Global Economic Competitiveness Report

SHENZHEN AT 40: China’s silicon valley of hardware(1978- 2018)

MBA 661 Professor Chen Liu

Siyu Wang Anqi Zhang Yunxia Ni Maryam Salehi Farkhondeh Birjandi

● Shenzhen is a major sub-provincial city and one of the special economic zones of China.

● With a population of 17.56 million as of 2020, Shenzhen is the fourth most populous city proper in China.

● Shenzhen is a global center in technology, research, manufacturing, business and economics, finance, tourism and transportation, and the Port of Shenzhen is the world's fourth busiest container port.

Introduction

Contents

1. Special economic zone

2. Deeping market reforms

3. Innovation hub

4. Moving forward

Strategy Structure and Rivalry

Porter’s diamond

Factor conditions Demand conditions

Related and supporting industries

Shenzhen Special Economic Zone 1980-1992

Shenzhen special economic zone 1980- 1992

Shenzhen special economic zone 1980- 1992

1. Formally established Shenzhen as a special economic zone

2. Rolled out economic reforms and market-oriented policies

1. Created a friendly business and investment environment

4. Hongkong manufacturers move their operations to Shenzhen 5. Attracted MNCs which led to increase competition (Huawei;Foxconn; ZTE;Mindray)

Shenzhen special economic zone 1980- 1992

Shenzhen special economic zone 1980- 1992

➢ Produced goods for exports to the global market

Major export trade partners: HK, Singapore, Japan, UK, Germany, Italy, US, Canada

➢ Produced goods that were competitively priced

Shenzhen special economic zone 1980- 1992

➢ Products were associated with counterfeits and to the shanzhai trade

iphone KFC

NIKE Adidas

Shan zhai

Shenzhen special economic zone 1980- 1992

Shenzhen special economic zone 1980- 1992

● Established industrial zones E.g. Shekou Industrial Zone

● Attracted talent by imposing few limits on citizen’s freedom of movement under the hukou registration system

shekou

“Time is Money Efficiency is Life’’

● Near to Hong Kong Financial Center which made fund easier

● Near to Hong Kong and Guangzhou seaports which supported logistics and exporting

Shenzhen special economic zone 1980- 1992

Shenzhen special economic zone 1980- 1992

● Established the Shenzhen Stock Exchange to further support funding raising

● Opening of the Shenzhen International Airport to support business and talent movements

Shenzhen special economic zone 1980- 1992

● Experienced manpower shortage in later years arising from its phenomenal economic growth

Shenzhen special economic zone 1980- 1992

Shenzhen special economic zone 1980- 1992

★ China’s Silicon Valley: Concentrated assembly factories and electronic components at Huaqiangbei to support business needs China’s Silicon Valley

