Analysis and reflection on the international division of labor positioning of Chinese enterprises based on international trade theory

  Positioning of China’s enterprises in international market division of labor

  The trend of economic globalization in today’s world is intensifying, and national relations are very obvious in this issue, which makes economic globalization form a very complex problem. A country plays a different role in it.

From an economic point of view economic globalization is reflected in two main aspects.

First, the globalization of the division of production. In this regard, transnational corporations play an absolutely important role, breaking the previous pattern of vertical division of labor in the country and forming a horizontal division of labor within the sector, in which the role of transnational corporations is becoming more and more prominent.

Second, the integration of the global market. The role of the state in today’s horizontal division of labor in industry has changed, and the role of the state in enterprises has also undergone significant changes. The domestic market of a country is becoming a smaller and smaller part of the international market, and any country is facing a huge challenge. However, unlike in the past, firms are facing more non-perfectly competitive markets where SMEs have to face off against strong firms. Large companies can gain the lowest cost advantage by way of economies of scale, but SME companies can only rely on product differentiation. For more SMEs, it is crucial to rely on their own conditions and characteristics to define their own position in the international market and work hard for it.

  In the international division of labor and international market positioning developed countries have better systems and policies than developing countries, and have advanced infrastructure and technical equipment. China’s enterprises do not know themselves objectively enough, the government is also lack of understanding, objectivity is not strong, but simply think that the pursuit of the expansion of enterprise scale is to improve the level. Developing countries, especially for China’s enterprises, most of them take diversified operations, their own loss of professional advantages, big but not strong. China’s accession to the WTO has been ten years, in the context of the new era, China’s enterprises must change their minds, find the right positioning, formal objective reality, so that enterprises bigger and stronger.

 Research on China’s trade in the framework of intra-product division of labor

  The status of China’s enterprises in the international market division of labor is “the world’s processing plants”, and it is difficult to change this situation. Although the share of China’s exports of intermediate and advanced technology-intensive manufacturing products is currently larger and continues to rise, at this stage, China’s comparative advantage is still concentrated in the labor-intensive aspects of these products (mainly processing and assembly), which are less profitable. This feature is particularly evident in Apple’s manufacturing plants in China.

  Apple opened a processing plant in China – Foxconn – to provide assembly and manufacturing services and to produce products for consumers around the world. It provides cheap labor for the entire Apple chain, resulting in a labor-intensive manufacturing industry. Although Chinese companies play an indispensable role in Apple’s industrial chain, it does not mean that Chinese companies can gain high profits. Chinese companies have been at the bottom of the smile curve, and Chinese workers only get 1.8% of the profits in the main profit structure of Apple’s supply chain. According to cost analysis, high-tech industries such as Apple, their product parts and components of cell phone design and manufacturing and chips occupy the high point of the industry chain profits, storage, touch panels and panels, although they are key accessories, but their profitability is very low, low value-added products, as a service for Apple, although China Foxconn is an integral and important part of the entire value chain, but can only obtain profits Although Foxconn is an integral part of the value chain, it can only earn the weakest OEM fees.

In 2010, the profits created by the iPhone industry chain, Apple made a profit of 585%, followed by metal, plastic and other raw material suppliers, relying on its own high-tech South Korea gained 47% of the profits, and the labor cost of mainland China accounted for only 18%. It can be seen that China’s lack of greater product development and design, their own innovation is insufficient.

  Innovation mechanism of enterprises

  Innovation is crucial to an enterprise, including institutional innovation, technological innovation, design innovation, etc. Among them, institutional innovation is especially important, which is the institutional guarantee for an enterprise to participate in the international division of labor. This not only enables enterprises to produce differentiated products, but also helps them to reduce product costs and form their own core advantages, so as to further increase their investment in science and technology.

  Trade theory among the various factors of endowment advantages are required through the transformation of advantages at the national level, as well as national policy support, which can ultimately form the advantages at the enterprise level, thus further promoting the formation of enterprises to form their own advantages of effective production, reduce costs and form cost advantages. The fundamental of enterprise technology innovation is not only composed of technology innovation itself, but also due to the innovation of enterprise system and the innovation of organization. Whether an enterprise has an advanced and comprehensive organizational system determines, to a certain extent, whether an enterprise can form its own competitive advantage, thus prompting the formation of specialized division of labor in its activities.

  Institutional innovation can bring the following benefits.

  Firstly, institutional innovation can enable enterprises to adapt to the changing external environment more quickly.

Studies show that countries with comparative advantages in resources are often less economically developed than countries without comparative advantages because they do not have advanced institutions. For this reason, enterprises must take corresponding measures: (1) Enterprises need to first form the most efficient economic organization for themselves, improve the operational efficiency of enterprises and reduce costs. (2) Enterprises need to have a large amount of abundant and competent human capital, both of which are particularly important. (3) Institutional innovation of enterprises can reduce costs and risks for enterprises.

  Secondly, the system innovation can improve the specialization division of labor for enterprises. Modern international specialized division of labor is mainly reflected in intra-product division of labor and intra-sector division of labor. Economies of scale and specialized division of labor are not the same. Specialized division of labor does not mean the expansion of enterprise industrial scale, but determines the positioning of enterprise market division of labor. The core of competition of most companies is also the product differentiation competition.

  Another advantage of institutional innovation is that after determining the direction of specialization and the level of specialized division of labor, the company itself can determine the production ratio of various factors by its institutional constraints, so as to exclude the previous institutional barriers, and can further improve the technical level of enterprises, form or strengthen their core competitiveness, widen the degree of difference with similar products, from quantitative to qualitative changes, so as to smoothly enter the In addition, institutional innovation is also conducive to enabling enterprises to achieve higher levels of specialization and division of labor.

In addition, institutional innovation is also conducive to the formation of enterprises’ own economies of scale. Facing the imperfectly competitive market, the strength of enterprises is partly reflected in the power of enterprises, forming their own enterprise groups, so as to obtain part of the monopoly profit is also the trend of participating in the international division of labor.

  Combining the development trend of international division of labor, Chinese enterprises should pay attention to the following issues in determining their own positioning in international division of labor and the combination of system innovation.

  Firstly, the direction of their development should be clearly defined from the perspective of division of labor positioning. The inability to find their own division of labor positioning in the international division of labor is an important reason for the poor institutional innovation ability of Chinese enterprises. As the development direction is not clear, the previous baggage cannot be unloaded and the new environment cannot be successfully adapted, so there is a lack of motivation for development. Enterprises must fully understand themselves in the division of labor positioning.

  Secondly, enterprises must pay more attention to the positioning of international division of labor and industrial chain if they want to realize going out. Engaged in international trade, enterprises must have a clear positioning of the industrial chain. Although the product creation and R&D capability of enterprises play an important role, positioning the industrial chain is a prerequisite, and then gradually shift to the upstream of the value chain.

  Third, system innovation should have a clear purpose. Cost reduction is a consistent way for enterprises to improve their competitiveness, especially for SMEs. Enterprises must form product differentiation among similar enterprises by increasing investment in R&D, enriching product variety, brand effect, and acquiring independent intellectual property rights, and strive to obtain economies of scale and maximize the utility of limited capital.