented, and large-scale standardized production replaced traditional manual operations, which gave birth to the embryonic form of the chain leader model. Ford Motor took the lead in building an integrated production system, controlling the whole process of automobile manufacturing, coordinating the processing and production of various parts, creating an early vertically integrated chain leader operation form, and laying a basic model for the development of the global industrial chain. The core feature of this stage is that enterprises try their best to grasp more production links in their own hands, because the external supply system was not mature at that time, and stable large-scale production needed to rely on the unified scheduling within the enterprise.
In the post-war economic recovery stage, Japan's manufacturing industry ushered in a period of rapid development. Relying on the concept of precision manufacturing and lean production management system, it created a mature and perfect local chain leader model. Manufacturing enterprises represented by Toyota have built a highly bound supplier system, chain leader enterprises maintain long-term and stable cooperative relations with downstream supporting manufacturers, focus on production quality control and supply chain coordination. With excellent product output capacity, the Japanese-style chain leader model became the benchmark form of the global manufacturing chain leader model at that time, and the close supply chain also became the mainstream development form of the manufacturing industry at that time. Different from the early stage that completely relied on internal production, the Japanese model paid more attention to long-term cooperation between enterprises, realized specialized division of labor through a stable supplier system, and maintained strong control over production standards and product quality at the same time.
Entering the 1990s, the pattern of global trade gradually took shape, and the industrial division of labor started global layout. European and American countries gave birth to a new type of chain leader form with asset-light attributes. Such chain leader enterprises no longer take over all production and manufacturing links, transfer low value-added links such as processing, assembly and parts production to the outside, and retain high-value links such as core technology R&D, product appearance design, brand operation and market pricing. Apple has become a representative enterprise of this model, relying on brand advantages and technical barriers to control the profit distribution of the industrial chain, and the manufacturing links are undertaken by manufacturers around the world. The asset-light chain leader has thus become the mainstream development model of leading enterprises in Europe and America. The industrial chain has thus gradually shifted from vertical integration within the enterprise to global specialized division of labor. Chain leader enterprises do not necessarily own a large number of factories, but they can still control the entire industrial chain through technology, brand and market.
(II) Development History of China's Chain Leader Model
China's chain leader model started relatively late, and its overall development rhythm fits the domestic industrialization construction process, which is divided into three development stages. From the early stage of reform and opening up to 2000, the domestic industrial foundation was weak, there was a lack of local leading manufacturing enterprises with market competitiveness, a large number of domestic enterprises were located in the downstream of the industrial chain, mainly undertaking OEM orders from overseas chain leader enterprises, and only responsible for basic processing and manufacturing business. Local enterprises did not have the dominance of the industrial chain, and industrial development was completely dependent on the mature overseas industrial chain, which belonged to the embryonic and dependent stage of the local chain leader model. The most important task in this period was not to establish a complete chain leader system, but to accumulate industrial capabilities by participating in the global division of labor, and learn modern production methods, quality management methods and supply chain cooperation experience.
From 2000 to 2015, the domestic manufacturing industry achieved rapid growth after long-term accumulation, and local leading enterprises with industry competitiveness first emerged in industries such as home appliance manufacturing and communication technology. Haier and Huawei gradually accumulated core technical strength, built their own supply chain system, cultivated exclusive upstream and downstream supporting manufacturers, gradually got rid of their dependence on overseas industrial chains, and had the ability to coordinate and lead the local industrial chain, and local physical manufacturing chain leaders were officially formed. Chinese enterprises began to shift from simply accepting orders to independently designing products, building brands and controlling supply chains, and their positions in the industrial chain gradually moved up.
Since 2015, China has implemented the industrial development policy of strengthening and supplementing the industrial chain, and vigorously cultivated high-quality local chain leader enterprises. Relying on the domestic ultra-large-scale consumer market and complete industrial system, many world-class chain leader enterprises have emerged in fields such as new energy, high-end manufacturing, and precision electronics. At the present stage, local chain leaders can not only dominate the operation of the domestic industrial chain, but also begin to participate in the layout of the global industrial chain, with international industrial competitiveness, and the domestic chain leader model has completed the advancement from local operation to global layout. The changes at this stage are not only reflected in the expansion of enterprise scale, but also in the fact that some Chinese enterprises have begun to master the core links of the industrial chain, and can reversely organize global suppliers, R&D institutions and market resources.
