Dear family members of Hong Kong,
Everybody is good! I will tell you some directions or ideas based on the current industry form and the current situation of the company, so as to clarify what state we need to meet the future challenges in the future work.
We all have our own teams in the daily management and operation process, and we all embrace the attitude of learning to face the challenges in the future. So today I would like to talk about a more harmonious mode of getting along with nature. Yesterday, the weather in Shanghai suddenly turned cold. Did several colleagues from the south feel it was winter when they came by plane? Or is the cold season coming? So please think about it, if we know in advance that the weather in Shanghai is very cold, if we see the weather forecast (made a forecast) know that the weather in recent days like roller coaster temperature drop. Then we have two ways to face it. One is that I am not afraid to go to a cold place, because I am very adaptable to the environment. The other one is that I predict the future and know that the temperature will drop in the future, so I take an extra piece of clothing with me. I put it on as soon as I get off the plane, so that it can match with the changes in the natural environment.
Of course, for companies, can we predict a "cold winter" ahead? Can we, like the boss of Huawei, have foreseen the coming crisis and the coming "winter" of the industry many years ago? If every team can view every day and every year with this kind of mentality, our future development will be better and better, and our foundation will be more and more solid. But we are afraid that some people may have made some achievements, but when facing the drastic changes in the external environment, we lose the ability to adjust ourselves and the mentality to adapt to the higher challenges in the future. So I will take this topic as an extension of what I want to talk about later.
In the past year of 2019, our performance was not good. According to the financial statements of each business unit at the end of the year, we can see that none of our public institutions have achieved the budget target. (In addition to the project, the project as a project department to explore a new product field, made 19 years of achievements.) There are also some divisions that are not even halfway through their sales targets, which is the cruel reality of 2019. Maybe we have made a lot of efforts, but the results are not optimistic. And that's when we need to think back to what is the problem with the business? Or is there a problem with the direction of decision-making? Or do we not have the ability to adjust and correct ourselves when market conditions change? If we had predicted this outcome in past 2019, what would we have done at the beginning of 2019 to adjust? Will you even come up with some bold ideas when it comes to setting business goals for 2019? By analogy, today we have put 2020 target strategy did predict 2020 operating environment or external competition would be any different, when in the quarter or year appear when we do not agree with us to predict what to take to rapid change and adjust, in order to faster to adapt to the change of external environment.
I want to tell you that predicting the future requires us to make preparations as soon as possible. When the forecast is wrong, we need to adjust our business strategy quickly. When winter comes, we should promptly add clothes and prepare more firewood for winter to keep warm.
Recall the 2008 financial crisis, the country called on the whole industry to get together. Then our enterprise and team should be more like this, we should play their residual heat, stimulate their potential, the side of their good magnify, make up for the deficiencies between the team, then these teams will be more and more excellent, this spirit and will overcome everything! It is a mistake to think that we fail by avoiding, avoiding, and waiting, when we are all within our means. In the course of natural changes, people should not only strengthen their physical health, but also adapt themselves to changes in the environment. Only then will their vitality become stronger. If everyone chooses to be comfortable and lazy, then maybe the genes of your next generation are not equipped with the spirit of struggle, just as nature dictates. Therefore, we should learn to adapt to natural changes. No matter how harsh the outside environment is, we should be prepared to adjust and adapt at any time. This is the theme I want to talk about today.
In addition, I would like to tell you that 2019 is indeed the worst year for the whole group including business units, and the worst year since we moved our headquarter to Shanghai. But this is not surprising. If we take a look at China's GDP growth, it has grown 33.5 times in the past 40 years of reform and opening up, with an average annual growth rate of 9.5%, and even double-digit growth in some years. This is unique and unique in the world. Many developed countries are stagnating. 3% growth is good, but China's GDP in 2019 is 6.4% in the first quarter, 6.2% in the second quarter, 6.0% in the third quarter, and around 6% for the whole year. This is the slowest growth rate since 1991. At the same time, due to the trade friction between China and the United States, China's exports and external investment have been decreasing in recent years. Domestic demand is driven by infrastructure. At present, the country is encouraging imports, and the growth rate of our exports is less than that of our imports, resulting in excess capacity and insufficient domestic demand in the whole industry (not just our industry). The owners of the chain should find that this year we have been operating at low prices and even on credit, while failing to meet sales targets, and it is worth reflecting on what has gone wrong.
Have colleagues in other business departments noticed that although we have received a lot of orders this year, we have found that many of them are those with low gross profit rate, arrears and even high receivables risk? What I want to say is that if it is a really good enterprise, its management essence can stand the test, and it has confidence in its bones. Such an enterprise does not have a good or bad external economic environment. It even hopes that there will be bad competition environment in the industry to highlight its advantages. There are still some people who make up numbers and rely on the good policies of the state and the good market, believing that they can make some profits and achievements if they do not work seriously and diligently. On the contrary, good enterprises even hope that the harsh environment of competition will come one day earlier, because they have real abilities at hand, whether it is management ability, technical ability, or service ability. The worse the situation is, the better the enterprises will be, because they have a good foundation and deep roots in their bones. So let's think back to the market and see if some businesses are having a hard time in 2019, or if they are facing a more severe situation than us, where they have to rely on low prices and credit to maintain normal operations. His costs on the rise, but the ability of the risk is on the decline, has been unable to meet even overdraft, so this time we need to gather resources, through upstream and downstream of the industry chain together, with our vast network, logistics distribution channels and rapid system response ability, to do our project overall operating cost is low; We do in the industry credibility, reputation, to provide customers with good products, to provide perfect service. So isn't that an opportunity? Therefore, I think an enterprise can be deeply rooted in its bones and foundation. It can firmly focus on a big goal and direction, firmly consolidate the foundation and improve the ability we should have. The harsher the environment, the more able we are to withstand challenges.
