In the backdrop of China's economic landscape, numerous enterprises are rising to the occasion by expanding their investments and increasing employment opportunitiesA poignant illustration of this is the recent collaboration between Midea Group and the Shunde District government, where a significant signing ceremony was held on May 27 to kickstart the Digital Technology Industrial Park projectMidea Group has set a formidable investment plan of 10 billion yuan, with a concentrated focus on pivotal technologies including IoT, cloud computing, big data, and digital twin technologies.

The implications of Midea Group's investment are substantial, as it is estimated that this initiative alone could create around 10,000 new jobsThis initiative follows closely on the heels of Midea Group's acquisition of the publicly-traded company Kelon Electric in the energy storage sector, signaling a determined stride towards robust economic stabilityThe dichotomy of "one investment and one acquisition" showcases Midea's confidence in the future and its resolve to contribute positively to economic stability.

If we extend the timeline of Midea Group's strategic maneuvers further, it becomes clear that these actions resonate with a broader, globally recognized trend of adjusting and amplifying industrial layouts in response to the changing cycles of the global economyThis cyclical strategy has been well-documented among global business titans.

Globally, firms like Microsoft and Google exemplify similar approachesReports indicate that Microsoft has been actively scouting for opportunities to expand its data centers worldwide since last year, aimed at enhancing the service capacity of its cloud computing venturesConcurrently, Google has intensified its investments in AI and smart hardware technologies.

Transformations in business inevitably lead to shifts within organizational structuresFor instance, Microsoft's organizational adjustments have seen a redistribution of personnel within its mobile business, while bolstering its cloud computing divisions

Advertisements

Meanwhile, in Google’s case, restructuring has also ensued, with a notable uptick in staffing for its Fitbit division that represents smart hardware.

Midea Group's evolution mirrors these trends, reflected in a sharpened focus on core business areas and increased investments in these domainsThe company's leadership recognizes the inexorable shift towards digitalization, AI, and IoT as the frontier of future industries, prompting a reallocation of personnel and organizational focus towards high-end manufacturing as well as innovative digital technologies.

As we find ourselves amidst the evolving global industrial cycles, it is essential to assess the investments made by titans such as MideaWhat novel strategies are being employed by these commercial giants, and what value do they bring to society?

At this juncture, it becomes apparent that it is tempting to define these giants through singular, exceptional concepts: Microsoft through cloud computing, Google through AI innovation, Apple via the mobile internet, and Midea's remarkable transition from a manufacturing titan to a technology-led corporate powerhouse.

However, this journey is fraught with difficulties where companies must anticipate changes in each industrial cycle ahead of timeApple serves as a prime example; during the PC era, the company struggled significantly and was even described by media sources as "deeply confused." This turmoil largely stemmed from Steve Jobs's insistence on diverging from the mainstream Intel x86 architecture, which resulted in Apple being sidelined in the dominant market landscapeThe incompatibility of popular software on Apple computers dissuaded many potential customers from adopting their products.

Failure to capture mainstream markets left Apple in profound turmoil, leading to significant turbulence among corporate leadership with Jobs's departure and eventual returnUpon his return, Jobs initiated drastic measures, slashing 70% of existing projects and ultimately unveiling the transformative iPhone in 2007 that spurred the smartphone revolution.

This groundbreaking product heralded the arrival of the mobile internet era, with Apple gradually asserting its dominance as a global technology leader

Advertisements

Today, Apple’s market valuation stands at an astounding $2.42 trillion, consistently securing its position as the world's most valuable company.

Interestingly, while Apple floundered during the PC era, it surged to greatness in the mobile internet landscape, contrasting the fate of MicrosoftThe latter, which dominated the PC era, struggled drastically during the mobile internet revolution, culminating in the launch of Windows Phone and a hasty acquisition of Nokia’s smartphone division in 2013.

Regrettably, Microsoft's acquisition of Nokia did not secure its foothold in the mobile market, leading to Satya Nadella's ascension as the company's third CEOFollowing this, Microsoft, having missed the mobile internet wave, shifted its strategic focus towards cloud computing services.

As cloud computing emerged as an industry standard, traditional IT giants like Microsoft, Oracle, and IBM scrambled to migrate their software operations to the cloudHowever, Microsoft emerged as the victor, with its Azure cloud service becoming a formidable competitor just below Amazon's AWS in scale.