III. Core Causes for the Formation of the Chain Leader Model
The reason why the chain leader model can become the mainstream industrial form in the industrialization stage is the inevitable result of the law of industrial development, and combined with the development environment of various countries, there are exclusive inducing factors. Large-scale industrial production is the basic condition for the birth of the chain leader model. Industrial production pursues product standardization and production capacity scaling. Scattered small and medium-sized enterprises cannot complete large-scale coordinated production work, and there must be core enterprises with coordination capabilities to formulate production standards, allocate production resources, and adapt to the basic needs of industrial production.
The continuous refinement of industrial division of labor further promotes the formation of the chain leader model. With the continuous improvement of the precision of product manufacturing, a finished product will be divided into dozens of production links, and different links are undertaken by different enterprises, and the industrial chain continues to extend. If there is a lack of core subjects to coordinate and plan the complex production links, problems such as production connection interruption, messy product specifications, and low production efficiency are very likely to occur. The industrial chain will naturally breed leading enterprises with coordination capabilities to undertake the coordination and management of the entire industrial chain. In other words, the more complex the industrial chain, the stronger the dependence on the core organizer. Chain leader enterprises actually undertake the function of reducing industrial cooperation costs.
Technical barriers and scale barriers will promote the gathering of industrial resources to leading enterprises. Core production technologies, large-scale production equipment, and market brand reputation require a lot of capital and time to accumulate, and small and medium-sized enterprises are difficult to have such development conditions. Enterprises with technical and scale advantages will continue to widen the development gap with small and medium-sized manufacturers, gradually build industry development barriers, and take the top position of the industrial chain. At the same time, in order to ensure the stability of their own operations, enterprises will tend to build a fixed supporting supply chain system to reduce the risk of interruption of raw materials and parts supply. The demand for supply chain stability further consolidates the industrial form of the chain leader model.
Based on the domestic development environment, China has the most complete industrial system in the world, which can support the supporting production of all categories of products. At the same time, the huge consumer market provides a market foundation for the large-scale development of leading enterprises. In addition, domestic industrial policies have long supported the development of leading entities in the real economy. Relying on the effect of industrial clusters, local enterprises can quickly integrate upstream and downstream resources. The interaction of multiple conditions accelerates the cultivation and maturity of the local chain leader model. Especially in industrial regions with a high concentration of manufacturing industries, leading enterprises and a large number of small and medium-sized enterprises coexist for a long time, and chain leaders can organize the scattered production capacity in the region into a complete industrial system through orders, technology, standards and markets.
IV. Development Benefits of Different Subjects under the Chain Leader Model
(I) Development Advantages Obtained by Chain Leader Enterprises
Chain leader enterprises at the top of the industrial chain can obtain multiple development advantages in the operation of the model and occupy a favorable position in industrial development for a long time. Chain leader enterprises master the right to formulate industry product standards, control core technologies and product market pricing, have the industry discourse power of the entire industrial chain, can adjust the production layout in accordance with their own development plans, and control the future development trend of the industry. Relying on the supporting supply chain system built for a long time, chain leader enterprises can obtain stable and high-quality parts supply, effectively reduce production costs, improve product delivery efficiency, and maintain stable finished product quality.
The large-scale industrial chain layout can build solid industry barriers for chain leader enterprises. A mature supply chain, huge production capacity and stable market share will greatly raise the entry threshold of the industry and reduce the emergence of market competitors. Relying on the support of upstream and downstream supporting production capacity, chain leader enterprises can continuously enrich their own product systems and continuously expand their business scale. In terms of risk resistance, chain leader enterprises have extremely strong risk resistance capabilities. Facing industry changes such as market fluctuations and raw material price fluctuations, they can rely on the industrial chain integration capability to buffer operating pressure and stabilize their leading position in the industry. More importantly, chain leader enterprises master the operation rhythm of the industrial chain, so they can quickly transmit market changes to the supply system, and reduce business fluctuations by adjusting orders, production capacity and product structure.
(II) Development Advantages Obtained by Small and Medium-sized Supporting Enterprises in the Downstream
For small and medium-sized supporting enterprises in the downstream of the industrial chain, relying on chain leader enterprises to carry out operations can also obtain corresponding development benefits. Small and medium-sized enterprises generally have operating problems such as unstable customer sources and insufficient capacity utilization. After docking with chain leader enterprises, they can obtain long-term and stable production orders, fully digest their own production capacity, and fundamentally alleviate the survival pressure of small and medium-sized enterprises.
