Introduction to Need For Machinery And Innovative Technology
Current situation of machinery and equipment
Entering a market economy, forcing businesses to improve themselves. The shift of the centralized, bureaucratic, and subsidized management mechanism to the market mechanism along with the strong trend of integrating the world and regional economy, the mechanism of allocation and transfer no longer exist.
Each business must be proactive and quick to recognize the situation, seize opportunities, and stand firm on its own “feet”.
The opening, exchange, and economic integration have opened up opportunities for businesses, but also posed many challenges, one of which is the increasingly fierce competition.
In order to survive, each business must immerse itself in the times and equip themselves with “weapons” of sharp competition. Science, technology, and technical equipment are one of the most important prerequisites.
However, for most businesses in developing countries today, the status of machinery and technology clearly shows the obsolescence and backwardness:
Most of the equipment is old and patchy, unable to produce products that require high precision and cannot meet the increasing tastes of the domestic and foreign markets.
Up to 70% of equipment and machinery in the 60s- 70s generation, of which more than 60% were fully depreciated, nearly 50% of old machines were refurbished for use, the replacement of only individual parts.
lack of sync, patchwork. The status of machinery with an average life expectancy of over 20 years accounts for about 38% and less than 5 years only accounts for 27%.
In the past, most of the imported machinery and equipment from many different sources:
25% from the Soviet Union, 21% from Eastern European countries, 20% from ASEAN countries, … so the synchronization, when using production capacity is only over 50% of capacity.
Due to the lack of synchronous investment, enterprises face many difficulties in spare parts, material, and fuel consumption per unit is still too large, many outdated norms and norms are no longer suitable.
consistent but not modified. Old machinery and equipment cause a high number of downtime hours… These are the main reasons for high product cost, low quality, and not competitive enough in the domestic market.
Stemming from the above situation of machinery and equipment, it is inevitable that businesses have to renew their machinery and equipment to meet market demand and win the competition.
The advantage of machinery and equipment innovation
In the market economy, the business always puts profit target on top and that is also the vital factor of the business.
To achieve maximum profits, first of all, businesses must find a place for themselves by the way of winning the competition.
Under the current conditions, when science and technology develop like a storm, victory lies in the hands of people who master science and technology and know-how to apply it effectively for their own purposes.
It is not a coincidence that today everywhere calls for innovation. This is a sign that businesses are aware of the importance of applying science and technology to their production and business activities, specifically the introduction of modern technology machinery. into production.
It can be seen that the machinery and equipment innovation also means increasing the production capacity of the business in terms of quantity and quality.
With asynchronous modern machinery and equipment systems, businesses will save raw material costs for a product unit, less fuel consumption, and less waste.
The cost of repairing, maintaining machinery and equipment is reduced while also reducing manual labor, making labor costs decrease.
From there, contributing to lower production costs, creating conditions for businesses to lower selling prices, expand market share to many different population classes.
In addition to saving costs, with modern machinery and equipment will increase productivity along with the quality of products produced, capable of meeting increasingly demanding requirements.
slot of the market in terms of product quality as well as designs and types. Improving product quality combined with lower selling prices will increase the competitiveness of businesses in the market, which is even more meaningful in the context of a changing economy in developing countries. integration direction.
In short, in order to achieve profitability goals, improve its position, each enterprise needs to increase its production capacity, improve product quality, and increase competitiveness. That also means the need to invest in machinery and technology innovation for each business.
The basic requirements when conducting investment in renovating technology equipment in businesses today.
Innovating technology equipment is very necessary for every business, but how to make the innovation really effective and suitable for the actual situation and capabilities of the business is completely not easy. It must satisfy the following requirements:
- Innovation must catch up with scientific and technological progress: The purpose of renovating technological equipment in enterprises is to replace and overcome the shortcomings and limitations of old technology with new and more advanced technologies. , more preeminent, capable of creating competitive products in the market. Therefore, when implementing innovation investment activities, enterprises need to investigate and carefully study technical features as well as the state-of-the-art technology level of investment. This investigation and research will help businesses avoid investing in outdated technologies, reducing the efficiency of investment activities.