★ Factories operated under the low-cost OEM model

Business Strategies and Frameworks

It’s the smallest planet in the Solar System

Performance gap

It’s the biggest planet in the Solar System

Requirements

It’s composed of hydrogen and helium

Evaluate process

It’s a cold place. It’s full of iron oxide dust

Changes

Venus has a very poisonous atmosphere

Assess results

It’s the farthest planet from the Sun

Vision and objectives

Business Strategies and Frameworks

Mercury is the closest planet to

the Sun

POLITICAL

P

Venus is the second planet from the Sun

ECONOMIC

E

Jupiter is the biggest planet

of them all

SOCIAL

S

It is a ringed planet and a

super gas giant

TECHNOLOGICAL

T

Despite being red, Mars is a

cold place

ENVIRONMENTA L

E

Neptune is the farthest planet from the Sun

LEGAL

L

Business Strategies and Frameworks

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6

C om

pa ny

S iz

e

Time

Mercury is the closest planet

Mars is a very cold place

Planet Earth is the third

Jupiter is the fifth planet

Venus is the second planet

Pluto is the ninth planet

Business Strategies and Frameworks

It’s the smallest planet in the System

Monitor

Venus is the second planet from the Sun

Coordination

The Solar System has eight planets

Implementer

Jupiter is the fifth planet from the Sun

Plant

Uranus is the third biggest planet

Complete

Mercury is the smallest planet

Investigation

Earth is the third planet from the Sun

Specialization

Despite being red, Mars is a cold place

Team worker

Pluto is the ninth planet from the Sun

Shape

Firm Strategy, Structure and Rivalry

Goal Saturn is the ringed planet

and a gas giant

Purpose Jupiter is the

biggest planet of them all

Values Venus is the

second planet from the Sun

The central government is committed to reform and opening up

Envisioned Mars is a cold place and the fourth planet

Shenzhen as an innovation hub (2006 to today)

The speed of the growth of high-tech industry was at the

top of the list of the country's different initiatives developed under five-year

plan

strategy

“We will support the Pearl River Delta as it leads opening up, innovation, transformation

and upgrading, and accelerate[s] the development

of science and technology centres and industrial innovation centres in

Shenzhen”

Structure

the central government promised to widely promote

investment possibilities and to increase the quality of

service provided to international investors. It has

advanced the building of high-tech industrial parks as well as Startup and incubator spaces in order to provide a favourable environment for

new and high-tech industries.

Rivalry

● generating 60% of overall industrial output Shenzhen alone accounts for over 20% of all Chinese patent applications.

● According to estimates, Shenzhen is nine months ahead of the rest of the world

● the ten Chinese companies with the most worldwide patent applications in 2016, six of which are headquartered in Shenzhen.

Shenzhen as an innovation hub (2006 to today)

Many innovations in Shenzhen are motivated by consumer-facing sectors and increased internet access and usage as a result of the rise of smartphones, e-commerce, and online services.

In this environment, OnePlus, WeChat, and DJI (which has a 70% market share of the worldwide consumer drone industry) are examples of innovations

Shenzhen residents and established businesses in the city will be eligible for a wide range of rebates and rewards, including discounted official rental, Startup

grants, and even special grants of up to RMB200,000 for specific emerging industries such as new materials, renewables, life sciences, and next-generation

telecommunications.BANNER SLOGAN AT SHENZHEN’S NANSHAN INNOVATION DISTRICT

Shenzhen is one of the world's most young centres of innovation and entrepreneurship Approximately 75% of the city's population is

between the ages of 15 and 44.

● More than 90% of R&D

● 90% of researchers, ● Over -90% of R&D

funding ● Over 90% of service

invention patents

Shenzhen as an innovation hub (2006 to today)

“It's not about stealing ideas It's about sharing ideas”

Shenzhen Shenzhen Makers in Shenzhen share information about their projects

use open-source hardware and software which is fits nicely with China's deeply

established shanzhai mentality

Legal barriers often hamper and limit innovation in the West mentality due to a focus on intellectual property protection

Shenzhen VS others

Rivals

Goal Saturn is the ringed planet

and a gas giant

Purpose Jupiter is the

biggest lanet of them all

Beijing

center of software

Shenzhen

center of hardware technology and

startups

Shanghai

the life sciences hub &

pharmaceutical

Xiaomi, Baidu Johnson & Johnson Pfizer

Demands

China’s population is expected to peak at 1.4 billion in 2025.

Its growing population and their increasingly sophisticated needs, driven by greater affluence and higher educational levels, inevitably add pressure on enterprises to innovate at a faster rate.

Factor Conditions

To compete with these Tier 1 cities, Shenzhen needs to ramp up its capacity to innovate and create original products and services, provide more support for scientific research and development, and improve its institutes of higher learning to provide the necessary talent.

Learned from Shenzhen

For other enterprise or country:

Strategy for a "culture-based city" （opportunity）（ strategy structure and rivalry）

Geographical link with Hong Kong Shenzhen has a close bond with Hong Kong, its next-door neighbor (related and supporting industries) (Advantages of geographical location)

Birthplace of China's modern design (Factor conditions)

High technology (Demand conditions)

For Chinese enterprise:

Upholding socialism with Chinese characteristics.

To learn the unremitting spirit of reform and opening up.

Thanks!