In terms of improving business capabilities, downstream manufacturers need to follow the production standards of chain leader enterprises to carry out operations. In the process of long-term cooperation, they can continuously optimize production processes, improve quality control systems, learn mature production management experience, and achieve steady improvement of their own production capabilities. At the same time, chain leader enterprises will produce technology spillover effects, and supporting manufacturers can access cutting-edge production technologies in the industry and share part of the supply chain resources. Small and medium-sized enterprises do not need to invest a lot of capital in brand operation and cutting-edge technology R&D, can deeply cultivate their own segmented production fields, reduce business investment risks, and with the expansion of the market scale of chain leader enterprises, downstream supporting manufacturers can also achieve simultaneous growth in business volume.
Therefore, the chain leader model does not only bring benefits to chain leader enterprises. For a large number of small and medium-sized enterprises, stably entering a mature industrial chain is itself an important way to obtain market, orders and capability growth. Many small and medium-sized enterprises do not need to become the final brand, nor do they need to master the entire industrial chain. As long as they can form stable competitiveness in a certain segmented link, they can obtain continuous development space by relying on the market scale of chain leader enterprises. This is also an important foundation for industrialization to form a specialized division of labor system.
V. Development Problems Existing in the Operation of the Chain Leader Model
(I) Common Drawbacks of the Global Chain Leader Model
The chain leader model itself has structural defects, which is also a common problem that occurs in all countries adopting this industrial form. The solidification of the industrial chain hierarchy is very prominent. Leading enterprises will continue to consolidate their industrial advantages, and downstream and midstream supporting manufacturers have been in the position of OEM production for a long time, and it is difficult to break through their own development positioning to complete industrial upgrading. Small and medium-sized enterprises have obvious growth ceilings, and the industrial hierarchy is difficult to change.
The profit distribution of the industrial chain is seriously unbalanced. The high value-added R&D, design and brand operation revenues are basically occupied by chain leader enterprises, and downstream supporting manufacturers can only earn meager processing profits, maintaining a low-profit operation state for a long time. At the same time, the one-way controlled industrial model will suppress the overall industrial innovation vitality. Most industrial innovation behaviors are concentrated in the top chain leader enterprises, and downstream and midstream manufacturers only need to complete production work according to standards, lacking the motivation for independent innovation, and the overall industrial innovation atmosphere is relatively weak. Over time, the industrial chain is easy to form a solidified structure of "the upper stream masters the standards and the lower stream is responsible for implementation", and the relationship between enterprises is more of command and execution, rather than joint innovation.
In addition, the industrial chain has extremely strong dependence. The operating status of downstream manufacturers is completely dependent on the development plan of chain leader enterprises. Once chain leader enterprises adjust cooperation strategies, transfer production orders or reduce production capacity, downstream supporting manufacturers will directly face crises such as reduced orders and stagnant operations. Small and medium-sized enterprises do not have the ability to independently resist market changes, and the distribution of industrial chain risks has obvious defects. This risk will not disappear automatically with the expansion of the industrial chain scale, but may further concentrate with the enhancement of chain leader's control ability.
(II) Exclusive Problems Existing in China's Chain Leader Model
Combined with the current situation of local development, there are phased development problems in the domestic chain leader system. In the early stage of industrial development, some local chain leader enterprises continued to suppress the processing fees of downstream manufacturers in order to reduce production costs, excessively squeezed the profit space of small and medium-sized enterprises, the symbiotic attribute within the industrial chain was weak, and the distribution of benefits between upstream and downstream was unreasonable. At the same time, some traditional manufacturing chain leader enterprises focus on the expansion of production capacity scale, pay insufficient attention to independent R&D of core technologies, and the progress of industrial upgrading is relatively slow. Moreover, in some high-end industrial fields, China still needed to rely on overseas chain leaders to obtain core parts for a long time in the past, and some key industrial links lacked independent controllability, and the local chain leader system still has room for improvement.
This also shows that the establishment of a chain leader does not mean that the industrial chain is naturally mature. A truly mature chain leader system should not only look at how large the core enterprise is and how high the market share is, but also look at whether upstream and downstream enterprises have the ability to continue to grow