We look at the results of 2019 to reflect, if we predict that the results of 2019 will not be good, what corrective actions should your team make? Back in life, what do you do when bad habits like eating unhealthy, staying up late and so on lead to physical problems? When we know what's wrong with us, it's time to see a doctor and take corrective action. For example, if someone goes swimming in winter or runs a marathon, his physique and the ability to withstand the cold will be much better than us. On the other hand, if you are in the pathological state for a long time, you can accumulate a lot of fatal lesions and even tumors. The same is true of our business, we need to be ruthless to cut down those bad accounts receivable, just as some tumors are not eradicated early, then it will be endless. When people are sick is not terrible, terrible is that we don't know what went wrong, we found some life premature end, often because of the problem of insufficient supply of blood, so today I am very serious to tell you that the most important is blood, blood flow is the core of an enterprise if you don't have good cash flow, you will find the big vision and ambitious, also does not have the available resources, and even the ability to pay has a problem, even overdrawn credit, so there is no time to consolidate the basis of their ability. So today we are glad that soon is the 20th anniversary of the establishment of the chain, China's private enterprises can go to 20 years is not many, and can unswervingly go on, and can have a blueprint for the future is even less. From the industry chain, our chain and prospects the future space is very large, because we are the future of the integration of industry resources, we are through the way of large channel network and logistics distribution to integrate upstream and downstream, but we are doing today, in the aggregate, in the industry accounted for the proportion of or very little, so there are huge market space, and integration of upstream and downstream of the measures and means for us to play, so as long as it is capable, enterprising, has the dream family, you will be of great use in this platform.
I just said that when people are in bad health, we will restrain ourselves and adjust ourselves. The same is true for enterprises. If you find out what links lead to the failure of our annual target and the failure of our annual planning function, we need to make rapid adjustment. In the process of adjustment, we must first adjust our mentality and thinking consciousness. Of course, there is one thing that I am very happy to tell you: in 2019, all our business departments have made profits. It is only a question of how much profit they make. In every previous year, almost some of our business divisions lost money, and some of our business divisions were in the initial stage and adjustment period. However, in 2019, all of our business divisions are making money. This shows that we have a kind of survival ability or self-reliance ability, have a certain business foundation and win a chance of future development, this is good.
In 2019, the competitors of many industries are in the state of survival, it has no resources to use, its only way is to continue to debt, continue to low prices, resulting in no profit but to pay more debt, or even be forced to go nowhere, that belongs to the life of the gamble. On the other hand, when we have the ability to have the conditions to make it not live, then we will beat his opponent, so we can't because when in casual relaxed and the problem of our management, efficiency and lead to our internal team is loose, and reach a consensus, and even lead to rivals are still breathing space and have room for manoeuvre. So we need to keep thinking about whether the industry's winter of 2020 is just beginning or ending. In such a bad situation, the next two, three or even five years when we take what to meet tomorrow.
We all know that the supply of nutrition and defense against viruses are important for human health, but what about business? That is, you have to create value as you grow, and you have to be risk resistant, and the core of risk resistant is to have a blood supply. The blood of the enterprise is the guarantee of the capital chain, especially when the market is depressed to ensure the normal cash flow. The second thing we need to do is adjust our decisions and act quickly and effectively. We need to hold fewer meetings that don't make a big difference to the business process and results. To the problem of deviation, deviation from the target direction of the problem, as soon as possible to find out the measures, quick action. We need to get rid of 20 percent of the bloated, inactive people or 20 percent of the functions, and use those resources to encourage the people we create value for. Of course, the premise is that the reduction of staff must increase efficiency, increase efficiency can increase salary, most of the increase needs to be completed by the performance mechanism. So this is the kind of thinking we need to have through the cold of winter, and it's certainly not organizationally acceptable for us to share the pot evenly and wait for the boat to flow. We can also relate the performance of the organization, the performance of the department and the cost, related to our team and the achievement of the results. We need to think about whether every penny spent and resource paid can match our business performance.
The year 2020 will be a year for further reshuffling of the market. Some of our products are solution-oriented and end-customer oriented, which require us to make breakthroughs in technology and solutions. From the perspective of conventional market, we also need to stand out from the competition. In 2020, we will continue to unswervingly to break through the chain channels to sprint, everyone is equivalent to scraping three layers of skin to face the challenges of tomorrow. I believe that the chain will do better and better, because our team has accumulated a 20-year foundation, which is not available in the industry. But on the contrary, even if our competitors are small and easy to turn around, as long as our huge resources can play a better management efficiency, we will not lose to any local competitors, nor lose to any manufacturer, but we will integrate these resources into our big chain business.
The year 2020 is also a year of transformation for us. We have preparations, plans and strategies in mind, as well as measures to adjust the operating differences. We need to continue to consolidate the operating foundation, optimize our organization, improve the incentive mechanism, and ensure the completion of performance. At the same time, ensuring the benign assets and the safety of cash flow is a very important link in 2020, and it is the core of management. We should see it as a business, not a short-term get-rich, overnight, a year to make a lot of money, because we have a bigger picture in the future, we are in the industry, we pursue the sustainable development of the foundation.
The year 2020 is still hard struggle, seize the day only a year, we want to put their life time energy struggle in the cause of hard work, of course, the enterprise also needs everyone's hard work spirit, our team also needs every member full and positive spirit. We must have the same spirit to meet the challenges of tomorrow. So we each family can not fall, each family should take the lead, go forward, take the burden, we work together, for 2020, for the longitudinal cause of better development, for their own dreams and work hard! Finally, on the occasion of the New Year, I would like to wish all of you a happy New Year, good health and a happy family!