This dramatic pivot redefined Microsoft’s value chain, making cloud services a dynamic revenue driverAs reported in its fiscal third-quarter results for 2022, Microsoft achieved a revenue of $49.4 billion, with the fastest growth segment being Azure and related cloud services which saw a 46% surge.

Similarly, Google, which initially built its empire on search, has been concentrating on AI and smart hardware by streamlining its non-core operations, thus honing in on its strengths.

This pattern reveals that American giants such as Apple, Microsoft, and Google are perennially reevaluating their environments and adjusting their business strategies in accordance with shifts in industrial cyclesThey cut back on non-core business functions while simultaneously exploring opportunities in digitalization and smart technology, aligning themselves closely with contemporary trends and rapidly restructuring their value chains.

In China, Midea Group is no outlier

Advertisements

As a leader in the manufacturing sector, Midea is proactively engaging in transformation amidst the backdrop of reconstructing the manufacturing industry chain—this is a necessity born out of an evolution in Chinese manufacturing techniques.

Midea's journey has transitioned from an OEM-centric model toward establishing its own brands and supply chainsToday, competition predominantly revolves around technological prowess, where AI and IoT are decisive factors in determining market leaders.

Thus, Midea persistently invests in AI and IoT technologiesAs articulated by the company's chairman, Fang Hongbo, the commitment is driven by "steadfast growth" and "technological advancement." The establishment of the 10 billion yuan Digital Technology Industrial Park highlights a concentrated endeavor towards high-tech areas such as IoT, cloud computing, and big data development to facilitate Midea's evolution into a dominant player within the IoT era.

The emphasis on "digitalization" remains pivotalThe underlying logic here is that AI and IoT fundamentally hinge on digital capabilities.

Notably, Midea's digital transformation initiative commenced in 2012, evolving from bridging company data in its 1.0 phase to achieving flexible manufacturing in its 2.0 phase, and now driving towards complete digital operation across its value chain within the latest iterationThis evolution marks Midea's impressive transition from a manufacturing entity into a technology-driven company.

Looking ahead, Midea has its sights set on future cycles by identifying emerging industry trends and nurturing growth areasThe focus will shift to business-to-business sectors, with a highlighted emphasis on robotics and automation, building technology, energy management, and smart transportation.

One significant milestone includes its acquisition of KUKA, one of the world’s elite industrial robotics companiesDespite the global supply chain challenges of 2021, KUKA's revenues approached 3.3 billion euros, indicating solid technological capacity and operational resilience.

Furthermore, Midea's acquisition of Kelon Electric for 2.2 billion yuan represents a significant stride in energy management within its B2B initiatives

Kelon is noted as one of the pioneers in the energy storage system integration sector in ChinaResearch data suggests that by 2025, newly installed capacity in China could hit 45 GWh, with an expected compound annual growth rate of 70% during the 14th Five-Year Plan, approaching a market worth near 50 billion yuan—underscoring the substantial growth prospects of the energy storage industry.

From an external vantage point, Midea Group must transcend its original manufacturing paradigm to realize these achievements—an endeavor that demands strategic transformations, even amidst the potential for contentious reactions.

Ultimately, any business giant aspiring to navigate through cyclical change must harness industry trends and rethink organizational structures to ensure longevity and sustained success.

Successful transformation propels firms into periods of rapid growth, which inherently leads to increased corporate size, heightened investment needs, and greater workforce demands, thereby contributing positively to national economic stability and employment prospects.

As seen with titans like Apple, Microsoft, and Google, a firm’s renewed focus and subsequent valuation growth often aligns with substantial social valueFor example, Apple reported in 2019 that it directly and indirectly accounted for approximately 2.4 million jobs in the U.S. economy.

Despite the inherent market fluctuations and the potential delays in perception of value during a company’s focused evolution, the overarching trend suggests that those companies that deeply invest in digitization, embrace intelligent transformations, and align with prevailing trends can convert nebulous opportunities into tangible performance, ultimately enhancing their long-term value and winning the trust and support of investors.

In this context, Midea Group stands at a crucial juncture of value reassessment, with room for further investment expansion.

Why is this moment considered crucial? Because it embodies Midea's strategic endeavors at this cyclical moment, involving not just adjustments in non-core operations but substantial expansion into promising sectors.

Whether through the planned 10 billion yuan investment or the 2.2 billion yuan acquisition of Kelon, each action bears witness to Midea’s commitment to utilizing substantial capital for future growth.

This determined approach is already yielding positive returns for investors, revealing promising growth trajectories, particularly in its second growth phase

Advertisements

Advertisements