Transaction Cost Principle

What does an enterprise solve for society? It reduces transaction costs. An enterprise exists because it can lower those costs.

As an enterprise grows, its internal transaction costs can eventually exceed external costs. At that threshold, growth has reached its limit and the organisation must split. Everything we do should reduce transaction costs.

Social Function Principle

An enterprise is an organ of society that solves social problems. A social problem is a business opportunity; a major social problem is a major business opportunity.

The first law shows that society is the end and the enterprise is the means: an enterprise is society's instrument for reducing transaction costs.

The second law again shows that society is the end and the enterprise is the means.

Some social problems must be solved by government and others by enterprises. To establish an enterprise, first ask what problem it can solve.

Innovation-Profit Law

Why does an economy develop? Its natural state is repetition; development is introduced by innovation. Only innovation creates development, and the same is true of an enterprise.

Competition continually drives selling price towards cost. Profit therefore comes from innovation. Schumpeter identified five forms of innovation:

First, create a new product or give an existing product new characteristics.

Second, use a new production method or process that lowers cost.

Third, open a new market, whether geographic or relational.

Fourth, develop a new raw material or a new characteristic.

Fifth, create a new combination that establishes or breaks a monopoly.

Social Supervision Principle

The brand is the means; society is the end.

Economically, a brand is a repeated-game mechanism created by an enterprise to win customer choice by giving customers the power to penalise it.

Brand Cost Principle

A brand exists to reduce three costs:

First, reduce society's cost of supervision.
Second, reduce customers' cost of choice.
Third, reduce the enterprise's marketing-communication cost.

Brand Asset Principle

Brand assets are consumer perceptions that create value for the enterprise. Every action should be judged by whether it creates, protects or increases those assets.

Two brand assets: buy my product and spread my good name.

Stimulus-Response Principle

All human behaviour is stimulus and response. Every communication releases a stimulus signal intended to trigger a customer action.

Only the customer's response can be measured, and that response is our ultimate objective.

Signal Energy Principle

The stronger the energy of a stimulus signal, the greater the action response.

Broadcast-and-Spread Principle

The essence of communication is not simply transmission, but broadcast and spread: broadcast the message and mobilise consumers to spread it for us.

Selected brand proverbs created by Hua & Hua:

Corporate Strategy Working Principle

Study and understand the client's business, then use the Hua & Hua Corporate Strategy Diamond to reimagine and redesign it.

Brand Creativity Working Principle

Use Super Sign methods to reduce brand-marketing communication costs, create brand assets and accumulate them efficiently.

Words and signs are humanity's first technologies and Hua & Hua's core technologies.

Words and signs are the starting point for all our strategic, marketing, brand and creative work. We seek and create those with the strongest signalling power to produce the greatest action response.

Technology of Words: Brand Proverbs

Proverbs carry ancient advice and human experience. They have primal force, meet no psychological defence and are the lowest-cost form for memory and transmission.

A proverb meets no psychological defence; it is an instruction for action.

Technology of Signs: Super Signs

All communication is the encoding and decoding of signs.

A Super Sign is the sign with the highest encoding and decoding efficiency, enabling communication and brand-asset accumulation at the lowest cost and highest efficiency.

Technology of Continuous Improvement

Continuous improvement is Hua & Hua's third core technology.