- The innovation must be synchronous and key: Synchronous in innovation is very important because some products created, if they want to be accepted by the market, need to meet many aspects such as quality, design, designs … if we only innovate in a “limp” way, not synchronously, for example, only changing product quality without changing designs or designs, consumers will find it difficult to recognize. new advantages of the product. From there, it will reduce the efficiency of machine innovation work. However, synchronous innovation requires enterprises to have a large amount of capital, which is a major obstacle for many businesses. Therefore, if there is a shortage of capital for investment, businesses should implement a situational solution that is the key innovation. The key feature of investment activities is shown in that: Enterprises only innovate with key technologies vital to their production and business activities, avoid spreading, and rampant investment is when the business is lacking capital.
- Innovation must anticipate market requirements and tastes: Market requirements for a certain product can change very quickly. If companies do not investigate and research carefully before implementing innovation investment activities, it will certainly reduce the efficiency of investment activities, even innovation will be completely meaningless.
Factors influencing innovation investment decisions.
The investment in renovating machinery and equipment is an objective requirement, but from a financial management perspective, this investment is a long-term investment decision, not only for the present but also for the present.
In the future, it will take advantage of future scientific and technical advances and require a large capital source. Therefore, to come to an investment decision requires enterprises to carefully consider a series of issues that directly affect their investment decisions.
The effectiveness of the investment project: Long-term investment activities always contain it many risks. Before deciding whether or not to implement a long-term investment project, each enterprise must determine the certainty of its investment project and must estimate future variation in investment costs.
Out, the income received from the investment project, loan interest and taxes, the ability to sell products … to see the feasibility of the project.
Therefore, analyzing the feasibility of an investment project is a job that must be done very carefully, meticulously, and scientifically before implementing an investment project.
The advancement of science and technology: Science and technology are always changing, it can be an opportunity for businesses that anticipate and embrace it, but it can also be a threat.
threatens businesses if their calculation and forecasts are inaccurate. Businesses before implementing investment projects need to take into account future advances in science and technology for the equipment they will invest in so that they can accurately determine the focus as well as how.
investment in equipment renewal. Investment sometimes requires enterprises to take risks in order to launch new products with high technology content by promptly approaching the advancement of science and technology in exchange for new equipment. However, this risk must be carefully considered and more likely to succeed.
Market and competition: An investment project can only be accepted when it has the ability to create advantages for businesses in competition, capable of producing products that satisfy the market is increasingly demanding and rich.
Therefore, making an investment decision requires businesses to base themselves on the current situation of the business itself, the competitive situation between businesses as well as predict the future market situation. to choose a suitable investment method.
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The financial capacity of the business: The business cannot conduct investment projects when it is out of its financial capacity. Machinery and equipment innovation investment activities are always double-sided.
On the one hand, it brings a new look, creating an advantage in competition and reputation for the business. On the other hand, it is an investment for the future, always containing risks and risks.
A solid financial structure will be a prerequisite for the survival of the business. Therefore, the investment in renovating machinery and equipment must pay attention to the financial situation at the time of investment, in the investment process, and the efficiency of investment activities.
Only then can enterprises avoid financial shocks caused by the effects of wrong investment activities.
The capital demand for investment activities is huge, it arises continuously. The general situation in businesses today is that their own capital is very limited and often does not meet the demand.
Therefore, in order to have enough capital to carry out investment activities, enterprises must mobilize more capital from other sources is inevitable.
However, when mobilizing capital sources, enterprises need to pay attention to the following issues:
- The diversification of forms of capital mobilization is necessary but must respect the financial principles such as No short-term capital mobilization for long-term investment, the amount of loans exceeds the amount of equity capital. can lead to a high debt ratio and possibly insolvency.
- Cost of capital: Enterprises need to compare the cost of capital when raising capital and the results obtained from the use of that loan. On the other hand, the loan period must be consistent with the depreciation period, with the rotation cycle of fixed assets formed from loan capital.
There are also a number of other factors that also affect the decision to invest in renovating machinery and equipment at the enterprise such as the State’s socio-economic development policies, the risk of investment activities. ….
Thus, in order to mobilize capital to renovate machinery and technology equipment in the right direction, bring high economic efficiency, before implementing investment projects, enterprises need to carefully study the mentioned issues. on.
That is an important basis for making investment decisions in the right direction to ensure the success of investment activities.