Low-cost Strategy Or Diversification Strategy:Research On Strategic Choice Of CSSC And CSIC

The report of the 19 th National Congress of the Communist Party of China clarifies that the two major national strategies of maritime power and military-civilian integration are inevitable choices to support the great Chinese dream.In the new era,China State Shipbuilding Corporation(CSSC)and China Shipbuilding Industry Corporation(CSIC)should seize the opportunity,accurately locate and adjust their own development strategy to serve the national strategy of maritime power and military-civilian integration.Therefore,this paper discusses the comparison and selection of the low-cost strategy of CSSC and the diversification strategy of CSIC,in order to provide useful reference for the high quality and sustainable development of the CSSC and CSIC.Firstly,this paper adopts SWOT analysis method and DuPont analysis method to conduct qualitative and quantitative analysis on the implementation effect of the current development strategy of CSSC and CSIC.It points out that:(1)At present,CSSC’s low-cost strategy has not only failed to effectively resist the cyclical fluctuations in the international ship market,but also has been unable to provide new kinetic energy for the group’s sustainable development.Due to the substantial shrinking of the hand-held orders in the global shipbuilding industry,the production capacity of CSSC is excessive,the bargaining power is limited,and the profitability is plummeting,so that the low-cost strategy cannot help the CSSC maintain its competitive advantage;(2)Although CSSC and CSIC jointly encountered the “cold winter” of the shipping market,CSIC’s business scale has grown steadily and its profitability has increased steadily.This is because CSIC has implemented a non-related diversification strategy,rationally allocated limited resources between the ship and non-ship industries,actively resolved excess capacity,scientifically laid out non-ship industries,and steadily promoted the integration of military and civilian development.It has created cutting-edge weapons and top equipment such as aircraft carriers,nuclear submarines and “Jiao Long” deep-sea manned submersible,which has formed a new profit growth pole of the CSIC,effectively stabilized the cyclical risks of the shipbuilding industry and the systemic risks caused by the overall decline of the shipbuilding market,and improved the CSIC’s overall sustainable development capability.Secondly,this paper constructs the evolutionary game model of CSSC and CSIC,analyzing the impact of changes in key factors such as ship price,total market order,total cost,single market share increment and diversified new income on CSSC’s and CSIC’s willingness to change existing strategies.The research shows that:(1)CSSC and CSIC both are sensitive to changes in ship prices,total market orders and total costs.They tend to change corporate strategies in order to maximize profitability when these key factors fluctuate.(2)When considering the influence from the change in single market share increment and diversified new income on strategic choice willingness of CSSC and CSIC,influence from the change in diversified new income is more profound.When the single market share increment surpasses the threshold,the party that originally selects the diversification strategy will gradually choose the low-cost strategy.When the diversified new income surpasses the threshold,the party that originally selects the low-cost strategy will gradually choose the diversification strategy.(3)The evolutionary game model visually shows the dynamic evolution process of the strategic choice of the CSSC and CSIC between the low-cost strategy and the diversification strategy when the relevant factors change,scientifically answering the question of what is the optimal strategy of CSIC as the strategy of the other party changes.Finally,based on the previous research,this paper proposes the choice of the future development strategies to CSSC and CSIC:(1)CSSC must not only strengthen the main ship industry by actively researching and developing advantageous ship types with long-term development potential,but also vigorously develop non-shipbuilding industries,implement non-related diversification strategies,and reduce costs and develop emerging industries;(2)CSIC should further optimize non-related diversification strategy,focus on new energy and high-end equipment manufacturing,and further explore diversified fields.In addition,this paper proposes the safeguard measures for the implementation of the new strategy by CSSC and CSIC.